Getting Docs Onboard

Gainsharing is among the methods of aligning doctors’ and hospitals’ incentives.

When coaxing and cajoling fail, money might do the trick.

That’s the rationale behind gainsharing, an arrangement in which hospitals share cost savings with physicians who cooperate in efforts to reduce costs, either by agreeing to standardize on certain physician-preference items or agreeing to use fewer supplies in their procedures.

Gainsharing was the subject of a panel discussion at the recent annual conference of Providence, R.I.-based Vector, an Amerinet company. On the panel were the concept’s architect and proponent, Joane Goodroe, president, Goodroe Healthcare Solutions in Norcross, Ga.; Karen Barrow, R.N., VP, Amerinet Clinical Advantage, St. Louis; and Bob Kidd, director, medical and surgical services for Vector.

Aligning incentives
In a nutshell, gainsharing is a way to align the often-divergent incentives of hospitals and the doctors who practice in them (and yet who seldom have a direct financial stake in their hospitals’ successes or failures).

The concept first hit the spotlight in 2001, when the Office of the Inspector General (OIG) of the Department of Health and Human Services (HHS) issued an advisory saying that it would not stand in the way of one hospital’s proposed gainsharing plan. Interest peaked in February of this year, when the OIG issued six more advisories to the same effect.

The following month, the chairman of the Medicare Payment Advisory Commission (MedPAC) recommended that Congress grant HHS the authority to allow gainsharing arrangements between physicians and hospitals, so long as quality of care is maintained and the arrangement does not affect physician referrals. Then, in May, Sens. Chuck Grassley (R-Iowa.) and Max Baucus (D-Mont.) introduced the Hospital Fair Competition Act of 2005 (S. 1002), which would direct HHS to establish criteria under which gainsharing could exist.

Handle with care
Despite the buzz, gainsharing has been slow to catch on. That’s because the concept straddles some tricky legal waters. Law prohibits hospitals from paying physicians to reduce services to Medicare patients. (That legislation was designed to prevent physicians from discharging patients quicker and sicker under the prospective payment system.) If a gainsharing program were to induce physicians to skimp on services or supplies, it could lead to malfeasance.

Furthermore, the Medicare anti-kickback statute prohibits hospitals from paying physicians to refer patients to their facilities. If gainsharing agreements were to induce physicians to steer patients to particular institutions, they could lead to violations of the statute.

But all these legal thickets can be avoided by careful planning, says Goodroe, whose 10-year-old company provides software to help hospitals capture cost and quality information.

“Because it was not going to be easy to obtain an approval [from the OIG], we did all the work upfront,” she says. The proposals to the department are extremely detailed and full of safeguards to prevent illegal inducements for physicians.

OIG Advisory Opinion No. 05-06, issued Feb. 18, 2005, is an example. This opinion involves a group of cardiac surgeons who perform the majority of cardiac surgery cases at an unnamed acute care hospital. The proposed arrangement calls for the hospital to pay the group “a share of the first-year cost-savings directly attributable to specific changes in the surgical group’s operating room practices, including standardization of certain cardiac devices.

The “program administrator” (Goodroe, although the company is unnamed in the OIG opinion) studied the historic practices at the hospital’s cardiac surgery department and identified 27 specific cost-savings opportunities, which could be divided into four categories.

What’s more, the proposal stipulates that patients must be told of their surgeons’ participation in the gainsharing arrangement.

In Goodroe’s programs, compensation to physicians is calculated as a percentage (typically half) of the cost-savings. The hospital pays the money to the physician group, rather than to individual doctors. Although all of Goodroe’s programs thus far have involved cardiology and cardiovascular services, the concept can be applied to other specialties, including orthopedics and neurosurgery.

Physicians’ program
Gainsharing rests on good, solid data about the hospital’s historical spending patterns, product usage and medical outcomes, so that the program administrator can set up reliable benchmarks to measure progress, says Goodroe. Naturally, it also calls for the collection of up-to-date information on spending, product usage and quality.

“If we didn’t have the ability to measure data in the detail we do, or to compare it with others’ costs, this never would have happened,” says Goodroe, referring to the past and current gainsharing programs.

As program administrator, Goodroe is responsible for accumulating such data. Just as important, she must share it on an ongoing basis with the doctors and staff, so they can gauge their progress and proceed accordingly. “It’s really [the physicians’] program,” she says.

Not the only approach
On the matter of gainsharing, the federal government is proceeding cautiously. What’s more, the fate of legislation is up in the air. (Some observers doubt legislation will ever come to pass.) For these reasons, rather than waiting for gainsharing to come to their IDNs, contracting professionals might be well advised to rely on some tried-and-true methods from years past to get physicians to help reduce costs.

“Hospitals who are successful [in cutting costs] without gainsharing are those with a long history of working with their physicians,” says Barrow, Amerinet Clinical Advantage.

Barrow says creative hospital administrators can align their incentives with those of their physicians without giving them cash. “Gainsharing has many, many avenues.”

“Ninety-nine percent of the time, it’s not money [physicians] want,” she says. “It’s ÔI’m tired of covering the ER,’ or ÔTurn my rooms over faster in surgery,’ or ÔGive me more qualified, trained personnel.'” Younger physicians may seek assistance from the hospital in marketing their practices beyond their traditional service areas.

One hospital account with which Barrow is working is constructing a separate wing for orthopedic surgical patients, for the convenience of patients and their doctors. “That’s what we’re finding more than anything else: the willingness of hospitals to reinvest in their surgeons’ service lines,” says Barrow. Administrators should work on demonstrating to their surgeons that by helping reduce costs, the surgeons can free up money for these kinds of improvements.

Hospitals need to consider the potential pitfalls of gainsharing before embarking on a program. For example, others in the facility might resent the fact that physicians are getting paid to help fix problems that they themselves created, says Dave Baker, VP of medical-surgical for Amerinet. OR directors might resent the fact that surgeons reap financial rewards while the nurses do the heavy lifting of implementing cost-saving programs, including trading out products (a process that causes much disruption in the OR). “You can’t underestimate the power of envy,” says Baker.

Count physicians in
Whether it’s gainsharing or something else, the fact is that physicians today are open to exploring ways to cut their procedure costs, says Barrow.

Contracting professionals should keep one more thing in mind: The attention being paid to gainsharing and the cost of implants has made the issue top-of-mind to hospital and IDN administrators. “We are seeing CEOs who finally know the expenses of their DRGs,” says Barrow. The corporate suite is interested in getting physicians involved in cutting those expenses, she adds. “If you want to get into physician-preference items, now is the time.”

Editor’s note: For a look at one of the OIG’s opinions regarding gainsharing, see