In a 2006 survey of 95 orthopedists, published in JBJS in September, 61% of respondents said they believed that gainsharing programs ("arrangements in which hospitals and physicians share in any cost savings achieved through greater efficiencies and physicians' effort") were an effective way to align hospitals and physicians to decrease health-care expenses. Yet further survey questions revealed that physicians were at times unsure about what does and what does not constitute gainsharing, helping to demonstrate that the merits and drawbacks of gainsharing may not always be clear.
As described in the JBJS article, gainsharing was conceived as a method of controlling hospital costs by bringing physicians together with the hospital to reduce expenses. The traditional hospital purchasing model disadvantages hospitals in negotiating with vendors, because the physician select products regardless of cost; vendors know the hospital buys the products the physician requests. However, if the physician selecting the product is concerned about cost and the pattern of utilization associated with the hospital, the collaboration between the physician and the hospital increases the hospital's bargaining power with vendors. The savings are then shared among physicians, which some proponents of gainsharing argue is a way of compensating them for the extra time spent on the cost-saving effort; as physicians receive income cuts, they are further incentivized to support gainsharing programs and other sources of pay.
The programs, of which there are only eight that the OIG has permitted to proceed, have raised concerns among industry groups that gainsharing is dangerous both to patients and medical device innovation. AdvaMed has said that gainsharing may be associated with reduced quality of patient care, may lead to less development of new technology and may discriminate against smaller manufacturers. MDMA has voiced similar objections. Among physicians, the 2006 survey showed only 15% believed gainsharing compromised the quality of patient care; at the same time, respondents were split over whether a physician should be required to disclose his participation in a gainsharing agreement to patients (42% said yes; 42% said no.) In some cases physicians were divided over arrangements that constituted gainsharing. Physicians were asked to designate whether a case was or was not gainsharing, and scenarios included:
- Physicians and hospital work together to lower implant costs for orthopedic procedures. 44% said that was gainsharing; 56% said it was not gainsharing.
- 25% of savings realized from lower implant costs go toward purchase of new technology for use by the orthopedic surgeons. 73% said it was gainsharing; 27% said it was not gainsharing.
- 25% of savings realized from lower implant costs go to the orthopedic group's research and/or educational programs. 93% said it was gainsharing; 8% said it was not.
- 25% of the savings realized from lower implant costs go to the orthopedic group's compensation pool. 84% said it was gainsharing; 16% said it was not.
- Physicains and hospital undertake a joint venture in the construction and operation of an outpatient orthopedic hospital. 25% of net income from the new facility is distributed to the orthopedic group. 64% said it was gainsharing; 36% said it was not.
The gainsharing programs that are currently allowed by the OIG to proceed have several features in common. First, it should be noted that the OIG has not said that gainsharing is legal, only that the specified programs would be allowed to proceed under close scrutiny. The eight approved programs were all devised and implemented by a consulting firm called Goodroe Healthcare Solutions. Among other core components, the programs involved a customized system of tracking software that measured cost, quality and utilization so that decisions could be made based on these data and that the data could be verified externally. The data collection would also show how costs could be affected by physician choices (including operating room and procedure room cost, as well as physician practice patterns on wards), effectively setting up the program as a contract between the physician and the hospital to reduce waste.
Among the data that have come out of existing gainsharing programs, it has been shown that since the implementation of the programs, not one physician has changed the vendor he or she used. In every situation, physicians and hospitals were able to get better pricing from all of their vendors.
Though vendors have remained constant in the eight approved gainsharing programs, that does not quiet many of the industry's concerns about the programs. While a reduction in the quality of patient care and gainsharing's role in stifling innovation may be hard to ascertain with the current data, gainsharing may be here to stay. Though only 23% of physicians said they were involved in a gainsharing program, 76% of physicians surveyed said they would participate if they had the opportunity. This suggests that there are currently only a small number of gainsharing arrangements in orthopedics, but there is an interest in more; how this demand will impact the industry remains to be seen.
For more information, please see previous posts and our report on Gainsharing.
