Partnering in Cost Savings Initiatives to Increase Compensation
While the Centers for Medicare and Medicaid Services (CMS) and other payors look for new ways to reduce total cost of care, health care providers are feeling the simultaneous squeeze in reimbursement. And the reality is that cost-cutting efforts are going to continue, further constricting cardiologists’ compensation. But, a silver lining can be found from an unlikely source—gainsharing. Gainsharing agreements allow physicians to share in cost savings achieved by reducing the cost of delivering care. Historically, these agreements have been difficult to implement due to burdensome legal restrictions placed on them. However, CMS’s recently announced mandatory bundled payment program—the Comprehensive Care for Joint Replacement (CJR) model—comes with waivers to many of these restrictions. This suggests that CMS is open to loosening regulations under certain circumstances, opening the door for hospitals to reward physicians for participating in cutting costs through gainsharing. Several cardiology-related procedures, such as coronary artery bypass surgery and stent implantation, have been included in gainsharing agreements previously, and will likely be incorporated in many more agreements in the future if or when regulatory requirements are relaxed. Under a gainsharing structure, physicians who assist in lowering the costs of implantable devices or supplies used in these procedures are eligible to receive payments for savings achieved. The financial opportunity for both health systems and physicians can be substantial, especially for larger physician practices.
Historical Legal Considerations
Gainsharing agreements have been around for many years, and opinions published by the Office of Inspector General (OIG) have provided insight into the rigorous restrictions placed on these arrangements.1 For good reason, the OIG has sought to prevent arrangements that potentially influence physicians’ judgment to the detriment of patient care. Specifically, the OIG wants to avoid a number of unfair, unsafe, or unethical behaviors, including the following:
- “Cherry-picking” healthy patients
- Steering sicker and more costly patients to hospitals that do not offer such arrangements
- Accepting payments in exchange for patient referrals
- Generating unfair competition among hospitals by offering cost-savings programs to foster physician loyalty and to attract more referrals
- Limiting or reducing care due to the financial rewards of the arrangement.
To ensure physicians are not incentivized to change their referral patterns as a result of the agreement, limits to the volume of procedures eligible for gainsharing were previously required. Because of this restriction, physicians with limited volumes at a hospital prior to a gainsharing agreement being offered were often not eligible for enough savings to make it worth their while.
Impact of New Legislation
Under the CJR initiative, CMS has waived the volume and referral restrictions previously placed on gainsharing with physicians. For their contributions to savings achieved during each respective year of the program, physicians are eligible to receive shared savings payments based on the volume of procedures performed in that year, provided that the agreement contains measurable quality criteria that physicians must meet to receive a gainsharing payment. These quality criteria must be measured for the same time period that the gainsharing payments are calculated, and documentation of the physician’s ability to meet the minimum thresholds associated with each quality metric is required.
While the necessity of monitoring patient care quality remains, easing of the volume and referral restrictions enacted under the Stark law and the Anti-Kickback Statute are important indications of the increased regulatory flexibility that is likely to continue moving forward. CMS is focused on incentivizing providers to engage with hospitals in efforts to drive cost savings, and the financial rewards for physicians can be significant.
Evaluating the Financial Opportunity
To fully realize the financial opportunity that gainsharing presents, it’s important to engage physicians and service line leadership in discussions about current care processes. For cardiology practices or service lines that have not been active in managing acute care costs, there is likely a substantial financial incentive for both hospitals and cardiologists to establish a gainsharing arrangement. Implantable devices are frequent candidates for gainsharing. Some organizations use a process to match patient characteristics (e.g. age and medical conditions) with the appropriate category of implantable device as a way to ensure that patients receive the correct level of care for their medical needs. Others evaluate supply usage or agree on staffing changes in the operating room that result in cost savings for the episode of care.
Even for organizations that have been active in managing internal costs, there are likely additional financial gains that can be achieved through care standardization across providers. Many third-party tools and templates exist that can be used to benchmark your cardiology practice’s costs against others within your region or across the United States. To comply with all legal requirements, gainsharing agreements must include clear definitions of the savings calculations and be transparent and auditable. Engaging a third party to evaluate the financial opportunity and confirm compliance with legal requirements is recommended. For most organizations, the financial returns generated by incentivizing physicians to participate in cost savings initiatives through a gainsharing agreement far outweigh the investment that is required.
- Department of Health and Human Services, Office of the Inspector General, Aug. 7, 2008. OIG Advisory Opinion No, 08-09. http://oig.hhs.gov/fraud/docs/advisoryopinions/2008/AdvOpn08-09B.pdf
- Centers for Medicare and Medicaid Services. Notice of Waivers of Certain Fraud and Abuse Laws in Connection with the Comprehensive Care for Joint Replacement Model. Nov. 16, 2015.
Jason Lee is a Senior Manager, and Will Crane is a Manager, at ECG Management Consultants. For more information, contact Jason at email@example.com or Will at firstname.lastname@example.org.
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