Nicolette Cregan is a 2019 J.D. graduate from Case Western Reserve University School of Law and was a member of the Health Matrix: Journal of Law-Medicine. She would like to thank Professor Sharona Hoffman of Case Western Reserve University School of Law for her constant encouragement and constructive feedback. She would also like to thank Jack Diamond of Brenna Manna & Diamond for his suggestion for a paper topic.
Even as someone who knows health care quite well, I felt like an uneducated fool in this instance. What I found out as soon as my mother got back to her room the evening of the surgery is that with joint replacements now, you are on a quick-moving assembly line. That line whips you out of the hospital and into a rehab facility as fast as is humanly possible, and then out of the rehab facility and either home or to a nursing home almost as quickly.
We’re pretending [health care] is not really a business, but it’s acting like a business . . . [and] [h]ealthcare businesses are getting away with [things] that we wouldn’t let any other businesses get away with.
When people hear the term “hospital,” they often envision doctors and nurses caring for their patients, they see waiting rooms and hospital beds, and they imagine emergency rooms and operating tables. They may even hear the beeping of a heart monitor or feel the prick of a needle from a shot. When people hear the term “business,” they envision an entirely different setting. They likely picture men and women in suits or see conference rooms and offices with desks and laptops. They can probably hear the clicking of high heels or typing on a computer. When people hear the term “business,” they do not envision a hospital. Yet, the U.S. healthcare system has taken on a business identity.3
This “business approach” adopted by U.S. hospitals adapts to the evergrowing financial challenges the U.S. health care system faces. The system wastes approximately $750 billion dollars a year, with the largest deficit stemming from unnecessary services, inefficient care, and excess administrative costs.4 Each year, per capita spending within the U.S. health care system continues to grow faster than the rest of the economy.5 This creates a strain on private and public health care budgets.6 To combat wasteful services and unnecessary procedures,7 many hospitals have adopted a business approach by implementing shared savings programs to improve productivity and quality and to reduce costs.8 Gainsharing models have emerged as a key business approach to address the ongoing health care financial challenges.9 Gainsharing is “an incentive plan in which employees or customers receive benefits directly as a result of cost-saving measures that they initiate or participate in.”10 Hospital gainsharing is rooted in the belief that “physicians are uniquely qualified to improve [both] quality and efficiency,” and it is designed to target many different areas of “small inefficiencies” in the field, thereby resulting in “substantial savings.”11 Gainsharing is a business strategy that encompasses group dynamics and the “fundamental human need for fairness.”12 But does a business strategy belong in a hospital when the hospital’s primary focus should be providing the best patient care?
This article engages with that question. Following this introduction in Part I, Part II of this article discusses what hospital gainsharing means, where it originated, and how it operates in a hospital setting. It recognizes that gainsharing programs are a newly implemented model and discusses the fact that it was not until 1988, and again in 1996, that the Health Care Financing Administration (HCFA), now known as the Centers for Medicare and Medicaid Services (CMS), started pilot programs “solicit[ing] bids from hospitals and their physicians to participate” in a type of gainsharing program.13 Next, Part II summarizes the law and agency opinions controlling hospital gainsharing and then discusses the obstacles gainsharing has overcome and the difficulties that remain today. It also explains the lack of protection and disorganization that make it so difficult to give gainsharing programs any structure, which ultimately restrains these programs from having a prevalent and positive impact on savings within our health care system.
Part III explores the path of today’s gainsharing programs and the positive results of models and programs that have been tested thus far. It details the progression of the New Jersey pilot program, Bundled Payments for Care Improvement program, and the Comprehensive Care for Joint Replacement model. Then, Part IV concentrates on the limitations of gainsharing and the negative effects this business model has had on hospitals, patients, and physicians. The specific concerns about gainsharing vary from role to role, but ultimately the consensus is that each participant must feel confident in the program for it to be successful. Part V proposes new legislation specifying mandatory safeguards that each and every gainsharing program must follow. It critiques and amends safeguards commonly approved by the U.S. Department of Health and Human Services (HHS), Office of Inspector General (OIG) in advisory opinions, recommends additional safeguards, and highlights the problems that will still need to be resolved and monitored even with mandatory safeguards in place.
Many models of gainsharing have been introduced in to the U.S. health care system.14 Despite its growing popularity, gainsharing is controversial because of the risk that hospitals and physicians will put the value of money before their patients’ needs and the quality of care.15 With gainsharing’s rapid growth, mandatory safeguards must be in place to (1) protect the patients, hospitals, and physicians; and (2) create a structure that can be measured and can set a basis to improve upon in order to achieve optimal results.
II. What is Gainsharing?
Gainsharing is “a group, operation, or facility-wide reward system that can improve productivity, efficiency, and innovation by developing and better using human capital.”16 Gainsharing reduces expenses in order to improve financial performance.17 “The basic concept of gainsharing [in a hospital setting] is that hospitals and physicians work together to save money.”18 Physicians take steps to save hospitals money; then the hospitals, due to the physicians’ efforts and results, “share the savings with [the] physicians.”19
A. Gainsharing’s Path to Hospitals
Gainsharing was not originally used in hospitals; instead, it originated in the manufacturing sector.20 Its long history can be traced back to the 1930s, when Joseph Scanlon designed the Scanlon Plan.21 The Scanlon Plan was an agreement among several failing steel factories that their employees would practice shared cost savings, and the factories would in turn share a portion of the cost savings with the employees.22 In early manufacturing programs, manufacturing businesses used incentive systems, which were individualized and not based on the business savings as a whole.23 Several problems arose through these incentive systems, including high administrative costs, competition between workers, and wage inequality.24 These incentive systems thus became a major source of grievance for employees.25 To combat these problems, manufacturers began to implement plant-wide gainsharing that paid plant-wide bonuses for performance improvements.26 Under this model, all of the manufacturing employees took measures to save the entire plant money and thus increased productivity; the plant then shared its gains as bonuses for all employees.27 “[T]he increased use of automation and other advances in manufacturing technology” helped end the trend of individual incentives and began a trend to motivate employees with plant-wide goals.28 Gainsharing has now made its way into multiple types of industries, including “manufacturing, retail, nonprofit, government, distribution, telecommunication, financial services, [and] hospitality.”29 Given gainsharing’s success in other industries, it was only a matter of time before it made the transition into hospitals.
B. Gainsharing in Hospitals
The U.S. Department of Health and Human Services, Office of Inspector General (OIG) “defines [hospital] gainsharing as an arrangement by which hospitals and other health care organizations promote standardization and more efficient use of expensive supplies in order to cut costs.”30 “[A] percentage of the resulting cost savings is then distributed among the physicians who helped generate those savings.”31 Hospital gainsharing differs slightly from gainsharing in a manufacturing setting but maintains the same business idea. Hospitals often do not implement gainsharing on a hospital-wide basis, but instead tailor it to physicians in a particular specialty, such as orthopedics or cardiology.32 There is no uniform, standard definition or example of gainsharing.33 Rather, there are a wide range of programs that cater to the needs of each hospital.34 When a hospital decides to implement gainsharing, its goal usually is to reduce hospital costs while still “meeting quality of care standards.”35 These programs offer incentives and reward physicians for their effort in helping the hospital reduce costs.36 Gainsharing can incentivize the appropriate use of imaging and testing services, the prescribing of therapies that are both effective and the least costly, the use of outpatient services rather than inpatient services, and the provision of disease management services that can be safely maintained in an “ambulatory setting or at home.”37 Gainsharing may also involve the consideration of purchasing programs, in which hospitals reduce the costs of devices, implants, drugs, and supplies.38 Improving physicians’ efficiency, reducing patients’ hospital length of stay, and “controlling resource utilization” can all reduce hospital costs.39
Gainsharing may stem from bundle payments.40 Traditional fee-for-service insurance, such as Medicare and Medicaid, often reimburses the hospital, physician, or anesthesiologist for a surgery or treatment they provide.41 Under a bundle payment model, the payer has a pre-arranged price (based on historical costs) for the “episode” of health care.42 “Providers who exceed the pre-arranged reimbursement for the episode bear [that] financial responsibility,” but if the provider falls below the given threshold, that extra money remains with the hospital.43 “This is intended to encourage standardized, cost-effective care decisions.”44 Bundled payment systems incentivize doctors to participate in cost savings.45
Hospitals generally use one of three models to reimburse physicians through gainsharing: (1) physicians are paid “a percentage of the dollar savings” achieved by the hospital; (2) hospitals reimburse a physician’s time by an “hourly or flat rate payment”;46 or (3) some gainsharing programs allow for employees to receive bonuses.47 Direct monetary incentives are not the only form of rewards that physicians can receive through gainsharing. Some programs provide incentives “in the form of increased hospital space, financial support for specific programs” that benefit the physician, or “hospital payments to cover physician start-up costs.”48
C. Mechanics of Gainsharing
For physicians to reap the benefits of gainsharing, they must meet a number of requirements. Most often, physicians’ costs must fall below a specific priced threshold.49 Often, if the participant’s costs fall below the threshold, the physicians receive a bonus because they ultimately helped the hospital save money.50 But, the participants also assume risk for expenditures above the established threshold, in which case the bonus could be withheld.51 When a hospital exceeds the target price of an episode of care, it is “financially responsible for the difference between” the threshold and the actual spending.52 Thus, in gainsharing, physicians share the rewards, and they also share the losses.
Given the breadth of opportunity to formulate a gainsharing program, the requirements the physicians must meet can vary widely and can depend on terms negotiated by the hospital with providers like Medicare.53 For instance, in determining savings to be shared with orthopedic surgeons, hospitals can look beyond savings on orthopedic devices and include broader savings associated with the entire episode of care.54 This could include inpatient hospital services received during the length of stay and whether or not the patient must be readmitted.55
Quality is another requirement that the hospital and physicians must meet.56 Under some programs, physicians are required to report statistics on three quality measurements: (1) hospital inpatient quality; (2) “inpatient mortality rates”; and (3) seven-day and thirty-day readmissions.57
Gainsharing programs are complicated and often vary among hospitals because there is no formal definition for the term “gainsharing.”58 Because a gainsharing system can take on so many different characteristics, it is incredibly difficult both to set rules and standards for a system and to monitor it. Currently, no mandatory laws regulate hospital gainsharing specifically.59 Gainsharing has a plethora of positive possibilities, but its monitoring challenges raise concerns that the incentives inherent in the system could lead to “less-than-adequate or [less-than]-appropriate evidence-based care, inducement by hospitals for increased physician referrals, and physician self-referral.”60 These benefits and concerns are addressed throughout the remainder of this article.
D. The Current Laws and Regulations That Govern Gainsharing Programs
Gainsharing must be carefully implemented to avoid violating federal laws that are currently in place to protect against health care abuse. The major laws controlling gainsharing are the Civil Monetary Penalties Law (CMPL),61 the Anti-Kickback Statute,62 and the Physician Self-Referral Law (Stark Law).63 However, the OIG has issued advisory opinions that have blurred the lines regarding what these laws prohibit and require. This section of the article addresses those laws and the simultaneous obstacles and guidance that they create for hospitals implementing a gainsharing program.
First, the CMPL prohibits a hospital from “knowingly mak[ing] a payment, directly or indirectly, to a physician as an inducement to reduce or limit services” to a Medicare or Medicaid beneficiary.64 Because gainsharing programs often involve both Medicare and Medicaid, gainsharing could potentially be categorized as inducement to “reduce” a medical service within the meaning of the statute.65 On April 16, 2015, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) was signed into law.66 Under this law, the CMPL is only triggered if there is a reduction or limitation in “medically necessary” services to Medicare or Medicaid beneficiaries — but “medically necessary” is not defined in the statute.67 Because “medically necessary” is not defined, hospitals have found it necessary to adopt safeguards or “safe harbors” in order to not violate the CMPL.68
Second, the Anti-Kickback Statute makes it a criminal offense to “knowingly and willfully” offer, pay, solicit, or receive any remuneration to induce referrals of items or services “for which payment may be made . . . under a [f]ederal health care program.”69 This raises the question of whether any gainsharing income paid to physicians amounts to a kickback under the statute. Violations of the Anti-Kickback Statute are punishable by a maximum fine of $25,000, imprisonment up to five years, or both, and exclusion from federal health care programs.70 The OIG may also initiate administrative proceedings to impose civil monetary penalties on violators under the CMPL.71 There are safe harbors that programs can meet to avoid violation and the subsequent liability, but gainsharing programs may not always meet all of those safe harbor requirements.72
Third, the Stark Law prohibits physicians from referring patients to an entity “for the furnishing of [certain] designated health services” if the physician has a financial relationship with the entity, unless the relationship meets an enumerated exception.73 To comply with the Stark Law, gainsharing compensation must be consistent with fair market value and not vary in proportion to the volume or value of referrals.74
Lastly, hospitals must navigate the OIG’s advisory opinions. In 1996, the Fraud and Abuse Control Program “authorized the OIG to provide guidance to the health care industry [in order to further] prevent fraud and abuse, and to promote the highest level of [hospital, insurance, and physician] ethical and lawful conduct.”75 In 1999, the OIG took notice of gainsharing programs in general, perhaps because of the CMS pilot program that assessed the financial achievability of gainsharing principles.76 The OIG issued an advisory bulletin77 that stated that these gainsharing programs “in most forms [are] illegal under the [CMP] provisions of the Social Security Act.”78 But in 2001, the OIG issued a favorable advisory opinion stating that, although the OIG had previously indicated that the gainsharing program reviewed by the CMS may violate the CMPL in theory, the OIG would exercise its discretion in this instance and not penalize the gainsharing program at issue due to the multiple safeguards that the hospital had in place.79 Since its 2001 advisory opinion, the OIG has issued fifteen more advisory opinions about gainsharing, with the most recent published on January 5, 2018.80 In each of these opinions, the OIG found that the gainsharing program put forth for approval could potentially violate federal law.81 However, in its January 2001 advisory opinion, for example, the OIG decided not to impose administrative sanctions in light of the safeguards implemented by the requestors:
The OIG will not proceed against the [r]equestors with respect to any action that is part of the [p]roposed [a]rrangement taken in good faith reliance upon this advisory opinion as long as all of the material facts have been fully, completely, and accurately presented, and the [p]roposed [a]rrangement in practice comports with the information provided.82
It is important to understand that the OIG’s advisory opinions are not laws or mandatory standards that every gainsharing program must follow. Rather, they are an approval of specific gainsharing programs that have been proposed to the OIG and that the OIG has determined provide sufficient protection from health care abuse.83 Obtaining an OIG opinion is not always mandatory, but obtaining and relying in good faith on an OIG opinion can provide protection against future repercussions.84 Only one court has ruled that “any gainsharing program will violate the [CMPL]” without approval by the OIG “through the advisory opinion process.”85 This is a difficult obstacle for a court to set because the OIG process is long and enduring and makes it extremely strenuous for a hospital to implement a program.86
These three federal laws and the multiple advisory opinions demonstrate the uncertainty regarding the legality of gainsharing programs. For gainsharing to be most effective, there must be a standard set of rules and regulations for hospitals to follow. This would help eliminate the daunting OIG approval process and prevent risk to patients.
III. Paving the Path for Gainsharing: Benefits of Gainsharing & Its Ever-Growing Presence
Gainsharing in hospitals has increased immensely over the last decade, especially since 2006, when “large-scale gainsharing . . . was successfully deployed in hospitals caring for Medicare, Medicaid, and commercially insured populations in [many] states.”87 The rapid growth is a result of gainsharing’s advantages and positive results, which are discussed below. Part III of this article highlights the positive impacts of gainsharing programs and investigates models that have been and are currently being tested in the health care system.
A. Positive Impacts
Gainsharing has made its way into a variety of fields because it has consistently generated positive results.88 As previously stated, the U.S. health care system wastes a tremendous amount of money each year,89 and hospitals have attempted to use traditional methods of cost savings with only “limited success in aligning the goals of hospitals and physicians.”90 Gainsharing is designed to have physicians and hospitals working together to obtain the same goal and obtaining the rewards.
The financial rewards are not the only advantages of gainsharing programs. Many features have made it an appealing alternative to traditional cost savings methods.91 Gainsharing programs allow for the employees of a hospital to be involved in important hospital decisions, thereby catering to both the hospital and physicians and aligning their goals.92 The funding for the payout to physicians is from savings generated by the gainsharing plan, and, if the hospital’s savings goals are not achieved, there is no payout to physicians.93 This helps prevent additional costs.94 Business consultants have said that gainsharing programs foster “a culture of continuous improvement,” enhance “employee focus,” and increase “the feeling of ownership and accountability” among hospital employees.95 These positive characteristics have presented themselves in multiple models throughout hospitals in the United States.96
B. Progression of Gainsharing Models
Gainsharing is adaptable to both large-scale and small-scale implementation, in both profit and not-for-profit hospitals. Gainsharing often stems from bundled payment systems. To demonstrate the effects of gainsharing and its growth, this section of the article addresses three bundle payment programs.
1. New Jersey Pilot Program
An early example of successful gainsharing is the New Jersey Hospital Association97 (NJHA).98 The NJHA approached the Healthcare Financing Administration with a gainsharing proposal, and, after getting approval, it began working with Applied Medical Software (AMS) in 2003 to establish a physician and hospital gainsharing program model.99 The original attempt to implement a program was hindered by legal obstacles.100 Luckily, in 2003, the Medicare Modernization Act101 was passed, giving authority to the CMS to implement limited gainsharing models; the NJHA then reapplied to participate and won approval.102
The program included twelve New Jersey Hospitals and 1,300 physicians on staff at participating hospitals.103 The base year was 2007, and the benchmark for performance was the “lowest [twenty-fifth] percentile cost per case. . . .”104 For physicians to receive incentive distributions, their performance in the demonstration was required to fall within a given threshold.105 Measures were also taken to evaluate and consider the quality of patient out- comes and post-acute care.106
The New Jersey gainsharing pilot results were positive, and “the success . . . prompted federal officials to expand the pilot through [the] CMS’s [B]undled [P]ayment” [I]nitiative, which is discussed below.107 From the second half of 2009 until the end of 2011, the program saw 125,569 Medicare fee-for-service admissions, and “[t]he savings, compared to the base year” of 2007, totaled $89,454,394.108 From 2009 until 2012, participating hospitals were estimated to have lowered their costs anywhere between eleven and twenty percent.109 Results from one particular hospital that participated in the New Jersey model can be seen in Figure 1. Approximately eighty-five percent of its admitted patients were seeing physicians who participated in the early periods of the project.110
The New Jersey gainsharing pilot ended in 2012, but, after the Affordable Care Act (ACA)112 was passed in 2010, the CMS established four models for bundled payments trials.113 “Model 1” was based on the New Jersey program,114 demonstrating that the CMS took notice of its success.
2. Bundled Payments for Care Improvement
The success of the New Jersey pilot gainsharing program and the ACA helped initiate bundled payment programs. The Bundled Payments for Care Improvement (BPCI) Initiative was authorized under the ACA115 and passed under the Obama administration.116 The goal of the BPCI Initiative is “to test innovative delivery arrangements to reduce federal spending while [simultaneously heightening] the quality of care.”117
The CMS “specifically authorizes” the use of gainsharing under the BPCI Initiative; it sees gainsharing as “a tool to support care redesign” and man- dates that gainsharing payments be “tied to actual changes in behavior and/ or increases in quality.”118 While the BPCI Initiative was originally a three-year program, several of its models were extended until September 30, 2018.119 In 2016, the Lewin Group released a report finding that the Initiative had thus far resulted in savings for orthopedic surgery.120 The Acting Principal Deputy Administrator and Chief Medical Officer for the CMS reported that such early results were “encouraging: orthopedic surgery bundles, in particular, have shown promising results on cost and quality in the first two years of the [I]nitiative.”121 The report, prepared for the CMS, found that Medicare payments for hospitalization within a ninety-day post discharge decreased approximately $864 per episode for orthopedic surgery.122 These findings were mollified within the report, however. The report stated that “[i]t is . . . too soon to tell whether the portion of the BPCI [I]nitiative focused on lower-extremity joint replacement is actually improving care and achieving savings for the Medicare program.”123
Despite the uncertainty of definitively positive results, the BPCI Initiative has grown immensely since the program began. “As of July 1, 2018, the BPCI [I]nitiative has 1025 participants.”124 This early success has led to the expansion of the program discussed below, the Comprehensive Care for Joint Replacement (CJR) model.125
3. Comprehensive Care for Joint Replacement Model
In April 2016, the CMS implemented the CJR model as a mandatory bundled payment system, directly based on the BPCI “Model 2.”126 It “builds on les- sons learned from the early experience” with the BPCI Initiative and includes more than 800 hospitals in 67 metropolitan areas.127
Though the CJR model is based on the BPCI Initiative, it differs in several ways. The CJR model uses average regional spending to determine the “target episode price,” as opposed to the BPCI Initiative, which uses the hospital’s own spending to define the “target episode spending.”128 Under the CJR model, hospitals are evaluated annually and become eligible to earn a reconciliation payment if they achieve spending below the target price and meet quality performance thresholds on three required quality measures.129 A reconciliation payment is “the difference between the target price and actual episode spending, up to a specified cap (‘stop-gain limit’).”130 If hospitals exceed the target price, they are “financially responsible for the difference between the target price and actual episode spending.”131
The CJR model is still in its early stages, but, regardless, these types of programs are clearly increasing and doing so without specific legal guidelines. Because no mandatory legal standards guide gainsharing programs, some gainsharing models have experimented with different techniques that, in some cases, have had negative effects on hospitals, patients, and physicians. Part IV examines those flaws in gainsharing programs.
IV. Limitations of Hospital Reimbursement Gainsharing Programs
With the continuous promotion of gainsharing in hospitals and the implementation of programs like the BPCI Initiative and the CJR model, hospitals are increasingly intrigued by gainsharing results for reduced healthcare spending. These gainsharing programs have produced many promising outcomes.132 But with benefits often come limitations, and both must be considered. Part IV examines the limitations of hospital gainsharing and their effect on patients, hospitals, and physicians.
A. Concerns for Hospitals
One major concern for hospitals is that the most recent bundle payment program, the CJR model, “unintentionally penalize[s]” hospitals for treating medically complex patients.133 This is because hospitals that treat patients with relatively more complex medical problems will have a more difficult time keeping their spending below the target price.134 When identifying a “complex” patient, physicians consider simple characteristics such as age, gender, and comorbidity, in addition to more complex characteristics such as anesthesia class and functional mental status.135 Even during the rulemaking period for the CJR model, many comments that were submitted identified this problem of complexity, and individuals testified about their concerns that, if there are no adjustments for hospital case complexity, the hospitals that treat complex patients, as well as the patients themselves, could be penalized.136 In other words, if a hospital treats more medically complex patients, that hospital is more likely to receive less money in refund payments. This is likely because complex patients may take more time to recover or have higher health risks.137 Therefore, the hospital is more vulnerable to falling short of the cost savings requirements under the bundle payment criteria.
These concerns are real. In 2016, health care and medical scholars from the University of Michigan conducted a study using Medicare claims for individuals in Michigan “who underwent lower extremity joint replacement.”138 The researchers examined the association between (1) average risk scores, which are calculated based on considerations like patient complexity, sex, and age; and (2) “the estimated reconciliation payments that hospitals would receive.”139 The researchers compared these two factors in two different scenarios. In the first scenario, which was aligned with the BPCI Initiative model, the researchers used “the hospital’s own . . . spending to define target episode spending.”140 Target episode spending is the threshold amount of money allot- ted to the hospital for a given procedure and its recovery.141 In the second scenario, which was aligned with the CJR model, the researchers used the average regional spending to determine the target episode price.142
The study’s findings revealed that the method in which the target price is determined will have a “significant impact” on the likelihood of hospitals falling below the given threshold and physicians receiving their bonuses.143 In the BPCI scenario, where the target prices were set using hospital historic spending, the researchers did not identify a “significant association” between the refund payments and the risk scores; instead, they observed “relative [year- to-year] consistency . . . of patient complexity within hospitals.”144 In the CJR scenario, where the target prices were set at a regional benchmark, there was a statistically “significant inverse association between [the] reconciliation payments and . . . [the] risk scores.”145 The findings demonstrated that the methods of the CJR program “led to reduced reconciliation payments [for] hospitals that treat medically complex patients.”146
These statistics raise the concern that moving toward a regional pricing scheme will deter hospitals and physicians from treating medically complex patients.147 Therefore, treatment could become more about the savings and rewards that hospitals and physicians are receiving, rather than the actual care for the patient. Laws have been passed “to prevent physician inducement to reduce or limit services to patients.”148 Hospital-based target pricing is not a mandatory requirement for gainsharing models. Legislation must be put in place to provide efficient parameters that will prevent future models from having this adverse effect on hospitals and physicians treating complex patients.
B. Concerns for Patients and Families
A second concern related to patient complexity is that complex patients will be mistreated and will not receive the quality of care they deserve. One eye-opening complaint is that bundle payments cause treatment to feel more like “a health care assembly line than coordinated care.”149
In one compelling story, Timothy Hoff150 relates that his mother’s dementia was not taken into consideration when she became a part of a gainsharing program in New York.151 His mother had difficulty with mobility due to low bone density and dementia, and she suffered a fall that fractured her left hip.152
Hoff has worked, studied, and taught in the health care field but says that he was not prepared for what his family was about to face.153 A surgeon performed a partial hip replacement on his mother, and immediately after the surgery, his mother entered a “quick-moving assembly line.”154 His mother was a part of a pilot gainsharing program.155 Just one day after her surgery, she was pressured to get up and move around, and Hoff and his siblings had to quickly decide on an appropriate rehabilitation hospital to move her to once the hospital provided for a discharge window of only a few days.156 Because she was a part of a gainsharing pilot program, she was a financial risk to the hospital if she were to stay for a longer period of time than the hospital had calculated; the family thus felt pressure from the hospital to get her through rehab and move out.157 Hoff’s mother’s dementia made her a challenging patient, and she was not able to move quickly through the rehab stage.158 It seemed as though the care teams and physicians were not taking her condition into account, and Hoff and his family were consequently forced to fight for their mother to be given proper care that was not compromised by the gainsharing program.159
Stories like Hoff’s suggest that gainsharing programs are having unintended consequences on patients. Instead of treating patients individually based on their unique needs, hospitals are treating them as a number or statistic.160 Looking at only the numbers, one will see a positive result from gainsharing programs because money is being saved. But, for some patients and family members, gainsharing is having a negative impact, and they have to fight to make sure adequate care is provided to the complex patient.161
For gainsharing to be successful, it must be regulated, and it cannot have an adverse effect on complex patients.162 Proper legal reform could set standards to prevent gainsharing programs from making the crucial mistake of ignoring patient complexity.
C. Concerns for Physicians
When looking at gainsharing from a physician’s perspective, there are a number of concerns that differ from those of hospitals and patients. Physicians are the backbones of gainsharing programs because they “are the central focus of each patient’s care and are in the best position to improve care while reducing cost.”163 Managed Care Organizations (MCOs)164 and networking companies have been largely demonstrative of the large cost of health care, but these organizations have not demonstrated an improvement in quality, thus indicating that they are not the most effective leaders in the shift to bundle payments.165 MCOs only have a relationship with a patient for a few days, whereas physicians have regular face-to-face relationships with patients that can last for months, years, or even decades.166 Gainsharing can pose a variety of concerns for physicians, perhaps because of those longer-lasting relationships that they tend to establish with patients.167
First, gainsharing could possibly “sway even the most altruistic, high-minded surgeon to put financial gain above benefits to their patients.”168 Both physicians and government regulators are concerned about this.169
Another physician concern is that their unfamiliarity with any substituted medical instruments and implants that they may be required to use in the program will be associated with them performing lower-quality procedures.170 An alternative suggestion to avoid the problem of substituted supplies is for hospitals use a “collaborative strategy” in which products are selected by rank-and-file nurses and physicians, rather than purchasing managers who are only concerned about costs.171 This method could be used for supplies beyond instruments and implants, including drapes, gowns, masks, and gloves.172 In addition, quality can be just as much of a vital factor when it comes to cost savings and price reduction — for example, Dr. Dwight Tyndall recalls seeing health systems switch to lower quality gloves but then ending up buying twice as many.173 This anecdote shows that using better quality products can produce cost savings over time.
Time is another concern for physicians. Many are concerned that after hospitals have successfully reduced costs, the “target prices will be lowered and the opportunity for savings will diminish.”174 In a gainsharing program where physicians change their supplies to another brand of implants, instruments, or devices that saves the hospital money, and the physician shares in the financial benefit, what is the effect after the savings have already been realized? Physicians want a program that can guarantee earnings over the long term.175 It is important to have regulations that will protect the physicians participating in these programs.
The physician “determines the indications for surgery . . . , performs the surgery,” and bears the risk of medical malpractice.176 For gainsharing to be successful, there must be communication between the physician and the hospitals. The hospitals must be willing to listen to physician suggestions. This, in turn, will allow for better leadership once gainsharing is implemented. Morale and confidence in the gainsharing program is important, and the entire medical staff must understand the parameters and be on board.177 Mandatory safeguards must be implemented to ensure education on the subject of gainsharing and protect the physicians from the concerns discussed above.
The legal guidelines currently controlling hospital gainsharing are inconsistent, inefficient, and difficult for the government to enforce and for hospitals to adhere to. Gainsharing programs may violate the Anti-Kickback Statute178 and must follow specific guidelines to comply with the CMPL179 and the Stark Law.180 A program can only have complete security and protection from legal challenges if it goes through the long and expensive process of receiving OIG approval.181 Even if the OIG deems a program to possibly be in violation of a law, it often chooses to not take enforcement action because of specific safeguards a gainsharing program has in place.182 Thousands of physicians currently participate in gainsharing programs,183 and not all programs have been approved through OIG advisory opinions.184
Part V of the article proposes amendments to the existing legal framework that will protect hospitals, patients, and physicians. The proposal is broken into two parts. The first section proposes revisions to the framework established by the OIG’s advisory opinions. It also critiques current safeguards commonly approved by the OIG in advisory opinions. The second section proposes new mandatory safeguards not addressed by the OIG, but necessary for optimal results. Each of these recommendations recognizes concerns that will remain within gainsharing programs and will need to be continuously researched even with the proposed mandatory safeguards in place.
A. Revisions to OIG Approved Safeguards
1. Disclosure of the Gainsharing Program
Many OIG-approved programs contain the safeguard that disclosure of a gain- sharing program “must be made to the patient before he or she is admitted to the [m]edical [c]enter. If pre-admission disclosure is impracticable, however, the disclosure must be made before the patient consents to surgery.”185 The extent of this disclosure is not enough. This article proposes that disclosure be made before the patient’s surgery to both the patient and the patient’s family — with the patient’s consent — and then again after the procedure has taken place.186 Upon a patient’s request, the hospital should also be required to provide the patient with material detailing the applicabe cost saving measures.187 The Department of Health and Human Services (HHS)188 would be responsible for providing guidance as to this disclosure. Often, a patient is in pain or a surgery must take place immediately, and the patient does not have the time or the ability to be educated about gainsharing programs.189 Thus, it should fall to the hospital to provide a patient with this crucial information.
The major concern surrounding disclosure is the patient’s mental ability to understand gainsharing. Patients are often older and may have conditions, such as dementia,190 that prevent them from understanding the complexity of gainsharing.191 The same goes for patients who are intellectually disabled. If a patient is unable to understand the parameters of gainsharing, she would not be able to discern whether her quality of care is being diminished and when she must “fight back,” so to speak.192 For this reason, the mandatory safeguard must also include disclosure to family members. The hospital must adequately monitor its gainsharing programs as well as the safeguards surrounding the programs, which are addressed below.
2. Oversight Committees
The OIG in its advisory opinions has also approved of gainsharing programs that use “oversight committee[s].”193 This article proposes that programs instead use an administrator whose sole job is to oversee gainsharing programs. When a hospital implements a gainsharing program, it is important to have a staff member knowledgeable on the subject who has the ability to oversee its progress and take disciplinary action when necessary.194 Under this article’s proposal, the gainsharing administrator would have this duty and authority.
The one major concern surrounding this safeguard is the following: how can programs prevent a hospital from putting added pressure on the administrator to report positive results? This could be prevented by making the administrator a third party, such as an HHS employee. Outsourcing would help to eliminate the added pressures from the hospitals.195
3. Monitoring and Documentation
A third common OIG-approved safeguard is adequate monitoring and documentation of both patient treatment and the costs of procedures.196 This monitoring and documentation safeguard must be expanded. Under the proposed mandatory safeguard, a disincentive for discharging should be added to gainsharing programs as a result of the monitoring and documentation. Using monitoring, documentation, and historical numbers to create a threshold would create a bright-line standard for a physician’s quality of care.197 For example, if a hospital implements a gainsharing program, in order to discharge a patient earlier for cost savings, that patient’s medical stats or charts must meet a certain threshold.198 For this to be possible, monitoring and documentation of the patient’s improving health is necessary.199 To set the threshold, hospitals will first need to use historical statistics, and the threshold may be adjusted once the safeguards are in place and positive results become apparent. If the patient’s health stats or health quality fall below the given thresh- old, the patient may not be discharged.200 If a physician continually fails to meet this quality of care level, then he or she will not receive the gainsharing kickback.201
Practicality is the greatest concern surrounding this safeguard for two reasons. First, it would be difficult for one person, or even a group of people, to oversee every chart for every patient. Second, there is no existing formula to determine what the exact quality of care must be to allow for discharge. These numbers are difficult to produce and are often determined on a subjective standard.202 To perfect this safeguard there will need to be continuous research into best practices for discharging patients. Nonetheless, having a disincentive for discharging, even if it begins at a minimal standard, will protect patients more than the current standard.
4. Creditable Medical Support
Hospitals using gainsharing programs often choose different methods of cost savings.203 To ensure that the cost saving methods will not negatively impact the patient, the OIG has approved of programs that “conducted an evaluation and clinical review” of the medical products the hospital plans to substitute for older, costlier products.204 The products, devices, and supplies that are regularly available to physicians must remain available throughout the program.205 That way, physicians have the ability to use their best medical judgment on whether or not the cost-reduction product would be just as beneficial for the patient.206
This proposed mandatory safeguard aligns with several of those suggested in the OIG advisory opinions,207 and this article proposes that it be made a mandatory safeguard under this article’s recommended amendments to the existing legal framework. This gives the physician discretion to use his or her medical judgment and protects the patient against possible complications. Implementing this safeguard may in fact allow the gainsharing program to be as efficient as possible.208 However, this proposal is not without concerns. The greatest concern is determining what qualifies as an equivalent substitution of a medical product. When substituting products, devices, and supplies, many factors other than the initial effect on the patient must be taken into account, including quality versus quantity and the physician’s experience using the product.209
5. Protection Against Physician “Cherry Picking”
The OIG advisory opinions also commonly approve of programs that provide a safeguard to combat physician “cherry-picking,” a term referring to a situation where physicians choose or refer a patient specifically because of the hospital’s gainsharing program and the complexity of the patient.210 These safeguards may limit the program to physicians already on medical staff and may not allow the aggregate payment made to the physicians to exceed fifty percent of the projected cost savings.211 Under this article’s proposed amendment to the current legal framework, this safeguard would be made mandatory because hospitals and patients can be unintentionally penalized without it.212 Without this safeguard, hospitals could potentially use their gainsharing programs to recruit physicians, and physicians could use the gainsharing program to discriminate against complex patients.
Even with this safeguard in place, money still ultimately controls the incentive for physician participation.213 This concern will remain throughout every gainsharing program, and it remains important to continue to research and discover new ways to measure quality of care and create a mandatory care threshold. When money is involved as an incentive, ethical concerns will remain.
B. Proposed Additional Safeguards
1. Education Program
Education is an important and necessary safeguard that is not addressed in the OIG-approved programs. Under the proposed safeguards, everyone involved in a gainsharing program must attend continued education classes about gainsharing. With gainsharing’s fast-growing pace and the need for continued research, it is important for physicians to stay educated on the subject in order to provide protection to themselves and to their patients.214 For a gainsharing program to reach its maximum potential, everyone involved must understand the goals, risks, and consequences of participating in a gainsharing program. It is important that those involved are accepting of the program.215 Under this article’s proposal, HHS would provide gainsharing education classes that all hospital staff involved in a gainsharing program would be required to attend.
This program would thoroughly educate participants on what gainsharing is, the risks that will be faced by staff if they choose to participate, and the specific measures the hospital is taking in order to increase cost savings. It would also provide an emphasis on quality of care and how it will be measured. Physicians are the source that drives the success of a gainsharing program.216 Therefore, making sure that they and their colleagues are knowledgeable about the program is central to helping the program succeed.
The implementation of a mandatory education program creates multiple concerns. First, how do we ensure that each education program is taught efficiently? Sometimes the success of a gainsharing program, or the enthusiasm to participate in one, rides on the individual who is presenting the program. Second, there is no uniform standard or single model that gainsharing follows.217 So, how does the health care system create an education program tailored to each hospital’s individual needs? If a gainsharing program does not properly assess what is needed for a “well-tailored design,” then the pro- gram will most likely fail.218 Lastly, a mandatory education program will be an added cost. Will this defeat the ultimate purpose of cost savings? And what do smaller, private, and rural hospitals do if they cannot afford the education system? This could create an added burden and contribute to the competitive aspect of physician recruiting.
2. Patient and Peer Review
Another mandatory safeguard that is not stated in the OIG advisory opinions — but that this article recommends implementing — is patient and peer review. Each hospital should administer optional surveys to patients of gainsharing programs and require mandatory peer review of physicians. It is important that the hospital spends time reviewing the data because the hospital needs to measure both cost savings and the standard of care their patients are receiving in order to gauge whether their gainsharing program formula is truly successful.219 The surveys must be administered after discharge and rehabilitation has been completed, and the peer review must be given on a quarterly basis. Consequently, the evaluation should be conducted often and with consistency.
The difficulty with patient surveys is that only certain types of people tend to take surveys.220 Another difficulty is that a patient may also take into account irrelevant factors when providing feedback via a survey, such as whether she liked the food she received or whether she thought that her bed was comfortable.221 This could sway statistics.222 Peer review will allow for a more educated review, but there is always the fear that physicians pressure the medical staff reviewing them to produce positive reviews.223 If the physicians regularly work with those giving the review, then this could create an uncomfortable work environment.
3. Target Episode Spending
To ultimately protect the quality of care, the final proposal in this article is a mandatory safeguard that creates a universal method of determining target episode spending.224 The OIG, in its advisory opinions, has not taken a strong enough stance to protect against the use of inadequate historical numbers in determining target episode spending.225 Based on the information gathered from the BPCI and CJR models,226 target episode spending must be deter- mined by the hospital’s own spending and not on a regional scale. As stated above, studies have revealed that the method of determining target price will have an impact on whether or not a hospital meets its gainsharing goals.227 When the target prices are set using hospital historic spending, they reflect the relative year-to-year consistency of patient complexity within hospitals.228 This protects patients because the historical numbers used to create the threshold that the gainsharing program must meet are specifically tailored to a hospital.229
To further perfect the target episode spending figure, hospitals must also reset their base each year based on statistics from the previous year. This safe- guard was approved in the most recent gainsharing advisory opinion issued by the OIG, and it eliminates the concerns for multiple-year gainsharing arrangements.230 Under this proposal, hospitals would no longer be able to carry over savings from previous years that could result in unlawful kickbacks; this, in turn, creates more accurate statistics, thereby protecting the patients.231
The concerns regarding quality of care are not eliminated with mandatory target spending. The concern remains that hospitals will continue to be punished for the acceptance of complex patients.232 Moreover, it is impossible to predict the exact types of patients a hospital will admit each year and the types of complications that may occur. Regardless, target episode spending is a necessary preventative action and can help to achieve the goal of cost savings and better-quality care.233
Hospital gainsharing is a business model, and its use is rapidly growing in the U.S. healthcare system. On the one hand, it has shown consistent rates of success in saving health costs and decreasing waste, and several programs have gained government agency approval. On the other hand, gainsharing is not without negative consequences. Statistically, while gainsharing leads to a decrease in health costs, there have been instances in which it has decreased the quality of care. This poses a threat to hospitals, patients, and physicians. The current legal identity surrounding gainsharing is unacceptable, as it provides neither adequate protection nor concrete legal parameters that allow gainsharing to move in a safe and successful progression. Mandatory safeguards — as proposed in this article — will ensure protection until legislators take a clear stance on the subject. The OIG has approved common safeguards, and this article both agrees with and critiques them, but also recognizes that a significant amount of more research must follow, even once the proposed mandatory safeguards are in place.
- Timothy Hoff, The Battle of the Bundle: Lessons from My Mother’s Partial Hip Replacement, 36 Health Affairs 1511, 1512 (2017).
- Lauren F. Friedman, Jonathan Bush: We Can Fix Healthcare in the U.S.—If We Stop Pretending It’s Not a Business, Bus. Insider (Sept. 9, 2014), http://www.businessinsider.com/jonathan-bushs-health-care-ideas-2014-9 [https://perma.cc/PM7H-9KC2] (internal quotations omitted).
- See id.
- See Brian Fung, How the U.S. Health-Care System Wastes $750 Billion Annually, Atl. (Sept. 7, 2012), https://www.theatlantic.com/health/archive/2012/09/how-the-us-health-care-system-wastes-750-billion-annually/262106/ [https://perma.cc/CK66-YVUU].
- See Gail R. Wilensky et al., Gain Sharing: A Good Concept Getting a Bad Name?, 26 Health Aff. w 58, w 58 (2006) (citation omitted).
- See id. (citation omitted).
- See Fung, supra note 4. According to a report by the Institute of Medicine, encouraging physicians to order fewer procedures could save an extensive amount of money. Id. For example, a patient need not receive more than one colonoscopy every ten years, a patient who faints but does not seize does not need a $2,000 MRI, and a patient with early complaints of back pain should avoid costly imaging studies. Id.
- See Afshin A. Anoushiravani & Ryan M. Nunley, Gainsharing Strategies, Physician Champions, Getting Physician Buy in, 32 J. Arthroplasty 1723, 1723–24 (2017) (providing an explanation of what gainsharing is in the context of the health care industry).
- See Tom Blasco, Hospital-Surgeon Gain Sharing Programs: Considerations and Cautions, Surgical Directions (Nov. 8, 2018), https://blog.surgicaldirections.com/hospital-surgeon-gain-sharing-programs-considerations-and-cautions [https://perma.cc/J6K7-HKSM].
- New Words 117 (Orin Hargraves ed., 2004).
- Anoushiravani & Nunley, supra note 8, at 1723.
- Dow Scott & Paul Davis, Revolutionizing Workplace Culture Through Scanlon Gain Sharing, in The Selected Works of Dow Scott 211, 211 (2015).
- Anoushiravani & Nunley, supra note 8, at 1724 (citations omitted).
- See, e.g., Jo Surpin & Anthony Stanowski, 5 Steps to Physician Alignment Using Gainsharing, Becker’s Hosp. Review (Nov. 25, 2014), https://www.beckershospitalreview.com/hospital-physician-relationships/5-steps-to-physician-alignment-using-gainsharing.html [https://perma.cc/QC6N-E6Z3].
- See Anoushiravani & Nunley, supra note 8, at 1727.
- Scott & Davis, supra note 12, at 212.
- See William L. Healy, Gainsharing: A Primer for Orthopaedic Surgeons, 88-A J. Bone & Joint Surgery 1880, 1880 (2006).
- See Theresa M. Welbourne & Luis R. Gomez Mejia, Gainsharing: A Critical Review and a Future Research Agenda, in Ctr. for Advanced Human Res. Studies Working Paper Series 3 (1995).
- Anoushiravani & Nunley, supra note 8, at 1724 (citation omitted).
- See Anoushiravani & Nunley, supra note 8, at 1724 (citation omitted); see also Scott & Davis, supra note 12, at 213–14 (providing an analysis of the Scanlon gainsharing program and how it revolutionized the workplace in many fields).
- See Larry Hatcher & Timothy L. Ross, From Individual Incentives to an Organization-Wide Gainsharing Plan: Effects on Teamwork and Product Quality, 12 J. Organizational Behav. 169, 169 (1991) (“Traditionally, individual incentive systems have been among the most popular means of tying pay to the performance of production workers in manufacturing organizations . . . .”) (citation omitted).
- See id. (citations omitted).
- See id. (citation omitted).
- See id. at 169–70 (citations omitted).
- See id.
- See id. (citations omitted).
- Scott & Davis, supra note 12, at 212.
- Rosemary Grandusky & Kathy Kronenberg, Back to Basics: Hospital-Physician Gainsharing, Tr. Mag., Mar. 2006, at 1.
- See Gainsharing and Shared Savings, Am. Acad. of Pediatrics, https://www.aap.org/en-us/Documents/practicet_gainsharing_and_shared_savings.pdf [https://perma.cc/44E9-MKM2] (last visited Jan. 9, 2018).
- E.g., Healy, supra note 17; Anoushiravani & Nunley, supra note 8, at 1724 (citation omitted).
- Cf. Healy, supra note 17.
- See Jo Surpin & Anthony Stanowski, 6 Essential Differences Between Gainsharing and Shared Savings Programs, Becker’s Hosp. Review (Sept. 23, 2014), https://www.beckershospitalreview.com/finance/6-essential-differences-between-gainsharing-and-shared-savings-programs.html [https://perma.cc/2QWN-V4MG].
- See Healy, supra note 17.
- See Wilensky et al., supra note 5, at w 60.
- See Healy, supra note 17. “Physicians can also participate in multidisciplinary, cooperative hospital activities, such as developing clinical pathways, managing departmental budgets, directing supply-chain management programs, developing joint ventures for subspecialty care, building hospital pharmacy formularies, administering managed-care products, and assisting with case management and discharge planning.” Id.
- See Robert G. Coates, The New Jersey Gainsharing Experience, Physician Executive J. 46, 50–51 (2014) (“Many of the cost-saving measures that [the hospital] used to succeed in gainsharing were expansions of programs that [the hospital] had already instituted in an effort to save costs.”).
- See Jacqueline LaPointe, Understanding the Basics of Bundle Payments in Healthcare, Revcycle Intelligence (July 14, 2016) [hereinafter Understanding the Basics of Bundle Payments], https://revcycleintelligence.com/news/understanding-the-basics-of-bundled-payments-in-healthcare [https://perma.cc/3DPX-HDRJ]; see also Jacqueline LaPointe, The Difference Between Medicare and Medicaid Reimbursement, Revcycle Intelligence (June 9, 2017), https://revcycleintelligence.com/features/the-difference-between-medicare-and-medicaid-reimbursement [https://perma.cc/D5AR-6TXJ].
- See Understanding the Basics of Bundle Payments, supra note 41.
- See id.
- See id. (stating that bundled payment systems allow providers whose episode of care falls below a set price to keep the difference, thereby incentivizing cost effectiveness).
- See Healy, supra note 17.
- See Holly Korda & Gloria N. Eldridge, How Can We Bend the Cost Curve?, 48 Inquiry J. 277, 279–80, 284 (2011) (discussing a South Bend, Wisconsin program where a self-insured employer paid bonuses to patients who had “radiology examinations completed at lower-cost centers. Insured employees [were] paid $500 bonuses for computed tomography and magnetic resonance imaging scans done at a lower-cost center.”) (citation omitted).
- See Healy, supra note 17.
- See Mark I. Froimson et al., Bundled Payments for Care Improvement Initiative: The Next Evolution of Payment Formulations, J. Arthroplasty 28 Suppl. 1 157, 158 (2013).
- See id.
- See id.
- Alexander S. McLawhorn & Leonard T. Buller, Bundled Payments in Total Joint Replacement: Keeping Our Care Affordable and High in Quality, 10 Current Rev. Musculoskeletal Med. 370, 372 (2017) (citation omitted).
- See id. at 371 (discussing an Acute Care Episode program where physician-hospital organizations negotiated payments) (citations omitted).
- See id. (discussing the CJR gainsharing model where the covered episode of care included physician and outpatient services, medical equipment, and medicine).
- See id.
- See Coates, supra note 40, at 46, 48; see also McLawhorn & Buller, supra note 52 (citations omitted).
- See Coates, supra note 40, at 48.
- Anoushiravani & Nunley, supra note 8, at 1724 (citation omitted).
- See Bricker & Eckler, LLP, Proposed Gainsharing Program Passes Federal Antitrust Review, Lexology (Jan. 31, 2013) [hereinafter Bricker & Eckler], https://www.lexology.com/library/detail.aspx?g=d99cdb6e-4744-4685-933f-4d770f4eec18 [https://perma.cc/7QTK-A4UZ] (discussing an instance where the Department of Justice declined to challenge a New York gainsharing program as long as it complied with the Civil Monetary Penalties Law, the Physician Self-Referral Law, and the Anti-Kickback Statute, which do not specifically apply to hospitals, but to the health care industry in general). See infra Part II(D) for an explanation of those laws.
- See Wilensky et al., supra note 5, at w 63. These examples relate to the concern that a physician will choose or refer a hospital because of a hospital’s gainsharing program, therefore unintentionally penalizing a hospital that chooses not to have a gainsharing program available.Cf. id.
- 42 U.S.C. § 1320a-7a (2012); see also Bricker & Eckler, supra note 59.
- Id. § 1320a-7b(b); see also Bricker & Eckler, supra note 59.
- Id. § 1395nn; see also Bricker & Eckler, supra note 59.
- Id. § 1320a-7a(b).
- See Dep’t of Health & Human Serv., Office of Inspector Gen., Special Advisory Bulletin on Gainsharing Arrangements and CMPs for Hospital Payments to Physicians to Reduce or Limit Services to Beneficiaries (1999) [hereinafter Special Advisory Bulletin on Gainsharing Arrangements].
- Jim Hahn & Kirstin B. Blom, Cong. Research Serv., R43962, The Medicare Access and Chip Reauthorization Act of 2015 (MACRA; P.L. 114-10) 1 (Nov. 10, 2015).
- See Medicare Access and CHIP Reauthorization Act of 2015, Pub. L. No. 114-10, § 512, 129 Stat. 87, 170 (2015).
- See Medicare and State Health Care Programs: Fraud and Abuse; Revisions to Safe Harbors Under the Anti-Kickback Statute, and Civil Monetary Penalty Rules Regarding Beneficiary Inducements and Gainsharing, 79 Fed. Reg. 59,717 (Oct. 3, 2014) (to be codified at 42 C.F.R. pts. 1001, 1003) (a proposed rule to protect “certain [health care] payment practices and business arrangements” from criminal prosecution or civil sanctions).
- 42 U.S.C. § 1320a-7b(b)(1)-(2).
- Id. § 1320a-7b(a).
- See Civil Monetary Penalties and Affirmative Exclusions, U.S. Dep’t of Health & Human Serv., Office of Inspector Gen., https://oig.hhs.gov/fraud/enforcement/cmp/index.asp [https://perma.cc/4NJF-LAAD] (last visited July 30, 2019).
- See Medicare and State Health Care Programs, 79 Fed. Reg. at 59,717.
- 42 U.S.C. §§ 1395nn(a)–(b).
- See Examining the Stark Law: Current Issues and Opportunities Before the S. Comm. on Finance, 114th Cong. 35 (2016).
- Special Advisory Bulletin on Gainsharing Arrangements, supra note 65.
- See id. (citation omitted).
- Id. (“The civil money penalty (CMP) set forth in section 1128A(b)(1) of the [Social Security] Act prohibits any hospital or critical access hospital from knowingly making a payment directly or indirectly to a physician as an inducement to reduce or limit services to Medicare or Medicaid beneficiaries under the physician’s care.”).
- Anoushiravani & Nunley, supra note 8, at 1724 (citation omitted).
- U.S. Dep’t of Health & Human Serv., Office of Inspector Gen., Advisory Opinion 01-1 (2001) [hereinafter Advisory Opinion 01-1]. Safeguards included utilizing “objective historical and clinical measures reasonably related to the practices and the patient population at the [h]ospital to establish a floor below which no savings would accrue to the [s]urgeon [g]roup.” Id. at 3. In addition, the hospital “established thresholds below which no cost savings will be credited.” Id. at 4.
- U.S. Dep’t of Health & Human Serv., Office of Inspector Gen., Advisory Opinion 17-09 (2018) [hereinafter Advisory Opinion 17-09].
- See, e.g., id., at 2–3 (issuing opinion on incentive arrangement for neurosurgeon group); U.S. Dep’t of Health & Human Serv., Office of Inspector Gen., Advisory Opinion 16-13 2-3, 5 (2016) (issuing opinion on cost-sharing and reimbursement program for medical study participants); U.S. Dep’t of Health & Human Serv., Office of Inspector Gen., Advisory Opinion 02-1 1-2 (2002) (issuing opinion on program involving “financially needy Medicare beneficiaries”).
- Advisory Opinion 01-1, supra note 79, at 14–15.
- See Grandusky & Kronenberg, supra note 30, at 1–2.
- See id. at 2-3 (quoting a Jones Day partner discussing that the key to a successful gainsharing program is to structure the program such that it conforms with OIG advisory opinions).
- Id. at 3.
- See id. at 4.
- Sean Hopkins et al., Lessons Learned from Implementation of Gainsharing, Healthcare Fin. Mgmt. Ass’n (Mar. 2015), http://www.appliedmedicalsoftware.com/wp-content/uploads/2015/03/0315_HFM_Hopkins.pdf [https://perma.cc/GM7R-3MEA].
- See Scott & Davis, supra note 12, at 212 (citations omitted).
- See Fung, supra note 4 (stating that the U.S. loses $750 billion annually to “siphons” in the health care system).
- I. Michael Leitman et al., Quality and Financial Outcomes from Gainsharing for Inpatient Admissions: A Three-Year Experience, J. Hosp. Med., 2010, at 1.
- See Robert L. Masternak, Compensation: Incentive Plans: Gainsharing, HR Guide, https://www.hr-guide.com/data/G443.htm [https://perma.cc/VXA7-JSY5] (last visited Mar. 14, 2018).
- See id. (listing enhancing employee focus, increasing employee feeling of ownership, and encouraging teamwork as benefits of gainsharing).
- See supra Part II(B)-(C) (discussing the mechanics of gainsharing).
- See supra Part II(B)-(C) (discussing the mechanics of gainsharing).
- Masternak, supra note 91.
- See, e.g., New Jersey Hospitals Save $113M with Gainsharing Project, Becker’s Hosp. Rev. (July 28, 2014), https://www.beckershospitalreview.com/finance/new-jersey-hospitals-save-113m-with-gainsharing-project.html [https://perma.cc/ZJ5L-M4LF] (stating that a New Jersey gainsharing program promoted hospital-physician collaboration and resulted in significant savings for the hospital); Surpin & Stanowski, supra note 14 (discussing gainsharing models in Maryland, Pennsylvania, New York, and New Jersey and the benefits of gainsharing).
- See generally About NJHA, N.J. Hosp. Ass’n, http://www.njha.com/about-njha [https://perma.cc/K2V5-5M46] (last visited Jan. 10, 2017) (providing a primer on the organization).
- See Coates, supra note 40, at 46, 51; see also How a N.J. ‘Gainsharing’ Program Pioneered Bundled Pay, Advisory Bd. (Feb. 21, 2013) [hereinafter N.J. Gainsharing Program Pioneer], https://www.advisory.com/daily-briefing/2013/02/21/how-a-nj-gainsharing-program-pioneered-bundled-pay [https://perma.cc/M6VW-56S8].
- See Coates, supra note 40, at 46.
- See id.
- Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 108–173, § 646, 117 Stat. 2066, 2324 (2003).
- See Coates, supra note 40, at 46.
- Id. at 48.
- See id.
- See id.
The program was designed by [the] CMS to be budget neutral. [The] CMS would examine payments for all medical care within an episode of care, which was two weeks before admission and [ninety] days post discharge. The purpose of this was to be sure that lowering the cost of care and length of stay on the inpatient stay would not significantly add to the cost of post-acute care.
- N.J. Gainsharing Program Pioneer, supra note 98.
- Coates, supra note 40, at 48 (where savings amounted to $767 per hospital admission).
- Id. at 47.
- Id. at 48.
- Id. at 47. Figure 1 starts two years after the initial base year and continues through the conclusion of the pilot program in 2012. Id. at 47, 50. It compares the average cost reduction per patient, the total number of incentives paid, and the decreased lengths of stay. Id. at 47.
- Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010).
- Froimson et al., supra note 49, at 158–59.
- Coates, supra note 40, at 50.
- See Patient Protection and Affordable Care Act §§ 3012, 3023, 124 Stat. at 380, 399 (authorizing a working group on health care quality and a national pilot program on bundling).
- Froimson et al., supra note 49; see also Sheryl Gay Stolberg & Robert Pear, Obama Signs Health Care Overhaul Bill, with a Flourish, N.Y. Times (Mar. 23, 2010), https://www.nytimes.com/2010/03/24/health/policy/24health.html [https://perma.cc/8YFR-K56Z].
- Froimson et al., supra note 49.
- Id. at 159 (internal quotation marks omitted).
- See McLawhorn & Buller, supra note 52, at 371 (citation omitted).
- Rich Daly, Report Finds Mixed Savings Results for BPCI, Healthcare Fin. Mgmt. Ass’n (Sept. 19, 2016), https://www.hfma.org/Content.aspx?id=50078 [https://perma.cc/67B8-GNAR].
- See id.
- Id. (quoting Elliott Fisher, MD, director of the Dartmouth Institute for Health Policy, from a JAMA editorial on the report’s findings on joint replacement).
- Bundled Payments for Care Improvement (BPCI) Initiative: General Information, Ctr. for Medicare & Medicaid Serv. (Apr. 17, 2019), https://innovation.cms.gov/initiatives/bundled-payments/ [https://perma.cc/CCF6-LA5F].
- Stephen B. Murphy et al., The Physician as the Provider at Risk: Rolling the Dice, 31 J. Arthroplasty 938, 942 (2016).
- Amol S. Navathe et al., Cost of Joint Replacement Using Bundled Payment Models, 177 J. Am. Med. Ass’n Internal Med. 214, 215 (2017) (citation omitted).
- Matthew J. Press et al., Medicare’s New Bundled Payments: Design, Strategy, and Evolution, 315 J. Am. Med. Ass’n 131, 131–32 (2016); Hospitals That Participated in Joint Replacement Bundles Saved Nearly $1K Per Patient, Advisory Bd. (July 9, 2019) [hereinafter Hospitals Participating in Joint Replacement Bundles], https://www.advisory.com/daily-briefing/2019/07/09/cjr [https://perma.cc/GE2F-VJVC].
- See Chandy Ellimoottil et al., Medicare’s New Bundled Payment for Joint Replacement May Penalize Hospitals That Treat Patients Medically Complex Patients, Health Aff., Sept. 2016, at 2, 4.
- McLawhorn & Buller, supra note 52.
- Id. (citation omitted).
- See supra Part III (discussing gainsharing benefits and providing examples of successful gainsharing programs).
- See Ellimoottil et al., supra note 128, at 1.
- See Improving Care for High-Need, High-Cost Patients, Am. Hosp. Ass’n, http://www.hpoe.org/Reports-HPOE/2017/improving-care-for-high-need-high-cost-patients.pdf [https://perma.cc/8HFV-QDLM] (last visited Aug. 19, 2019) (stating that complex, high-need patients are high-cost).
- See Ellimoottil et al.,supra note 128, at 6.
- See id. at 2; McLawhorn & Buller, supra note 52, at 373.
- See Jennifer Whitlock, How Long Will Recovery Take After Surgery? When Will I Feel Like Myself Again?, VeryWell Health (June 27, 2019), https://www.verywellhealth.com/how-long-will-recovery-take-after-surgery-3156870 [https://perma.cc/WW6H-387S].
- Ellimoottil et al., supra note 128, at 3, 9.
- See id. at 4, 5. Reconciliation payments include the year-end bonuses that hospitals receive and disburse to physicians for cost savings under the CJR model. See id. at 2.
- Id. at 4.
- See CJR Target Prices, Med. Mgmt. Plus Inc. (June 6, 2017), http://mmplusinc.com/news-articles/item/cjr-target-prices [https://perma.cc/P9BQ-6QE3] [hereinafter CJR Target Prices].
- Ellimoottil et al., supra note 128, at 4.
- See id. at 6.
- Id. at 5.
- Id. at 6.
- See McLawhorn & Buller, supra note 52, at 373, 375 (“As bundled payments move toward regional pricing, preserving access to care for patients with high comorbidity burdens and those requiring more complex care is a lingering concern.”).
- See Todd DeVree, Physician Perspectives on Gainsharing, HealthTrust (June 5, 2017), https://healthtrustpg.com/clinical-performance/physician-perspectives-on-gainsharing [https://perma.cc/JT2T-KTVL].
- Hoff, supra note 1, at 1511.
- Timothy Hoff is a D’Amore-McKim School of Business Professor of Management, Healthcare Systems, and Health Policy at Northeastern University and a Visiting Associate Fellow at Green-Templeton College, University at Oxford. Timothy Hoff, Ne. Univ. D’Amore-McKim Sch. Bus., http://www.damore-mckim.northeastern.edu/faculty/h/hoff-timothy [https://perma.cc/6BBH-VJDD] (last visited Jan. 17, 2018).
- Hoff, supra note 1, at 1511, 1514.
- Id. at 1511–12.
- See id. at 1512.
- See id.
- See id. at 1512–13.
- See id. at 1512–14; cf. Murphy et al., supra note 125, at 943 (“Another concern with these emerging programs surrounds frail and older patients.”).
- See Hoff, supra note 1, at 1512–14.
- Cf. id. at 1512 (referring to a gainsharing program as a “quick-moving assembly line.”).
- See id. at 1514.
- See Murphy et al., supra note 125, at 943 (“Moving forward, we must ensure that these [complex] patients have access to the care they require and deserve.”).
- Id. at 938.
- Managed Care Organization (MCO) Law and Legal Definition, U.S. Legal, https://definitions.uslegal.com/m/managed-care-organization-mco/ https://perma.cc/L2KV-82NR] (last visited Mar. 16, 2017):
A managed care organization (MCO) is a health care provider or a group or organization of medical service providers who offers managed care health plans. It is a health organization that contracts with insurers or self-insured employers and finances and delivers health care using a specific provider network and specific services and products.
- See Murphy et al., supra note 125, at 938, 941 (citations omitted).
- See id. at 939.
- See DeVree, supra note 148 (discussing common physician concerns with gainsharing, including the ramifications of diverting business to hospitals participating in gainsharing, the exclusion of medical device representatives, and the harms of monetary incentives).
- See Gainsharing and Other Surgeon/Hospital Partnering: What’s Legal, What’s Not?, Healio: Orthopedics Today (Mar. 2006), https://www.healio.com/orthopedics/business-of-orthopedics/news/print/orthopedics-today/%7B90afbbe9-23dc-4b80-a499-4fb1863b8eba%7D/gainsharing-and-other-surgeonhospital-partnering-whats-legal-whats-not [https://perma.cc/A5TY-6YVU] (“Although government regulators acknowledge that many legitimate business relationships are called into question under the existing statutes and rules, the fear of abuse is seen as a greater potential harm.”); see also DeVree, supra note 148.
- See Healy, supra note 17, at 1882–83.
- DeVree, supra note 148 (reporting on a gainsharing-alternative proposal from Dwight Tyndall, a partner at the Center for Minimally Invasive Surgery).
- Murphy et al., supra note 125.
- See DeVree, supra note 148.
- Murphy et al., supra note 125, at 939.
- See id. at 939, 943.
- 42 U.S.C. § 1320a-7b(b)(2); see also supra Part II(D) (providing a more in-depth analysis of laws relevant to gainsharing).
- 42 U.S.C. § 1320a-7a; see also supra Part II(D).
- 42 U.S.C. § 1395nn(a) (providing for limitations on physician referrals); see also supra Part II(D).
- See supra Part II(D) (discussing the process of obtaining an OIG advisory opinion).
- See, e.g., Advisory Opinion 17-09, supra note 80, at 11.
- Cf. Hospitals Participating in Joint Replacement Bundles, supra note 127 (stating that as of February 2018, about 465 hospitals were part of the CJR program, thereby inferring that thousands of physicians are part of gainsharing programs).
- See supra Part II(D) (stating that OIG approval of a gainsharing program is not mandatory).
- E.g., Advisory Opinion 17-09, supra note 80, at 6.
- Many gainsharing cost saving practices take place after or outside of the procedure itself. See Healy, supra note 17, at 1880, 1882 (describing a myriad of gainsharing practices beside surgery, including determining length of stay, ordering diagnostic tests, and participating in cooperative hospital activities).
- This proposal is similar to that stated in OIG advisory opinions. Advisory Opinion 17-09, supra note 80, at 6 (“The patient must be given an opportunity, if desired, to review the details of the [a]rrangement and to learn the specific cost-saving measures applicable to his or her surgery.”).
- About HHS, U.S. Dep’t of Health & Human Serv., https://www.hhs.gov/about/index.html [https://perma.cc/9UBZ-2AHK] (last visited Mar. 18, 2018) (“It is the mission of the U.S. Department of Health & Human Services (HHS) to enhance and protect the health and wellbeing of all Americans. We fulfill that mission by providing for effective health and human services and fostering advances in medicine, public health, and social services.”).
- See Hoff, supra note 1, at 1512, 1514 (describing the negative experience of a gainsharing patient suffering from dementia and her inability to understand her part in the gainsharing program).
- What Is Dementia?, Alzheimer’s Ass’n, https://www.alz.org/what-is-dementia.asp [https://perma.cc/2WLM-XPHW] (last visited Mar. 18, 2018) (“Dementia is a general term for a decline in mental ability severe enough to interfere with daily life.”).
- See Hoff, supra note 1, at 1511, 1514 (discussing a case where an elderly patient with dementia experienced subpar care in a hospital participating in gainsharing).
- Cf. id. at 1514.
- See, e.g., Advisory Opinion 17-09, supra note 80, at 6 (“To confirm the [a]rrangement does not result in a reduction or limitation of medically necessary services, [r]equestors developed an oversight committee . . . .”).
- See Kent E. Romanoff & James B. Williams, Gainsharing: A Powerful and Proven Method for Improving Hospital Productivity and Quality, in Handbook of Health Care Human Res. Mgmt. 156-57 (Norman Metzger ed., 2d ed. 1990) (describing the importance of having staff knowledgeable about gainsharing before a program is introduced into a hospital).
- See Jeff Lagasse, Hospital Costs Should Be Cut 24 Percent by 2022 to Break Even, Outsourcing May Help, Survey Says, Healthcare Fin. News (May 8, 2018), https://www.healthcarefinancenews.com/news/hospital-costs-should-be-cut-24-percent-2022-break-even-outsourcing-may-help-survey-says [https://perma.cc/WVH8-AUHC].
- See, e.g., Advisory Opinion 17-09, supra note 80, at 5 (describing “monitoring and documentation” as a listed safeguard in the gainsharing program at issue).
- See supra Part II(B)–(C) (discussing bundle payment models’ reliance on historical costs and the use of thresholds).
- See Eric Alper et al., Hospital Discharge and Readmission, UpToDate (Dec. 19, 2017), https://www.uptodate.com/contents/hospital-discharge-and-readmission [https://perma.cc/XDY4-T3GB] (discussing the factors doctors consider when discharging a patient).
- Cf. Dev Mandya, Patient Monitoring Systems Critical to Future Healthcare, Elec. Component News (Apr. 2, 2019), https://www.ecnmag.com/article/2019/04/patient-monitoring-systems-critical-future-healthcare [https://perma.cc/V93W-CNW3] (“Assessing the condition or other medical parameters of a patient is essential in making informed clinical decisions.”).
- See Michael O. Schroeder, What to Do If You Feel the Hospital Is Discharging You Too Soon, U.S. News (Aug. 14, 2018), https://health.usnews.com/health-care/patient-advice/articles/2018-08-14/what-to-do-if-you-feel-the-hospital-is-discharging-you-too-soon [https://perma.cc/D4T8-AZAM].
- See supra Part II(B)–(C) (discussing the requirements for physician kickbacks).
- See James Hill & William Filer, Safety and Ethical Considerations in Discharging Patients to Suboptimal Living Situations, 17 Am. Med. Ass’n J. Ethics, 506, 507 (2015), https://journalofethics.ama-assn.org/article/safety-and-ethical-considerations-discharging-patients-suboptimal-living-situations/2015-06 [https://perma.cc/J7YH-9KTC].
- See Healy, supra note 17.
- E.g., Advisory Opinion 17-09, supra note 80, at 2, 5, 12. This safeguard was most recently approved in the OIG advisory opinion for which “neurosurgeons . . . agreed to implement cost-reduction measures in designated surgical procedures.” Id.I at 1.
- See supra Part IV(C) (discussing physicians’ concerns when switching devices and supplies is mandated by a gainsharing program).
- See Advisory Opinion 17-09, supra note 80, at 12–13 (discussing the importance of a safeguard where neurosurgeons can choose less expensive products if they determine those products are appropriate for a patient). Almost all OIG advisory opinions have a version of this safeguard. For example, OIG advisory opinion 17-09 states: “[F]or products covered by the product standardization recommendations, the [n]eurosurgeons have available the same selection of devices and supplies while the [a]rrangement is in place as they did prior to the arrangement.” Id. at 12.
- See supra Part II(D) (discussing OIG advisory opinions).
- See DeVree, supra note 148 (discussing the benefits of physician involvement in product selection).
- See Lawton R. Burns et al., Physician Preference Items: What Factors Matter to Surgeons? Does the Vendor Matter?, 11 Med. Devices: Evidence & Research 39, 42 (2018).
- See McLawhorn & Buller, supra note 52, at 373; see also Advisory Opinion 17-09, supra note 80, at 6 (“To mitigate the risk of cherry-picking or steering away more costly patients, the [n]eurosurgeons are prohibited from selecting patients to participate in, or withdrawing patients from, the [a]rrangement.”).
- Advisory Opinion 17-09, supra note 80, at 3, 8.
- See generally McLawhorn & Buller, supra note 52, at 371, 373 (discussing “cherry-picking” concerns in the context of the BPCI Initiative where hospitals could be unintentionally penalized for past good performance).
- Cf. Wilensky et al., supra note 5, at w 59, w 63.
- See Blasco, supra note 9 (discussing the expansion of hospital gainsharing and the importance of implementing best practices using “careful attention to gathering and distributing the appropriated data”).
- See Romanoff & Williams, supra note 194, at 148.
- See Murphy et al., supra note 125, at 938, 943.
- Anoushiravani & Nunley, supra note 8, at 1724 (citation omitted); Healy, supra note 17.
- Romanoff & Williams, supra note 194, at 148.
- See Woodruff Imberman, All You Ever Wanted to Know About Gainsharing But Were Afraid to Ask, Target, May/June 1993, at 28.
- Cf. Assessing the Representativeness of Public Opinion Surveys, Pew Research Ctr. (May 15, 2012), http://www.people-press.org/2012/05/15/assessing-the-representativeness-of-public-opinion-surveys/ [https://perma.cc/W22P-HVZW] (discussing in the context of politics that survey takers are not necessarily representative of the general public) (citation omitted).
- See Mary Draper et al., Seeking Consumer Views: What Use Are Results of Hospital Patient Satisfaction Surveys?, 13 Int’l J. Quality Health Care 463, 464 (2001).
- See id. (stating that a patient satisfaction measurement may be flawed because of its subjective quality).
- See Bob Wachter, Is Hospital Peer Review a Sham? Well, Mostly Yes, Hosp. Leader (June 1, 2009), https://thehospitalleader.org/is-hospital-peer-review-a-sham-well-mostly-yes [https://perma.cc/4P48-XGQ4] (discussing issues surrounding “medical staff self-policing”).
- See generally CJR Target Prices, supra note 141 (defining episode target price as the expected spending of an episode of care).
- Cf. Wilensky et al., supra note 5, at w 63 (discussing the inadequacy of OIG opinions to provide guidance to hospitals).
- See supra Part III(B)(2)-(3) (discussing BPCI and CJR models).
- See supra Part IV(A).
- Ellimoottil et al., supra note 128, at 5.
- See supra Part II(B) (discussing uniquely tailored gainsharing programs).
- See Advisory Opinion 17-09, supra note 80, at 2, 7, 12.
- See id. at 12.
- See supra Part IV(A) (discussing the risks of treating medically complex patients).
- See supra Part IV(A) (discussing generally what target episode spending is).