Medical Device Daily Washington Editor

WASHINGTON – One of the panel presentations during last week's annual meeting of the Medical Device Manufacturers Association (MDMA; Washington) addressed gainsharing, an effort by hospitals to share savings with referring physicians who take action to reduce unnecessary costs.

Gainsharing is an idea that has not found a friendly home among MDMA members and, while the conversation between CMS officials and MDMA members was polite, the tone coming from industry was unmistakable.

Mark Wynn, PhD, director of the division of payment policy demonstrations at the Centers for Medicare & Medicaid Services (CMS; Baltimore) led the panel with a brief discussion of several CMS demonstration projects, but pointed out up front that “we have a serious issue with Medicare costs.” Medicare Part A ran up a tab of roughly $119 billion in FY05 and physicians rang the Medicare bell to the tune of $24 billion for inpatient care that same year.

Wynn noted that hospitals are paid prospectively while doctors are paid on a per-service basis, which has forced CMS to ask itself how it can align these two systems of incentives. Unfortunately, section 1128 A(b)(1) of the Social Security Act prohibits hospital payments to doctors even when such payments would reduce unnecessary tests and procedures, he observed.

Several demonstration projects for gainsharing are under way, including those examining the impact on Medicare managed care (Medicare Part C) and preferred provider organizations, as well as critical access hospitals in rural areas. Other pilots are scrutinizing how gainsharing will affect disease management under Medicare and skilled nursing facilities operating on prospective payment systems. Wynn said that a total of 30 demonstration projects are under way and another 12 are en route.

One of the concerns voiced by critics of gainsharing is that the quality of care will suffer because of what are perceived to be incentives to take less aggressive treatment and/or follow-up action than is called for. However, Wynn said that the Deficit Reduction Act of 2005 (DRA), which called for demonstration projects to evaluate gainsharing, also mandates quality safeguards.

He noted that as a result, “hospitals must report quality measures to CMS” and DRA stipulates that hospitals can forward incentive payments to practitioners only if they “contribute to quality efforts.”

“A thorough evaluation [of quality] is part of the project,” Wynn remarked.

Lending a voice of caution to the gainsharing idea was panel member Andrew Imparato, president of the American Association of People with Disabilities (AAPD; Washington). Imparato made the case that “CMS programs are best measured by the benefits to people with disabilities.” He argued that gainsharing has the “potential to harm the physician-patient relationship” because patients may come to fear their doctors' motives.

“We're also concerned about how you measure savings,” he said, arguing that the distinction between short-term savings and long-term savings must be made so as to ensure that gainsharing does not end up driving practitioners into a quick-fix mode.

“I'm not arguing that CMS is unaware” of some of the dilemmas posed by gainsharing, Imparato admitted, but he insisted that quality of life should be the primary ingredient in quality measures.

Following Imparato to the microphone was MDMA Executive Director Mark Leahey, who made the case that “if CMS can focus on a program that offers real opportunity” to employ technology to reduce costs without compromising care, gainsharing just might work. However, “this is separate and distinct” from the emphasis on cost savings embodied in the pilots, he said, adding that “it would be a very na ve approach” to assume that hospitals would all be able to avoid engaging in exclusionary behavior based on the cost of device and other treatment regimes rather than based on the cost/benefit of outcomes.

Leahey expressed concern that gainsharing “doesn't turn into another well-intentioned federal program with unintended consequences,” asserting that “personalized patient care offers the greatest opportunity” to reduce costs in the long run. He added that MDMA members are concerned at the prospect that gainsharing may impose a “one-size-fits-all” mentality on healthcare because of an incentive to “use the cheapest products out there.”

During the question and answer period, Wynn noted that CMS wrote its requests for proposals in such a way as to build in quality measures. “We expect applicant projects to come in with their own quality proposals,” he noted, adding that CMS will examine readmissions and the incidence of complications. CMS has a library of quality measures that it expects to see at least in some part in the proposals, but “we're open to new measures,” Wynn said.

One attendee told Wynn that he saw “parallels with the perverse incentives provided by Congress” in group purchasing legislation, a prospect which the attendee said he found “absolutely terrifying.” Wynn replied that it is not true that gainsharing projects “will operate in an exclusionary manner” regarding the availability and purchase of medical devices.

MDMA members spoke poorly of gainsharing during the lunch break on the second day of the conference, but CMS Administrator Mark McClellan tackled the gainsharing issue head-on in his luncheon address, insisting that “it's absolutely true that if we can get hospitals and doctors to work together,” quality will improve even as costs go down. He said that the emphasis at CMS is to look beyond “just what happens at admission” and to keep an eye on “what happens down the road” to patient care.

McClellan's argument included that gainsharing can lead to faster diagnoses, shorter stays, reduced drug interactions and faster adoption of innovative technologies. Another area in which he said he hoped to see improvement is in discharge planning. “They just bounce back” to the hospital when the hand-off from hospital to outside provider is not properly managed, McClellan said.