Gainsharing

by Leona Egeland Siadek, Vice President, Government Relations

Gainsharing is defined as a financial arrangement where a doctor gets a share of the reduced hospital costs for patient care that can be attributed to that doctor’s efforts. Gainsharing has grown since its inception in the late 1990s, particularly in the areas of cardiology, cardiac surgery, and orthopedics.

In July 1999, the Office of the Inspector General (OIG) issued its first special advisory bulletin on the subject. The OIG concluded that gainsharing violated the civil monetary penalty prohibition on hospitals making payments to doctors that induce reductions in services to Medicare or Medicaid beneficiaries. In 2001, the OIG stated in six new advisory opinions that limited gainsharing could be permitted if the federal civil monetary penalty law was not violated and certain safeguards were in place. These safeguards included: identified cost savings, credible medical support, limited impact on federal health care programs, protections against inappropriate reductions in service, patient disclosure, limits on incentives, and protections against disproportionate cost savings.

Senators Charles Grassley (R-IA) and Max Baucus (D-MT) introduced S.1002 in May 2005. This bill, known as the Hospital Fair Competition Act of 2005, was designed to eliminate legal obstacles to broader gainsharing, or “coordinated care incentive arrangements,” as the language of the bill put the matter. The bill did not pass. Representative Nancy Johnson (R-CT) has spearheaded the congressional debate on gainsharing and backed demonstration projects that were placed in the budget bill. In a floor statement in support of the proposal to advance demonstration projects, Senator Grassley said, “Instead of allowing current law to stifle innovation, this demonstration will allow us to take a closer look at what these quality sharing programs have to offer. This demonstration is critical for two reasons. First, physicians are the ones who can actually control costs because they know where waste is occurring. Second, the whole purpose of quality sharing is that it targets the waste of resources in order to improve quality.”

Demonstration projects for gainsharing under way in 2006 included an examination of the impact on Medicare managed care and preferred provider organizations and a study of the effects on critical access in rural areas. Pilot programs in the planning stage will scrutinize how gainsharing affects disease management under Medicare and skilled nursing facilities operating on prospective payment systems.

Opponents of gainsharing argue that the quality of care will suffer because a less aggressive treatment or followup action will result. The American Association of People with Disabilities has consistently been the voice of caution. Medical device companies are also concerned that their products will be the first cut under gainsharing. Additionally, gainsharing critic Representative Pete Stark (D-CA) will now chair the Ways and Means Health Subcommittee instead of Nancy Johnson. Stark has been quoted as saying he will continue to oppose gainsharing.

If quality can be assured in a gainsharing arrangement, the risk of medical malpractice need not be affected. But there are valid questions about whether quality is adequately protected, and the argument that cost savings take priority may be used to alienate courts and juries. Gainsharing can put doctors and hospitals in a very weak position if a medical liability claim is filed. Receiving financial inducements to exercise clinical judgment in a way that saves money will be hard to justify if a patient is harmed and malpractice alleged. Doctors will be loath to say that their own practices before gainsharing were unnecessarily wasteful or had no added value. Without that, there may be an uphill battle to establish credibility.

The Federal Scene

While the House and Senate both changed party hands in last November’s mid-term elections, in reality 93 percent of the House seats and 94 percent of the Senate seats did not change party hands. The number of congressional races won by fewer than 10 percentage points doubled between 2004 and 2006. Leadership changes, and thus committee chair changes, will clearly mean an alignment toward the political “center.”

During the 2006 campaign, some Democrats called loudly for repeal of the McCarran-Ferguson antitrust exemption for insurance companies. Since that time, the new House leadership has not endorsed this call. Many of the newly elected Democratic members of Congress are on the more moderate side, and many sustaining members understand the need for doing no harm when it comes to state laws on medical liability. These things matter when it comes to assessing our new House and Senate majorities and learning about their political agendas. Clearly there is only a slim hope of tort reform passage this year.

Despite that, Senators John Ensign (R-NV) and Judd Gregg (R-NH) have reintroduced medical liability reform bills that are identical to S.22 and S.23 of 2006. Senator Ensign modeled S.243, the Medical Care Access Protection Act of 2007, after successful Texas legislation featuring a stacked cap on noneconomic damages. Senator Gregg’s bill, S.244, the Healthy Mothers and Healthy Babies Access to Care Act of 2007, includes reform for providers involved in the delivery of reproductive medical care.

One of our main tasks for 2007 will be to educate the new members of Congress and their many new staff members about the key elements of medical liability and the relationship of premium stability to issues of access to care. Preventing harmful legislation is our agenda. A strong defense may be necessary to prevent tort reform opponents from pushing pseudo reform legislation.

State Efforts

Most state legislatures began their sessions in January. Some sessions will run all year, and others will have a short 60-day focus. Virginia will attempt to fix its insolvent Birth-Related Neurological Injury Compensation Fund; Georgia will grapple with venue provisions from last session’s legislation; Texas will be fighting erosion of its multi-tiered cap on noneconomic damages; and Louisiana will attempt to change last year’s court panel ruling that medical malpractice caps were unconstitutional. Tort reformers in Oregon and Washington predict a season of “playing defense.” In Colorado, tort reform advocates will be vigilant to any attempts to change that state’s caps, as Republican governor Bill Owens was replaced by Democrat Bill Ritter.

Oklahoma will attempt to address lawsuit reform that allows the legislature to cap noneconomic damages. A late December 2006 ruling by the Oklahoma Supreme Court (8–1) overturned a 2003 law that mandated a signed affidavit attesting that a qualified expert had reviewed the proposed medical malpractice case and had declared it “worthy” of trial. The court’s decision also called into question whether the legislature could cap noneconomic damages at all.

California’s governor has announced his priority as a restructuring of the state’s provision of health care. We will need to safeguard MICRA within this broad agenda.