The federal government's approval of a limited gain-sharing arrangement at an Atlanta hospital could open the door for scores of similar initiatives across America, healthcare observers suggest.
For now, the advisory opinion by HHS' inspector general's office affects only 145-bed Saint Joseph's Hospital of Atlanta and a 10-member surgical group, which have a deal that links any physician bonuses to cost savings associated with specific medical equipment and drugs used in the operating room.
Still, the 16-page ruling is almost certain to have dramatic implications across the U.S., setting a precedent that could affect hundreds of hospitals-and fatten the wallets of thousands of physicians.
"You will see a significant number of hospitals in these types of relationships," said Joane Goodroe, president of Atlanta-based Goodroe Healthcare Solutions, a consulting firm. She helped draft the written proposal that led to the advisory opinion. "It could save billions of dollars."
The inspector general's opinion represents a dramatic departure from a July 1999 ruling that barred gain-sharing, a practice that rewards physicians for reducing costs by giving them a percentage of the total savings achieved. Federal officials have outlawed most forms of gain-sharing based on concerns that some physicians would reduce the quality of care to reap extra payments, or steer sicker, more costly patients away from hospitals that do not offer the cost-saving incentives.
But the government, apparently satisfied with a series of safeguards built into the proposal, approved a limited plan involving Saint Joseph's and a single surgical group, Peachtree Cardiovascular and Thoracic Surgeons.
Robert DeWitt, an Atlanta healthcare attorney who worked with Goodroe on the proposal, said he expects the limited arrangement, and others like them, will demonstrate enough benefits that "there will be increasing pressure from a regulatory perspective to change the landscape to permit this in broader applications."
Hospitals are allowed to administer physician-incentive programs for doctors who treat patients enrolled in Medicare or Medicaid HMOs. But all other such arrangements, until now, have violated a Social Security Act provision that bars hospitals from paying physicians as an inducement to limit care to Medicaid or Medicare beneficiaries.
The proposal by Goodroe calls for the surgical group to receive a payment of 50% of the hospital's cost savings during a one-year period for 19 "cost-saving opportunities." Most involve opening packaged supplies only as needed during a procedure, or substituting less-costly items when they don't adversely affect the patient.
Despite concluding that the arrangement technically constitutes an "inducement to reduce or limit current medical practice," the inspector general determined that Goodroe's proposal provides "sufficient safeguards so that we would not seek sanctions" under current statutes.
"Importantly," the opinion read, "the (proposal) sets out the specific actions to be taken and ties the remuneration to the actual, verifiable cost savings attributable to those actions. This transparency allows an assessment of the likely effect of the (proposal) on quality of care and ensures that the identified actions will be the cause of the savings."