The CMS last week quashed the New Jersey Hospital Association's beleaguered attempt to realign the competing economic interests of doctors and hospitals, raising questions as to whether physician "gain-sharing" has any future in the budding pay-for-performance movement.
Hospital association officials said CMS officials told them that they have given up on reviving the three-year demonstration project that was launched in January and derailed in April by four excluded hospitals that sued (April 19, p. 6). Since the project was put under a permanent injunction by a federal judge in Newark, the hospital association had been exploring obtaining an advisory opinion in its favor from HHS' inspector general's office.
The association also was working with the CMS to "tighten up the project" and address the judge's concerns, said Sean Hopkins, the association's senior vice president of health economics. "It's a lost opportunity," Hopkins said.
At deadline, no letter had officially gone out; CMS officials were unwilling to comment any further, said Peter Ashkenaz, a CMS spokesman.
Years in development, the project proposed getting hospitals and doctors on the same page by offering cash bonuses, or gain-sharing, to doctors who contained costs and helped widen hospitals' thin Medicare profit margins. But the plaintiffs in the lawsuit-three hospitals in the Robert Wood Johnson Health System in New Brunswick and 155-bed St. Francis Medical Center in Trenton-charged that the project created an uneven playing field that favored a select group of hospitals (Feb. 9, p. 12).
In the future if any gain-sharing project is to get off the ground, the CMS will have to surmount two major legal hurdles, said Howard Young, a partner in the Washington office of Sonnenschein Nath & Rosenthal and a former senior lawyer at the inspector general's office. Those hurdles are the inspector general's interpretation of the civil monetary penalties law, which prohibits physicians from reducing care to Medicare and Medicaid patients; and the Stark law, which prohibits self-referral, as it pertains to gain-sharing, he said. But they are hurdles worth tackling, he said.
"In light of increased costs and pressures on the healthcare industry as a whole and a new focus by Congress and the CMS on pay-for-performance ... it's my contention that policymakers should take a very close look at reducing the barriers to what may be both a clinically appropriate and cost-effective method to align physician and hospital care," Young said.
Michael Kalison, chairman of Applied Medical Software, the company that developed the methodology and software for the demonstration project, said he was naturally disappointed but didn't rule out a revival, noting that Medicare abandoned the project not on its merits but because other hospitals wanted to gain entry. "One way or another, we are going to bring this project to life," he said.
"It's a shame. The experiment was just that-an experiment," said Michael Maron, president and chief executive officer of 318-bed Holy Name Hospital in Teaneck, one of the selected hospitals. "The system needs improvement. If you can't experiment to improve, how do you achieve a better system?"