What I am curious about are the current issues around using length of stay (LOS) or cost/case or the like as part of compensation packages. I have had discussions with several other folks, and I think I am getting the picture. However, it sounds like there has been some new interpretation of the laws around gainsharing, and that is what I am curious about.

K.S., Ohio

Dr. Hospitalist responds:

Tough question, and let me start by saying that I’m not a healthcare lawyer: This stuff is tricky. I’ll do my best to explain the current situation as I understand it, but I’m no expert on this.

So gainsharing, as generally defined in healthcare, is where a hospital and a group of physicians design a contract around services for which the two sides can share in any savings. Physicians are paid fee-for-service by Medicare, thus they are reimbursed per unit of work, with no incentive for cost control. Hospitals are paid on a per-case (or per-procedure) basis, so cost control means a lot to them: Because they get a set payment, any savings generated, they get to keep. Ideally, this means that better performance leads to more efficient care, less waste, and better outcomes. Unfortunately, that’s not always what happens, especially in the view of the federal government (you know, the guys who issue the bright orange jumpsuits for you to wear when you break the law).

Gainsharing has an interesting history as interpreted by the Office of the Inspector General (OIG) and the Centers for Medicare & Medicaid Services (CMS). Back in 1999, the OIG explicitly stopped any gainsharing models between physicians and hospitals based on concerns that these contracts might reduce the care provided to patients. The opinion was that there might be a “race to the bottom” in terms of cutting expenses (read: services).

Since then, there has been only incremental movement forward in the form of demonstration projects. One project looked at two very specific procedures: cardiac catheterization and coronary artery bypass grafting (CABG). The results showed that gainsharing could be beneficial to the hospital-physician relationship, and, more important, not harmful to the patient. There has since been some movement toward gainsharing, but only in the context of specific procedures, with very clear safeguards around it, including an independent auditor. Nothing to this point has suggested that a cost per case or adjusted LOS gainsharing agreement would pass muster with the OIG.

So, at this point in time, I would caution against any contract that contained explicit references connecting compensation to a change in hospital costs, such as reducing LOS or cost per case. The new accountable-care organization (ACO) model might be a different prism through which to view this, but it’s a world apart from an individual physician or hospitalist group contract (see “A Chilly Reception,” August 2011, p. 23).

For contractual compensation, I think that quality metrics can fill a need, and there are lots of ways to be creative here. You could set a target around something measurable (appropriate DVT prophylaxis is just one example) and tie dollars to that specific performance. The key is avoiding any language that would imply additional physician compensation for a reduction in patient services.

Might things change in the future? Your guess is as good as mine.