Gainsharing with doctors yields big savings on devices

Materials Management in Health Care

Last year, cardiologists at Harrisburg Hospital in Harrisburg , Pa. , helped their organization save $500,000 on the costs of cardiology devices, and the savings are now being split more or less evenly between the hospital and the doctors.

Paying doctors for this work, called gainsharing, would have been illegal at the 116-bed hospital until February, when the HHS Office of the Inspector General approved six such arrangements at four hospitals, including Harrisburg .

Roger Longenderfer, MD, president and CEO of PinnacleHealth System, the hospital's parent, says gainsharing has not only realized short-term savings but also in long-term changes in physicians' attitudes. He says Harrisburg cardiologists are now much more attuned to the cost of the devices they use and know how to work with the hospital to keep those costs in line.

“The physicians had no idea about materials management and purchasing, or how many variations there were in terms of contracts,” Longenderfer says. “Now they have a better understanding of the process.”

Joane Goodroe, RN, president and CEO of Goodroe Healthcare Solutions in Norcross , Ga. , helped Harrisburg and the other hospitals apply for the gainsharing clearances. H ospitals have long wanted physicians to help standardize the devices they use, but Goodroe says they could not do so without paying for their time, which would have violated the federal antikickback statute.

For years, Goodroe and others failed to get special clearance for gainsharing from the OIG. Then Goodroe developed a fairly complex set of rules that passed OIG muster. So far, the arrangements have been approved only for cardiology and cardiac surgery, but Goodroe is now working on one for orthopedics. The arrangements differ somewhat from hospital to hospital, and the OIG must approve each one. But in essence, they boil down to some basic steps.

Under the arrangements, physicians are paid as much half of the realized savings. Hospitals can propose ways to standardize products, but physicians make the final decisions, and they must continue to have access to items they used before. If the hospital achieves more than a predetermined level of savings, physicians cannot share in the money above that level, and physicians cannot be paid again for the same savings they realized the year before. Also, the hospital must continuously monitor effects on patient care.

Goodroe stresses that “the only way you are going to involve physicians in this process is if they are paid for their time.” Their work goes into assessing devices, exploring clinical implications of proposed changes, helping negotiate rates with vendors and then actually changing work patterns. “Time is money,“ she adds.

Goodroe says the arrangements approved so far have yielded savings of as much as $4 million a year. “The level of interest is huge,” she says, adding that she has received dozens of inquiries, including a few from “major organizations” that she will not name.

Although the OIG approved Goodroe's basic arrangement for 346-bed St. Joseph 's Hospital of Atlanta back in 2001, she says many hospitals did not view it as transferable to them until the recent batch of OIG approvals. In addition to Harrisburg , the approvals went to 223-bed Sisters of Charity Providence Hospital in Columbia , S.C. , and two unnamed hospitals.

Dr. Longenderfer says Harrisburg started with its 50 cardiologists because most of them were in just two major groups and a few had already been discussing costs. But the cardiologists had to take a financial risk. “The doctors understood that if the federal government didn't approve this, there would be no reward at the end,” he says.

“Physicians participated in a lot of meetings,” Dr. Longenderfer says. ”We had to lay out our goals.” After the process got started, “we had a lot of day-to-day contacts with them, sharing our information (on utilization),” he says.

The arrangement covers 16 items, including stents, balloons and interventional guidewires. “There was an attempt to standardize, but it was device by device, and we ended up with two vendors for most devices,” Dr. Longenderfer says. He adds that the cardiologists also sat at the bargaining table in negotiations with vendors.

“The physicians were able to take a look at things vendor by vendor, and for example, they might say that with this device we should go 70 percent with one vendor and 30 percent with another, rather than 50-50,” he says. “That was very helpful.”

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