Gainsharing under BPCI, CJR, EPM or any other alphabet soup

Gainsharing is becoming an increasingly important tool to create alignment between hospitals and physicians.

Gainsharing in healthcare typically involves hospitals sharing savings with physicians for cooperating in cost reduction initiatives. Traditionally, these cost savings initiatives focused on the hospital’s internal cost savings from efficiencies realized through standardization of clinical practices, supplies and equipment. Gainsharing arrangements have been permitted under a series of opinions from the Office of Inspector General of the U.S. Department of Health & Human Services (OIG) that set forth a series of strict requirements. The series of requirements include a cap on gainsharing payments to physicians of 50% of their annual fee-for-service income for the related procedures, and that distributions to physicians must be made on a per capita (equal) basis.

Gainsharing arrangements structured to comply with these OIG opinions have often disappointed high volume physicians who believe they make the largest savings contribution and who are dis-incentivized when they receive the same payment as a physician who performs only one procedure.

With the rapid spread of both voluntary and mandatory bundled payment programs recently, new cost saving opportunities have been created – focusing strategies on saving costs through post-acute care and a reduction in readmissions.

Various CMS existing and proposed bundled payment programs permit new flexibility and effectiveness with hospital and physician gainsharing arrangements. These programs include:

• Bundled Payment for Care Improvement Program (BPCI)
• Comprehensive Care for Total Joint Replacement Program (CJR)
• Episode Payment Model (EPM) proposed rule released by CMS on July 25, 2016 which will impact Acute Myocardial Infarction (AMI), Coronary Artery Bypass Graft (CABG) and Surgical Hip/Femur Fracture Treatment (SHFFT)

These programs continue to impose the 50% cap on gainsharing payments to physicians but this can be an important incentive since 50% of physician practice revenue is used to pay overhead, and the additional 50% payment effectively doubles the net income that a typical physician can earn on an episode of care.

The Stark Law prohibition against basing payments on the volume or value of referrals remains in place, but the bundled payment models listed above allow physicians to be compensated based on other factors such as:

• quality scores
• savings generated
• relative level of care coordination and improvement activities of the providers, as suggested by the proposed EPM Rule

These structures reward quality improvement and cost reduction. In addition, high volume physicians who successfully comply with care redesign and quality improvement initiatives can receive higher gainsharing payments than low volume physicians. In the proposed EPM Rule, CMS proposes that if the hospital gain shares with a physician group (as opposed to individual physicians) and the physicians group follow the regulations governing distributions to its members, then the physicians group would have a high degree of flexibility in utilizing and distributing gainsharing proceeds, including making gainsharing payments to physicians in excess of their individual physician cap.

Gainsharing is also being utilized in commercial bundled payment programs, where there are fewer restrictions on payments to physicians. This activity is expected to increase as commercial payors follow CMS’ rapid advancement of bundled payment programs and as the opportunity to perform total joint replacements on an outpatient basis continues to develop and expand. CMS sought comment around reimbursement for outpatient total joint replacement both in the Medicare Hospital Outpatient Prospective Payment System Proposed Rule for CY 2017 (released by CMS on July 15, 2016) and in the proposed EPM Rule (released by CMS on July 25, 2016).

In summary, gainsharing will likely become a critical tool to create alignment between hospitals and physicians. For example, some hospitals have designed gainsharing structures to be as favorable to the physicians as possible to encourage splitting physicians to favor their facility. Gainsharing through bundled payment programs is a logical step in the “transition to risk” encouraged by healthcare payment reform, with logical next steps being bundled payments where up and downside risk is shared, and with the ultimate goal being population based risk contracts.

Stryker’s Performance Solutions experts are uniquely positioned to help hospitals and physicians benefit from gainsharing opportunities by providing insight and strategies around:

• opinions from the office of the OIG
• alignment of physicians
• how the BPCI, CJR and the proposed EPM Rule allow physicians to be compensated at different levels
• care redesign, quality improvement and cost reductions
• the potential mandatory EPM bundles for Acute Myocardial Infarction (AMI), Coronary Artery Bypass Graft (CABG) and Surgical Hip/Femur Fracture Treatment (SHFFT)

Paul Jawin, JD
Vice President, Stryker Performance Solutions

Paul brings more than 30 years of legal, business, financial and capital markets experience to his role in developing physician alignment and payment reform programs. A co-founder of Comprehensive Care Solutions—acquired by Stryker in 2012—he has helped physician organizations and health systems align and turn reform into opportunity by utilizing new payment and delivery structures, including Accountable Care Organizations (ACO) and bundled payments.

Paul is a regular speaker at industry conferences and events, including serving as Chairman of the upcoming 5th Annual Healthcare Bundled Payments Congress. He co-founded and served as Senior Vice President and General Counsel of Secured Independence, Inc., and has held senior executive positions with public and private companies involved in real estate and senior housing. Paul has a Bachelor of Arts degree in History from Ithaca College, and practiced corporate, securities and real estate law in New York City for more than 10 years after graduating from Syracuse University School of Law with a Juris Doctor degree.

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