Gainsharing Saves New Jersey Hospitals Money

by webadmin on February 22, 2013

In 2009, 12 New Jersey hospitals introduced a program known as gainsharing in which doctors receive bonuses for saving their hospitals money on Medicare patients, according to an article by The Associated Press.

Under the program, a doctor would be less inclined, for example, to order 24-hour heart monitoring for a patient who had just been transferred from the ICU, provided their condition was acceptable, thus potentially saving a hospital more than $1,000 a day.

As one doctor told the press, “We never before looked at what our costs were in the hospitals. Some things we always do because we always just do them.”

The AP reports that the gainsharing “program is getting a bigger test this year as part of the federal health-insurance overhaul. It’s one of four new payment models hospitals can try to trim their costs.” Trimming costs is one of the goals of healthcare reform, especially since Americans spend $3 trillion every year on healthcare or $1 for every $6 spent in the U.S. economy.

Although gainsharing is a relatively new program, the results so far have been impressive, with hospitals “saving an average of 8 to 10 percent compared with 2007,” the New Jersey Hospital Association said.

One hospital that uses the program is Flemington’s Hunterdon Medical Center, where they’ve seen the average cost for treating Medicare patients decline from $12,138 per patient in 2007 to $9,381 in 2012 and the average stay from 5.9 to 5.2 days over the same time period. Also, the hospital’s quality of care has not suffered, with mortality rates remaining stable and fewer seven or 30-day readmissions.

How much the hospital can credit gainsharing with these figures remains to be seen, but one official “believes it’s been a major factor in the lower costs.”

So far under the program, eligible doctors have received bonuses “totaling $160,000 to $200,000 every six months” with the average payment being $3,000 to $4,000. Essentially, the AP writes, “the amounts offset some of the payments physicians may sacrifice by using lower-cost methods–particularly shortening stays.”

Nationally, hospital piloting gainsharing “will also see small cuts in their payments from Medicare so it’s not just the doctors sharing in the savings, but also the Medicare system.”

Is your hospital one of the 32 participating hospitals in the national gainsharing program? If so, why did you decide to test this model? How are you preparing your eligible physicians for the transition?

If you’ve never heard of this program, what are your initial thoughts? As an executive, do you feel that informing your physicians of healthcare costs will motivate them to get behind organizational efforts to cut spending? Would you consider adopting gainsharing or a similar model?

-by Pete Fernbaugh

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