Physician Responses to Gainsharing
- Presenter:
Chair: Michael Morrisey; Discussant: John Brooks Tue June 6, 2006 10:45-12:15 Room 313
Rationale: Financial incentives influence physician treatment decisions, yet regulation has limited the arrangements between hospitals and physicians. Hospital costs are the single largest component of health care spending, and clinical preference items (devices and drugs) account for up to 80 percent of the total cost spent on each patient, particularly for cardiology and orthopedics. The Office of Inspector General (OIG) has recently approved several gainsharing arrangements for cardiac care, where physicians receive equal shares of a hospital’s savings in a given service area. The aim of gainsharing is to control costs by promoting standardization of physicians’ treatment decisions. Although these incentives may influence behavior, a number of factors may limit their ability, including strong financial ties with device manufacturers, preference for non-taxable in-kind remuneration rather than cash, or free-riding. This paper provides empirical evidence about the impact of gainsharing from ongoing programs.
Objectives: We estimate the impact of hospital-physician gainsharing in the cardiac cath lab on hospital costs, quality of care, and access to technology. First, we decompose the sources of cost savings due to lower device utilization, lower price per item, and substitution of lower-priced items. Second, we assess the implications for patient care, including outcomes and complications, and the types of patients receiving treatment. Finally, we examine the impact on the availability of devices, adoption of new devices (e.g., drug eluting stents), and the extent of product standardization.
Methodology: The study uses data from Goodroe Healthcare Solutions from 2000-2005 for both gainsharing and non-gainsharing hospitals. These data include detailed information on patient demographics and risk-factors, physician identifiers, procedures and tests performed, which drugs and devices were used and what the hospital paid for them. Four hospitals have begun gainsharing for cardiac care since 2002. Difference-in-difference regression analyses are performed at the level of hospital, medical group, and physician. Although the difference-in-difference design eliminates a number of potential sources of bias, our estimates of gainsharing may be biased upward if, for example, physicians that participate are more responsive to financial incentives than average. We rely on propensity matching and instrumental variables to address such issues.
Results: We find evidence of significant cost savings due to gainsharing. One hospital reduced costs by $4.3 million and paid participating physicians $41,000. The majority of savings appears to be due to lower prices for a given device, and some due to fewer devices per patient. Treatment did not become more standardized, and neither patient outcomes nor risk factors changed.
Conclusions: Although preliminary results indicate large savings due to gainsharing, it has had little effect on standardization. It is unclear whether these savings are sustainable or whether they represent a onetime reduction in prices from manufacturers. The work will further consider which types of physicians appear most responsive to gainsharing. The findings of the study have important implications for a number of stakeholders, including supply chain managers and health systems who are considering the adoption of gainsharing, as well as government regulators and health services researchers.
