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Experts Predict Gainsharing Legislation Could Move by Summer

MAY 25, 2005 -- Experts were split Wednesday on the outcome of allowing doctors and hospitals to share the savings from treating patients more efficiently, a concept known as "gainsharing," which the experts said would either revolutionize the health care industry or undermine patient care.

The concept is gaining attention on Capitol Hill, with the bipartisan leadership of the Senate Finance Committee sponsoring legislation (S 1002) that would have the secretary of Health and Human Services establish criteria for when hospitals and physicians could engage in such arrangements.

The Medicare Payment Advisory Commission (MedPAC) has urged Congress to give the HHS secretary the authority to regulate gainsharing arrangements between hospitals and physicians so that quality of care is protected and financial incentives that could affect physician referrals are minimized.

Experts at a Wednesday forum sponsored by the Washington Legal Foundation said legislation to permit gainsharing could move as early as this summer.

David Nexon, senior executive vice president for the Advanced Medical Technology Association, urged lawmakers to proceed cautiously. Permitting such arrangements, Nexon said, could create a "fundamental conflict of interest" because physicians would be given incentives to under-treat patients. Nexon is a former health policy staff director to Sen. Edward M. Kennedy, D-Mass.

Gainsharing would also limit physicians' choice of "the most appropriate technology" for a particular patient, Nexon said, because hospitals would want physicians to select only from a list of medical devices from manufacturers who have agreed to discount their prices. Patients could be hurt, he said, because they may not know about that arrangement.

Proponents of the idea believe gainsharing will help cut health care costs without harming patient care. "It's not necessarily less care. It's about different care," said William T. Mathias, a principal in the Baltimore office of the law firm Ober Kaler.
D. McCarty Thornton, a partner in the Washington office of the firm Sonnenschein Nath & Rosenthal, said gainsharing will give hospitals a "new and potentially powerful strategy in pricing battles with device manufacturers" a more than $20 billion market that is a "huge hospital cost center."

"That sets up a bargaining dynamic that hospitals have never dreamed about," Thornton said. "That is the promise of gainsharing."

Physicians who disliked the "gainsharing" idea could decide not to participate and could use devices not on the specified list if it were medically appropriate for the patient, Thornton said.

Physicians would not be given financial incentives to increase their volume of procedures, nor would they be allowed to "cherry pick" the lowest-risk patients, he said.

Nexon countered that deciding whether one medical device was clinically equivalent to another one was "a very slippery concept" due to differences between individual patients. Physicians' expertise levels also vary, and they would have to be trained in how to implant devices they are not accustomed to using, he said.

Gainsharing, Nexon said, would provide "no benefit to me—just a benefit to the physician's bottom line," Nexon said.

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