Gainsharing 101:

1
Gainsharing 101 Optimizing Your Physician
Relationships
2
Goodroe Healthcare Solutions
Benchmarking Individual Queries Research
CathSource HeartSource Ortho/NeuroSource
Reengineering, Strategic Planning, Quality
Assessments, Cost Analysis, Hospital-Physician
Alignment
3
Achieving Cost and Quality Efficiencies

• There is a compelling reason to align with
  physicians.
• Data clinical, cost and utilization.
• Gainsharing is only one method of alignment.
• Every situation is different.
• Create a situation that benefits the patient, the
  hospital and the physician.

4
The Dilemma of Health Care Reform
Reduction in Revenue and Increase in Cost
Continued Demand for Quality
Hospitals and Physicians
5
Average Device CostCoronary Stent Case
Incremental Average Cost 2,042
Includes stents, guidewires, guide caths,
balloons, other miscellaneous supplies
6
Incremental Annual ImpactNew Stent Technology
7
Average Device Cost per Stent PatientVariation
by Hospital

• What accounts for variation?
• Cost of individual stent
• Use of DES vs. BMS
• Stents used per patient

Average Cost
August 2005
8
Average Stents per PatientVariation by Hospital
1.63
August 2005
9
Drug Eluting Stent Brand UtilizationVariation by
Hospital
BRAND A 45 Usage
August 2005
10
Three-Year Mortality by SurgeonCABG Cases
Surgeons with less than 20 cases excluded due to
statistical variance.
11
OR Cost and Mortality RatioQuality Can Be
Achieved at Low Cost
J
B
I
G
A
K
L
C
Cost
E
F
D
Actual/Predicted Mortality Ratio
12
Hospitals Need Physicians for Cost Management
Clinical Knowledge
Quality Driven Cost Saving Processes
Clinical Experience
Clinical Responsibility
Extra Effort
13
History of Gainsharing
Congress authorized gainsharing demo and
considering change in law
OIG Bulletin prohibiting gainsharing because
proper safeguards not in place
6 programs submitted for OIG approval
Mid to Late 90s
Feb 2005
2002 to 2003
1999
2001
2006
OIG approved cardiac surgery program
Many hospitals sought OIG approval
OIG approved 3 cardiology and 3 cardiac surgery
programs
14
OIG Definition of GainsharingCardiac Operating
Room

• arrangement in which a hospital will share with
  each cardiac surgery group a percentage of the
  hospitals cost savings arising from the cardiac
  surgery groups implementation of a number of
  cost reduction measures in certain operating room
  procedures.

15

Categories to Achieve Savings

• Open disposable products as needed during
  procedure
• Substitute less costly product to achieve
  identical result
• Change processes to limit use of products to
  medically indicated clinical circumstances
• Standardize products where medically appropriate

16
Traditional Product Decision
No Relationship to Hospital or National
Benchmark Data
HOSPITAL Pays for Product
PHYSICIAN Selects Product
Negotiates Price
Education and Promotion
VENDOR Provides Product
17
Gainsharing (Aligned) Product Decision
Interested in Hospital and National Benchmark
Data Involves Demand Matching
HOSPITAL Pays for Product
PHYSICIAN Selects Product
Negotiates Price with Physician Direction
Education and Promotion
VENDOR Provides Product
18
ICD System300 Cases
Annual Savings 1,079,934
Market Share
40
30
12
18
19
Vascular Closure Devices3,000 Coronary
Diagnostic Cases
Annual Savings 224,325
20
Cardiology Example2,600 Coronary Stent Cases
Total Potential Annual Savings 3.4 million
21
Cell Saver1,000 Open Heart Surgery Cases
Pricing
Utilization

• Current cost/case 130
• Proposed cost/case 105

• Current utilization 100
• Proposed utilization 30

Annual Savings 25,000
Annual Savings 73,500
22
Cardiac Surgery Example1,128 Open Heart Surgery
Cases
Total Potential Annual Savings 787,911
23
Bone Morphogenetic ProteinUtilization by
Physician
Cervical Implant Patients _at_3,900/Patient
Average 12
Total Annual Pt. Volume
54
31
21
62
66
31
35
10
46
41
25
24
Bone Morphogenetic ProteinUtilization By
Physician
Lumbar and/or Thoracic Implant Patients
_at_4,900/Patient
Average 28
Total Annual Pt. Volume
37
17
70
83
37
46
12
14
10
46
97
10
25
Bone Morphogenetic ProteinPotential Annual
Savings
Potential Annual Savings (includes utilization
and 6 cost reduction/unit) 414,460
26
Spine Surgery Example920 Implant Cases
Potential Annual Savings 1,705,733
27
1,000,000 of Opportunities Identified50
Savings to Physicians
GROUP A
GROUP B
GROUP C
60
30
10

• Payment to physicians can not occur until
• End of measurement year
• OIG issues favorable Advisory Opinion

600,000
300,000
100,000
450,000
225,000
150,000
Payout 225,000
Payout 112,500
Payout 50,000
28
OIG Legal Analysis and Safeguards

• Savings initiatives clearly and separately
  identified
• Targets and savings calculated separately for
  each initiative
• Spending on single initiative does not impact
  savings on others
• Can share up to maximum target for each
• Select initiatives may require setting floor
  beyond which no savings can accrue

29
OIG Legal Analysis and Safeguards

• Individual physicians make patient by patient
  determination of most appropriate device
• Full range of devices must be available to
  physicians
• Changes must not adversely affect patient care
• Use data collection tool to measure cost,
  quality, utilization
• Outside Program Administrator analyzes/validates
  data

30
OIG Legal Analysis and SafeguardsActions NOT
Permitted Under Gainsharing

• Exclude qualified physicians
• Pay physicians
• As an individual
• If quality or severity decrease
• An unlimited amount of money
• For future volume/value of referrals
• For historical performance
• For work not in their control
• For increasing federally funded patient volume

31
Gainsharing A Long-Term Strategy?

• Typically pursue low hanging fruit in year 1
• Targets not reached in year 1 roll into year 2
• Setting baselines after year 1
• One time
• Negotiating vendor contracts
• Reset each year but does not exclude physicians
  from receiving compensation for future
  negotiations
• Ongoing
• Making practice pattern changes that require
  ongoing work to maintain
• Held constant until practice becomes routine

32
Gainsharing A Long-Term Strategy?

• Physicians identify and work on new areas of
  savings as
• Gain better understanding of data system
  capabilities
• Use data to guide decision making
• Embrace concept of alternative ways to reach
  great outcomes
• Technology changes
• Provides foundation for hospital-physician
  relationship

33
Implementation Steps

• Implement customized software to measure cost,
  quality, utilization
• Identify and quantify waste reduction
  opportunities
• Establish quality baselines
• Prepare hospitals OIG submission based on
  approved template
• Develop hospital specific work plan
• Provide quarterly performance reviews and
  benchmarks
• Pay physicians at end of one year

34
Gainsharing Program CommitteeCath Lab Procedures
Physician Representatives
Hospital Representatives
Goodroe Representatives
1 Physician from Each Participating Group
Senior VP, CV Services
Consultants, Cath Lab
Director, Cardiac Cath Lab
Director, Materials Management
Ad hoc members may include representatives from
Case Management and Finance/Decision Support.
35
Cath/EP Lab Case StudyGainsharing Hospital
36
Program Overview

• 600 bed non-profit private hospital
• 5 cath labs, 2 EP labs
• OIG Advisory Opinion Process
• Submitted cath, EP, peripheral vascular
  initiatives in 2003
• Received favorable Opinion in 2005
• Awaiting Opinions for Years 2 and 3
• Participants
• 5 cardiology groups
• 1 vascular surgery group
• Hospital

37
Savings Results
3.4 Million Cumulative Savings
Total Savings 1,018,372
38
A Gainsharing Hospital Success StoryHow Savings
Were Achieved

• Director of Cath Lab empowered to negotiate
  contracts in conjunction with representatives
  from Materials Management and advice from
  physician groups
• Physicians complied with contracts
• Reductions a result of strategic decisions
• Bulk buys
• Free drug eluting stents through multiple stent
  program
• Lower access prices
• Higher discounts and rebates

39
A Gainsharing Hospital Success StoryHow Savings
Were Achieved

• Used data collection tool that allowed for
  internal and national benchmark comparisons
• Provided physicians with credible data to guide
  decision making
• Regularly updated physicians on progress
• Strictly monitored quality outcomes

40
A Gainsharing Hospital Success StoryHow Savings
Were Achieved

• Negotiated aggressively with vendors
• Drug eluting stent
• 75/25 split with 2 vendors
• Average net cost from 2,293 to 2,150
• Annual Savings 465,164
• ICD System
• 50/50 split with 2 vendors
• Average net cost from 19,360 to 16,389
• Annual Savings 1,057,502

41
Savings That Did Not Materialize

• Gainsharing Hospital negotiated one of the lowest
  drug eluting stent costs nationwide with its
  primary vendor
• However, the physicians did not share in savings
  because utilization
• Continues to increase
• Differs significantly from national average

42
Drug Eluting Stents per Patient
43
Drug Eluting Stents per Patient

• Hospital uses 0.34 more DES/patient than National
  Average
• If Hospital achieved National Average, annual
  savings would be 1.4M
• Was there opportunity to reduce stents per
  patient?
• Potential savings of 1.4M far exceeds multiple
  stent rebate of 443,700

44
Coronary Stents per PatientBy Group
45
Coronary Stents per PatientBy Physician
National Average
46
Coronary Stents per PatientBy Physician

• Cardiologists made commitment to discuss more
  sensitive and clinically relevant utilization
  measurement in Year 3
• In process of studying stents per lesion at
  physician level in comparison to national figures

47
How To Successfully Implement

• Use data collection tool that allows for internal
  and national benchmark comparisons
• Provide physicians with credible data to guide
  decision making
• Regularly update physicians on progress

48
How To Successfully Implement

• Empower individuals with understanding of
  practice patterns and pricing in cath lab to
  negotiate directly with vendors
• Carefully monitor contract compliance
• Strictly monitor quality outcomes
• Use outside Program Administrator to validate data

49
Achieving Cost and Quality Efficiencies

• There is a compelling reason to align with
  physicians.
• Data clinical, cost and utilization.
• Gainsharing is only one method of alignment.
• Every situation is different.
• Create a situation that benefits the patient, the
  hospital and the physician.