Gainsharing and Shared Savings Continue to Spark Interest

Karen Minich-Pourshadi, June 11, 2012

Though the Patient Protection and Affordable Care Act may stay or go this month, proven cost reduction strategies never die. Two examples are gainsharing and shared savings, which predate the latest attempt at healthcare reform and in fact have had new life breathed into them.

Gainsharing allows hospitals and physicians to collaborate and share cost savings as a reward for quality and efficiency improvements. The definition of shared savings is essentially the same. The difference is that gainsharing targets device and supply usage within a specific service line (e.g., orthopedics or cardiology) whereas shared savings targets specific patient populations (e.g., diabetics or asthmatics).

Gainsharing has gotten a bad rap, however. "Gainsharing is difficult and technically it is not legal, though the OIG [Office of Inspector General at the U.S. Department of Health and Human Services] has granted waivers. … I think people are still uncomfortable with the waivers, which is why gainsharing has struggled," says Robert Glenning, executive vice president and CFO at the 775-bed Hackensack (NJ) University Medical Center.

The problem for gainsharing is that OIG ruled that such arrangements violate the Stark Law and the Anti-Kickback Statute. Nevertheless, gainsharing programs have demonstrated cost savings and quality results, so in 2005 OIG began granting waivers to allow these arrangements.

Karen Minich-Pourshadi Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media. Twitter

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