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Gainsharing, Shared Savings Examined

Karen Minich-Pourshadi, for HealthLeaders Media, August 28, 2012

For those organizations that are willing to work within the OIG's guidelines and pursue gainsharing, there are bottom-line rewards. At the 864-licensed-bed St. Luke's Health System, based in Boise, Idaho, gainsharing was a choice the organization made to encourage greater supply-chain savings in its cardio, spine implant, and total joint implant service lines while maintaining or improving the quality of products and care to the patient. The system, which reaches southwest Idaho, northeast Nevada, and southeast Oregon, began looking into gainsharing in 2009 after doing a cost analysis, explains Cam Marlowe, St. Luke's system director of contracting and sourcing for supply chain management. The analysis showed that St. Luke's combined spend for cardiology, spine implants, and total joint implants totaled $39 million.

"We had a sense that our three largest spend areas had contract prices that were average at best, and perhaps below average given our size," says Marlowe. "We need to reduce our costs and wanted to get the doctors involved to help us determine how we could lower our cost while maintaining or improving quality. The gainsharing program was the best way to jump-start that collaboration."

Also wary of the OIG guidelines, the organization worked with Goodroe Healthcare Solutions, a subsidiary of VHA, to guide it through the legal logistics and help it get its data gathering processes in place.

St. Luke's gainsharing agreements took effect in two of its hospitals in 2009, but year one was filled with trial and error and limited returns, Marlowe says. By 2010, however, the organization had cleared a path to reap financial savings, reducing the cardio, joint implant, and spine implant spend by $1.3 million for the two participating hospitals, and garnering another $450,000 in rebates from implant device vendors. In 2011 St. Luke's saved another $7.1 million, and it anticipates estimated savings of an additional $3.7 million in 2012, he says.

By year two Marlowe says the organization invested in a benchmarking service that provided data on vendors by tracking hundreds of hospitals supply prices. The information helped with vendor contract negotiations. And, to encourage collaboration between the hospital and the physicians and help measure progress and define the financial goals for the gainsharing model, clinical department administrators and directors together with supply chain leaders shared data on individual performance with the physicians. They held regular group meetings with the cardio, orthopedic, and spine implant physicians and reviewed physician usage data and discussed optimal implant product choices and pricing.

To help physicians gauge their performance, individual physician data was compared to that of their peers and to the group average to allow for easy comparison and discussion. The gainsharing company provided quality and competitive cost data for key devices. In addition, St. Luke's tracked and reported patient outcomes to ensure these remained constant, or improved.

Implementation of the savings program did not adversely affect clinical care in any of the specialties included in the gainsharing program, Marlowe says. "The physicians did not alter the demographic makeup of the patient populations they treated. Indicators such as outcomes, case severity, age, and payer are monitored throughout the program to assure no significant changes from historical measures," he adds.

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