Getting a Grip on Gainsharing 4664

May 1, 2006

6 Min Read
Getting a Grip on Gainsharing

To prepare for the possible proliferation of gainsharing among healthcare providers, medtech manufacturers must first understand the principles of the practice. These arrangements, in which hospitals standardize their use of various devices in order to negotiate lower prices with manufacturers, could dramatically change how medtech companies do business in the future.

In the May/June issue of MX, Mark Prodger, vice president for the medical devices and technology division of Market Strategies Inc. (MSI; Livonia, MI), shares the findings of a study in which researchers conducted in-depth interviews with cardiovascular physicians and senior hospital administrators, some of whom currently participate in gainsharing arrangements. The full text of the article is available at

Although the study found a high level of support for gainsharing among physicians and hospital administrators, especially those currently participating in the arrangements, medical device manufacturers have voiced staunch opposition to the arrangements. They say gainsharing arrangements focused on standardizing device usage have the potential to harm patient care and limit access to the latest innovations and advances in medical technology.

According to the MSI study, proliferation of gainsharing would likely result in lower average selling prices for devices. The arrangements also carry the potential for increased levels of sales exclusivity, with a resultant increase in market share for individual companies. According to Mark Leahey, executive director of the Medical Device Manufacturers Association (MDMA; Washington, DC), such factors could effectively wipe out smaller manufacturers that are developing new products, and dominant suppliers would likely become entrenched. “People also have to look away from the short term,” Leahey says. “In the long term, gainsharing will lead to more consolidation within the industry, and the dominant suppliers will be able to control the cost of products. Industry consolidation is not good for the pipeline or for pricing.”

“Even with regard to products developed by large companies, gainsharing is a threat to medical progress,” says Stephen J. Ubl, president and CEO of industry association AdvaMed (Washington, DC). “By definition, it is based on providing incentives to physicians to use products for which discounts have been negotiated in return for market share. This cannot help but slow the diffusion of new therapies since it effectively penalizes physicians who are early adopters.”

Joane H. Goodroe, president and CEO of Goodroe Healthcare Solutions LLC (GHS; Norcross, GA), concurs with the findings of the MSI study in that physicians seem to be generally open to the concepts behind gainsharing. Goodroe's company has developed the only model for gainsharing that has currently been approved by U.S. Department of Health and Human Services Office of Inspector General (OIG).

However, the MSI study also notes that physicians not participating in gainsharing have an increased level of suspicion regarding the practice. Many are concerned such an agreement will require them to use less-costly devices that will ultimately result in compromised patient care.

“That is a concern that is certainly heard,” Goodroe says. “But we find that those concerns are absolutely answered once they understand how the program works.”

According to Ubl, physician perceptions are not the key measure by which decisions related to gainsharing arrangements should be made. “The key to evaluating gainsharing is understanding its impact on physician behavior,” he says. “Gainsharing legalizes the practice of hospitals paying doctors bonuses for making their medical decisions based on cutting costs. We are concerned that this will lead to inappropriate decisions, and this is why OIG has expressed great concern about this practice.”

According to Goodroe, many physicians and device manufacturers do not have a complete understanding of how current gainsharing programs work. “Many are under the impression that gainsharing is a compliance program in which hospitals will pay physicians to comply with the hospital's decision,” she says. “Physicians are right to be concerned about that approach. Physicians should be the engineers of these arrangements.”

According to the MSI study, physicians participating in gainsharing say they have retained their ability to make choices about the devices they use to care for their patients. In many cases, similar devices within certain categories are perceived by physicians as being interchangeable. Where this is the case, physicians are willing to use less-costly devices. However, Leahey says that it's hard to discount the effect of the financial inducements of gainsharing. “Right now, without gainsharing, there's nothing to prevent a physician from using the cheaper product,” he says. “If the products were truly interchangeable, doctors would be making that choice on their own, without the financial incentive.”

Ubl also says that the notion that physicians have retained their ability to make choices about the devices they use is disingenuous. “All the gainsharing hospitals in the study were hospitals that were approved under OIG rules that required hospitals to keep the same devices in their inventory as before the gainsharing program was adopted,” Ubl says. “A large hospital chain implemented a gainsharing program that would have prohibited doctors from using devices provided by any manufacturer other than those that had provided the greatest discounts. The program has broken down because doctors refused to comply with the restrictions.”

Goodroe says that although maintaining quality healthcare is paramount, it is also necessary to find ways to make healthcare delivery more affordable, and gainsharing provides one model for achieving this end. “Our greatest challenge is being able to afford care,” she says. “Device companies may come out with great things, but no one will be able to afford them.”

“No one would argue that there isn't room for efficiencies in healthcare,” Leahey says. He says it is MDMA's hope that the federal government will look to drive these efficiencies through pay-for-performance incentives for physicians rather than by limiting physician access to innovations in medical devices.

© 2006 Canon Communications LLC

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