Does Gainsharing Hurt Device Makers?

Medical Device & Diagnostic Industry Magazine
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Originally Published MDDI January 2006

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Maria Fontanazza

Many device makers are strongly opposed to agreements in which hospitals would reward doctors for using devices from a selected list of suppliers or products. The practice, called gainsharing, is supposed to align hospital and doctor incentives to lower hospital costs without compromising the quality of patient care. Recently, Congress even discussed making the system federal law, though no laws have been introduced yet.

But the abstract model of gainsharing is quite unlike the practical model, said Mark Leahey. The executive director of the Medical Device Manufacturers Association (MDMA) made his comments during MDMA's annual coverage and reimbursement conference in November 2005. OEMs against gainsharing say it will not only limit a doctor's access to new technologies but also hurt smaller firms.

“By asking doctors to pigeonhole options, you're going to push away innovation,” which could have long-term financial effects, said Andy Stapars. Stapars is director of government affairs and public policy at Advanced Medical Optics Inc. (Santa Ana, CA). He spoke to panelists after a discussion on gainsharing at the MDMA event. Smaller firms will not be able to take part, he said. “We can't compete with these market share giants.”

Gainsharing could also violate federal antikickback statutes and the Civil Monetary Penalty (CMP) law, said Lewis Morris. “Any hospital gainsharing plan that encourages physicians, through direct or indirect payments, to reduce or limit clinical services violates the CMP,” testified Morris before members of the House subcommittee on health. Morris is chief counsel at the HHS Office of Inspector General (OIG). He spoke to the subcommittee during its hearing on gainsharing in October.

OIG ruled gainsharing illegal in 1999, but approved its practice under tight guidelines in 2001. More recently, it provided advisory opinions on separate requests from hospitals that proposed gainsharing plans in February 2005. OIG wrote that it would not take action against the hospitals if they put certain protections in place. Those protections include maintaining patient access to quality care and ensuring public awareness of the arrangements.

“The OIG required these elaborate and extensive safeguards to ensure that hospitals would not stint on care, because it recognized that gainsharing could result in economic incentives undermining clinically appropriate decisions by physicians,” Martin Emerson told the subcommittee. Emerson, president and CEO of American Medical Systems Inc. (West Minnetonka, MN), spoke on behalf of AdvaMed at the hearing. He warned that if patients were not well protected, “gainsharing could easily reward cheaper treatments, not better treatments.”

He also shared the belief that small firms would suffer from the arrangement. Small firms create a large amount of new technologies, he noted. “[Those firms] already confront significant hurdles to bring technologies to market and have them accepted into the Medicare system.”

Gainsharing will just create another hurdle to surmount to gain entry to a market in which the largest OEMs have a major advantage, he said.

MDMA opposes gainsharing because it infers that doctors will be rewarded for using cheaper and less-innovative technologies. “No single brand of medical device is superior for all patients and physicians, as each device has unique features and functionalities,” Leahey wrote in a statement to the subcommittee. He added that gainsharing promotes “stagnation” in the industry, because it financially punishes doctors for buying new devices, and it could be a conflict of interest if it prevents them from using what they think is the best treatment.

Although gainsharing provides a monetary reward to doctors, not all of them are in favor of the practice. More than half of the physicians surveyed in an online Harris Interactive Inc. (Rochester, NY) poll responded that hospitals should not limit a doctor's choice of devices or provide them incentives just to save the hospitals money. The poll, which AdvaMed commissioned, was conducted in August of 2005.

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