Budget Reconciliation Package Calls for Gainsharing Demonstration

In late December, after House-Senate conferees wrapped up the Deficit Reduction Omnibus Reconciliation Act of 2005, many legislators and healthcare industry watchdogs were surprised to learn that the final bill included funding for a gainsharing demonstration project. Under the provisions of the budget reconciliation package, the Centers for Medicare and Medicaid Services (CMS; Baltimore) will establish six gainsharing pilot programs, to be fully operational by January 1, 2007.

Gainsharing initiatives typically provide financial incentives to doctors who agree to use preapproved medical devices, equipment, and supplies that have been standardized by hospitals to control costs through volume buying.

Representative Nancy Johnson (R–CT), chair of the health subcommittee of the House Ways and Means Committee, led the charge to include the gainsharing demonstration in the final bill. The projects were largely modeled on Johnson's draft legislation known as “The Hospital Quality and Performance Demonstration Act of 2005.”