Connections : Join the Conversation - The blog of Biomet CEO Jeffrey R. Binder

Back in the day, before there was the daily lottery, urban "entrepreneurs" offered a similar service, known as "running numbers." These games were, of course, illegal and the government pursued and punished the perpetrators.

Today, government-run lotteries are common, driven by deficit-plagued states that promise to use the funds for education and other inarguably positive aims. The prospect of easy revenue without the political cost of taxation made it easy for policymakers to rationalize away the reasons why numbers running was illegal in the first place. The ends justified the means.

I cannot shake the feeling that the Center for Medicare and Medicaid Innovation's (CMMI) bundling programs, which encourage gainsharing, are a little like state-sponsored gambling. What was previously thought to be an evil – providing surgeons with financial incentives to choose one course of treatment or one technology over another – is now a worthwhile innovation when the kickback is provided by the government.

And let's not mince words: these incentives are definitely kickbacks. The Affordable Care Act provides CMMI the authority to waive the anti-kickback statute and other legal roadblocks to run its experiments.^1,9 One simply has no need to waive the anti-kickback statute if one is not concerned that a scheme features kickbacks.

What is Gainsharing?

The concept behind gainsharing is simple: engage physicians in saving hospitals and payors money by sharing with them a portion of any savings. This is not a new idea. In 1999, the Office of the Inspector General, Department of Health and Human Services (OIG), issued an opinion on a proposal to gainshare. In that opinion, the OIG stated:

None of the [gainsharing] arrangements provided sufficient assurance that the care to Medicare and Medicaid beneficiaries would not be adversely affected.²

In the 2000s, the OIG issued a handful of narrowly tailored exemptions that allowed hospitals to gainshare with physicians, primarily in exchange for reducing the cost of medical devices, mostly in cardiac services. One exemption was issued for spine and neurosurgery.³

Also in the 2000s, Medicare initiated several demonstration projects that allowed gainsharing.³

Thus, to date, Medicare gainsharing has been limited to a handful of hospitals that have OIG exemptions and to those institutions participating in a CMS demonstration project. But all that is about to change.

The new CMMI bundling initiative encourages applicants to design gainsharing programs and submit them to CMMI for consideration. Unlike previous gainsharing programs, the bundling program is not a limited demonstration project or a small number of exemptions; CMMI has the authority to clear gainsharing in any institution it deems worthy. And the new initiative raises the stakes for physicians. Whereas in previous demonstration projects, the incentive (kickback) was typically capped at 25% of the clinician's current Medicare reimbursement³, under the bundling programs this is increased to 50%^4-6. For a large volume joint surgeon performing 400 Medicare surgeries per year, for instance, the cap on surgeon earnings could be upward of $250,000 per year.⁷

We applaud the idea of engaging physicians in cost-reduction and efficiency improvements. However, we see nothing in the bundling program that addresses OIG's original, long-held reservations about gainsharing's impact on patient care.

The Perils of Gainsharing

Policymakers are rightfully concerned about the perverse incentives that are created when a manufacturer provides inducements in return for a health care professional's referral of business or choice of products. The theory is that this will potentially lead to compromised patient care (e.g., surgeons choosing an inappropriate treatment or product) and/or additional expense to the healthcare system (through overutilization of medical technology or choosing an unnecessarily expensive treatment path or product).

But policymakers do not apply the same logic to gainsharing. There should be an equivalent, or I might argue greater concern, of providing inducements to choose an inappropriate treatment or product to save money. One might further argue, more indirectly, that gainsharing could add expense in the long run by encouraging temporizing treatments that delay, but do not supplant, necessary surgical intervention.

This argument is not an indictment of the motives of CMMI or its leadership. CMMI's mission is the so-called three-part aim, defined as better healthcare for individuals, better health for populations, and lower costs through improved care.⁸ We believe that CMMI officials are well-meaning and sincere people who are not in any way attempting to harm patients. In fact, CMMI has attempted to put in place quality measures that will be scored and followed as part of the program.

Unfortunately, these short-term measures are inadequate, especially in gauging and ensuring the quality of long-term outcomes in a field like orthopaedics. Ultimately, the clear incentives to save money and skimp on treatment may outweigh the impact of weaker, short-term quality measures, potentially hindering patients' access to advanced medical technologies and treatments.

Avoiding Unintended Consequences

How long will it be before we read headlines about patients claiming to have been damaged because hospitals incentivized doctors to cut corners on their care? And where are patients' groups on this issue - do they really believe that a kickback provided by a for-profit company is fraught with peril, but that one provided by the government will not diminish the quality of patient care? It is impossible to argue that kickbacks provided by corporations cloud medical judgment, while those offered under government-sponsored gainsharing programs do not.

When I recently asked a senior CMMI official if he was concerned about doctors underutilizing medical technologies in response to cost-saving incentives, he responded that doctors want to do the right things for their patients. I agree.

But gainsharing exposes the government's circular reasoning. If the government truly believes in the integrity of physician judgment, why does it presume to use gainsharing to induce physicians to modify their behavior?

Indeed, the very premise of gainsharing is that physicians are not now doing the right things—just the most expensive things-and that they can and should be induced to change their treatment patterns.

Physician skill and judgment are ultimately the most important contributors to successful patient outcomes. When patients are candidates for surgery, or are suffering from complex disorders, the choice of treatment path or technology may not be clear-cut, and surgeons must choose the option which is, in their judgment, best in each case. For some patients, that may mean conservative care; in others, immediate surgery. Programs that push surgeons to err in the direction of lower short-term cost may result in detrimental compromises that will not be apparent for years.

CMMI should slow down the gainsharing rush, approving only a limited number of experiments rather than using its authority to effectively institutionalize governmental kickbacks to healthcare professionals.

In addition, all gainsharing payments to healthcare professionals should be disclosed publicly in much the same way as manufacturers will soon be required to disclose payments to healthcare professionals. As a strong supporter of transparency in the reporting of company relationships with doctors, I see no reason why the logic does not extend to incentive payments under the bundling programs.

It's ironic that, under the sunshine provisions of the Affordable Care Act, companies must report any transfer of value to physicians of $10 or more¹, while the bundling initiative allows physicians to enjoy gainsharing benefits of up to 50% of their Medicare reimbursement without requiring similar public disclosure. Clearly the pens and doughnuts that are covered under the Act's disclosure provisions are less likely to sway surgeons' clinical judgment than the potentially rich payments that they can earn via gainsharing.

When the government performs an activity that is considered to be suspect when practiced by the private sector, we should all slow down and take notice of the discrepancy. Such was true for lotteries and such is true for gainsharing kickbacks.