Quality and financial outcomes from gainsharing for inpatient admissions: A three‐year experience

Abstract

Gainsharing is a way to provide incentives to physicians to decrease hospital costs without compromising quality. A pay-for-performance program was instituted over a three-year period from July 2006 to June 2009. Baseline length of stay (LOS) and case costs were developed during the year prior to the inception of the program. Best practice norms (BPNs) were established at the top 25th percentile of physicians for each all patient refined (APR)-diagnosis related group (DRG). Hospital costs were analyzed in several areas, including operating room charge (OR), supplies and implants, nursing and per-diem room costs. Payments were based upon case level performance compared to BPN's and the physician's historic performance. Eligible cases included commercial insurance only for the first 2 years but Medicare cases were included after October 2008 resulting from a Centers for Medicare and Medicaid Services (CMS)-approved demonstration project. Payments to physicians required meeting quality thresholds, including chart completion, and compliance with core measures. A total of 184 (54%) physicians enrolled into the program. There was a $25.1 million reduction in hospital costs during the 3 years ($16 million from participating and $9.1 million from non-participating physicians, P < 0.01). Most cost reductions were attributed to reduced LOS and reductions in medical supply costs. Total physician payouts were over $2 million (average $1,866 per quarter). Delinquent medical records decreased from an average of 43% in the second quarter 2006 to 30% (P < 0.0001) in the second quarter 2009. Quality measures improved during the study period but not by a statistical significance. Gainsharing provided an incentive for physicians to reduce hospital costs while maintaining hospital quality.