Gainsharing: Heightened interest at Federal level AAOS Bulletin - February, 2006

Gainsharing: Heightened interest at Federal level

The gainsharing dilemma: Issues include cost savings, ethics and patient care

By David A. Lovett, JD

This issue of the AAOS Bulletin takes a comprehensive look at gainsharing arrangements. Though gainsharing arrangements have been considered illegal for most of the last decade, the Inspector General of the Department of Health and Human Services issued several advisory opinions last year, which now make these arrangements possible.

Gainsharing arrangements can be broadly or narrowly defined, as seen in the following group of articles. Although there are a range of hybrids, gainsharing arrangements can be primarily categorized as either “supply-based purchasing” agreements or “hospital-based cost-savings programs” (value improvement initiatives, quality savings). In the first model (supply-based purchasing agreements), for example, a hospital may limit a surgeon’s choice of orthopaedic implant, in an effort to bring down the costs of these products. The cost savings realized are shared between the institution and the physician.

However, there are many other types of gainsharing arrangements, such as the physician-hospital joint development of case-management guidelines, under which physicians may also be compensated. The physician community, hospitals, insurers, and manufacturers have diverse opinions on the legality and ethics of these arrangements and on the effects gainsharing could have on patient care and the advancement of new technologies.

In today’s environment—where the Centers for Medicare and Medicaid Services is embracing pay-for-performance initiatives that would provide hospitals and physicians with higher reimbursements based on quality measures that may also be linked to cost savings, gainsharing arrangements have become even more attractive.

In this context, Rep. Nancy Johnson (R-Conn.), chair of the Subcommittee on Health of the House Ways and Means Committee, drafted Federal legislation advancing gainsharing arrangements. These provisions, which would legalize gainsharing, were included in the budget reconciliation bill that Congress recently passed.

At this time, however, the ethical and legal considerations for orthopaedic surgeons remain. At its December 2005 meeting, the AAOS Board of Directors held a two-hour strategic discussion on gainsharing arrangements to identify the greatest concerns to the orthopaedic community and to decide on next steps for the AAOS.

The articles that follow are based on the presentations made during that meeting. David A. Halsey, MD, chair of the AAOS Council on Health Policy and Practice, helps define gainsharing, provides a brief legislative and regulatory history and identifies some of the legal and ethical problems associated with this subject. William J. Robb, III, MD, chairman, Department of Orthopaedic Surgery, Evanston Northwestern Healthcare in Illinois, discusses his positive experiences, including the value of and short-term savings with gainsharing arrangements. David Teuscher, MD, chairman of the AAOS Professional Liability Committee, expresses an opposing view. Finally, AAOS General Counsel Richard N. Peterson, JD, provides a detailed examination of the ethical issues confronting orthopaedic surgeons when considering gainsharing arrangements.

Currently a Gainsharing Project Team, chaired by Dr. Halsey is exploring future activities for the AAOS, which may include a white paper, a position statement and possible changes to AAOS ethical principles. As the AAOS position on gainsharing evolves, we welcome comments from AAOS fellows on the topic. Send your thoughts to Kathryn M. Pontzer, JD, deputy director of the AAOS Washington office and principal staff liaison for the AAOS Gainsharing Project Team, at

David A. Lovett, JD, is director of the AAOS Washington office. He can be reached at

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