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Is gainsharing ethical?

Transparency, patient care, legality must be considered

By Richard N. Peterson, JD

Many have called the propriety of gainsharing arrangements into question because they create an inherent conflict of interest. On the one hand is the physician’s duty to provide patients with high-quality medical care. On the other is the hospital’s (and, possibly, the physician’s) desire to reduce costs and maximize profits.

The AAOS Ethics Committee has identified several factors that should be considered when determining whether a proposed gainsharing arrangement is ethical. Most of these factors are covered in the AAOS Principles of Medical Ethics and Professionalism in Orthopaedic Surgery and must simply be applied to the proposed arrangement.

Physician-patient relationship

The first—and most important—consideration is the physician-patient relationship. As stated in the AAOS Principles:

“The orthopaedic profession exists for the primary purpose of caring for the patient. The physician-patient relationship is the central focus of all ethical concerns. The orthopaedic surgeon should be dedicated to providing competent medical service with compassion and respect.”

When considering whether a particular gainsharing arrangement meets appropriate ethical standards under this consideration, orthopaedic surgeons should ask:

• Does the gainsharing arrangement enhance care to the patient?

• With a gainsharing arrangement, is the quality of the patient’s care compromised in any way? Evidence-based medicine is necessary to determine whether there are substantial differences between implants that are widely available commercially or those that are made available under certain gainsharing arrangements.

• Does the patient receive any financial benefit from the gainsharing arrangement?

• Should not the economic “gain” inure to the patient (rather than the physician)?

• If an orthopaedic surgeon believes a certain implant is the only or best implant for a patient and that implant is not part of the gainsharing arrangement, what arrangements must the orthopaedic surgeon make?


The second principle to consider is the orthopaedic surgeon’s personal and professional integrity. According to the AAOS Principles, “The orthopaedic surgeon should maintain a reputation for truth and honesty with patients and colleagues….”

Implicit in the principle of integrity is the concept of transparency. It is not enough to recommend a particular device or implant to the patient. If the orthopaedic surgeon is participating in a gainsharing arrangement, is the patient informed or should the patient be informed of the gainsharing arrangement? If informed, must the patient approve of the gainsharing arrangement?

Legalities and honor

Gainsharing arrangements are considered in technical violation of federal anti-kickback and self-referral rules. They also violate the Civil Monetary Penalties Act and various state laws. Notwithstanding this, in several advisory opinions issued last year by the Office of the Inspector General (OIG) of the Department of Health and Human Services, the OIG, while admitting that “the proposed arrangements would constitute an improper payment to induce reduction or limitation of services,” also said that it “would not impose sanctions on the requestors.” The OIG’s confusing position raises ethical concerns about the legality of both gainsharing arrangements and the physician’s participation in them.

According to the AAOS Principles, “The orthopaedic surgeon must obey the law, uphold the dignity and honor of the profession, and accept the profession’s self-imposed discipline. The orthopaedic surgeon also has a responsibility to seek changes in legal requirements that are contrary to the best interest of the patient.”

The first question that is raised is: Are gainsharing arrangements legal? According to the OIG, technically, they are not legal. That being the case, under the AAOS Principles, should orthopaedic surgeons be ethically prohibited from entering into them?

But the OIG’s actions lead to an even more convoluted question: If gainsharing arrangements are technically illegal and government enforcement agencies indicate they will not enforce the law in this area, are orthopaedic surgeons ethically prohibited from entering into them?

Further, many raise the concern that it is unseemly for physicians to participate in gainsharing arrangements, as it appears they have incentives to consider the issue of money first rather than the best interest of their patients. Because orthopaedic surgeons must “uphold the dignity and honor of the profession,” all of their actions should be able to withstand public scrutiny. For example, if a gainsharing arrangement were discussed on the front page of The New York Times, would participants be embarrassed and would extensive discussions be necessary to explain the arrangements?

Conflicts of interest

As mentioned above, gainsharing arrangements create a conflict of interest for physicians. The AAOS Principles take a patient-centered care approach to this issue: “Wherever a conflict of interest arises, it must be resolved in the best interest of the patient. The orthopaedic surgeon should exercise all reasonable alternatives to ensure that the most appropriate care is provided to the patient. If a conflict of interest cannot be resolved, the orthopaedic surgeon should notify the patient of his or her intention to withdraw from the care of the patient.”

Even if the principles of transparency and full disclosure previously discussed are followed, does the physician’s receipt of additional funds in a gainsharing arrangement, even if acknowledged, encourage that physician to perform the surgery?


Gainsharing arrangements are frequently seen as creating strategic alliances between physicians and hospitals. Surely, this would come under the principle of cooperation: “Good relationships among physicians, nurses, and health care professionals are essential for good patient care. The orthopaedic surgeon should promote the development of an expert health care team that will work together harmoniously to provide optimal patient care.”

On the other hand, orthopaedic surgeons could ask:

• Are health care administrators part of the “expert health care team”?

• Must orthopaedic surgeons work with health care administrators to provide high quality patient care?

• Must orthopaedic surgeons work with administrators to control costs?

According to the AAOS Position Statement on Containing the Cost of Orthopaedic Implants, “it is important that orthopaedic surgeons be mindful of the expense of orthopaedic implants and their impact on health care costs for the treatment of musculoskeletal conditions.” Even though the costs of comparable implant systems can vary substantially, the AAOS believes that “the final authority for selecting implants should rest with the treating physician.”

The position statement notes that a hospital’s attempts to control costs and maintain clinical programs should not interfere with the surgeon’s goal of providing the highest quality care and serving the patient’s best interest. But orthopaedic surgeons within a hospital can cooperate in developing cost-containment strategies such as competitive bidding and consignment negotiations, which could also be considered “gainsharing” arrangements.


“Remuneration for orthopaedic services should be commensurate with the services rendered,” read the AAOS Principles. “Orthopaedic surgeons should deliver high quality, cost-effective care without discrimination.”

The AAOS has adopted a thoughtful “Opinion on Ethics and Professionalism on the Orthopaedic Surgeon in the Managed Care Setting.” This Opinion provides that it is ethically appropriate for orthopaedic surgeons to consider cost as one factor in choosing between equivalent but alternate forms of treatment. It provides that “receiving a financial return for services can encourage some physicians to overtreat. Conversely, a system that uses a capitated reimbursement plan may encourage physicians to undertreat. The orthopaedic surgeon’s personal economic consideration should not influence his/her decision-making in patient care.”

In addition, another important aspect of gainsharing arrangements is that the physician, or the physician’s office or department, receives a percentage of the savings realized under the program. This raises the question: Is the additional amount the physician receives through a gainsharing arrangement beyond the recognized/accepted fee for the implant and procedure?

Although some gainsharing arrangements have attempted to address this issue by earmarking the savings for office or departmental improvements, many orthopaedic surgeons believe that the savings should be passed directly to the patient. This would avoid any suggestion of impropriety.

Societal responsibility

Finally, there are the larger societal issues surrounding gainsharing. Under the AAOS Principles, “The orthopaedic surgeon has a responsibility not only to the individual patient, to colleagues and orthopaedic surgeons-in-training, but also to society as a whole. Activities that have the purpose of improving the health and well-being of the patient and/or the community in a cost-effective way deserve the interest, support, and participation of the orthopaedic surgeon.”

Does gainsharing improve the health and well being of the patient and/or the community? If not, should an orthopaedic surgeon support legislation or regulations (or interpretations of legislation or regulations) that would prohibit gainsharing? If gainsharing has been documented to enhance the health and well being of the patient or community, then should not orthopaedic surgeons support legislation to clarify or support its legality? Until these questions are answered, the decision whether to participate in a gainsharing arrangement must be left to the individual orthopaedist’s conscience.

Richard N. Peterson, JD, is general counsel for the AAOS and staff to the Ethics Committee. He can be reached at peterson@aaos.org

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