ACOs and Gainsharing: What was old is new again

by Jim Toole, managing director, life & health, FTI Consulting

Accountable Care Organizations (ACOs) bring hospitals and physicians together as a risk bearing entity, aligning incentives between parties with different economic interests. This collaboration has not often occurred in the U.S., although success stories exist within specialties in some hospital systems. This alignment becomes the de facto best practice standards of care within the U.S. This new approach requires careful planning and collaboration to ensure it becomes a reality, and more importantly, a success.

The Medicare ACO model represents a dramatic change in Medicare policy and provides an opportunity to transform care delivery and provider alignment. In this model, ACO providers take responsibility for quality and overall care, and Medicare shares the savings from improved policy and the elimination of unnecessary costs. The term used to describe this approach is gainsharing.

What is gainsharing?
Gainsharing refers to provider organizations sharing savings that result from more efficient and effective practice of medicine. There is a presumption that gainsharing will result in a reduction of medical errors and higher overall quality of care. Proponents cite the tremendous regional variation in the amount of care and type of care as a rationale for promoting gainsharing.

There is little in the way of benchmarks and evidence-based research to define the quality of care to start with. Properly constructed, gainsharing arrangements might form the backbone of research for new benchmarks around best practices for cost and quality management. Gainsharing can be a part of a transitional strategy, bringing local systems,  regions, and ultimately the U.S. healthcare system to higher levels of accountability and improved performance.

The interest in gainsharing originally started in the 1990s, with a pull and tug between physicians and hospitals to gain control of the savings being generated by managed care.  While HHS recognized appropriately structured gainsharing arrangements could offer benefits to patients and providers alike, Section 1128A of the Social Security Act clearly prohibited such arrangements. There was a concern that such arrangements might create conflicts of interest that limit the ability of physicians to exercise independent professional judgment in the best interest of their patents.

With the push to align incentives with outcomes, gainsharing arrangements are being revisited as a potential means of bridging the gap between costs and quality of care. In order to effectively implement gainsharing, there must be accountability, quality controls, and safeguards for patients.

ACOs offer the potential for genuine win/win situations for physicians, hospitals, beneficiaries and taxpayers. The private sector is jumping at the opportunity to develop new products, services and contracting arrangements to support the needs for this expanding market. Actuaries are bringing advanced business analytics tools to shed light on the burgeoning healthcare databases in order to assess priorities and measure success. All of which is to say that healthcare delivery is becoming smarter at a rate faster than it ever has before; one can only hope that it becomes fast enough to overtake the weight of medical inflation.

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