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Pierre Thomas Léger, Ph.D.<br />Associate Professor and<br />Professorship in Health Economics<br />HEC Montréal<br />Gain...
Concernswith the Current System<br /><ul><li>Currently in Canada, hospitals and physicians are paid independently from one...
Hospitals receive revenue from insurers or governments and must pay for all “non-physician services” and costs (ex: non MD...
Physicians receive their income directly from the insurer or government through fee-for-service, salary…
Although hospitals are responsible for most costs, they have very little control over them -> they are often controlled by...
Concerns: Misalignment of Incentives<br /> This is especially true in cardiology and orthopaedics where there are “physici...
Concerns: Misalignment of Incentives<br /> Another feature of this area is that hospitals buy D&Ds directly from vendors a...
Proposed Option: Gainsharing Programs<br />Gainsharing programs allow hospitals to provide bonuses to physicians based on ...
Benefits and Considerations for Canada<br />Considerations for Canada: <br /> Under strict rules, allow Canadian hospitals...
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WHAT IF: Group-based profit-sharing strategies aligned physician incentives with the priorities of hospitals and policy-makers?

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Pierre-Thomas Léger, HEC Montreal

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WHAT IF: Group-based profit-sharing strategies aligned physician incentives with the priorities of hospitals and policy-makers?

  1. 1. Pierre Thomas Léger, Ph.D.<br />Associate Professor and<br />Professorship in Health Economics<br />HEC Montréal<br />Gainsharing<br />
  2. 2. Concernswith the Current System<br /><ul><li>Currently in Canada, hospitals and physicians are paid independently from one another.
  3. 3. Hospitals receive revenue from insurers or governments and must pay for all “non-physician services” and costs (ex: non MD labour, drugs, devices…).
  4. 4. Physicians receive their income directly from the insurer or government through fee-for-service, salary…
  5. 5. Although hospitals are responsible for most costs, they have very little control over them -> they are often controlled by physicians. </li></li></ul><li>Concerns: Misalignment of Incentives<br /><ul><li>Currently, there is a misalignment of incentives where:</li></ul>The hospital wants the physician to consider costs that are borne by the hospital (for example: drugs and devices (D&Ds)).<br />The physician has no incentive to consider costs when making treatment decisions.<br />
  6. 6. Concerns: Misalignment of Incentives<br /> This is especially true in cardiology and orthopaedics where there are “physician preferred devises” (like stents or prosthetics).<br />This is important because: <br />The increases in drug and device costs (at least in the US) account for most the rise in total expenditures in cardiology over the last decade.<br />These costs are large in both absolute and relative terms. <br />
  7. 7. Concerns: Misalignment of Incentives<br /> Another feature of this area is that hospitals buy D&Ds directly from vendors and bargain over prices.<br /> The contracts include quantity and market-share rebates -> the more the hospital buys from a particular vendor, the less is the per-unit price!<br />Result: <br /> The hospital would like physicians to consider the price of D&Ds when making decisions (e.g. use the less expensive bare metal stent) &<br />The hospital would like physicians to standardize on the same types of D&Ds for it to benefit from such rebates. <br />
  8. 8. Proposed Option: Gainsharing Programs<br />Gainsharing programs allow hospitals to provide bonuses to physicians based on savings at the team level. <br />Under gainsharing, hospitals save (and physicians benefit) when:<br />Physicians substitute towards the cheaper D&D (substitution).<br />Physician reduce quantity (although this is prohibited and monitored).<br />Physician coordinate and standardize on D&Ds type (hospitals benefit from rebates).<br /><ul><li>Because the individual is paid as a function of his team’s choices, there is an incentive for mutual monitoring.</li></li></ul><li>Experience and Evidence<br />Experience in the US: the government has allowed gainsharing programs under extremely strict rules targeting cardiologists and orthopedic surgeons. <br />Physician teams split bonuses based on savings year to year (relative to a historical baseline) on different D&Ds (for example, team members equally share 50% of the total savings in bare-metal stents).<br />Empirical evidence from Ketcham, Léger and Lucarelli (2011) show that gainsharing lead to substantial reductions in costs in treating PCI-patients & this reduction is due to decreases in the price paid per stent NOT reductions in quantity…. <br />
  9. 9. Benefits and Considerations for Canada<br />Considerations for Canada: <br /> Under strict rules, allow Canadian hospitals to make direct payments to physicians to implement such programs in a meaningful way (generally legally prohibited now).<br />Add safeguards for potentially perverse effects (for example, monitoring quantities).<br />
  10. 10. Conclusion:<br />Gainsharing may be a way to decrease the costs of care (i.e., bend the cost curve) in many areas.<br />How? By aligning the incentives of hospitals and physicians through gainsharing! <br />Result: important savings come from the reduction in prices paid for D&Ds not reductions in quality or quantity of care<br />

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