By Terry Baynes
NEW YORK, Jan 16 (Reuters) - The Justice Department on
Wednesday cleared the way for a New York hospital association to
adopt a program that compensates physicians for reducing the
cost of patient care.
The Greater New York Hospital Association, which represents
around 250 healthcare facilities in New York and nearby states,
sought to adopt a so-called "gainsharing" program to give
doctors a financial incentive to lower healthcare costs to
For New York hospitals that participate in the program, the
association, with the help of a medical technology company, will
analyze the costs of inpatient services performed by specific
physicians. Physicians whose costs go down or remain low share a
portion of the savings.
Gainsharing is designed to bring doctors' and hospitals'
incentives in line, according to the hospital group. Physicians
order medical products and services while hospitals pay for
them. Gainsharing encourages doctors to consider the hospital's
resources in their decision-making process.
Historically, federal regulators have been suspicious of
gainsharing programs. In 1999, the Office of the Inspector
General, a unit of the U.S. Department of Health and Human
Services, found that gainsharing violated the Civil Monetary
Penalties law, which prohibits a hospital from paying a doctor
to limit medical care for Medicare or Medicaid patients.
But starting in 2001, the Office of the Inspector General
shifted its position and approved the first of many gainsharing
programs for specific hospitals, under strict conditions. Now
the Greater New York Hospital Association is seeking to adopt
such a program for its participating members.
The hospital association was concerned that the arrangement
would be seen by the government as limiting competition by
setting caps on physician compensation at numerous hospitals, so
the group reached out to the Justice Department for clearance.
In a letter to the hospital association's lawyer, the
Justice Department said that the proposal on its face did not
run afoul of antitrust laws. Under the plan, each individual
hospital determines how to use the performance data to reward
physicians, and each hospital sets its own cap on the
The agency's letter did caution, "If (the Greater New York
Hospital Association) uses those provisions as a pretense for
coordinating hospital payments to physicians, such conduct would
be subject to prosecution under the antitrust laws."
Catherine Martin, a healthcare lawyer at Adelman Sheff &
Smith, said gainsharing programs have typically been adopted by
individual institutions but that the concept makes sense for a
"There's a lot to the management of it. Hospitals have to
gather the data, pool the data and make sure that patient
protections are still in place," she said.
The Greater New York Hospital Association and its lawyer,
Colin Kass of Proskauer Rose, did not immediately provide a
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