Hospitals May Pay a Big Price to Save Money

Share Article

Â?Gain SharingÂ? - A new experiment to pay incentives to physicians could cause negative results.

At a time when the complexities of healthcare provider organizations (HPOs) are already on the brink of chaos, a new experiment to pay incentives to physicians for the use of “best value” products is being considered as a mechanism to control run-away inflation for many high cost implantable products. Thomas MacVaugh, Vice President of Strategic Initiatives In Healthcare, LLC, a NJ based firm specializing in change management and strategy execution for healthcare providers, cautions that this new experiment has the potential to add to the misalignment and waste of scarce healthcare resources as well as create even more regulations and increased litigation. Mr. MacVaugh commented, “As an individual who has studied and participated in healthcare expense reduction initiatives for more than thirty years, I am quite concerned about the potential ramifications of this new approach.”

According to MacVaugh, there are a few aspects of this approach referred to as “Gain Sharing” that may need to be more closely scrutinized. One of these issues involves physicians who already routinely and voluntarily collaborate with their hospital executives to use the most cost-effective products. Will they also be eligible to receive incentive payments for current practices? If not, MacVaugh questions whether this inequity will set the stage for a potential dual standard of behavior for the physicians? He commented, “While today’s experiments cover only cardio vascular and selected orthopedic implants, will this model encourage other physicians to demand incentives in other product categories? Can you imagine the potential magnitude of such a system of incentives for gloves, dressings, IVs, surgical instruments, stents, costly medications and the thousands of other products for which physicians may express a preference or dislike?”

Obviously senior executives in healthcare provider organizations will need to carefully examine the potential longer term scenarios of such “Gain Sharing” arrangements. If the physicians are entitled to incentives, MacVaugh expresses concern that nurses, technicians, environmental services department directors and other individuals, who can and often do specify brand preferences, might expect and demand similar incentives/benefits. Also, without strict and detailed guidelines, the potential broad application of these incentive programs could lead to arbitration or litigation between parties; especially when hospital executives attempt to determine who introduced which products that led to savings, or how to split the incentives if multiple parties were involved in the savings initiative.

Mr. MacVaugh, who has devoted most of his business career to helping the industry reduce expenditures, cautions provider organizations, “Hospitals, physicians and the rest of the “care team” should be aligned on reducing costs, and picking the right device (procedure, medications, etc.), at the right costs, for the right indications, for the best possible patient outcome. New “incentives”, programs, regulations, and mandates; however, may not necessarily be the best or only solution. Each segment of the care team must exercise good judgment by weighing the longer term impact of decisions rather than merely chasing short term gains.”

For further information or to contact Mr. MacVaugh, please visit

# # #

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Matt Gyulay
Email >
Visit website