NJ hospital gainsharing initiative saves $113 million

A quality and cost initiative spearheaded by the New Jersey Hospital Association (NJHA) saved a dozen hospitals in the Garden State about $113 million over three years.

Known as New Jersey Care Integration Consortium, the initiative reduced costs per patient admission by about 8.5 percent. The program paid each hospital a fixed rate for each patient regardless of how long he or she was hospitalized, while physicians were paid "a la carte" for each test, procedure or patient day, and received a backend bonus if costs decreased, NJBiz.com reported

Hospitals must accept a reduction of their Medicare payments to participate in the program, which was 0.25 percent in the first year and is currently 1 percent.

Such a program, known as gainsharing, has raised concerns about the ethics of paying physicians to help reduce the cost of care and the potential for collusion, but the U.S. Department of Justice ruled last year that such practices were lawful. In the New Jersey initiative, physicians could be paid up to $300 in incentives for each surgical case and about $100 for other patients admitted into a participating hospital, FierceHealthFinance previously reported.

"In an environment where there are significant pressures downward on government revenue, and Medicare is a big part of any hospital's business, this was an opportunity for the hospitals to coordinate care delivery with the doctors and for those doctors that performed and improved the quality of care to receive a modest financial bonus to do so," Sean Hopkins, NJHA's senior vice president of health economics, told NJBiz.com.

The participating physicians received about 17 percent of the savings back in the form of bonuses, which totaled just under $19 million. Meanwhile, quality of care indicators either remained the same prior to the program or increased slightly.

A new version of the program has 16 hospitals participating under the Centers for Medicare & Medicaid Services' Bundled Payments for Care Improvement initiative, AHA News Now reported. A profile of the original project appears on the website of the Agency for Health Care Quality's Innovations Exchange.

To learn more:
- read the NJBiz.com article
- here's the AHA News Now article
- check out the AHRQ Innovations Exchange profile of the project