Pierre-Thomas Léger, HEC Montreal

1. Pierre Thomas Léger, Ph.D. Associate Professor and Professorship in Health Economics HEC Montréal Gainsharing

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. Physicians receive their income directly from the insurer or government through fee-for-service, salary…

6. Concerns: Misalignment of Incentives This is especially true in cardiology and orthopaedics where there are “physician preferred devises” (like stents or prosthetics). This is important because: 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. These costs are large in both absolute and relative terms.

7. Concerns: Misalignment of Incentives Another feature of this area is that hospitals buy D&Ds directly from vendors and bargain over prices. The contracts include quantity and market-share rebates -> the more the hospital buys from a particular vendor, the less is the per-unit price! Result: The hospital would like physicians to consider the price of D&Ds when making decisions (e.g. use the less expensive bare metal stent) & The hospital would like physicians to standardize on the same types of D&Ds for it to benefit from such rebates.

9. Benefits and Considerations for Canada Considerations for Canada: Under strict rules, allow Canadian hospitals to make direct payments to physicians to implement such programs in a meaningful way (generally legally prohibited now). Add safeguards for potentially perverse effects (for example, monitoring quantities).

10. Conclusion: Gainsharing may be a way to decrease the costs of care (i.e., bend the cost curve) in many areas. How? By aligning the incentives of hospitals and physicians through gainsharing! Result: important savings come from the reduction in prices paid for D&Ds not reductions in quality or quantity of care