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October 21, 2019

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MedMan and Medicare Commonality?

March 15, 2018

What could MedMan and Medicare possibly have in common? Oddly enough, both value 'sharing'.  Sharing is the most common value cited for MedMan Advancing our Values nominees, MedMan's version of Employee of the Year award. But Medicare has two distinct types of sharing - Gain Sharing and Risk Sharing. The terms are used rather loosely, and may not be well understood, as I learned at a recent client Annual Planning Meeting. Ergo, let’s take a closer look…

 

Gain Sharing has been around for well over 15 years – one of the first attempts by Medicare to control escalating healthcare costs. It represents a formal reward system for hospitals to share with physicians the savings, or increase to profits, that stem from collaborative activities to save Medicare money. Early skeptics, me included, claimed that the very nature of that violated Fraud and Abuse Laws – such as compensating physicians to limit medically necessary services to beneficiaries. But the government agreed to waive certain Fraud and Abuse laws and Gain Sharing was born. How does it work? If a hospital can get a group of orthopedists to use one hip implant device, they get great volume based pricing, lower inventory costs, and write checks to the doctors for helping reduce the cost of care.

 

Similar to GainSharing is “P4P” and Value Based Payment wherein insurance companies pay to reduce the cost of care, or hit performance targets that they know will ultimately reduce the cost of care.

 

Risk Sharing is a more recent concept that emerged coincident with the rise of Accountable Care Organizations (ACOs). Here is where the insurance company elects to share in savings (a lower Medical Loss Ratio) when it incurs less than the expected cost through the efforts of the hospitals and physicians. Medicare will sometimes use the Average Actuarial Cost per Capita as the threshold for “expected” cost. In this situation, the ACO gets one payment for the cost of the hip replacement surgery, and all costs associated with that procedure for 90 days post op. The insurance company shifted the financial risk to the ACO, its hospital and physician members.

 

As of January 2018 CMS announced 99 new ACOs, and a new model – “Track 1+” that reduces the amount of downside risk in hopes of encouraging smaller organizations to join in the risk sharing. Interested?

 

I prefer MedMan’s type of sharing to either of the Medicare types of sharing.

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