The Dangers of Profit and Loss

Posted by Stephen Weinberg, MD FACC FACP
Gain-sharing is an incentive program in which physicians are compensated for putting forth extra time and energy in an effort to save the hospital, in which they work, money. This could be by standardizing equipment used in the OR, ER, pacemakers, suture material, and other disposables that will reduce costs. It can also occur by developing and adhering to protocols that will make care more efficient and thereby keep costs low. I have participated in these programs and spent endless hours on committees coming up mechanisms to reduce expenses and then implementing them. The time spent is compensated by physicians sharing in the savings, if any, generated by the hospital. These are all laudable endeavors and should be encouraged in all programs.
I have concerns however when physicians get compensated for reducing or withholding care. Once a physician is in the employment of a hospital or is financially aligned with a hospital  and his salary is dependent upon the profit or loss of the hospital, the pressure on the doctor to admit or not admit a patient to the hospital or discharge a patient too early is greater than I believe it should be. With shrinking physician and hospital reimbursements, both entities are being placed in a situation where the need to wring every last wasted dollar out the system is becoming overwhelming. As a result, people can get hurt.
I believe there needs to be a firewall between physician income and hospital profit and loss to avoid rationing of care. There is nothing wrong with developing care protocols, streamlining flow, reducing waste from duplication of effort, developing purchasing power by decreasing the numbers of vendors in the hospital, using quality control measures in the hospital so that physicians get feedback as to their style of practice in terms of quality and cost, and other mechanisms to improve quality and efficient care.
There needs to be a mechanism by which each new improvement program is evaluated as to whether it crosses the line and whether it can potentially put patients at risk. The melding of physician income and hospital profit as a consequence of withholding "appropriate" care should not be permitted. The problem is that determining where that barrier should be erected is difficult, but I believe we should err on the side of caution. It is likely that our current quality measures will not detect these shortcomings unless they are egregious and therefore, individuals will likely be hurt. An example of this is the existing Medicare rule (since October, 2012 under the Accountable Care Act) that penalizes hospitals where the 30 day readmission rate for certain diagnoses (heart attack, heart failure and pneumonia) is above a level set by Medicare. The penalty is 2% and will rise to 3% next year. If a patient comes to the ER with recurrent symptoms of heart failure and is within the 30 day window, he might be sent home to avoid the penalty even if his best interests would have been served by readmission. Currently over 2000 hospitals in 49 states are being penalized a total of $280M this year. More about this program later.
The push by the ACA (Obamacare) to have physicians employed by hospitals, adopt Accountable Care Organizations, global payment risk models, and other profit and loss sharing programs, the more physicians will be integrated into a global financial model and the more patients should be concerned that this could lead to rationed care.
At the end of the day, patients want their doctor to be their advocate and ultimately do what is in the best interest of the patient and not the hospital, insurance company or other entity.