Diagnostics & Imaging Week Washington Writer

WASHINGTON – Complaints about device contract gain-sharing resonated loudly at the recent Medicare and Reimbursement Conference hosted here by the Medical Device Manufacturers Association (MDMA; Washington).

“We’re adamantly opposed to it,” Jori Frahler, MDMA’s director of federal affairs, told Diagnostics & Imaging Week, “and advocating against it.”

In theory, the process of gain-sharing is designed to lower healthcare costs by eliminating wasteful medical practice. To do so, gain-sharing offers financial incentives to doctors who reduce expenditures, with hospitals transferring to physicians a share of any reduction in the hospital’s costs due to the physicians’ efforts.

As this strategy relates to device usage, gain-sharing would provide doctors a percentage of the costs they cut by using products to which a hospital has contractual ties.

Although the practice is technically illegal, a number of hospitals have programs in place to test gain-sharing, and recent movements on Capitol Hill indicate that it could gain further footing by way of legislative legitimacy.

Its advocates argue that gain-sharing would better align physician practices with those of hospitals and thereby promote hospital cost reductions.

Last month, the House of Representatives’ Subcommittee on Health of the Committee on Ways and Means held a hearing on the matter, and Chairman Nancy Johnson (R-Connecticut) has said she would like to introduce a bill in support of gain-sharing by the end of this year or early 2006.

But MDMA has long voiced its opposition to a similar cost-reduction effort by opposing the practices of group purchasing organizations which say that their contractual arrangements with hospitals serve to reduce costs. GPO contracts, it contends, suppress the marketing of innovative technologies often developed by smaller firms.

Thus, at the conference it argued that gain-sharing would limit the ability to make the best choices for their patients and thus adversely impact patient care.

“The physicians’ choice is completely left out of the model,” argued Mark Leahey, the trade association’s executive director.

Such fears were best articulated at the MDMA meeting by Paul Tobin, the deputy executive director of the United Spinal Association (Jackson Heights, New York), himself a spinal cord injury patient. “With the very best of intentions,” he said, “you are jeopardizing medical care.”

He added that gain-sharing would induce doctors to move away from seeing patients on a case-by-case basis and instead tempt them with personal gain through such a cost-cutting program.

“I, for the life of me, can’t figure out why we’re taking a short-term view on healthcare,” Tobin added. “I think this is a horrible direction that we’re going in.”

For MDMA members, a group comprised of the device industry’s smaller companies, gain-sharing programs could have negative business implications, they said, by legitimizing what they see as anti-competitive practices.

“The largest market share manufacturers will have an unfair advantage,” said Andy Stapars, the director of public policy for Advanced Medical Optics (Santa Ana, California). He later added that small companies won’t be able to participate in gain-sharing “because they don’t have the market clout.”

“Let the markets determine winners and losers,” Leahey said, later adding that “you don’t fix one conflict of interest by creating another.”

In contrast, MDMA advocates pay for performance initiatives, which focus on financial incentives for enhancing clinical practices that improve patient outcomes. Notably, the association has said that pay for performance is made up of programs that are consistent with the growing movement embracing evidence-based medicine.

Importantly, Frahler noted that all stakeholders have had a voice with lawmakers considering gain-sharing bills, as members of the device industry were able “to clearly and articulately express” concerns at the conference.

And a number of legislative aides who work on the issue attended the meeting, although all declined to speak publicly on the matter, thus not matching well with the association’s promotion of the meeting which emphasized offering open access to government, including participation from a number of representatives from the FDA and CMS.

Both agencies advocated early interaction with device companies to align clinical development activities with evidence, a practice designed to streamline the approval and reimbursement processes.

Frahler said that “Both CMS and FDA are open to working with stakeholder.”