New Jersey pilot demonstrates reduced costs through better care coordination

The New Jersey Hospital Association is expanding an innovative "gainsharing" pilot program designed to improve healthcare efficiency and reduce costs by promoting better coordination and collaboration among New Jersey hospitals and physicians.

The original pilot program that began with 12 hospitals in 2009 was part of the Centers for Medicare & Medicaid Bundled Care initiative-- a program to test how bundling payments for episodes of care can improve care coordination and lower overall Medicare expenditures. The program expansion will now include a total of 30 hospitals and health systems representing 33 hospital sites statewide that will begin testing bundled payments as early as April 2013.

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Under NJHA's gainsharing pilot program, Medicare payments were aligned to ensure that hospitals and physicians would work together. Hospitals and physicians that successfully reduced costs while meeting strict federal quality standards were allowed to share the savings.

CentraState Medical Center in Freehold, New Jersey was one of the original pilot program hospitals. "We did save approximately $2.2 million over the three-year period ending in 2012 which we shared through various formulas with our doctors," said Daniel Messina, PhD, CentraState senior vice president and chief operating officer. "We went into the program as a way to take our physician alignment strategy to the next level. The gainsharing project allows the physicians and hospitals to really be side-by-side in the trenches with some dollars on the table. "

"All of the pressure on hospital payments is downward, so hospitals know that payments aren't going up, they're not even staying flat, they're going to be pushed down," Sean Hopkins, senior vice president of health economics at NJHA. "So hospitals need to do everything in their power to operate as efficiently as possible in an effort to live under these lesser means."

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Programs like New Jersey's gainsharing pilot are the "essence of healthcare reform," Hopkins said. "It's better care at lower costs. Providers talking to each other and collaborating together with the patient at the center of care. These modest incentive structures that are available through this program are enough to get that to happen."