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Burzichelli & Coughlin Bill Providing Incentives to Improve Hospital Care Head’s to Gov’s Desk

The full Assembly on Thursday unanimously granted final legislative approval to a bill sponsored by Assembly Democrats John Burzichelli and Craig Coughlin that will allow hospitals to provide physicians with performance-based incentive payments to increase quality of care and reduce costs.

“Essentially, this bill would allow hospitals and physicians to enter into arrangements to improve the overall health of an individual patient by tracking him or her through the healthcare delivery system,” said Burzichelli (D-Cumberland/Gloucester/Salem). “Through objective measurements, physicians will have an additional incentive to go above and beyond to improve outcomes for their patients. This is a win for everyone.”

The bill (A-3404), which now heads to the governor’s desk, would enable New Jersey hospitals to apply the benefits of the previously successful Medicare gainsharing program, which was operational from 2009 through 2016, to the New Jersey commercial patient population by permitting physicians and hospitals to work collaboratively to improve patient care while cutting costs.

“This will create an additional incentive for physicians and hospitals to work collaboratively and efficiently to strive for excellence,” said Coughlin (D-Middlesex). “While doctors will receive incentives, it’s ultimately the patients who will win through superior levels of care.”

A hospital that seeks to implement such a plan would be required to establish a steering committee to: develop institutional and specialty-specific goals related to patient safety, quality of care, and operational performance; implement an incentive payment methodology that ensures fair and consistent payments that correlate with individual and collective physician performance; and adopt a mechanism to protect the financial health of the hospital.

The plan may additionally include specific patient management tasks, care redesign initiatives, and patient safety and quality of care objectives. At least half of the members of the committee are to be physicians.

In developing the goals for a plan, steering committees will be required to ensure that there exist no incentives to reduce the quality or provision of medically-necessary care or to exceed best practice standards. In developing the payment methodology for a plan, steering committees will be required to ensure that physician performances are objectively measured in light of each physician’s own performance, the nature of the care provided, improvements in the physician’s performance over time, and local and regional standards.

Additionally, the methodology must ensure that payments objectively correlate with physician performances and are uniformly applied with regard to all physicians participating in the plan. Overall payments to individual physicians under a plan will be limited to 50 percent of the total professional payments for services related to the cases for which that physician receives incentive payments under the plan.

Hospital and physician incentive plans will be administered by an independent third party. Except for plans limited to specific clinical specialties or diagnosis related groups, hospital and physician incentive plans will apply to all admissions and all inpatient costs related to those admissions in a given program. Plans will be open to all surgeons and attending physicians of record who have been on the medical staff of the hospital for at least one year, except that this restriction will not apply to hospitalists and physicians who are new to the participating hospital’s geographic area. Hospitals will have the discretion to additionally open their plans to other physicians involved in the provision of inpatient care.

Each plan is to include a mechanism to limit incentives attributable to year-to-year increases in patient volume for physicians on staff with multiple admitting privileges. Patients are to be notified of a hospital and physician incentive plan in advance of admission.

Physicians will be permitted to withdraw from a plan upon reasonable notice to the hospital, and hospitals may terminate a plan upon reasonable notice to DOH and to participating physicians.

DOH would also be required to review, and potentially terminate, hospital and physician incentive plans every six years.

Current law prohibits self-referral by a physician if there is a financial interest. However, the sponsors feel that with the change in the healthcare landscape brought on by the Affordable Care Act, this law needs to be amended to promote better coordination of care. To that end, the bill would amend current law to provide that payments made to a physician under a hospital and physician incentive plan do not violate the statutory prohibition against physician self-referrals.