Benchmarks & Gainshare
In an interesting example of the growing use of gainshare arrangements, the US courts have given clearance to an initiative covering more than 100 hospitals in New York.
The legal review was based on concerns that the proposed gainshare program might prove anti-competitive and to address these there is a high level of transparency in the overall process. The gainshare applies to physicians and awards will be based on their efficiency and effectiveness in the use of resources, both relative to others and to their own performance over time.
I find the program interesting because it demonstrates the power of technology in allowing us to think in new ways about undertaking benchmarks and measuring performance. As companies seek better ways to determine the relative value being provided by their internal and external providers, i believe we will see increased use of programs like this. An interesting question is who will sit behind their development – for example, industry bodies or associations, software companies, analysts, major consultancies, or a new breed of service providers focused on supplying the information that drives continuous improvement?
And for suppliers, what exactly does this trend mean in terms not only of rewards, but also with regard to their performance obligations and the customer’s termination rights?