Twelve New Jersey hospitals and their participating physicians are taking part in the Physician Hospital Collaboration Demonstration, a Medicare project that will evaluate “gainsharing” — basically paying doctors to cut out tests and shorten hospital stays — as a way to cut costs.

“Rising healthcare costs are a growing burden for all of us,” Betsy Ryan, CEO of the New Jersey Hospital Association, said in a statement. “This is a bold test to see if we can redesign the failed system of the past and replace it with strategies that keep healthcare affordable while making it better and safer for patients. That’s essential as we embark on a national effort to reform our healthcare system.”

NJHA spearheaded the effort to win a waiver from the federal Centers for Medicare & Medicaid Services to test the initiative in New Jersey. The program, says the NJHA, also includes stringent quality controls to protect patients.

The program is designed to encourage physicians and hospitals to work together to provide the most efficient care for patients. Currently, Medicare reimburses hospitals a fixed rate for treating a Medicare patient, based on the patient’s diagnosis. But physicians are paid differently, receiving individual payments for each procedure or each day spent in the hospital. Those very different payment philosophies are inconsistent, and the gainsharing project aims to bring them together.

Under gainsharing, physicians may share a portion of the savings that are realized by working with the hospital to make a patient’s stay more efficient.

The participating hospital in the greater Princeton area is St. Francis in Trenton. Also taking part are AtlantiCare Regional Medical Center, Overlook Hospital in Summit, Holy Name Hospital in Teaneck, Jersey Shore University Medical Center in Neptune, Hunterdon Medical Center in Flemington, Monmouth Medical Center in Long Branch, Our Lady of Lourdes Medical Center in Camden, Valley Hospital in Ridgewood, Somerset Medical Center in Somerville, JFK Medical Center in Edison, and CentraState Healthcare System in Freehold.