OIG Addresses Gainsharing Arrangements in 6 New Advisory Opinions
The first 6 DHHS Office of Inspector General (“OIG”) Advisory Opinions issued in 2005 address gainsharing arrangements between hospitals and physicians which offer physicians a portion of a hospital’s cost savings in exchange for implementing cost saving strategies. These cost saving strategies often take the form of:
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Curbing inappropriate use or waste of medical supplies |
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Limiting use of certain supplies to an “as needed” basis |
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Substituting less costly items for items currently being used |
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Product standardization of certain devices and supplies |
Gainsharing arrangements are rare today because in 1999 most hospitals terminated these arrangements in response to an OIG Special Advisory Bulletin that suggested the arrangements would violate the law. In fact, in each of the new Advisory Opinions, the OIG found that virtually all of the elements of the arrangement implicated one of the following 3 legal authorities: (1) the civil monetary penalty for reductions or limitations of direct patient care services provided to Federal health care program beneficiaries; (2) the fraud and abuse anti-kickback statute; and (3) the Stark physician self-referral law. Nevertheless, the OIG decided not to impose sanctions because the arrangements contained appropriate safeguards against the risk that the arrangement would influence physicians judgment to the detriment of patient care.
The OIG is concerned about these arrangements because payments to physicians based on cost savings may be intended to motivate the physicians to reduce hospital costs associated with procedures performed by physicians at the hospital. In addition, the gainsharing payment may be used to disguise illegal remuneration to the physicians to make referrals to the hospital. The Advisory Opinions reflect the OIG’s concern that these arrangements will lead to: (1) stinting on patient care; (ii) “cherry picking” healthy patients and steering sicker patients to hospitals that do not offer such arrangements; (3) payments in exchange for patient referrals; and (iv) unfair competition among hospitals offering cost savings programs to foster physician loyalty and to attract more referrals.
Properly structured, gainsharing arrangements can serve legitimate business and medical purposes. In the wake of the guidance provided by these advisory opinions, I predict that hospitals will begin implementing gainsharing arrangements but will proceed with caution.
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