Physician-hospital gainsharing plans violate federal laws, OIG says
Physician-hospital gainsharing plans violate federal laws, OIG says
Special bulletin advises providers to stop the practice
If your practice has any kind of financial arrangement with a hospital, you should review it immediately to make sure you’re not violating federal laws against gainsharing.
In a July advisory that surprised many in the health law community, the Office of Inspector General (OIG) of the Department of Health and Human Services pulled the plug on gainsharing arrangements between hospitals and physicians.
Unless Congress changes the law, most gainsharing arrangements are illegal and could result in fines for physicians and hospitals of up to $2,000 per patient, the OIG special bulletin says.
The speed with which physicians and hospitals terminate their gainsharing arrangements will have a bearing on the punishment that could be levied in the future, the bulletin adds.
The other shoe has already fallen
"The clear message is that the health care community should immediately start analyzing all financial arrangements between hospitals and doctors. They should not sit and wait for the other shoe to drop because it’s already fallen," says John Knapp, JD, a health law attorney at Cozen and O’Connor, a Philadelphia-based law firm with 13 offices across the United States.
Gainsharing is an arrangement in which a hospital gives physicians a percentage share of any reduction in the hospital’s cost for patient care that can be attributed to the physicians’ efforts.
According to the OIG bulletin, the Social Security Act "prohibits any hospital or critical access hospital from knowingly making a payment directly or indirectly to a physician as an inducement to reduce or limit services to Medicare or Medicaid beneficiaries under the physician’s care."
Beware payments to limit clinical services’
The advisory bulletin stated that even though there may be cost-saving benefits to gainsharing arrangements without any impact on the quality of care received by the patients, such arrangements are clearly prohibited by law. The only way such arrangements can be legal is by a law passed by Congress, the bulletin advises.
"In short, any hospital incentive plan that encourages physicians through payments to reduce or limit clinical services directly or indirectly violates the statue," the OIG bulletin says.
Until the OIG special bulletin, the health care community had felt that gainsharing arrangements could be constructed to comply with the law and that such arrangements had been tacitly approved by the government, Knapp says. He estimates that thousands of gainsharing arrangements are currently in place.
"Even though the law has been on the books for years, the general thinking has been that it is the intent of the government to get hospitals to act more efficiently, so it is logical and appropriate to find ways to get physicians to cooperate with them and to deliver health care services more efficiently," Knapp says.
Following the OIG bulletin, Knapp has advised all his clients to begin analyzing all hospital/ physician arrangements to make sure they are not gainsharing. Physicians who are employed by the hospital should seek advice regarding whether bonuses or other incentives to encourage efficiency may constitute gainsharing, he advises.
"An important point is that this doesn’t mean all financial relationships are not permissible. It doesn’t mean that hospitals are prevented from taking steps to make their care more efficient. What it does mean is that these arrangements have to be even more carefully structured than in the past," Knapp says.
In the past, many health care lawyers have advised clients that one-on-one gainsharing is not permissible, Knapp says. In other words, they advised hospitals and physicians not to set up arrangements whereby physicians are paid on an individual basis when patients are discharged early.
A more common arrangement is for the hospital to track all admissions by a physician or a group for a year and pay a bonus based on the average number of patients discharged before their target dates. Some arrangements specify that the physicians qualify for the incentive payments only if the hospital determines that the patients are not adversely affected by early discharges.
"The health care community believed that if the arrangements didn’t relate to any one particular patient or any one particular doctor, they were OK," Knapp says.
However, the recent OIG advisory has stated that no matter what kind of arrangement is involved, it is illegal, he adds.
"The language in the special bulletin states pretty strongly that everyone has to analyze their current arrangements with hospitals, and if they have impermissible gainsharing arrangements, they have to be unwound immediately," Knapp says.
The ruling is frustrating to the health care community. On one hand, the OIG says gainsharing may be a good idea if it reduces the cost of patient care; but on the other hand, the OIG plainly states that gainsharing is illegal until Congress changes the law.
"The OIG recognizes that hospitals have a legitimate interest in enlisting physicians in their efforts to eliminate unnecessary costs. Savings that do not affect the quality of patient care may be generated in many ways, including substituting lower cost but equally effective medical supplies, items or devices; re-engineering hospital surgical and medical procedures; reducing utilization of medically unnecessary ancillary services; and reducing unnecessary lengths of stay," the OIG stated.
It added that achieving the savings might require a substantial effort on the part of participating physicians.
"Obviously, a reduction in health care costs that does not adversely affect the quality of the health care provided to patients is in the best interest of the nation’s health care system. None theless the plain language of section 1128A(b)(1) of the [Social Security] Act, prohibits tying the physicians’ compensation for such services to reductions or limitation in items or services provided to patients under physicians’ clinical care," the advisory says.
The advisory notes that there are ways hospitals can offer incentives to physicians to achieve cost savings without violating the law.
"For example, hospitals and physicians may enter into personal service contracts where hospitals pay physicians based on a fixed fee that is fair market value for service rendered, rather than a percentage of cost savings," the advisory says.
However, such arrangements must meet the requirements of the anti-kickback (Stark II) statute, the OIG warns.
The OIG staff decided against examining individual gainsharing arrangements and issuing opinions as to their legality.
"Were the OIG to issue a favorable opinion to one provider, that provider would have a significant competitive advantage in recruiting and attracting physicians to admit patients to the facility," the report says.
Subscribe Now for Access
You have reached your article limit for the month. We hope you found our articles both enjoyable and insightful. For information on new subscriptions, product trials, alternative billing arrangements or group and site discounts please call 800-688-2421. We look forward to having you as a long-term member of the Relias Media community.