OIG approves hospital plans to share cost savings with doctors

Two hospital agreements to share with physicians some of the cost savings derived from quality-of-care measures are not likely to violate federal fraud and anti-kickback statutes, according to a pair of Jan. 14 advisory opinions by the Dept. of Health and Human Services' Office of Inspector General.

Gainsharing agreements let hospitals pass to doctors some of the savings facilities reap due to, in part, the physicians' efforts to increase quality and efficiency. Experts said the OIG letters not only offer added insight into what the government sees as acceptable collaboration but also may signal a recognition that gainsharing arrangements -- if done right -- can be a viable way to improve quality.

The agreements face ongoing scrutiny, and the recent examples do not represent a one-size-fits-all solution, experts warned.

The OIG opinions do not name the facility or physician group. One arrangement involves a cardiology practice with hospital privileges and the other involves an anesthesiology group with hospital privileges that provides services during cardiac procedures. In both agreements, the hospital proposes to pass on up to 50% of its savings to the doctors for one year. Both specialty groups are the only ones that provide their respective services within the facilities. The cardiac surgeons refer patients to the hospital for both inpatient and outpatient treatment. The programs outlined initiatives that eliminate wasteful practices and encourage physicians to use specific types of supplies during surgeries.

No safe harbor exists for gainsharing agreements, which the OIG warns could limit patient care and hospital competition, cause doctors and hospitals to "cherry-pick" healthy patients and disguise illegal payments in exchange for referrals.

Still, "properly structured, arrangements that share cost savings can serve legitimate business and medical purposes," OIG Chief Counsel Lewis Morris wrote in the two opinions. The letters highlighted a host of safeguards in both agreements to pre-empt the OIG's concerns, including:

• Clearly detailing cost savings.
• Tracking the specialists' performance against national standards to show that the measures will not adversely affect patient care.
• Using historical and clinical measures to set quality performance "floors" below which the specialists could not earn any payments.
• Monitoring the physicians' referral patterns in relationship to the gainsharing arrangement.

A sign for other specialties?

Historically, gainsharing has been approved among hospitals and cardiology groups, said Catherine A. Martin, former senior counsel in the Office of Inspector General. The letter on the anesthesiology group marks the first time the government has given the go-ahead to another specialty, she said.

"These opinions are another indication that the OIG is willing to look at gainsharing outside of the traditional cardiology and cardiac surgery specialties ... and it opens up the question as to whether or not other specialties, like orthopedics, might fit well into a gainsharing model," said Martin, now a lawyer with Washington, D.C.-based Alston & Bird LLP.

Such expansion could give doctors and hospitals another way to address cost and quality issues, she said. "With quality of care being such an important issue ... [gainsharing] really is a collaborative effort between hospitals and physicians to take a look at how they can practice medicine in a more efficient and better way."

The OIG opinions focused heavily on the doctors and the hospital being able to reach their goals without jeopardizing patient care, experts noted.

"The transparency is there in a number of ways to identify that the cost savings are the result of specific actions of physicians involved, and not just some amorphous production," said Gary W. Eiland, a partner and regulatory expert with Vinson & Elkins LLP in Houston.

For example, though in each arrangement the hospital chose to standardize the use of certain medical devices during surgical procedures, a full range of supplies was still available to physicians so as to not inhibit their medical judgment or limit services, Eiland pointed out. "It's implicit here that the objective was not just to reduce costs," he said.

The advisory opinions do not signal that the government is loosening the reins on gainsharing agreements, experts caution.

Eiland said the arrangements are meant to be short-term vehicles to help doctors and hospitals reach certain quality and cost-saving objectives. He noted that the two programs were for a one-year period.

Martin said an open issue is whether gainsharing agreements comply with physician self-referral laws, which fall under the Centers for Medicare & Medicaid Services' authority. The agency has yet to weigh in on that question, she said.

To avoid legal risk, Eiland recommended that doctors, in partnership with hospitals, seek counsel to assist them in requesting an advisory opinion on any gainsharing proposal.