By: Dave Davidson
The concept of gainsharing in the health care industry has been around for decades. Under a typical gainsharing program, a hospital and participating physicians will develop a cost-savings plan in relation to a specific procedure or service line. As the savings are realized, the hospital will then share a portion of the measurable savings with those physicians. The goal of gainsharing has always been to align physician and hospital interests, in order to improve the quality and efficiency of clinical care.
Gainsharing has not always been viewed favorably by the government. In fact, in a 1999 Special Advisory Bulletin, the Office of Inspector General (OIG) took the position that gainsharing arrangements violated the law, and that the payments could even constitute kickbacks to the participating physicians. Since then, the government has not backed off its position that gainsharing programs might violate the law. However, the OIG has also determined that it would not seek sanctions in a growing number of gainsharing arrangements.
Gainsharing was addressed in the Medicare Access and CHIP Reauthorization Act (MACRA) in 2015. In MACRA, Congress clarified that any gainsharing program that resulted in a reduction of medically necessary services to Medicare beneficiaries would be illegal. Such a reduction would violate the law, and expose the parties to civil monetary penalties and possible criminal prosecution if deemed to be a kickback.
In late 2017, the OIG provided its first guidance on gainsharing since MACRA took effect. In Advisory Opinion No. 17-09, the OIG considered a gainsharing program established between a hospital and a group of neurosurgeons. Pursuant to the program, the hospital and the doctors identified 34 cost-saving opportunities related to spinal fusion procedures. Those opportunities were primarily focused on the implementation of protocols for the use of Bone Morphogenetic Protein and product standardization. Under the plan, the hospital would share 50% percent of its cost savings attributable to changes implemented by the doctors over a three year period.
After analyzing the gainsharing program, the OIG concluded that it would not impose sanctions on the parties involved with the gainsharing program. As is almost always the case, the OIG’s determination focused on safeguards built into the program to protect against fraud and abuse. The two primary program features that the OIG considered were its monitoring and documentation requirements.
The monitoring feature was satisfied through the hospital’s establishment of an oversight committee to ensure that medically necessary services would not be reduced or limited. The committee reviewed product costs, quality measures, and resource utilization, as well as patient demographics, to make sure the hospital’s spinal fusion surgery numbers remained historically consistent. The documentation requirements included certification concerning the nature and cost of the services and notices to patients that their physicians were participants in a gainsharing program.
Also relevant to the OIG was the manner in which the savings were shared. Even though the program covered three years, the OIG accepted the hospital’s annual “rebasing” of the initial base year costs. Since the cost savings would be determined independently for each year, using the rebased calculations, the OIG accepted the payment methodology, even though multi-year gainsharing programs are generally not accepted. The OIG also looked favorably on the fact that the savings were apportioned equally among the participating physicians, as opposed to varying the payments by the amount of work or savings generated by each individual surgeon. Also beneficial was that the physician group itself retained some of the money paid by the hospital, to cover administrative expenses of the practice, rather than distributing all of it to the physicians.
With the release of this Advisory Opinion, the OIG has demonstrated that gainsharing remains an option for hospitals and physicians to consider as they seek to improve quality of care and increase efficiency. However, all such arrangements must be meticulously crafted, in order to provide the safeguards necessary to satisfy the OIG’s concerns about medically necessary services and kickbacks. Of course, all parties must also keep in mind that the OIG’s analysis does not include the application of the Stark self-referral law, so a Stark analysis would also be required for all gainsharing arrangements, since in all cases, a failure to protect against those areas of fraud and abuse can lead to catastrophic penalties.