On Jan. 7, 2013, the Office of Inspector General (OIG) issued Advisory Opinion 12-22 providing a favorable review of a co-management arrangement between a hospital and a group of cardiologists that included performance-based compensation for patient and employee satisfaction, quality, and cost-savings measures. Clinical co-management arrangements, as they are commonly referred to, involve an agreement between a hospital and a group of physicians who agree to assist the hospital in co-managing the clinical and operational activities of a hospital-based service line in exchange for a management fee, which typically includes a fixed payment amount, as well as some form of performance-based incentive fee.

In Advisory Opinion 12-22, the OIG concluded that the hospital’s co-management arrangement with the physician group would not incur sanctions under the Anti-Kickback Statute or Civil Monetary Penalties Law. While the Advisory Opinion is based upon a nuanced factual background, the factors that the OIG considered in making this conclusion are instructive for other hospitals contemplating similar co-management arrangements with performance-based compensation. The OIG’s favorable analysis is an indication that clinical co-management arrangements, when properly structured, can be useful tools for hospitals in building clinical and operational management schemes that are effective and beneficial to the delivery of patient care.

For a summary of the Advisory Opinion and more information on key concepts for hospitals considering development of similar arrangements, review this article.