In Adv. Op. 08-15, issued October 14, 2008, the U.S. Department of Health and Human Services Office of Inspector General (the “OIG”) approved an existing gainsharing arrangement between an acute care hospital and two cardiology groups under which the hospital would share a percentage of its cost savings generated by the groups’ implementation of cost-reduction measures recommended by the Program Administrator overseeing the arrangement. The cost-reduction measures fell into three general categories: product standardization, use-as-needed cardiac medical devices, and product substitution. The hospital agreed to pay each group 50% of the yearly cost savings directly attributable to each group’s implementation of 30 cost-reduction measures in their cardiac catheterization laboratories over a three-year period, with payments to be made to each group at the end of each of the three years.

The OIG recognized that the arrangement implicates both the Civil Monetary Penalties Law and the Anti-Kickback Statute (as well as Stark and the IRS’ regulations governing the conduct of tax-exempt health care entities, both of which are outside of the OIG’s opinion authority). The OIG declined to impose sanctions based on the factual circumstances and safeguards at issue, which were viewed as reducing the risk of fraud and abuse under the arrangement. As is customary, the OIG declined to provide any opinion as to whether amounts to be paid under the arrangement are consistent with fair market value.

The OIG placed significant importance on the existence of the following safeguards:

  • specific cost-reduction actions and resulting savings were clearly and separately identified, creating sufficient transparency to allow for public scrutiny and individual physician accountability for patient care;
  • credible medical support indicated that implementation of the cost-reduction measures had not adversely affected patient care, as confirmed by periodic reviews of the arrangement;
  • amounts to be paid to the groups were based on all procedures, regardless of the patients’ insurance coverage, subject to the cap on payment for federal healthcare program procedures;
  • the procedures at issue were not disproportionately performed on federal healthcare program beneficiaries;
  • the arrangement protected against inappropriate reductions in services by ensuring that individual physicians have available the same selection of devices and supplies as before the arrangement;
  • the hospital and groups disclosed their participation in the arrangement in writing to patients;
  • financial incentives under the arrangement were reasonably limited in duration and amount;
  • participation in the arrangement was limited to cardiologists already on the hospital’s medical staff;
  • potential savings derived from procedures for federal healthcare program beneficiaries were capped based on the physicians’ prior year’s admissions of these beneficiaries, which were monitored for changes; and
  • the structure of the arrangement (e.g., the groups’ physician members are the sole participants in the arrangement) eliminated the risk that it would be used to reward other cardiologists or physicians referring patients to the groups or their cardiologists.

The above safeguards will undoubtedly be of interest to others contemplating a similar arrangement and are informative as to the OIG’s current thought process on gainsharing arrangements.

Providers seeking more information about this OIG Advisory Opinion or other compliance issues should contact their Vorys health care attorney.