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Inspector General declares physician gainsharing illegal
Gainsharing violates the Social Security Act by encouraging physicians to withhold services for Medicare and Medicaid patients.
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WASHINGTON — Hospitals will have to find a new way to award financial incentives to doctors who cut costs now that the Office of the Inspector General (OIG) has declared gainsharing arrangements with hospitals illegal.
The move by the OIG applies to Medicare and Medicaid; private insurance companies could still continue to form these arrangements. William A. Sarraille, JD, a health care lawyer from Arent, Fox, Kintner, Plotkin & Kahn in Washington, said the ruling of the OIG was final, short of legislative relief to change the statute.
“There are hundreds of thousands of these arrangements out there. Hospitals are now looking at ways of unwinding transactions, and they’ll need to do it very quickly or they’ll face very serious problems, not just from the government but from whistle blowers,” Mr. Sarraille said.
Those problems include civil monetary penalties of as much as $2,000 per patient covered.
An incentive for doctors
Gainsharing arrangements were set up for hospitals to tap physicians as the source for cutting cost, without cutting quality, after a cycle of re-engineering and downsizing in the late 1980s and early 1990s failed to pull hospitals out of their bleak financial state.
A typical arrangement would have the hospital giving physicians a percentage share of any reduction in the hospital’s costs for patient care attributable, in part, to the physician’s effort. Most arrangements require that to receive payment, the clinical care must not have been adversely affected.
The Social Security Act prohibits a hospital from making a payment, directly or indirectly, to induce a physician to reduce or limit services to Medicare or Medicaid beneficiaries under their direct care. The OIG interpreted the broad nature of this statute to mean that reducing care that a physician deems medically unnecessary also is in violation of the law.
“The payment need not be tied to an actual diminution in care, so long as the hospital knows that the payment may influence the physician to reduce or limit services to his or her patients. There is no requirement that the prohibited payment be tied to a specific patient or a reduction in medically necessary care,” the report said.
A matter of interpretation
Mr. Sarraille said that conclusion is unreasonable. “I think that the correct interpretation of the statutory prohibition is that Congress was saying that you as a hospital cannot pay to cut medically necessary services, but the OIG is saying that you can’t pay to cut any services medically necessary or unnecessary if they’re Medicare and Medicaid services,” Mr. Sarraille said.
Although a hospital’s ability to cut costs for Medicare and Medicaid and share the savings with doctors has been severely limited by the OIG, Mr. Sarraille said the agencies might be able to work directly with physicians. He said it is possible to argue that the rule only applies to hospitals, and the government agencies can contribute directly to gainsharing pools without violating the OIG rule.
However, if the hospital simply moves the payment from itself to the payer, and the arrangement remains otherwise the same, the government may argue that this is an indirect payment of the hospital in violation of the statute.
“That’s an issue that a lot of people are struggling with right now. How much control does the payer have to have over the payment, its calculation, and the terms under which the payment is made before it’s the payer’s payment and not the hospital’s?” Mr. Sarraille said.
For Your Information:
- The complete text of the report is available at: www.hhs.gov/oig/frdalrt/gainsh.htm.