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CMS evaluates possible inpatient savings garnered through gainsharing plans
Results of the agency's demonstration project may lead it to encourage physician involvement.
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A demonstration project by the Centers or Medicare & Medicaid Services seeks to examine the potential benefits of gainsharing arrangements. These arrangements may have a profound effect on the future delivery of inpatient care.
The Centers for Medicare & Medicaid Services (CMS) often contracts with health care entities to test the attributes of various health care models in an effort to evaluate whether certain health care delivery systems are viable. These contracts or projects are called demonstration projects. CMS then uses data obtained from these projects to determine whether certain models should be expanded to the general public.
Last September CMS published a notice soliciting proposals inviting hospitals to participate in the Medicare Hospital Gainsharing Demonstration Project. Section 5007 of the Deficit Reduction Act (DRA) of 2005 mandated that CMS establish this demonstration project to evaluate certain arrangements between hospitals and physicians that are designed to improve the quality and efficiency of health care provided to beneficiaries. The demonstration project is specifically designed to examine arrangements that improve hospitals' operational and financial performance through key relationships with the medical staff.
Costs associated with inpatient care make up a significant portion of CMS' annual budget. If the data obtained from the demonstration project reveals that certain practices bring significant cost savings, CMS may encourage providers to enter into gainsharing arrangements.
Gainsharing arrangements
Though the deadline for applications has passed, the CMS' conditions of participation give interesting insight into which arrangements the government may permit and even actively support. Both physicians and hospitals should be monitoring the outcomes of these test projects. If these arrangements proliferate, they could promote a new era of physician-hospital cooperation toward achieving the efficient delivery of quality health care services.
The key element of the demonstration project is the evaluation of gainsharing arrangements between hospitals and physicians. Gainsharing arrangements include agreements whereby hospitals pay physicians a percentage of savings achieved from policies or practices that physicians adopt to reduce the hospital's costs.
Treading carefully
Traditionally, remuneration under gainsharing arrangements has been suspect under state and federal fraud and abuse laws. Specifically, the Office of Inspector General of the Department of Health and Human Services (OIG) has taken the position that payments under gainsharing arrangements may implicate: (1) the civil monetary penalty law (CMP Law), which prohibits knowingly making payment to a physician to reduce or limit items or services provided to Medicare or Medicaid beneficiaries under the physician's care; and (2) the Anti-Kickback Statute, which prohibits, among other things, knowingly making payments to physicians to induce the referral of items or services reimbursable under the federal health care programs. Payments under gainsharing arrangements also may implicate the Stark Law, which limits the ability of physicians to refer patients to entities with which they have financial relationships.
Due to the legal implications associated with such arrangements, physicians and hospitals often seek OIG guidance in the form of advisory opinions to avoid sanctions associated with entering into potentially improper gainsharing arrangements. The OIG has issued several prior advisory opinions, which endorsed arrangements between hospitals and physicians provided that the arrangements included certain safeguards. Providers that participate in the demonstration project also will have to comply with the state and federal fraud and abuse laws discussed above.
Project requirements
Eligible Providers: CMS proposed to accept six proposals, which were to include two projects based in rural areas. Hospital participants must comply with CMS's hospital quality improvement program requirements and submit Hospital Quality Alliance quality performance data. In addition, the hospital-applicants must prove that they have in place an internal committee that will monitor the project and ensure that physicians who are not participating in the demonstration project are not receiving payments under the project.
CMS proposes several Conditions of Participation that applicants had to satisfy in order to participate in the demonstration project. First, each proposed arrangement had to include a viable plan for distributing the savings achieved from the gainsharing arrangement to physicians.
These payments may not violate the Anti-Kickback Statute, the CMP Law or the Stark Law. In addition, payments to physicians under the proposed arrangements must be linked to the improvement of the overall quality and efficiency of care, and result in cost savings. Finally, payments made to physicians may not exceed 25% of what a physician would typically receive for a case included in the demonstration project.
Must-do's
All proposals also had to set forth the following:
- the process that the parties to the gainsharing arrangement would use to promote the efficient use of resources;
- the patient population that the project targets;
- the physicians and departments of the participating hospitals that are to be involved in the arrangement;
- how physicians participating in the demonstration project will be able to influence the resources used to treat the target patient population;
- various details regarding the compensation provided to physicians;
- the methods used to notify patients of the gainsharing project; and
- details regarding monitoring of quality and efficiency achieved through the gainsharing arrangement and its operational and financial performance.
CMS warned that the proposed gainsharing arrangements should not encourage the cherry-picking of healthier patients. In other words, hospitals and physicians participating in demonstration projects may not send sicker patients to different hospitals in an effort to increase the level of cost savings achieved.
Finally, the participants must cooperate with CMS' requests for information throughout the operation of the arrangement. These requests for data on performance and cost savings may be frequent. In addition, to the extent CMS contracts with an independent third party to assess the viability of such arrangements, providers also had to agree to respond to such independent entity's requests for data.
For more information:
- Deficit Reduction Act of 2005 at § 5007; 71 Fed. Reg. 54664, Sept. 18, 2006.
- Social Security Act at § 1128A(b)(1)-(2), 1128B(b) and 1877.
- Andrew B. Dahlinghaus, JD, Arent Fox LLP, 1050 Connecticut Ave. NW, Washington, DC 20036; 202-857-6414; Dahlinghaus.Andrew@arentfox.com. He has no financial conflicts to report.