OIG condemns hospital-physician gainsharing

New advisory bulletin surprises health care experts with claim that gainsharing violates anti-kickback laws

If you’re involved in a gainsharing relationship with a local hospital, be warned: A new special advisory bulletin from the Department of Health and Human Services’ Office of Inspector General (OIG) makes it clear that federal investigators now consider such arrangements to be little more than elaborate kickback schemes.

The bulletin defines gainsharing as an arrangement in which a hospital pays physicians a percentage of any reduction in the hospital’s costs for patient care attributable to the physician’s efforts. The goal in pushing such arrangements is to get physicians on board with the hospital’s cost-cutting efforts, particularly when it comes to Medicare and Medicaid reimbursement.

According to the advisory bulletin, however, while the OIG recognizes that hospitals have a legitimate interest in enlisting physicians in their efforts to eliminate unnecessary costs, gainsharing arrangements are prohibited by Section 1128A(b)(1) of the Social Security Act. That section essentially prohibits hospitals from paying physicians, either directly or indirectly, to reduce or limit services to Medicare or Medicaid beneficiaries under the physician’s direct care. The OIG argues that for gainsharing relationships to become legal, Congress would have to amend current laws and regulations, particularly the physician incentive provision under the civil monetary penalty statute.

That’s shocking news to some health care experts, who had previously assumed that gainsharing arrangements weren’t prohibited under federal law, says Pat Smith, director of government affairs at the Medical Group Management Association in Englewood, CO. "A lot of attorneys were fooled by it," he says. Indeed, only a few weeks before the advisory bulletin was released, a health care attorney who had spoken to OIG officials about gainsharing had offered assurances that OIG was only looking at the practice and wasn’t likely to issue anything. "He said they’re not really very concerned about it," Smith says. "Then, boom!"

Smith says no data exist on just how many physicians are involved in gainsharing relationships with hospitals, but anecdotal evidence indicates that the practice is "somewhat widespread," he says. Since the advisory bulletin was released, his office has been flooded with calls about the OIG’s stance. "They ask, Do you think this is going to affect me?’ And pretty much the answer is Yes.’"

Much of the reason for concern is that the OIG’s new position on gainsharing seems to have come virtually out of the blue, says Robert Homchick, a partner with the Seattle-based law firm Davis, Wright, Tremain.

Although the OIG is attempting to support its stance by citing the Social Security Act provision, Homchick argues that the regulations based on that provision do little to explain what arrangements would be acceptable or offer substantive guidance in this area. "Essentially nothing has been done in terms of enforcement activity or interpretive guidance on these regulations and statutes," he says.

In addition to gainsharing, the advisory also casts aspersions on clinical joint ventures involving physicians and freestanding hospitals. The OIG argues that hospitals typically market such ventures only to physicians who are in a position to refer patients to the venture. According to the OIG, these arrangements are structured to take advantage of an exception in the physician self-referral law and, like gainsharing arrangements, "may induce investor-physicians to reduce services to patients through participation in profits generated by cost savings in clinical care." Therefore, they also may violate the anti-kickback statute.

The special advisory comes in the wake of seven requests for advisory opinions about the legality of these arrangements based on fears that these arrangements could trigger the anti-kickback statute or Stark anti-self referral laws. "We have determined that gainsharing arrangements raise significant issues that cannot be resolved through the advisory opinion process," HHS Inspector General June Gibbs Brown said in a prepared statement. "Without adequate safeguards, gainsharing could pose a risk of abuse, could adversely affect patient care, and could be manipulated to reward physicians for patient referrals."

"The statutory proscription is very broad," argues the OIG. "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."

The advisory adds that there is no requirement that the prohibited payment be tied to a specific patient or to a reduction in medically necessary care. "In short, any hospital incentive plan that encourages physicians through payments to reduce or limit clinical services directly or indirectly violates the statute," the advisory concludes.

The advisory bulletin will be published as a Federal Register notice later this month. It’s available on the Internet at www.os.dhhs.gov/oig.