OIG nixes gainsharing between hospitals, docs

In a special advisory bulletin, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) has brought an end to the practice of "gainsharing" among hospitals and physicians.

According to the OIG bulletin, gainsharing typically refers to an arrangement in which a hospital gives physicians a percentage share of any reduction in the hospital’s costs for patient care attributable in part to the physicians’ efforts.

"Since the institution of the Medicare Part A DRG system of hospital reimbursement and with the growth of managed care," states the bulletin, "hospitals have experienced significant financial pressures to reduce costs. However, because physicians are paid separately under Medicare Part B and Medicaid, physicians do not have the same incentive to save hospital costs. Gainsharing arrangements are designed to bridge this gap by offering physicians a portion of the hospital’s cost savings in exchange for identifying and implementing cost saving strategies."

The Health Insurance Portability and Account-ability Act of 1996 prohibits these arrangements, according to the OIG. "It is critical for hospitals and physicians to review their financial arrangements with each other to determine if they are affected by this OIG advisory," says health law attorney John Knapp, a member of the Philadel-phia-based Cozen and O’Connor law firm. "If current financial arrangements are implicated, the hospital and physician should immediately seek legal counsel as to how to go about changing or unwinding all gainsharing arrangements," he notes, "because violating the gainsharing prohibition could result in the imposition of civil monetary penalties and other sanctions."

The OIG advisory also addressed instances where hospitals and physician have carved out hospitals within hospitals, i.e., a heart hospital within a larger hospital, and sold ownership interests in the specialty hospital to referring physicians. "The OIG has pulled the plug on such arrangements," says Knapp. "Each party involved in such an arrangement is subject to heavy fines and other penalties."

The OIG has indicated that penalties assessed against participants in gainsharing and physician ownership of hospital-within-hospital arrangements may be mitigated if the arrangements are terminated expeditiously, he says.