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The Office of the Inspector General (OIG) has given the green light to a narrowly structured gainsharing proposal that permits a group of cardiac surgeons to share in the savings produced as part of a hospital cost-cutting project, despite an existing ban on such arrangements. This move in January (Advisory Opinion No. 01-1) was the first exception issued by the OIG since it effectively banned gainsharing arrangements between hospitals and physicians in July 1999. Under such arrangements, individual providers or practices can receive a percentage of any cost cuts they generate for the a hospital.
In announcing the ban, OIG said hospitals and physicians could legally enter into certain personal service arrangements in which hospitals pay physicians based on a fixed fee that reflects fair market value for services rendered, rather than a percentage of cost savings. Over opposition from providers, the OIG also directed hospitals to "expeditiously terminate" such gainsharing programs.
Despite several legal questions about the January proposal, the OIG decided to approve an arrangement based on the fact it was of "limited scope" and because numerous safeguards had been built into the arrangement. Even then, the OIG’s blessing was conditional since it limited its approval to one year. After that year, federal regulators will review the agreements to determine if the related financial benchmarks need to be revised before deciding if it will approve a renewal or extension of the arrangement.
Here’s how the arrangement is structured: The gainsharing arrangement identified 19 "specific cost-savings opportunities" where participating surgeons would be rewarded with a percentage of any related savings they could generate, according to the OIG.
Under the agreement, cost savings would be measured based on the surgeons’ use of specific supplies and medications during designated cardiac surgery procedures. The proposal also linked any financial give-backs to the surgeons’ group practice to specific cost-saving activities, not general savings, the advisory opinion noted. The OIG also stated that, under the proposal, the cost savings would be independently verified and that only currently employed surgeons (not those subsequently hired) would be eligible to take part in the arrangement.
In addition, each surgeon included in the proposal shares equally in the savings distribution, thereby eliminating an incentive for an individual surgeon to generate disproportionate cost savings or reduction in services. The proposal applies to services for all patients, both those privately insured and Medicare and Medicaid beneficiaries.
One key factor in gaining the OIG approval was that various safeguards were included to protect against inappropriate reductions in services, the OIG opinion noted. For instance, the proposal will use objective historical and clinical measures "reasonably related" to the practices and the patient population at the hospital to establish a "floor" below which no money would be paid to the surgical group. Another critical safeguard was the decision to include statistically valid quality of care indicators and objective clinical indicators to calculate the cost savings being measured.
To review the OIG’s advisory opinion, go to: www.hhs.gov/oig/advopn/2001/index.htm.