OIG breathes new life into gainsharing arrangements

Heath care attorneys say the Department of Health and Human Services’ Office of Inspector General’s (OIG) latest advisory opinion on a potential gainsharing arrangement breathes new life into these hospital-physician agreements roughly 18 months after the OIG appeared to rule out those arrangements.

"We had all pronounced gainsharing dead, and now it has come back to life," says attorney Craig Holden with Ober Kaler in Baltimore.

Holden says the advisory is an about-face from the guidance the OIG issued in July 1999. Then, the OIG claimed federal law prohibits hospitals from paying physicians "to reduce or limit" care to fee-for-service Medicare and Medicaid patients.

In its advisory opinion released Jan. 18, however, the OIG maintains that its decision not to impose sanctions on the proposed arrangement is an exercise of its "discretion" and is consistent with its earlier special advisory.

"I was surprised when I saw this because, when you go back to the language in the advisory, there was only flexibility in flat-fee arrangements that did not have any effect on care," asserts Stacey Murphy, of Sonnenschein Nath in St. Louis.

Murphy says the OIG opinion seems to hinge on a unique aspect of this arrangement that was not characteristic of arrangements that led to the 1999 advisory. The current arrangement ties specific cost-lowering activities to the cost savings that will be generated and shared with the physicians.

By contrast, some of the earlier arrangements involved a more generalized cost-savings pool and lacked a direct link between the cost-saving activities of the physicians and the actual cost savings that resulted.

"I don’t think this opens the floodgates for gainsharing in the same way providers were thinking of gainsharing two years ago," predicts Murphy. Rather, she says it creates an opportunity for certain plans on a very limited basis where providers can directly track savings in a particular area with a physician initiative.

"I think you are going to see a lot of consultants and others trying to put together focused gainsharing arrangements that have a chance of being approved," predicts Holden.

But Murphy says that when hospitals and physicians dissect this opinion, they will realize that what they can do is fairly limited. "There may be significant opportunity for cost savings on a one-year basis; but beyond that, I wonder if there will be much they can do in terms of cost-sharing arrangements."

OIG spokeswoman Judy Holtz maintains that hospitals should not read too much into the advisory. "When advisory opinions are issued, hospitals try to apply them across the board," she says. "But advisory opinions are issued to the requester, and it only applies to them."

Nevertheless, most attorneys, including Al Shays, of Sonnenschein Nath’s Washington, DC office, argue that the OIG probably overstated its position 18 months ago when it indicated that it had no discretion, and that a case-by-case review would prove unworkable. "That is exactly what they are doing now," he asserts.