OIG Lifts Gainsharing Restrictions?!

The Office of Inspector General (OIG) released a new and more liberal advisory opinion regarding gainsharing (the practice of sharing cost savings with physicians) this past January 5, 2018—the first new gainsharing opinion since 2015.

What a difference three years make.

For starters, the Medicare Access and CHIP Reauthorization ACT (known as MACRA) was passed—which said that gainsharing was not part of the older Civil Monetary Penalty laws.

And now, the OIG has issued an interpretation of the MACRA rules (Advisory Opinion 17-09 – January 5, 2018) and says that it is now ‘OK’ for physicians to be paid for cutting costs as part of an overall gainsharing program.

Quick, What Is Gainsharing?

“Gainsharing” is a way to pay doctors for cutting costs while still maintaining or improving quality of care. It is supposed to align the economic and patient care interests of hospitals and physicians.

Historically, the OIG has warned physicians and hospitals away from gainsharing. The dozen or so pre-2015 Special Advisory Bulletins expressed deep suspicions and warned care providers that gainsharing could violate Civil Monetary Penalty (CMP) laws. Those laws restrict hospitals from compensating physicians in order to reduce or limit Medicare or Medicaid services.

MACRA clarified CMP in favor of gainsharing. It said that the CMP law only applied to cases where the payment to the doctor was to reduce medically necessary services. Any other purpose, like cutting costs while maintaining (or improving) care was fine.

And now the OIG has confirmed it by saying (in Advisory Opinion 17-09) that gainsharing Arrangements would not result in sanctions under the Civil Monetary Penalty rules or the Federal Anti-Kickback Statute—if structured properly.

Details

The January 5th advisory opinion was in response to a specific case—and, thereby, shows how these rules would be applied in a real-world case.

The group which was examined by the OIG consisted of eight neurosurgeons who were practicing within a larger, multi-specialty medical center.

Of the eight, seven were shareholders in the practice and one was not. The non-shareholder neurosurgeon was an employee and was allowed to participate in any gainsharing incentive payments for the third performance year only.

All of the surgeons have active medical staff privileges at the medical center. They referred patients to the Medical center for inpatient and outpatient hospital services. They performed most of their spinal surgeries at the medical center and all of the medical center’s spinal surgeries are furnished by the eight neurosurgeons.

The medical center hired a program administrator to manage the gainsharing Arrangement. The administrator was paid a fixed monthly fee which was certified as fair market value in an arm’s length transaction.

The administrator was not eligible to participate in any cost savings benefits.

The Gainsharing Arrangement

The deal with the neurosurgeons was that they could be paid a share of three years of cost savings attributable to changes the neurosurgeons made when selecting and using products for their spinal fusion surgeries.

For example: before gainsharing, the neurosurgeons used BMP2 in 29% of their cases. After gainsharing, the neurosurgeons set guidelines to reduce BMP2 usage to no more than 4% of the cases.

At the beginning of the program the administrator collected, measured, and analyzed supply costs, quality of patient care, and utilization on a national level and compared it to actual experience at the medical center and came up with a total of 34 cost-saving changes.

Everyone (the medical center and the neurosurgeon group) reviewed the cost savings recommendations for medical appropriateness—which entailed looking at FDA guidelines and clinical research information.

Following that, the medical center then asked the neurosurgeons to make certain operating room changes for spinal fusion surgeries. There were two major change categories.

1. Use Bone Morphogenetic Protein on an As-Needed Basis – Three recommendations suggested that the neurosurgeons use bone morphogenetic protein (BMP) only on an as-needed basis for surgeries performed on three specific regions of the spine. The neurosurgeons had conducted a comprehensive medical review of BMP and were careful to ensure that any reduction did not affect quality of care.
2. Product Standardization – Thirty-one recommendations suggested that the neurosurgeons standardize spine fusion devices and supplies. That triggered a vendor and product review and a three-step product evaluation process. All the neurosurgeons agreed to use the preferred products where medically appropriate.

Along with these product change recommendations, the gainsharing Arrangement also set up patient quality of care monitoring and documentation in order to protect against inappropriate reductions in services.

The medical center also organized an oversight committee (The Program Committee) from medical center representatives and the neurosurgeons.

The program administrator reported—not to the neurosurgeons—but to the Program Committee and kept everyone up to date regarding product costs and patient care quality measures.

To reduce the possibility that a surgeon would cherry-pick patients, the surgeons were prohibited from selecting patients to participate in, or withdrawing patients from, the Arrangement.

To enforce these restrictions, the Program Committee periodically reviewed patient age, case severity and payor data in order to confirm a historically consistent selection of patients.

The penalties for not complying with the rules were simple—expulsion from gainsharing.

Payments to Doctors

At the end of every year in the three-year Arrangement, the program administrator was asked to calculate the cost savings for each of the 34 cost-savings recommendation. Specifically:

1. Determine the historical cost for each product covered by the Arrangement.
2. Calculate each product’s total costs and divide the total costs by the total number of units of that product.
3. The base year for the first year of the Arrangement is the most recent twelve-month period prior to the start of the Arrangement. Requestors reset the base year annually, so that the first year of the Arrangement becomes the base year for the second performance year, and the second year of the Arrangement becomes the base year for the third performance year.
4. Divide the total costs for each product used in the universe of spinal surgeries covered by the Arrangement in the performance year by the total number of products used in the surgeries during the performance year (the “performance year cost”)—regardless of the patients’ insurance coverage.
5. If there are no savings, then no payments are made to the neurosurgeons.
6. The savings from each recommendation are added together to arrive at the total savings in the applicable performance year.
7. Fifty percent of the total savings, after first deducting the program administrator’s fee for administering the Arrangement were paid to the surgeons on a per capita basis—subject to a few other details (like a reserve for any miscellaneous administrative costs).

Key Takeaways From This Example

The gainsharing Arrangement in this case had numerous checks and balances to guard against reducing or limiting medically necessary services to Medicare or Medicaid patients.

The OIG evaluated the methodology used to develop the cost-saving recommendations, the monitoring and documentation safeguards and concluded that they were reasonable and reduced the risk that the payments to the neurosurgeons would induce them to reduce or limit medically necessary services to their Medicare or Medicaid patients.

The OIG also looked at the gainsharing Arrangement in terms of the anti-kickback statutes. The worry is that these cost-saving measures were actually payments to induce or reward surgeon referrals or to attract referring physicians.

This Arrangement, in the OIG’s view, presented a sufficiently low risk of fraud and abuse under the anti-kickback statute for several reasons:

1. The Arrangement had safeguards that reduced incentives to increase their referrals to the Medical Center.
2. The incentive payments would be distributed on a per capita basis, which reduces the risk that the Arrangement may create an incentive for any particular neurosurgeon to generate disproportionate cost savings.
3. Savings were capped based on the number of spinal fusion surgeries performed by the neurosurgeons on federal health care program beneficiaries in the relevant base year.
4. Payments, when made, did not exceed 50% of the projected cost savings estimated by the program administrator at the beginning of the term of the Arrangement (after deducting the program administrator’s fee for administering the Arrangement).
5. Finally, the Program Committee collected and reviewed data on patient severity, age, and payor for the spinal surgeries covered by the Arrangement to confirm a historically consistent selection of patients.

Conclusion

Many more details are available in Advisory Opinion 17-09, but the conclusion and the tenor of this is 180 degrees from three years ago.

Gainsharing, under these kinds of programs, appears now to enjoy acceptance by the OIG and, we would expect, will prompt many more practices to work up their own gainsharing programs.