OIG Approves Physician-Hospital Gainsharing Deal

On November 25, 2008, the Department of Health and Human Services Office of Inspector General (“OIG”) issued Advisory Opinion 08-21, approving a gainsharing agreement between a hospital, four cardiology groups and a radiology practice. Although the OIG noted that the proposed arrangement had the potential to reduce improperly services or to generate prohibited remuneration, the OIG indicated that it would not impose administrative sanctions on the parties involved. Under the proposed arrangement, the hospital agreed to pay the physician groups a share of cost savings resulting from changes the groups made to their cardiac catheterization practices over the course of two years. Cost savings were realized due to standardization of devices and supplies used, reduction of device and supply waste and substitution for the use of certain less costly products. However, the fact that supply use was determined on a case-by-case basis and the fact that the range of available supplies was not limited led the OIG to conclude that the arrangement was sufficiently safeguarded from inappropriate reductions in service. “The economies gained through the [arrangement] resulted from inherent clinical and fiscal value and not from restricting the availability of devices and supplies.” The parties used “objective historical clinical measures… to establish ‘floors’ beyond which no savings accrued” to any physician group. The agreement was structured so that physician groups would not be entitled to cost savings for patient volumes exceeding baselines established the previous year. Finally, the agreement was structured so that it reduced the likelihood of increasing or rewarding referrals. The OIG cited the transparency of the agreement and the support of objective historical and clinical data in exercising regulatory discretion. The full text of Advisory Opinion 08-21 can be found here