OIG counsel emphasizes caution on gainsharing ventures

Healthcare Financial Management, Dec, 2005

Gainsharing arrangements may violate the civil monetary penalty rule and pose a substantial risk of violating the federal anti-kickback statute, concluded Lewis Morris, chief counsel of the Department of Health and Human Services Office of Inspector General, in testimony to the House Ways and Means health subcommittee on Oct. 7.

However, he did state that when properly structured, gainsharing arrangements offer ways for hospitals to reduce costs without causing inappropriate reductions in medical services or rewarding referrals of federal healthcare program patients.

According to Morris, gainsharing between hospitals and physicians should occur only with strict safeguards that emphasize accountability, quality controls, and the prevention of direct payment for referrals. A major concern, Morris said, is the impact of gainsharing on the quality of care provided to Medicare and Medicaid beneficiaries.

Morris cited congressional concerns that under the inpatient prospective payment system, hospitals would have an economic incentive to pay physicians to discharge patients too soon or truncate patient care. Any hospital gainsharing plan that encourages physicians, through direct or indirect payments, to reduce or limit clinical services violates the civil monetary penalties regulations, Morris said. Hospitals that have obtained favorable advisory opinions, Morris added, established baseline thresholds based on historic utilization and national data to protect against inappropriate reductions in services and to ensure that physicians would not receive any money for savings that accrued beyond the baseline thresholds.

Also, arrangements intended to encourage physicians to "cherry pick" healthier patients for hospitals offering gainsharing while sending the sicker, more costly patients to other hospitals not offering gainsharing could potentially implicate the federal anti-kickback statutes, according to Morris.

To read Lewis Morris' testimony on gainsharing, go to waysandmeans.house.gov/, click on "committee hearings," select, "100th Congress," and scroll to the hearing on 10-7-2005.