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A window opens on gainsharing arrangements
For the first time, hospitalists may be able to share some hospital bonuses

Keywords: Gainsharing approved for some initiatives - hospitalists may be able to share hospital bonuses


by Phyllis Maguire



Published in the July 2009 issue of Today's Hospitalist

HOSPITALISTS HAVE LONG HAD THEIR EYE on a payment methodology that, to date at least, has remained off-limits and illegal: gainsharing. After all, who better than hospitalists—who have made cost savings one of their calling cards—to start sharing some of the money they save hospitals and insurers?

While the HHS’ Office of the Inspector General (OIG) has maintained a blanket prohibition against gainsharing, it has given the go-ahead to some very specific initiatives. The OIG has, for example, allowed individual cardiology groups to continue efforts to standardize their use of coronary stents,
“Last October’s opinion took the gainsharing discussion to the next level.”

–Andrew Knoll, MD, JD
Scolaro, Shulman, Cohen, Fetter & Burstein PC


with physicians sharing some of the savings that accrue.

None of the arrangements blessed by the OIG has pertained to hospital medicine—until now. Last fall, the OIG issued an opinion on a hospital that shared pay-for-performance bonus money from an insurer with its medical staff members. The OIG ruled that the hospital could give medical staff up to 50% of that bonus, which the hospital earned by meeting quality improvement goals. (The opinion didn’t give the name of the hospital or insurer, and it didn’t identify the quality improvement measures used.)

The opinion is potentially great news for hospital medicine because the specialty is so instrumental in helping hospitals reach quality goals. And it comes at a time when the Centers for Medicare and Medicaid Services is experimenting with a payment mechanism known as “value-based purchasing” that would put a portion of a hospital’s total billing at risk based on quality performance.

While the opinion does not pertain to any Medicare pay-for-performance bonus now, there’s no saying that it wouldn’t in the near future. To find out what the opinion means for hospital medicine, Today’s Hospitalist spoke with Andrew Knoll, MD, JD, a former hospitalist and a health care attorney with Scolaro, Shulman, Cohen, Fetter & Burstein PC in Syracuse, N.Y.

Were you surprised by the OIG opinion?
In the recent past, there has been a flurry of positive gainsharing opinions. The early opinions all dealt with sharing savings related to ordering less expensive products.

Last October’s opinion took the discussion to the next level. It said, “Rather than just saving money on efficiencies, what about that extra money for pay for performance? Shouldn’t physicians be able to participate in that bonus because, after all, the hospital can’t get that money without them?”

The opinion is a recognition that cognitive specialists— as opposed to just proceduralists—can start thinking about sharing some of the money they save. Before, no one could come up with a way to do that because a bonus for performance on conditions like pneumonia and heart failure never existed.

What could that mean for hospital medicine?
This could be huge for physicians, particularly if Medicare starts paying hospitals based on performance. A pay-for-performance bonus based on a certain percentage of a physician’s Medicare billing may be a trivial amount of money for a lot of work.

But if Medicare put 2% of a hospital’s medical billing at stake for a hospital-wide bonus, that could be $10 million. That’s real money that hospitals want to go after.

Ten years ago, hospitals didn’t really consider more efficient care of acute MIs as a type of savings. But now they do. They’re going to their medical staff and saying, “We need you to do these things so we can collect our $10 million.” The medical staff wants to know, “What’s in it for us?”

What safeguards need to be in place to make sure a bonus distribution doesn’t violate antikickback rules?
The antikickback statute prohibits giving anything of value that would either induce or reward referrals.

One way to structure this type of bonus payment is through per capita distribution, with all members of the medical staff who contribute to earning this bonus receiving the same amount of money. A hospital can’t reward certain specialists for referring patients by paying those physicians more from the bonus pool.

Other safeguards that the hospital in the opinion had in place included ongoing supervision of the bonus-distribution program from the hospital, the physicians and the insurer; notifying patients about the program; and having clearly defined quality targets.

Were the physicians covered by this opinion hospital employees?
They were not, so according to the OIG, the physicians in that hospital formed a professional limited liability company. But for hospitalists employed by a hospital, the Stark law exception for bona fide employees is very broad. Hospitals can even pay employees based on productivity.

There is of course a caveat: Hospitals can’t reward anyone for limiting care. Although we don’t have particulars about the measures used in this specific quality program, many people think that any incentive tied to length of stay—even for employed physicians—would violate gainsharing regulations because it implies a reduction in care.

The OIG warns against applying this opinion universally. Should other hospitals not opt for a similar arrangement?
The OIG always says that. For the particular hospital that asked for this opinion, the OIG is saying, “You get a get-out-of-jail free card because we are basically creating a personal safe harbor for you.”

Health care attorneys tell people that if they want their own get-out-of-jail-free card, they have to pay for an OIG advisory opinion. But based on the last five opinions in which the OIG said it won’t prosecute, I think there’s a very good chance it won’t prosecute a similar program. That is usually enough for our clients.

What else interests you in this opinion?
Unfortunately, the opinion doesn’t give specifics about the exact measures used in the quality program. If we knew for sure, we could apply those across the board.

The OIG did use the example of discontinuing antibiotics within a specified time. The OIG said, “That potentially could be a reduction in services.” In fact, the concept of continuing antibiotics postop for only a certain period of time is very well-accepted in medicine.

That tells me that the OIG still has a very broad idea of what it would consider a reduction in care, which would reinforce my discomfort with length-of-stay incentives. The fact that the OIG is objecting to stopping antibiotics when that is the standard of care suggests that you have to take a very conservative approach in what quality measures to include.

Ultimately, the gainsharing prohibition blocks payment to limit care, not payment for good care. Using CMS core measures would be evidence that the criteria chosen are quality driven, not cost driven.

Phyllis Maguire is Executive Editor of Today’s Hospitalist.

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