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Gainsharing arrangements

Gainsharing arrangements align the incentives of physicians and hospitals to realize and share cost savings. The freeze on use of gainsharing arrangements to help contain costs is being revisited following announcement in early 2005 that the Department of Health and Human Services Office of the Inspector General (OIG) had given a pass several such arrangements.

Gainsharing arrangements recently approved by the OIG in a series of Advisory Opinions have used cost reduction mechanisms such as limits on use of certain supplies; product standardization; and using certain supplies and services only on an "as needed" basis, in order to curtail waste.

While the gainsharing arrangements reviewed by the OIG vary, other features common to the permitted arrangements include:

• Specific, identifiable, and transparent cost saving actions and verifiable cost savings from those actions (a "rifle shot" between the actions and the resulting savings, not a "black box" arrangement producing overall savings)
• A ceiling on how much of the realized savings participating physicians could receive
• Arrangements of limited duration
• A floor on the minimum permissible use of certain services and materials, set in accordance with objective evidence
• Provisions for participating physicians to make a patient-by-patient determination of necessary care and other patient-care safeguards
• Disclosures to patients about the hospital's and physician's participation in cost saving efforts
• Equal distribution of cost savings among all participating physicians, and
• Use of third-parties to develop and monitor the gainsharing arrangement.

Advisory Opinions shed light on the OIG's analysis of gainsharing arrangements and what is likely to raise concerns. However, Advisory Opinions are non-binding and all proposed arrangements should be reviewed by competent counsel. The OIG's Advisory Opinions expressly cautioned that the gainsharing arrangements it reviewed violated the Social Security Act's "Civil Monetary Penalty" prohibition against improper limitation of services to publicly-insured patients, in addition to violating the federal Anti-Kickback Law. In each instance the OIG nonetheless concluded it would not impose sanctions for the violations. (The "Stark" law may also be violated; however, the OIG left that determination to the Centers for Medicare and Medicaid Services, which enforces Stark).

OIG Advisory Opinions 05-01 through 05-06, involving gainsharing, are available online.

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