On December 29, 2017, OIG issued a favorable advisory opinion interpreting the application of the gainsharing civil monetary penalty provision (Gainsharing CMP) and the Anti-Kickback Statute in connection with a proposed arrangement whereby a hospital will share with certain neurosurgeons a percentage of the hospital’s cost savings attributable to cost-saving measures implemented by the neurosurgeons for spinal surgeries performed at the hospital. This Advisory Opinion marks the first time since recent revisions to the Gainsharing CMP that OIG has issued an advisory opinion interpreting the provision.
In 2015, the Medicare Access and CHIP Reauthorization Act (MACRA) revised the Gainsharing CMP, 42 U.S.C. § 1320a-7a(b)(1), to limit its application to payments to induce the reduction or limitation of “medically necessary” services. Prior to the adoption of MACRA, OIG had interpreted the Gainsharing CMP as prohibiting incentive payment arrangements between hospitals and physicians that in any way restricted or limited care available to Medicare or Medicaid beneficiaries, regardless of whether the items or services being restricted were “medically necessary.”
In several respects, the proposed arrangement discussed in the Advisory Opinion mirrors arrangements analyzed by OIG in advisory opinions prior to MACRA. In connection with the proposed arrangement, the hospital engaged a program administrator to conduct a study of the historical practices in spinal fusion surgeries performed by the neurosurgeons at the hospital. As part of this analysis, the program administrator analyzed supply costs, quality of patient care, and utilization on a national level to identify 34 recommendations based on cost-saving opportunities.
Three of the recommendations involve the transition to using bone morphogenetic protein (BMP) on an as-needed basis for surgeries. Historically, the neurosurgeons used BMP in approximately 29 percent of their spinal fusion surgeries performed at the hospital. However, based on an analysis of national data and objective and historical clinical measures, the program administrator determined that it would be reasonable for the neurosurgeons to reduce their use of BMP in spinal fusion surgeries considerably (but not lower than four percent).
The remaining 31 recommendations relate to the standardization of certain devices and supplies used in spinal fusion surgeries. The neurosurgeons worked with the hospital to evaluate and clinically review vendors and products, and selected certain preferred products that they agreed to use where medically appropriate. Despite the designation of preferred products, the neurosurgeons are not prohibited from using other products and will have the same range of devices and supplies available as they did prior to the arrangement.
Similar to arrangements in the pre-MACRA advisory opinions, the proposed arrangement has various safeguards, including that the neurosurgeons would not receive any share of savings that result from reducing the use of BMP beyond the four-percent floor discussed above and that the cost savings for each preferred product are to be calculated separately to preclude shifting cost savings among the items.
Additionally, patients will receive written notice of the arrangement and the compensation relationship, including the fact that the neurosurgeons are compensated based on a percentage of the hospital’s cost savings. In concluding that it would not impose sanctions pursuant to either the Gainsharing CMP or the Anti-Kickback Statute, OIG emphasized the importance of the various safeguards incorporated into the arrangement.
Unsurprisingly, OIG did not opine as to the impact on medical necessity of the cost-saving measures. Instead, the requestors certified that none of the recommendations contained within the arrangement would reduce or limit medical necessary services, and OIG noted that it evaluated the methodology used to develop the cost-saving recommendations, the monitoring and documentation safeguards, and the methodology that will be used to calculate each performance year’s savings, and concluded that they appear reasonable.
Of note, the four neurosurgeons participating in the arrangement are part of a multi-specialty physician group that consists of more than 100 physicians. Although only the four neurosurgeons will participate in the arrangement, due to a longstanding formula in the group’s operating agreement that applies to all physician collections, the group will retain a portion of the amount received pursuant to the cost-sharing arrangement. OIG found it important that the amount retained by the group would be used only for administrative and recruitment expenses. OIG noted that this safeguard minimized the risk that the group’s retention of a portion of the compensation would be used to induce or reward referrals from the physician group’s nonparticipating physicians to the hospital. OIG cautioned that it might reach a different conclusion as to the risks posed by the arrangement if the amounts retained by the group were used for anything other than administrative expenses or if the formula were not a pre-existing feature of the group’s compensation structure.
Legal representation of the hospital system and the multi-specialty group requesting the opinion was provided by Glen A. Reed in our Atlanta office. To view the Advisory Opinion, Advisory Opinion No. 17-09, click here.
