Although a medical center's arrangement to pay two different physician practice groups (orthopedic surgery and neurosurgery) a share of the first year cost savings directly attributable to specific changes made in the groups' practices constituted an improper payment to induce reduction or limitation of services under anti-kickback regulations, the Office of Inspector General (OIG) would not seek sanctions against the medical center because the medical center's plan included sufficient safeguards to reduce the risk of increased referrals. The hospital agreed to pay the orthopedic surgery groups and the neurosurgery groups 50 percent of the savings achieved, which would be distributed to the group's members on a per capita basis in the prohibited remuneration agreement.
These types of arrangements are designed to align incentives by offering physicians a portion of a hospital's cost savings in exchange for implementing cost saving strategies. To develop the arrangement, the medical center conducted a study of historic practices in the surgical groups and identified 36 areas in which costs could be saved. In general, the medical center recommended (1) “use of biologicals” as needed, and (2) product standardizations of devices and supplies. Safeguards were set up by the medical center to protect against inappropriate reductions in services. The payment agreement would motivate the physicians to reduce hospital costs associated with procedures performed by physicians at the hospitals, influencing judgments.
Anti-kickback. The OIG would not seek sanctions under the federal anti-kickback statute because: (1) the circumstances and safeguards of the arrangement reduced the likelihood that it would be used to attract referring physicians or to increase referrals from existing physicians; (2) the arrangement was structured to eliminate the risk that it would be used to reward other physicians who referred patients to the two practice groups; and (3) the arrangement set out with specificity the particular actions that generated the cost savings on which payments were based.
Monetary penalties. The OIG would not impose civil monetary penalties against the hospital because: (1) the specific cost saving actions and resulting savings were clearly and separately identified; (2) the medical center and practice groups proffered credible medical support for the position that the implementation of the recommendations do not adversely affect patient care; (3) the amount paid under the arrangement was calculated based on all services regardless of the patients' insurance coverage, subject to the cap on payment for federal health care program procedures; (4) the arrangement protected against reductions in services by utilizing objective historical and clinical measures to establish baseline thresholds beyond which no savings accrue to the two practice groups; (5) the practice groups had available the same selection of devices and supplies after implementation of the arrangement as before; (6) the medical center and practice groups provided written disclosures of their involvement in the ar angement to patients whose care may have been affected; (7) the financial incentives were reasonably limited in duration and amount; and (8) any incentive for an individual surgeon to generate disproportionate cost savings was mitigated because the group distributed profits on a per capita basis.
OIG Advisory Opinion, No. 08-09B, Aug. 7, 2008, Health Care Compliance Reporter, ¶500,188
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