OIG Says OK to Paying Groups for Imposing Cost-Saving Opportunities

An Office of Inspector General (OIG) Advisory Opinion, OIG Advisory Opinion No. 09-06, was released addressing the issue of whether or not “an existing arrangement in which a hospital has agreed to share with a cardiology group, a vascular surgical group, and an interventional radiology group a percentage of the hospital’s cost savings arising from the physicians’ implementation of a number of cost-reduction measures in certain cardiac catheterization procedures (the “Arrangement”) would violate the anti-kickback statute or impose civil monetary penalties for “a hospital’s payment to a physician to induce the reduction or limitation of services to Medicare or Medicaid beneficiaries under the physician’s direct care.”

The Arrangement involved a hospital agreeing to pay a cardiology group, radiology group, and a vascular surgical group a “share of the cost savings directly attributable to specific changes in that particular [g]roup’s cardiac catheterization procedures. ” To develop the Arrangement, the Program Administrator conducted a study and identified 21 specific cost-saving opportunities with respect to cardiac catheterization procedures. After the groups and the hospital reviewed the opportunities, they adopted the recommendations and conclusions.

“The Arrangement contained several safeguards intended to protect against inappropriate reductions in services.” The safeguards include, ensuring that the individual physicians made patient-by-patient determinations regarding the most appropriate device or supply to be used in the procedures; ensuring that the physicians could still access the same selection of devices and supplies; and ensuring that the money gained through the Arrangement was not a result of limiting the availability of devices and supplies. Additionally, to ensure the quality of care did not decrease, the Program Administrator monitored the performance of the covered cardiac catheterization procedures.

The Arrangement also contained three limitations on payment. Firstly, compared to the base year, if the number of cases that were payable by a Federal healthcare program increased, there would be no sharing of cost savings for the additional cases. Secondly, if there was an indication of significant changes in patient referrals to other hospitals, the physician would be terminated from participating in the Arrangement. Finally, groups would not receive more than 50% of that group’s share of the “projected cost savings identified in the base year.”
The Program Administrator found that there were “substantial cost-savings opportunities…without any adverse impact on the quality of patient care.”
The OIG recognized that the Arrangement could be beneficial in many ways, but enumerated four concerns it had regarding the Arrangement:
1. Stinting on patient care;
2. “Cherry picking” health patients and steering sicker (and more costly) patients to hospitals that do not offer such arrangements;
3. Payments in exchange for patient referrals; and 4. Unfair competition (a “race to the bottom”) among hospitals offering cost-savings programs to foster physician loyalty and to attract more referrals.
Furthermore, the OIG stated that the Arrangement implicates three Federal laws: the civil monetary penalty (§ 1128A(b)(1)-(2) of the Social Security Act), the anti-kickback statute (§ 1128BB(b)), and the physician self-referral law.

Regarding the civil monetary penalty, the OIG evaluated, and ultimately determined that, “the Arrangement induces physicians to reduce or limit items or services;” however, ‘the Arrangement has several features that, in combination, provide sufficient safeguards so that we would not seek sanctions….”

Regarding the anti-kickback statute, the OIG determined that “[t]he safe harbor for personal services and management contracts…is potentially applicable to the Arrangement.” Determining that the Arrangement does not exactly fit the exception because the groups received a percentage and not an aggregate compensation set in advance, the OIG determined that it would not impose sanctions; however, illegal remuneration could be possible, though the Arrangement poses a “low risk of fraud or abuse under the anti-kickback statute.”

Thus, though this Arrangement is not perfect, the OIG determined that it contains sufficient safeguards to protect against OIG sanctions and, possibly, violations of federal law.

For more information, please call Abby Pendleton, Esq., Robert Iwrey, Esq., Adrienne Dresevic, Esq., Carey F. Kalmowitz, Esq. or Jessica L. Gustafson, Esq. at (248) 996-8510 or visit The HLP website.

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