Anderson, Oppenheim and Wagonhurst on HHS OIG Gainsharing Opinions

Fraud and Abuse
HHS OIG Opinions on Incentive Programs Leave Some Hospital Advisers With Concerns

Reproduced with permission from BNA’s Health Law Reporter, Vol. 17 (Dec. 11, 2008) p. 1593. (Copyright 2008) by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com

Health law attorneys analyzing recent Department of Health and Human Services Office of Inspector General advisory opinions on gainsharing tell BNA that the opinions are an encouraging development, but that they still see risks for clients that move forward with such arrangements.

The opinions approve for the first time a pay-for-performance arrangement between a hospital and its staff physicians and—again for the first time—a gainsharing arrangement with a term greater than one year.

Robert G. Homchick of Davis Wright Tremaine LLP in Seattle said the fact that the Centers for Medicare & Medicaid Services did not issue companion opinions on the Stark law implications of the incentive programs described in the OIG advisory opinions, issued Oct. 14 (17 HLR 1394, 10/23/08</a>; 17 HLR 1361, 10/16/08),  is a “significant omission given … the potentially significant exposure that can arise out of a Stark violation.”

T. Scott Noonan with Bass, Berry & Sims in Nashville agreed, citing the upcoming change in administration and the fact that Rep. Pete Stark (D-Calif.) submitted a comment letter advising CMS not to finalize its proposed Stark exception for gainsharing arrangements.

Other attorneys were more enthusiastic about the possibilities the opinions open up to hospitals trying to design gainsharing programs, including pay for performance (P4P), value-based purchasing, and others that use economic incentive.

Janice A. Anderson at Foley & Lardner LLP said P4P arrangements such as that described in Adv. Op. 08-16 are “a win/win for hospitals and physicians because hospitals can perform better under [such payment methodologies] when physicians are incentivized to meet quality targets and are given an opportunity to supplement declining physician incomes by partnering with hospitals around quality patient care.”

P4P Opinion Called Groundbreaking.

Foley & Lardner’s Charles B. Oppenheim and Cheryl L. Wagonhurst praised the opinion, calling it groundbreaking. Oppenheim told BNA that the P4P arrangement the OIG analyzed is “likely to be a durable one, as the OIG approved it for a three-year period, not for just one year as is generally the case for gainsharing arrangements.”

William T. Mathias of Ober Kaler in Baltimore said the fact that the P4P payments originate with the insurance company further expands the definition of gainsharing. The three-year approval term also is a great benefit, he said. “Previously, some hospitals were hesitant to go into gainsharing arrangements based on earlier advisory opinions, figuring that with the legal fees and other costs of setting up a program, it would not be worth it if it ran only for a year. The costs could not be recouped. So having the certainty of a longer period is very helpful.”

Wagonhurst praised the advisory opinions for providing the hospital industry with what she said were some very real workable and practical solutions. “The OIG really deserves some credit here,” she told BNA.

While Homchick and Noonan both agreed that approval of the gainsharing and P4P arrangements sends a “positive signal” to an industry trying to align hospital and physician incentives, Noonan said the “lack of clarity from the Stark law standpoint” is creating a hesitancy to move forward.

Homchick was of the same opinion, saying hospitals should recognize that the favorable opinions were “replete with safeguards and caveats.” His colleague Robert D. Girard, of DWT’s Los Angeles office, added that each of the arrangements was carefully crafted, employing an independent administrator to design and oversee the programs and, “most importantly, both leave several regulatory issues unanswered,” among them whether it is necessary to seek an advisory opinion in each instance.

The opinion of these attorneys expressed in an advisory to Davis Wright clients is that the “light has turned from red to yellow, but it’s clearly not green.”

Mathias agreed that, on the one hand, the OIG guidance is “not very clear. They say the P4P arrangement implicates the anti-kickback statute and the Civil Monetary Penalties law (CMP) against reducing services to Medicare patients, but they will use their discretionary enforcement authority to not sanction it. This maintains the greatest flexibility for themselves, but it not very helpful to hospitals.”

He, too, cited “the Stark law problem.”

“The OIG has said over and over again that there are different statutes and just because an arrangement is OK under one does not mean it is OK under the others,” he told BNA. “By the same token,” however, “it is hard for me to believe that OIG would issue an AO if they felt there was a significant risk of enforcement from Stark. The agencies talk about these things.”

His bottom line? “I think that hospitals that go forward will face some Stark risk, but I don’t think it will come from the government, I think it will come from qui tam relators. I just don’t think the government, absent something fairly abusive, is going to go after anyone for a gainsharing arrangement under Stark.”

Quality Targets Problem.

Most of the attorneys interviewed had a problem with the OIG’s approach to the quality measures on which the private insurer’s P4P program was based in Adv. Op. 08-16.

The quality measures selected were taken from the Joint Commission’s Quality Measures Manual, which the OIG acknowledged represents the joint efforts of CMS and the commission to publish a uniform set of quality measures. Moreover, the payments for meeting this standard were subject to safeguards designed to ensure that care was not compromised and patient referrals did not increase. Nonetheless, the OIG found that implementing these quality measures could induce physicians unlawfully to reduce or limit services to Medicare patients.

The OIG acknowledged in a footnote that quality targets that do not potentially induce the reduction or limitation of care do not implicate the CMP, but apparently concluded the measures at issue did not meet that test. Given that the quality measures were CMS-approved, “the OIG’s interpretation of the CMP seems overly rigid and will likely impede the development of pay for performance programs,” Homchick and Girard stated.

Mathias added that he was “surprised that the OIG thought the CMP was implicated at all since it wasn’t the hospital making the payments, but the insurance company.” It just looks as though the OIG has “boxed itself into a corner on the CMP,” he said.

A fourth attorney, not identified because of the frankness of his remarks, was simply exasperated, saying, “They’re telling people to do this but saying it could implicate the CMP? How stupid is that?”

CMS Stark Exception on Hold?

CMS’s proposed Stark exception at 42 C.F.R. §411.357(x) for incentive payment and shared savings programs is a clear indication of its interest in encouraging various types of gainsharing arrangements if fraud and abuse can be controlled and quality assured. In the preamble to its July 7 Federal Register notice of the proposed rule, the agency acknowledged that a new exception was needed because existing exceptions to the physician self-referral statute might not be “sufficiently flexible to encourage a variety of nonabusive and beneficial gainsharing, P4P, and similar programs.”

Unfortunately, health care providers hoping for relief from this quarter may continue to be disappointed despite the fact that, of the more than 50 comments on the rule that CMS received, most reportedly encouraged greater liberalization or relaxing of the proposed regulation, Noonan said.

Mathias said the agency “simply ran out of time to get the rule through” and now changes in administration and at CMS and Stark’s opposition could cause further delays. Noonan said, “you have to assume it will take new people time to get up to speed, there might also be some new policy choices with the new administration or from comments from Stark that might influence and shape how this will ultimately be resolved.” In his comment letter, Stark said that rather than create a broad exemption to self-referral rules, CMS should wait to make any changes until after the completion of three gainsharing demonstration projects authorized by Congress (17 HLR 1198, 9/11/08).

It is “a complicated issue,” Mathias said. “And now we don’t know when it will be picked up again because the top two people who have been writing the Stark regs have left or are about to leave so there is no one to write Stark guidance or at least there won’t be by the end of this year.”

CMS Stark experts Don Romano and Lisa M. Ohrin announced plans to leave the agency for Arent Fox LLP and Sonnenschein Nath & Rosenthal LLP, respectively.

By Susan Carhart