Tag: health care

HHS launches innovative payment model for ambulance providers

Curtis Campbell, Class of 2019; Kim Harvey Looney, Partner at Waller

The United States Department of Health and Human Services (HHS) recently announced a new payment model for emergency ambulance services that will permit Medicare patients to be transported to healthcare facilities other than hospital emergency departments.

The Emergency Triage, Treat and Transport (ET3) model was announced on February 14 with the objective of allowing Medicare Fee-for-Service beneficiaries to receive the most appropriate level of care, while simultaneously reducing out-of-pocket costs. Under the model, HHS will allow ambulance suppliers and providers to transport Medicare beneficiaries to areas besides the emergency room, such as a doctor’s office or urgent-care facility, or use telemedicine, with the goal of reducing unnecessary trips to the hospital.

The ET3 model will run for five years and is expected to start in early 2020. This model was introduced to create a new set of incentives for emergency transport and care while ensuring patients get convenient and appropriate treatment in the correct setting. One concern with the existing model is that the payment system only pays ambulance providers when they take beneficiaries to the hospital emergency department, which HHS argues may lead to unnecessary emergency room visits or hospitalizations that may harm the patients.

The ET3 model will test two new payment models while still paying for emergency transport when a Medicare beneficiary is transported to a hospital emergency department or other destination covered under current regulations. The two new payment models are:

  • payment for treatment in place with a qualified healthcare practitioner, either on-the-scene or connected using telehealth; and,
  • payment for unscheduled, emergency transport of Medicare beneficiaries to alternative destinations, such as 24-hour care clinics.

The ET3 model will reward participating ambulance suppliers or providers by providing the opportunity to earn up to a 5% payment adjustment in later years of the model if they meet certain quality measures. The quality measurement strategy aims to avoid adding additional burdens to participants, while also seeking to minimize new reporting requirements. The model will be phased in with multiple application periods in order to maximize participation throughout the country. HHS anticipates it will start accepting applications from Medicare-enrolled ambulance suppliers and providers in Summer 2019.

The proposed ET3 model illustrates the willingness of HHS to develop and evaluate new cost-containment strategies while ensuring that Medicare patients receive the appropriate levels of care in the right settings.

The HHS press release announcing the program can be found here.

The Amazon-Berkshire Hathaway-JPMorgan Chase healthcare venture remains a mystery

Seth Carver, Class of 2020; Neil B. Krugman, Partner at Waller

In early 2018, Amazon announced a joint healthcare venture with Berkshire Hathaway and JPMorgan Chase to build an independent, nonprofit healthcare company targeted at improving care and reducing costs for its employees.

Since then, the joint venture has continued to form and develop, hiring surgeon and author Dr. Atul Gawande as its chief executive.  Outside of the joint venture, Amazon has also recently acquired PillPack, an online pharmacy, and now offers its own line of over-the-counter medical products, under the Basic Care brand.

These moves by Amazon, and a general lack of information about the joint venture’s ultimate goals, and, in particular, whether those plans include bringing healthcare services and products to the general public, make some segments of the health care industry nervous.

Recently the joint venture has encountered some headwinds in the form of a lawsuit filed against it by UnitedHealth. The latter company is seeking a temporary restraining order to block the joint venture from employing a former executive of UnitedHealth Optum, which is in the pharmacy benefit management business.

In her recent article in the New York Times, Reed Abelson described the suit as “a stark example of aggressive tactics that health companies have taken to protect their turf from technology powerhouses like Amazon and Apple,” and to pry open secrets about the joint venture’s ultimate plans.

The joint venture and Amazon’s moves in the health care space are especially pertinent to the Nashville healthcare industry with the recent announcement of Amazon’s “Operation Center of Excellence,” which will be located in Nashville Yards, just blocks away from Waller’s offices and the offices of such healthcare giants as HCA.  Regardless of the joint venture’s or Amazon’s ultimate plans, Nashville’s local healthcare community is bound to be impacted by the influx of approximately 5,000 new Amazon employees, with an average salary of $150,000.

Cigna-Express Scripts, CVS-Aetna deals continue vertical integration in healthcare

By Curtis Campbell, Class of 2019; Kim Looney, Partner at Waller

The Cigna-Express Scripts and the CVS Health-Aetna mergers are among the most significant healthcare mergers of the past decade and are anticipated to transform the U.S. healthcare business. Both of these vertical deals have successfully shown how they can provide consumer benefits in order to pass federal antitrust scrutiny.

Cigna-Express Scripts

The Department of Justice decided not to challenge Cigna’s $67 billion acquisition of Express Scripts because the deal would “unlikely result in harm to competition or consumers.” Regulators spent six months on the investigation, reviewed more than 2 million documents, and interviewed more than 100 people before reaching their conclusion. However, while the federal antitrust division will not seek to block the merger, the deal is still subject to state regulations and various departments of insurance. The deal is expected to close at the end of the year.

Because the DOJ is not challenging the merger, Cigna is closer to putting its medical benefit services and Express Scripts expertise in pharmacy benefit management under one roof. This will potentially help rein in spending on costly specialty drugs. However, there is some concern that consumers could end up at the “mercy of a handful of giants” as choices of medical care and pharmacy become a thing of the past. However, backers of the merger thought that it will create efficiencies in the market. Cigna CEO David Cordani stated that “we are another step closer to completing our merger and delivering greater affordability, choice and predictability to our customers and clients as a combined company.

Given the lack of overlap between Cigna’s business versus Express Scripts, analysts stated that it is not surprising that the merger went through. Cigna had to overcome last-minute opposition from some investors, but they backed down after major shareholder advisory firms came out in support of the deal. Cigna executives said they expect the deal to result in earnings per share to increase from $18 to $20-21 by 2021 with a long-term annual growth of 6 to 8 percent.

CVS Health-Aetna

Shortly after approving the Cigna-Express Scripts merger, the DOJ also conditionally approved the $69 billion merger between CVS Health and Aetna. The conditional approval was based on Aetna’s decision to sell off its private Medicare drug plans. This addressed the government’s concerns that the combined companies would control too much of the healthcare market.

CVS Health had revenues of about $185 billion last year and provided prescription plans to roughly 94 million customers. Aetna had about $60 billion in revenue last year and currently covers 22 million people in its prescription health plans. With this merger, the two companies hope to better coordinate care for consumers as the mergers aim to help tighten cost controls. The merger focuses on Aetna’s addition of a retail component and the use of CVS’s 10,000 pharmacies and 1,100 retail clinics to deliver care, enabling a variety of new services to be brought into its retail stores, potentially transforming the corner pharmacy chain to a healthcare hub with thousands of locations.   This change could enable CVS stores to serve as a location where someone could get care for ailments ranging from a sore throat to diabetes. A person could also potentially go to a CVS store to get blood tests to monitor chronic conditions.

These two mega-mergers continue the growing trend of healthcare companies vertically integrating to improve quality and lower healthcare costs. With more consumers going to outpatient facilities instead of hospitals, this merger could help claim more of a market share in the healthcare industry by utilizing the CVS stores to attract more consumers. The merger also could help by decreasing deductibles and lowering out-of-pocket spending, which are two primary concerns for consumers when deciding to seek medical care.

These mergers could also put pressure on rival companies to come up with their own deals.  Critics worry that these mergers mean that consumers could end up with fewer options and higher expenses because consumers could have less control over their medical care and prescription drugs. Only time will tell how these mergers actually affect consumers going forward.

Requesting EMTALA waivers during a natural disaster

By Seth Carver, Class of 2020; Andrew F. Solinger, Associate at Waller

With the start of hurricane season, and the recent destruction caused by Hurricane Florence on the Carolinas and beyond, hospitals must review and update their policies and procedures to ensure that proper care can be provided to patients following surges caused by natural disasters and emergencies.

Following large natural disasters such as Hurricane Florence, and other mass casualty events such as terrorist attacks or public health emergencies, hospitals are likely to experience significant surges of patients that will test and push the limits of hospitals’ capacities.  In the face of these mass casualty events, hospitals must quickly and effectively choose which patients will be treated and which will not.

This decision is likely to cause friction with a hospital’s obligations under The Emergency Medical Treatment and Active Labor Act (“EMTALA”), which requires hospitals to properly screen and stabilize all patients that present to an emergency department for care.  Because of this tension between a hospital’s ethical and legal obligations to treat patients and the realities of responding to natural disasters and other mass casualty events, hospitals must understand the requisite responsibilities under EMTALA during such disasters as well as ways in which they can protect themselves from liability for potential, but unavoidable, violations of EMTALA.

EMTALA prohibits all Medicare-participating hospitals from denying emergency medical service to individuals, regardless of ability to pay.  It also requires hospitals to provide an appropriate medical screening to determine if a medical condition exists.  If such a condition exists, the hospital is required to provide stabilizing treatment before transferring or discharging the patient.

Natural disasters do not by themselves absolve hospitals of this requirement under EMTALA.  However, it is foreseeable that hospitals in the path of a natural disaster will need to transfer patients to other facilities without conducting medical screening exams or stabilizing treatment.  An option which has been used in the past to transfer these patients without violating the requirements under EMTALA is a Section 1135 waiver. These waivers are short-term releases from the normal EMTALA requirements in the wake of declared natural disasters.  HHS has issued these waivers in previous natural disasters, including Hurricanes Katrina, Rita, Gustav, Ike and Dean, the Iowa floods of 2008, and the Minnesota floods of 2009.

When utilizing Section 1135 waivers, in order to lawfully transfer patients without conducting such medical screening exams, or if needed stabilizing treatments, all of the following conditions must apply:

  • The President declares an emergency or disaster under the Stafford Act or the National Emergencies Act;
  • The Secretary of HHS declares that a public health emergency (PHE) exists;
  • The Secretary of HHS authorizes EMTALA waivers under Section 1135 of the Social Security Act;
  • Unless EMTALA waivers are granted for an entire geographic area, the hospital in question applies for a waiver from HHS;
  • The hospital has actually activated its emergency operations plan; and
  • The state has activated its emergency operations plan or pandemic plan for the area that covers the hospital.

Once the Secretary of HHS authorizes § 1135 waivers a hospital may submit a request to operate under that authority by sending an email to the CMS regional office in their service area.

The request should contain the following:[i]

  • Provider Name/Type;
  • Full Address (including county/city/town/state) CCN (Medicare provider number);
  • Contact person and his or her contact information for follow-up questions;
  • A brief summary of why the waiver is needed.  For example: “Critical Access Hospital (CAH) is the sole community provider without reasonable transfer options at this point during the specified emergent event (e.g. flooding, tornado, fires, or flu outbreak)” or “CAH needs a waiver to exceed its bed limit by X number of beds for Y days/weeks” (be specific);
  • Consideration – Type of relief you are seeking or regulatory requirements or regulatory reference that the requestor is seeking to be waived;
  • There is no specific form or format that is required to submit the information but it is helpful to clearly state the scope of the issue and the impact;
  • If a waiver is requested, the information should come directly from the impacted provider to the appropriate Regional Office mailbox with a copy to the appropriate State Agency for Health Care Administration to make sure the waiver request does not conflict with any State requirements and all concerns are addressed timely.

The waiver request is then reviewed by a cross-regional waiver validation team.  In reviewing waiver requests CMS makes the following inquiries: [ii]

  • Is the hospital within the defined emergency area?
  • Is there an actual need?
  • What is the expected duration?
  • Can this be resolved within current regulations?
  • Will regulatory relief requested actually address stated need?
  • Should we consider an individual or blanket waiver?

If granted, Section 1135 waivers generally last for up to 72 hours after both the emergency is declared and the hospital’s emergency plan is activated.  In some instances, the waiver will terminate prior to 72 hours if the HHS Secretary determines that the waiver is no longer necessary. It is important to note that this waiver does not allow for hospitals to selectively only treat patients with insurance and to transfer away all uninsured or underinsured patients.  If utilizing the waiver to transfer such patients, hospitals must not discriminate on

In order for hospitals to remain compliant with all EMTLA regulations during natural disasters and emergencies, it is important to review and revise EMTLA policies so that they reflect the proper steps in utilizing Section 1135 waivers.  Natural disasters and other mass casualty events impose large challenges for hospitals regarding treatment requirements. However, with active preparation and well-written emergency policies hospitals can limit violations of government regulations and ease the decision making of hospital personnel.

10 ways you can protect your company from a cyberattack

By Emmie Futrell, Class of 2018; Robb S. Harvey, Partner at Waller; Elizabeth N. Pitman, Counsel at Waller

The government, through the United States Department of Justice, has increased its efforts to respond to cyberattacks, a hot-button issue that extended across disciplines in 2017. The newly created Cyber-Digital Task Force has been charged with developing policies to combat global cyber terror and involve federal law enforcement on the front lines of this virtual battlefield.

The OCR’s January and February 2018 OCR Cybersecurity Newsletters provided targeted tips to HIPAA-covered entities and business partners to prevent cyber extortion as a means to obtain ransom money and to avoid the consequences of phishing attacks. The OCR recommended training, vigilance and bolstering defenses by encrypting and backing up sensitive data and training workforce. Specifically, OCR provided the following list of suggestions:

  1. Train employees to identify unusual emails and other messages that hackers could use to break into your system.
  2. Document suspicious activity and review those logs regularly.
  3. Perform a risk analysis that looks at the entire organization and addresses known risks.
  4. Use anti-malware programs to prevent access by malicious software proactively.
  5. Implement and test cyberattack recovery plans.
  6. Encrypt and back up sensitive data.
  7. Stay on top of new and emerging cyber threats, perhaps by signing up for governmental alerts known as US-CERT alerts, which are generated by the government’s National Cyber Awareness System and received via email or an RSS feed and provide timely information about security issues
  8. Be wary of unusual emails and text messages
  9. Use multi-factor authentication
  10. Stay updated with anti-malware software and system patches

These measures can both protect and prove cost-effective.

The 2017 Ponemon Data Breach report found that the healthcare industry in the United States stands to lose the most from a data breach, with the average cost per lost or stolen record at $380. Estimated savings for companies that only chose to extensively encrypt information are $16 per record and, companies that have a prepared Incident Response Team and Plan could save $19 per record. Saving these costs per record could significantly lessen the inevitable economic impact of a large-scale breach. The report made clear that time is of the essence in a breach, a sentiment that has been echoed by the OCR’s guidance and HIPAA’s response requirements.

Implementing the OCR’s guidance can help healthcare companies save costs when faced with cyber extortion. Many of the suggestions from the OCR will also ensure that HIPAA standards are satisfied. For example, documenting suspicious activity will be key in creating the necessary paper trail in the event of an OCR investigation. This type of documentation is already required by HIPAA. Implementing cyberattack recovery plans like training an Incident Response Team and developing contingency plans, including the possible necessity of paying the ransom, will guarantee that the breach can be identified and contained as quickly as possible and data availability and integrity are maintained. These measures will ensure that electronic health records and other healthcare information continue to be a pathway towards innovation, rather than a backdoor for an insidious attack.

Why telehealth was a big winner in new budget deal

By Andy Cole, Class of 2018; Amber Greene Arnold, Associate at Waller

Hidden in the details of the Bipartisan Budget Act of 2018 are some key telehealth provisions that are receiving praise from many industry groups and could mark a significant development for Medicare telehealth policy.

The new legislation promotes telehealth in several ways.

Tele-stroke. Medicare currently only covers tele-stroke services for patients located in rural health professional shortage areas and counties not classified as a metropolitan statistical area.  Effective January 1, 2019, however, Medicare will cover a telehealth consultation for any Medicare beneficiary presenting at a hospital with acute stroke symptoms, without regard to current geographic restrictions.

End-Stage Renal Disease (ESRD) Services.  Beginning January 1, 2019, the legislation allows nephrologists to use telehealth to provide monthly clinical assessments for ESRD patients on home dialysis.  This provision is not subject to any geographical restrictions and the “originating site” may be a freestanding dialysis facility or the patient’s home. However, ESRD patients benefiting from this provision will still be required to have an in-person assessment each of the first three months of home dialysis and once every three months thereafter.  This provision is notable for ESRD patients who may have difficulty traveling.

Medicare Advantage Plans.  Currently, Medicare Advantage plans may cover telehealth services in addition to those covered by the traditional Medicare program, but these additional telehealth services are not paid for separately by Medicare.  The new legislation, however, authorizes Medicare Advantage plans, beginning with the 2020 plan year, to offer to include additional telehealth benefits beyond those available under traditional Medicare in their annual bid to the government.  These additional telehealth services would also have to be available to patients through in-person visits as well.  Due to the rapidly growing number of beneficiaries enrolling in Medicare Advantage plans, this provision may have a significant effect on the growth of telehealth services under Medicare.

Accountable Care Organizations.  The legislation also allows for increased coverage of telehealth services provided to Medicare patients assigned to certain ACOs.  More specifically, after January 1, 2020, for two-sided ACOs (meaning the ACO shares in both savings and losses) or an ACO tested or expanded through the Center for Medicare and Medicaid Innovation, existing telehealth geographic limitations will not apply.  This will allow for a patient’s home to qualify as an “originating site” even if the patient’s home is not located in a rural health professional shortage area.

These changes reflect a continued interest by lawmakers in supporting and expanding telehealth services and have the potential to increase access to care for Medicare beneficiaries while potentially lowering costs.  Healthcare providers should monitor the implementation of these provisions and evaluate opportunities for participating in Medicare’s expansion of coverage for telehealth.

Between a rock and a hard place: medical-device stakeholders disappointed by cancelled CMS rulemaking

By Emmie Futrell, Class of 2018; Denise D. Burke, Partner at Waller

Another attempt at bridging the gaping lag between FDA approval for medical devices and CMS’s Medicare coverage determinations has been struck down, after a nine-month standstill.

CMS’s proposed rulemaking included a promising new program called EXCITE, or expedited coverage of innovative technology. The proposed rulemaking had not been made public in substance, and the reasons for its cancellation are still unclear.

CMS officials confirmed that EXCITE was intended to improve access to innovative medical-device technologies for Medicare patients.

Members of the medical-device industry, however, believe that EXCITE was patterned after a 2016 industry proposal that had been presented to CMS to correct the backlog.

The 2016 proposal, known as PACER, or the provisional accelerated coverage to encourage research initiative, suggested that CMS grant provisional coverage under Medicare for FDA-approved devices. This would ensure that patients could access innovative technology, while CMS could gather the information necessary for its own approval process.

The provisional coverage would also alleviate pressure on device sponsors, who would not suffer from having to bankroll expensive and highly specific clinical tests before devices are even on the market.

EXCITE is not CMS’s first attempt to reduce the backlog between FDA and Medicare approval for medical devices.

This backlog, which can sometimes last years, results from the independent statutory mandates that tie the hands of the respective agencies. FDA must ensure that the drugs and devices it approves are “safe and effective,” while CMS can only approve products for Medicare coverage if the products are “reasonable and necessary.” This coverage determination requires CMS to evaluate the necessity of devices for typical Medicare patients, which are generally more medically complex than those of patients in FDA clinical trials.

In 2011, the Department of Health and Human Services attempted to address the lag between FDA and Medicare approval by initiating a parallel review program. This program focused on increasing communication between CMS, the FDA and device manufacturers, including providing medical-device stakeholders and manufacturers with detailed information about the study data that each agency would require in the approval process.

It was believed that this would speed the review process by allowing manufacturers to tailor their studies to encapsulate necessary data for each agency.   Lack of resources, however, largely doomed this program before it was effectively launched. Critics have condemned the program, which only resulted in two approvals by CMS.

CMS’s cancellation of the EXCITE program is a strong indication that, for at least the immediate future, medical-device manufacturers will continue to suffer from the bottleneck between the FDA and CMS and experience lengthy delays between FDA approval and CMS reimbursement.

CMS unveils new bundled payment model

By Chase Doscher, Class of 2018; Elizabeth N. Pitman, Counsel at Waller; Zachary D. Trotter, Associate at Waller

Earlier this month, CMS announced the launch of the Bundled Payment for Care Improvement Advanced (BPCI Advanced) payment model.

This is the first Advanced Alternative Payment Model (Advanced APM) introduced under the Trump Administration and the start of the next generation of BPCI models offered through the Center for Medicare and Medicaid Innovation and authorized under the Affordable Care Act.  Under the MACRA Quality Payment Program, providers will be subject to Medicare payment adjustments through one of two tracks: Merit-based Incentive Payment System (MIPS) or Advanced APM.

Under MIPS, a provider may receive a negative, neutral or positive adjustment with the expectation that the majority of participants will experience either negative or neutral adjustments. The BPCI Advanced model, however, entices providers to participate in an Advanced APM by offering the potential for bonus payments under MACRA for those who meet or achieve certain benchmarks during a 90-day episode of care, including the all-cause hospital readmission measure and advance care plan measure.  As with other Advanced APMs, BPCI Advanced requires that participants assume some of the risk and ties payment to quality performance metrics and the required use of certified healthcare technology.

After cancelling an Obama-era proposal for converting certain of the BPCI episode models to mandatory bundled-payment models, the Trump Administration effort to maintain voluntary participation is an attempt to decrease the administrative burdens such models placed on providers. Voluntary participation in BPCI models, such as Comprehensive Care for Joint Replacement and the Cardiac Rehabilitation Incentive model, has been offered since 2016.

This new model will give providers, “an incentive to deliver efficient care,” Seema Verma, CMS Administrator, said. “BPCI Advanced builds on the earlier success of bundled payment models and is an important step in the move away from fee-for-service and toward paying for value.”

Thirty-two clinical care episodes will initially be included in BPCI Advanced, 29 inpatient-setting episodes of care and three outpatient-setting episodes of care and the potential for episode revision for new and existing participants beginning January 1, 2020.   The clinical care episodes include services such as major joint replacement of a lower extremity, percutaneous coronary intervention and spinal fusion.

BPCI Advanced performance period is from October 1, 2018 through December 31, 2023.  Participants joining in the initial stage may not exit prior to January 1, 2020.

Providers interested in at least one of the 32 clinical episodes to apply to the model have until 11:59 pm EST on March 12, 2018 to apply via the application portal.

Back to the Future: CMS revives Obama-era proposed rule on critical access hospitals

By Emmie Futrell, Class of 2018; Kristen A. Larremore, Partner at Waller; Amber Green Arnold, Associate at Waller

Since the 1997 Balanced Budget Act, which created the designation for Critical Access Hospitals (CAH), the requirements for Medicare and Medicaid participation for these rural facilities have largely remained untouched.  But, a recent decision by CMS to revive and finalize an Obama-era proposed CAH rule will change certain Medicare participation requirements for CAHs.

According to a recent rulemaking notice, CMS intends to issue a final version of the proposed CAH rule sometime in the next 17 months.

The CAH designation was created to protect financially vulnerable rural hospitals that provide vital care to rural communities and combat a string of rural hospital closures. However, the intervening years since 1997 have brought many changes to healthcare in the United States, and in June 2016 CMS issued a proposed rule in an attempt to modernize Medicare participation requirements for CAHs and other hospitals.

Highlights of the wide-ranging proposed rule include a requirement that CAHs maintain an infection prevention program, as well as an antibiotic stewardship program to promote the appropriate use of antibiotics.  CAHs would also be required to designate leaders for each of these programs.

CMS hopes these programs will result in a reduction in hospital-acquired infections, including those that may be drug-resistant, which can lengthen inpatient stays and result in increased costs to the Medicare program. However, critics of these proposed requirements have noted that many drug-resistant organisms come into hospitals from other settings and have questioned whether these anti-infection requirements will improve patient care if care delivered outside of the hospital setting is not subject to similar requirements.

The proposed rule also establishes an explicit requirement that CAHs comply with federal anti-discrimination laws — – a requirement already applicable to Medicare providers.  The proposed rule would address this disparity and seek to address reports of discriminatory barriers to access by requiring CAH facilities to adopt and implement nondiscrimination policies.

In addition, the proposed rule would clarify that each patient’s medical records must contain adequate documentation justifying the patient’s admission and continued hospitalization, support the patient’s diagnoses, and describe the patient’s progress and response to medications and services.  The proposed rule also clarifies that patients should be able to access their medical records in form and format requested by the patient, including electronically, if readily producible in that form and format.

In light of recent findings in a Bipartisan Policy Center report that was published in January 2018, CMS may consider additional revisions to the proposed rule.

The report considered the rural communities of seven upper Midwest states and the relationship between local communities and CAHs. The report indicated that, while in many of the smaller localities studied, there were still barriers to access of critical primary care services, CAHs would not necessarily be helpful in addressing such access issues in each rural community.

The report found that, in some instances, CAHs are not financially sustainable due to low occupancy of patients requiring inpatient services. Proposals are wide-ranging to correct this issue, but many proposals include modifying the CAH designation to allow these facilities to include primary care and other outpatient services in addition to the inpatient care that they are already required to provide.

Although the extent to which the Trump administration will finalize the rule as initially proposed remains unclear, CAHs should closely monitor developments for any new CMS proposals addressing CAHs and a final rule implementing changes, because CAHs continue to be a focus of lawmakers and healthcare policy advisors.

OIG Gives Green Light to Gainsharing Arrangement

By Brandon Huber, Class of 2019; Kim Harvey Looney, Partner at Waller; Justin Hickerson, Associate at Waller

A gainsharing arrangement between a non-profit hospital and members of a multi-specialty physician group has been authorized by the Office of Inspector General for the first time since the 2015 enactment of MACRA removed certain roadblocks from the expanded use of gainsharing in the healthcare industry.

An OIG advisory opinion issued earlier this month involves a proposed arrangement in which a non-profit medical center will pay certain neurosurgeons a share of cost savings realized by the selection and use of certain products during spinal fusion surgeries. Thirty-four cost-reduction measures were identified by the medical center based upon considerations of costs, quality of patient care, and utilization on a national level. Thirty-one recommendations involved standardizing certain devices and supplies used in spinal fusion surgeries. The remaining three suggested that the neurosurgeons use Bone Morphogenetic Protein for spine surgeries only on an as-needed basis.

The proposed arrangement established a three-year term, whereby the neurosurgeons would receive 50 percent of the annual cost savings, paid each year over the term of the arrangement. The compensation paid to the neurosurgeons would then be divided on a per capita basis, with the remainder being allocated towards paying the practice group’s administrative expenses. Other safeguards implemented under the arrangement included an oversight committee and a requirement that all patients be given written notice of the arrangement and an ability to review the details prior to the performance of their procedure.

In assessing the legality of the arrangement, the OIG examined the application of both the CMP and the Anti-kickback Statute. Regarding the CMP, although the OIG could not opine as to whether the arrangement would reduce medically necessary services, it found that, based on the methodology for development and payment of the cost savings, along with the monitoring and safeguards put in place, it would not impose sanctions.

Likewise, the OIG concluded that it would not impose sanctions under the Anti-kickback Statute because the arrangement presented a sufficiently low risk of fraud and abuse. The OIG based its decision on several factors:

  • the majority of the money received pursuant to the cost-sharing arrangement would be divided per capita amongst the four neurosurgeons, thereby reducing the risk that any particular physician would be incentivized to generate disproportionate cost savings;
  • there was no prohibition on using nonstandardized products, despite the product standardization recommendations; and
  • no other neurosurgeons from outside groups were allowed to participate, reducing the likelihood that the medical center would use the arrangement to attract neurosurgeons from competing hospitals to perform surgeries at its facility.

Although the opinion only applies to the parties who requested it, the opinion can serve as a valuable reference tool for those wanting to ensure future gainsharing arrangements are legally appropriate. Furthermore, this opinion highlights the OIG’s willingness to support gainsharing arrangements as the healthcare industry transitions from a fee-for-service model of care to a system which emphasizes value-based payments.