By Tina Cressman |
Laws about Gainsharing

Laws about Gainsharing

Date Posted: Tuesday, July 01, 2008


The Office of the Inspector General (OIG) has issued three Special Advisory Bulletins on gainsharing arrangements, going back to 1999. "The definition of "gainsharing" refers to an agreement or arrangement in which a hospital provides an inducement to a physician in the form of a pay or a percentage share, of any reduction in the hospital's costs through effort of the physician." 1 Gainsharing is an area of potential fraud or abuse, and there are several other laws that impact the interpretation of relationships between physicians and hospitals.

There are some "Safe Harbors" where the OIG has issued regulations designating specific arrangement that are not in violation of the laws reviewed below. The Safe Harbors are exclusions to the laws, but to utilize them an arrangement must fit exactly into the exclusion to be considered legal.

Establishing definitions is an important factor of understanding these laws:

Stark Laws:  Prohibits a physician from referring designated health services paid for by Medicare or Medicaid to entities with which the physician has a financial relationship

Anti-kickback Statute:  Prohibits payments by a hospital to physicians that create incentives to refer patients to the hospital for services or supplies paid for by Medicare or Medicaid

Civil Monetary Penalty Law: Prohibits payments by a hospital to physician that create incentives to reduce or limit medical services to Medicare or Medicaid

Stark Laws address providers that refer patient to other providers where a financial relationship exists. Stark I was added to the Social Security Act in 1989. In 1993, the Omnibus Budget Reconciliation Act (OBRA) expanded the definitions of a referral to include ten 'designated health services', which is normally referred to as Stark II.

Currently there are eleven designated health services (DHS) that are subject to Stark regulations:

  • Clinical laboratory services
  • Physical therapy services, including speech/language pathology services
  • Occupational therapy services
  • Radiology services, including MRI, CT, and ultrasound
  • Radiation therapy services and supplies
  • Home health services
  • Durable medical equipment and supplies
  • Prosthetics, orthotics, prosthetic devices and supplies
  • Parenteral and enteral nutrients, equipment and supplies
  • Inpatient and outpatient hospital services
  • Outpatient prescription drugs

If these services are bundled into other services or billed out in another manner, Stark laws still apply. In November 2007, CMS published the final rule for physician's referrals to healthcare entities with which they have financial relationships, which is Phase III or Stark III. Stark III added definitions and clarifications to Stark I and II.

The Anti-kickback Statute is more about the referral of a patient in exchange for something of value. A key factor in Anti-kickback is the intent of a provider with regard to the referral of patients to other providers in exchange for remuneration. This Statute was originally enacted in 1972.

Some examples of topics covered in Anti-kickback are:

  • Waivers of co-pays or deductibles
  • Agreements below fair market value
  • Paying for patient referrals
  • Provider referral agreements
  • Joint ventures

The OIG has been issuing advisory opinions about Anti-kickback since 2000. The opinions are based on questions raised by providers, and also from observations of behavior made by the OIG.

Civil Monetary Penalty (CMP) Law was added to the Social Security Act, and modified by HIPAA laws. CMP is now $10,000 per item or service, with the potential of that amount being tripled based on the type of violation. There is proposed legislation that may increase the minimum threshold to $20,000 per item or service, or a $100,000 minimum per incident.

Consulting with a healthcare attorney is recommended before engaging in any potential gainsharing arrangements. The interpretation of the relationships between the parties could shift, so all current opinions and laws should be thoroughly assessed for all of the issues above.

Sources:  CMS 
1Medical Compliance Training Manual, Gainsharing Arrangements

Tina Cressman MALS, CPC-I, CPC-H-I, CPC-P, CCS-P, MCS-P, MCS-I, CMC, Director, Managed Care Education, Cooper University Hospital, Camden, NJ

Tina has over 25 years of experience in Revenue and Reimbursement Management.
She is Director of Managed Care Education for Cooper University Hospital in Camden, New Jersey. Recent achievements include being a Medical Compliance Specialist Instructor (MCS-I), and Secretary/Treasurer of the Medical Society of New Jersey Medical Practice Managers Section.

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