OIG: Hospital not subject to sanctions for doc incentives

OIG offers guidance on anti-kickback law exception
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Providing bonuses to physicians for quality and cost efficiency doesn't warrant financial penalties under anti-kickback laws, according to the Office of Inspector General.

In its review of a comanagement arrangement between an unnamed hospital and a cardiology group, OIG determined that the hospital shouldn't suffer sanctions for offering performance bonuses to the physicians for implementing patient service, quality and cost-saving measures, OIG said in an advisory opinion, released yesterday.

The rural, acute care hospital operates four cardiac catheterization laboratories on its campus. The cardiology group has 18 full-time physicians and is the only group that provides cardiac catheterization services in the town.

Under the three-year comanagement agreement, the physicians receive bonuses for reducing costs associated with lab procedures (60 percent), quality improvement (30 percent), employee satisfaction (5 percent) and patient satisfaction (5 percent)--measures the OIG found to be in line with national care standards and not used for incentives for Medicare referrals, Law360 reported.

To qualify for the bonuses, the agreement includes certain rules: Physicians may not increase referrals to the hospital or cherry pick patients with desirable insurance, nor speed up patient discharges.

The Inspector General said the arrangement is designed to align incentives with quality strategies. OIG found the agreement doesn't adversely affect patient care, and the rules in place provide safeguards against illegal actions.

"However, like any payment arrangement between a hospital and physicians who refer business to the hospital, payments purportedly intended to encourage quality improvements and cost savings might be misused by unscrupulous parties to induce limitations or reductions in care or to disguise kickbacks for federal healthcare program referrals," OIG warned.

Yesterday's opinion represents an exception to the anti-kickback rule and offers other hospitals compliance guidance on hospital-physician relationships, Law360 noted.

"Properly structured, arrangements that compensate physicians for achieving hospital cost savings can serve legitimate business and medical purposes," OIG said.

In October, the OIG approved a hospital's emergency department agreement that offered per-diem payments to on-call physicians. OIG said the agreement was compliant because of the physician shortage.

For more information:
- see the OIG opinion (.pdf)
- read the Law360 article (subscription required)

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