OIG Gives “OK” on Gain-Sharing By Neurosurgeons

On January 5, 2018, the Office of Inspector General (“OIG”) of the Department of Health and Human Services evaluated a proposed arrangement (the “Arrangement”) whereby neurosurgeons would implement certain cost-reduction measures in designated surgical procedures with a hospital and the hospital would then share a percentage of its cost savings resulting from such measures with the neurosurgeons. The OIG determined it would not impose sanctions on the parties under the gainsharing provision of the Civil Monetary Penalties Act (“CMP”) and that it would not impose sanctions under the Anti-Kickback Statute. 

The parties to the Arrangement included a non-profit hospital, the hospital’s wholly-owned subsidiary (which providing the infrastructure for the calculation of incentive payments under the Arrangement) and neurosurgeons within a multi-specialty group. Importantly, the neurosurgeons performed the majority of their procedures at the hospital, and all of the hospital’s surgeries were performed by the neurosurgeons. 

Under the Arrangement, the cost savings would come from changes made by the neurosurgeons when selecting and using products during spinal fusion surgeries. An administrator of the above-referenced subisidiary (the “Administrator”) would, utilizing software, identify potential cost savings and, along with the neurosurgeons and the hospital, create a document containing 34 savings recommendations. In large part, those recommendation would concern either the reduction of use of Bone Morphogenetic Protein in appropriate cases or the standardization of certain devices and supplies used in spinal fusion surgeries. The neurosurgeons worked with the hospital to develop a three-step process to evaluate and clinically review such standardized devices and supplies: (1) consideration of whether the products were clinically safe and effective; (2) consideration of whether the proposed standardization was appropriate on the basis of the clinical criteria; and (3) selection of changes based on prices available to the hospital. 

Several factors were deemed important to this Arrangement. First, the requesting parties certified that economies of scale were gained from both fiscal and clinical considerations and would not restrict the availability of products. Second, the Administrator would review data to confirm that the neurosurgeons did not select patients to participate in, or withdraw from, the Arrangement in order to achieve cost savings. Third, the parties to the Arrangement were required to retain all documentation and provide the patients written notice of the Arrangement and, if desired, an opportunity to review the details of the Arrangement. Fourth, at the end of the three-year period, cost savings would only be paid out in accordance with a particular multi-step process and, then, only if the neurosurgeons did not perform more of the relevant spinal procedures in the performance year than in the base year. If such metrics were met, the hospital would transfer an amount equal to 50 percent of the total performance year savings after paying the Administrator. 

Evaluating the Arrangement, the OIG determined that the gainsharing CMP was unlikely to be violated because of the methodology used to develop the cost-saving recommendations, the monitoring and documentation safeguards and the methodology used to calculate each performance year’s savings. Under the Anti-Kickback Statute, the OIG likewise found it would not issue sanctions given the aforementioned safeguards, but also emphasizing that the neurosurgeons applied the shared savings to administrative and recruitment expenses, so as to lower the risk that it would be used to reward particular physicians. 

For more information, 
Dana S. Durrett
The Durrett Firm, LLC at
ddurrett@thedurrettfirm.com or 770-685-1041.