Gainsharing arrangements where hospitals give physicians financial incentives to reduce services to patients will be considered illegal.  FEDERAL REGISTER, July 14, 1999 Pages 37985 – 37987.

   The Department of Health and Human Services Office of Inspector General has issued a Special Advisory Bulletin it believes will eliminate a major potential source of sub-standard care of hospital patients.

   The Office of Inspector General has indicated it will interpret existing laws to make it illegal for a hospital to pass along to a physician or for a physician to accept a percentage share of cost reductions attributable to the physician’s decisions affecting the care of a patient, whether or not any actual diminution of the quality of the patient’s care can be shown to have resulted from the physician’s decisions.

   This policy will go on unless and until Congress intervenes with new legislation.

   According to the Inspector General, hospitals have a legitimate interest in enlisting physicians in their efforts to eliminate unnecessary costs.

   Savings that do not affect the quality of patient care may be generated, for example, by substituting lower cost but equally effective medical supplies, items or devices, re-engineering hospital surgical and medical procedures, reducing utilization of medically unnecessary ancillary services and reducing unnecessary lengths of stay.

   However, the law prohibits a hospital from linking a physician’s personal compensation to reductions or limitations in items or services provided to Medicare or Medicaid patients under the physician’s care.

FEDERAL REGISTER, July 14, 1999

Pages 37985 – 37987.