In its final Advisory Opinion of 2012 (OIG Advisory Opinion 12-22, issued:  Dec. 31, 2012, posted: January 7, 2013), the Office of Inspector General (“OIG”) approved a co-management arrangement in which a hospital paid a cardiology group to manage the hospital’s cardiac catheterization laboratories (the “Arrangement”).  The compensation paid by the hospital included a fixed management fee and a performance bonus, based upon achieving certain quality and costs savings benchmarks in connection with operation of the cath labs.

The OIG determined that, although the arrangement (i) could potentially constitute an improper payment to induce the reduction or limitation of healthcare services, in violation of the Civil Monetary Penalties Statute (“CMP Statute”), and (ii) could potentially generate prohibited remuneration in exchange for referrals under the Anti-Kickback Statute, the presence of certain “safeguards” minimized the possibility of violation of the applicable statutes.  Because the likelihood of violation of these statutes was minimal, the OIG stated it would not seek to impose sanctions against the parties.

The OIG identified the following features of the Arrangement as safeguards which minimized the potential for violation of the CMP Statute: (i) the hospital’s certification that the Arrangement did not adversely affect patient care; (ii) low risk that the Arrangement would cause physicians to use medically inappropriate items to achieve cost savings; (iii) the financial incentives to achieve cost savings were reasonably limited in duration and amount; and (iv) the presence of certain other limitation on physician actions, including restrictions against a)stinting on patient care, b) increasing referrals to the hospital, c) cherry-picking healthy patients or patients with desirable insurance coverage, or d) accelerating patient discharges.

Safeguards which minimized the potential for violation after the Anti-Kickback Statute included: (i) the hospital’s certification that both the fixed fee and the performance bonus represented fair market value compensation for the services performed; (ii) the compensation paid to the physicians did not vary with the number of patients treated; (iii) the Arrangement would not serve as an incentive for the physicians to refer patients to the hospital’s cath labs instead of to a competing facility; (iv) the Arrangement was designed to improve quality rather than to reward referrals, and (v) the Arrangement had a limited duration.

Hospitals and physician groups which are considering entering into co-management arrangements pursuant to which the hospital would pay physicians to manage one or more hospital services should review Advisory Opinion 12-22 carefully and utilize it as a road map for structuring the arrangement.  The parties should seek to incorporate as many of the “safeguards” identified in the Opinion as possible.

Attorneys in Akerman’s Health Care Practice Group have experience in setting up co-management arrangements, and would be delighted to discuss such arrangements with interested parties.