Shared savings addressed in OIG’s Advisory Opinion No. 17-09

The Office of Inspector General (“OIG”) released a favorable Advisory Opinion (No. 17-09)1 on January 5, 2018 with regards to an arrangement (“Arrangement”) in which neurosurgeons (“Neurosurgeons”) will utilize cost-reduction measures for certain spinal fusion surgeries performed at a non-profit acute care hospital (“Medical Center”) and the resulting shared savings split between the two parties.

Under the Arrangement, the Medical Center through a subsidiary (“Subsidiary”) will compensate the Neurosurgeons a portion of three years of cost savings attributable to changes the Neurosurgeons make when selecting and utilizing products during spinal fusion surgeries.

The Advisory Opinion analyzed whether or not the OIG would pursue sanctions associated with: “the civil monetary penalty provision for a hospital’s payment to a physician to induce the reduction or limitation of medically necessary services to Medicare or Medicaid beneficiaries under the physician’s direct care, sections 1128A(b)(1)-(2) of the Social Security Act (the “Act”); or (ii) the exclusion authority at section 1128(b)(7) of the Act, or the civil monetary penalty provision at section 1128A(a)(7) of the Act, as those sections relate to the commission of acts described in section 1128B(b) of the Act, the anti-kickback statute.”1

According to the Advisory Opinion, the OIG would not impose sanctions for the Arrangement as the subject requestors certified that cost reduction measures will not reduce or limit medically necessary services for the spinal fusion surgery patients, and that the Arrangement is monitored by the program administer (“Program Administrator”) by analyzing and tracking quality of patient care, changes in cost/ resource utilization, and reports the findings quarterly to the program committee (“Program Committee”). In addition, the OIG noted that the methodology utilized to develop the cost-savings recommendations, the monitoring and documentation safeguards in place, and the methodology utilized to calculate each performance year’s cost savings are reasonable.

The Advisory Opinion also acknowledged several ways that shared savings arrangements could be problematic. Listed below are key questions to consider based on Advisory Opinion No. 17-09:

  1. Does the shared savings arrangement induce the physicians to reduce or limit medically necessary services to Medicare and Medicaid patients?

  2. Does the payments a hospital makes to the physicians for implementing cost-saving measures intend to induce or reward the physicians’ referrals or to attract referring physicians?

  3. Does the arrangement include safeguards, monitoring and documentation requirements which protect against inappropriate reductions in medical services and maintain patients’ quality of medical care?

  4. Does the arrangement encourage physicians to admit patients to the hospital, solely to receive a share of the hospital’s reimbursement if the changes they make to their operating room practices generate cost savings?

  5. Do multiple year gainsharing arrangements inappropriately carry over savings from previous performance years?

  6. Does the arrangement ensure the use of the most clinically appropriate devices for the patients and allow shared savings when the physicians choose less expensive, but equally cost-effective products?

  7. Does the arrangement have safeguards in place to prevent cherry picking of healthier (lower cost) patients?

  8. Do the patients receive written notice of the shared savings arrangement and the compensation relationship between the parties?

  9. Is the gainsharing arrangement compensation consistent with Fair Market Value and Commercially Reasonable?

Although the Advisory Opinion is favorable, the OIG made it clear that gainsharing arrangements can be risky if not properly structured and monitored. By analyzing the Advisory Opinion and understanding the aforementioned questions, creating an appropriate gainsharing arrangement should be an easier undertaking.

Bartt B. Warner, CVA is a Director with VMG Health and is based out of VMG Health’s Nashville office. Mr. Warner can be reached at (615) 577-4206 or by e-mail at

1. OIG Advisory Opinion No. 17-09,

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