If proponents have their way, legislation could be introduced this year to allow hospitals to implement physician incentive plans for doctors who treat patients with traditional Medicare or Medicaid fee-for-service coverage.
As minor consolation for the delay, hospitals have a green light to administer physician incentive programs for doctors who treat patients enrolled in Medicare or Medicaid HMOs. The concession came at the behest of managed-care plans that serve government beneficiaries.
In a letter released Aug. 24, HHS' inspector general's office affirmed the legality of physician incentive plans, or gain-sharing, under Medicare and Medicaid managed-care programs. The letter, dated five days earlier and signed by Lewis Morris, assistant inspector general for legal affairs, was released without the recipient's name and address. Last week, a Sacramento, Calif.-based law firm, Salem & Green, identified one of its lawyers, David Salem, as the recipient.
HHS spokeswoman Alwyn Cassil said the letter was meant to clarify any doubts arising from a July 8 bulletin released by the inspector general's office. The bulletin said that hospital-based physician incentive arrangements may violate the Social Security Act (July 12, p. 12).
The act bars hospitals from paying physicians as an inducement to reduce or limit care to Medicare or Medicaid beneficiaries. It subjects violating hospitals and physicians to civil fines of up to $2,000 per patient.
Medicare and Medicaid managed-care plans are not subject to the act. Health plans are increasingly delegating to hospitals the responsibility for administering risk pools, Cassil said. In essence, the letter affirms that such delegated risk arrangements are legal.
Still in legal limbo, however, are hospitals that pay physicians to eliminate unnecessary hospital costs on their own, without any managed-care plan involvement. Proponents say gain-sharing could help lower total healthcare costs.
"(The letter) doesn't go to the heart of what gain-sharing is about for the vast majority of Medicare patients who are still in fee-for-service," said Marilou King, a partner in charge of the healthcare practice at the Washington office of McDermott, Will & Emery.
The law firm is trying to form a coalition of hospitals and health systems to lobby Congress for legal changes that would clear the way for gain-sharing.
She said hospital and physician associations, which are occupied with priorities such as amending the Balanced Budget Act of 1997, have not placed gain-sharing on the front burner.
King said the coalition seeks to amend the Social Security Act by introducing legislation that would prohibit only payments that encourage doctors to limit "medically necessary" care.
The inspector general's bulletin suggested a legislative fix, although the process is tedious and costly. McDermott, Will & Emery has asked interested organizations to pay $500 as earnest money to participate in a related teleconference. However, King said the coalition's total costs will likely run thousands of dollars.
"We actually think that with proper safeguards, (incentive payments) could be beneficial, but you've got to get the law changed," Cassil said.