United States: OIG ♥'s Co-Management Arrangement For Cardiac Cath Labs

Last Updated: February 12 2013
Article by Dinetia Newman and Daniel F. Murphy

BABC Assists Client In Obtaining Favorable Advisory Opinion

On January 7, 2013, the Department of Health and Human Services Office of Inspector General ("OIG") posted a favorable advisory opinion concerning an existing co-management arrangement ("Arrangement") between a large, rural, acute care hospital (the "Hospital") and a physician group practice comprised of cardiologists (the "Group") under which the Group and the Hospital jointly manage the Hospital's cardiac catheterization laboratories (the "Cath Labs"). ( The OIG Advisory Opinion No. 12-22 is available on the OIG's website, www.oig.hhs.gov.) Under the Arrangement, the Hospital pays the Group a fixed base fee for its services, plus a potential performance-based fee (the "Performance Fee") tied to both quality measures and cost savings. Bradley Arant Boult Cummings prepared the request for the applicant and assisted the applicant in obtaining a favorable opinion.

The OIG has previously issued a number of advisory opinions, including several on co-management arrangements, that address pay-for-performance ("P4P") and gainsharing compensation paid to physician referral sources of hospitals. While the new advisory opinion echoes many long-standing principles regarding P4P and gainsharing arrangements, the OIG appears to have applied considerable scrutiny to the selection and calibration of the specific quality measures comprising the Arrangement, as well as the controls and safeguards implemented by the requestors with respect to the gainsharing elements.

Although the OIG concluded that it would not impose sanctions on the requestors under either the Anti-Kickback Statute ("AKS") or the Civil Monetary Penalties ("CMP") law, the advisory opinion demonstrates the challenges providers face in implementing value-based compensation arrangements with referral sources in light of existing laws that have not fully adapted to quality or cost-saving incentives.

The OIG recognized in the opinion that "incentive compensation arrangements like the Arrangement are designed to align incentives by offering physicians compensation in exchange for implementing strategies to meet quality, service, and cost-saving targets." Notwithstanding the apparent consistency of the Arrangement with these current federal health care policy goals, the OIG's approval required a fact-intensive analysis and the exercise of agency discretion to not impose sanctions.

The Arrangement

The Hospital operates four Cath Labs, which are the only ones within a 50-mile radius of the Hospital. The Group is comprised of 18 full-time cardiologists, including general cardiologists, interventional cardiologists, and electrophysiologists. Six interventional cardiologists in the Group perform procedures in the Cath Labs.

Under the Arrangement, the Group provides medical direction and management services for the Cath Labs. These services include overseeing Cath Lab operations, strategic planning, cardiology program training and development, credentialing of Cath Lab personnel, purchasing decision input, consulting regarding information systems and payor issues, and public relations.

In exchange for its services, the Hospital pays the group a fixed fee and offers the annual Performance Fee, which can equal an amount up to the fixed fee, depending on the Group's performance relative to the quality and cost-saving measures. The requestors certified that the fees paid under the Arrangement are consistent with fair market value ("FMV") and obtained an appraisal from an independent third party confirming this position.

The table below summarizes the components of the potential Performance Fee. The fee is comprised of employee satisfaction levels (5%), patient satisfaction levels (5%), clinical quality measures (30%), and cost-saving components (60%). Each of these components specify three tiers of performance improvement and an associated percentage of the fee allocation available at each tier (50% for tier 1, 75% for tier 2, and 100% for tier three). For example, with respect to a quality measure for prescribing Beta blockers upon discharge, the Group must rank at the 70th percentile of hospitals to achieve the tier 1 performance fee level, and is eligible for tier 3 (100% of the performance fee for this component) if it ranks in the 90th percentile. In addition to the tiered quality and cost-saving goals, the Group is eligible to receive additional compensation if the Hospital ranks in the Thomson Reuters Top 50 Cardiovascular Hospitals (subject to an overall Performance Fee cap equal to the fixed fee).

 Performance Fee Components

 Category / Indicators / Allocation

 Source of Indicator

 Employee Satisfaction (5%)

 National Survey Data

 Patient Satisfaction (5%)

 Patient Satisfaction

 National Survey Data

 1st case start time


 Wait time between cases


 Quality (30%)

 Beta blocker at discharge

 National Cardiovascular Data Registry ("NCDR")

 ACE-1 or ARB for left ventricular systolic dysfunction at discharge


Door to balloon time 

American College of Cardiology ("ACC") 

Aldosterone blocking agent at discharge


Document LDL-c level 


Reduce percutaneous coronary intervention ("PCI") complications


Reduce bleeding incidence within 72 hours of surgery


Reduce PCI risk adjustment complications index


Cost Savings (60%) 

Cardiac catheterization costs per case 

Internal Financial Records

Contrast costs per case 

Internal Financial Records

Top 50 Cardiovascular Hospital ($x) 

Thomson Reuters Ranking

  • The requestors have implemented the following safeguards against the OIG's AKS-related concerns and those stemming from the theoretical potential for inappropriate reductions in care that could result from gainsharing aspects of the Arrangement:
  • The requestor certified that it bases purchasing decisions on the best interests of patient care and utilizes products that are clinically safe and effective.
  • The Hospital uses an Interventional Cardiology Committee, including all of the Group's interventional cardiologists, to generate initial product purchasing recommendations based on evidence of clinical effectiveness. 
  • The Hospital negotiates with vendors for favorable pricing on selected products, but does not require the Group physicians to use any particular products (e.g. contrast or stents) during procedures. The physicians remain free to use any product they judge as clinically appropriate for a particular situation.
  • The requestors use an independent third-party utilization review firm to verify the clinical appropriateness of procedures performed at the Cath Labs and to confirm that the Arrangement does not adversely impact patient care.
  • Multiple hospital committees monitor the performance of the Group under the Arrangement.
  • Cath Lab Patients and their families are notified of the Arrangement when they are providing informed consent to the procedures.

OIG Analysis

The AKS makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a federal health care program. While noting that the Arrangement could potentially constitute improper remuneration under the AKS, the OIG gave relatively short shrift to the possibility that the fees paid under the Arrangement would violate the AKS. In concluding that it would not impose sanctions on the requestors under the AKS, the OIG cited the following favorable factors embodied in the Arrangement:

  • the requestors certified that the compensation paid to the Group is consistent with FMV;
  • compensation does not vary based on the number of patients treated;
  • because the Cath Labs are the only ones within 50 miles of the Hospital, and because the Group does not perform cardiac cath procedures at any other hospital's labs, the fees paid under the Arrangement are unlikely to act as incentive for the physicians to refer cases to the Hospital, as opposed to any other provider;
  • the Performance Fee components are specific, based on nationally recognized measures, focused on quality improvement, and require measurable improvement over the status quo; and
  • the Arrangement is written and limited to a three-year term.

The CMP law establishes a civil monetary penalty against any hospital or critical access hospital that knowingly makes a payment to a physician as an inducement to reduce or limit services provided to Medicare or Medicaid beneficiaries under the physicians' direct care. Notably, the CMP law does not distinguish between reductions in medical care that is necessary and care that may be wasteful or unnecessary. Payments for reductions in medically unnecessary care can technically violate the CMP law. Therefore, in order to have assurances that such payments will not result in penalties, an exercise of prosecutorial or agency discretion, such as an OIG advisory opinion, is required.

In evaluating the Arrangement under the CMP law, the OIG reiterated its consistently held concerns that P4P and gainsharing payments can result in stinting on-patient care, cherry-picking healthy patients, choosing clinically inappropriate products, or accelerating patient discharges. The OIG concluded that the Arrangement "has several features that, in combination, provide sufficient safeguards so that we would not seek sanctions" against the requestor under the CMP law. The opinion specifically cited the following aspects of the Arrangement in support of its CMP conclusion:

  • the requestor certified that the Arrangement has not adversely affected patient care, and certified that it monitors the Arrangement to detect and safeguard against inappropriate reductions or limitations in care;
  • based on safeguards included in the Arrangement, there is a low risk that Group physicians will make clinically inappropriate product selections as a result of the cost-saving components of the Performance Fee (supply and contrast costs per case);
  • the financial incentives tied to the cost-saving elements of the Performance Fee are capped and reasonable in amount and duration; and
  • the receipt of any portion of the Performance Fee is conditioned on the Group physicians not taking any of the following actions as a result of the fee—stinting on care, increasing referrals to the Hospital, cherry-picking healthy patients, or accelerating discharges.


A number of major Medicare initiatives, including accountable care organizations, the hospital value-based purchasing program, and bundled payments, emphasize reimbursement systems that encourage increased quality and reduced costs. The Performance Fee structure included in the Arrangement reflects these goals. Despite the recent push for payments based on value, current law and guidance under the AKS and CMP laws coexist in tension with payments to referral sources designed to improve quality and reduce costs. This tension is on full display in the advisory opinion, which required an extremely fact-intensive analysis of the Arrangement (rather than, e.g., a straightforward safe harbor or exception) in order to receive OIG approval for a relatively common form of co-management.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.