	Background

Health systems may use a variety of financial incentive programs to  encourage improvements in the quality and efficiency of health care  delivery. explicit goals of quality improvement rather than efficiency improvement,  these programs can improve quality and efficiency by rewarding  physicians for adhering to clinical protocols. Studies have found that these self-referrals encouraged overutilization  and increased health costs. OIG is  responsible for enforcing the Stark law’s civil monetary penalties. Certain Financial Incentive Programs Are Permitted under Federal Fraud and Abuse Laws, Regulations, and Guidance, but Stakeholders Reported Challenges in Designing and Implementing Programs within This Framework

Certain financial incentive programs are permitted within the framework of  federal fraud and abuse laws through various Stark law and anti-kickback  statute exceptions and safe harbors, respectively or because they do not  implicate one or more of the laws in the first instance. OIG has interpreted  the CMP law to prohibit hospitals from rewarding the reduction or  limitation of services, but permits certain financial incentive programs  through its advisory opinion process. However, stakeholders we spoke  with reported that the laws, regulations, and agency guidance have  created challenges for financial incentive program design and  implementation, and some health systems have terminated or refrained  from implementing these programs. exception. Stakeholders Reported That OIG Interpretation of CMP Law Diminished Ability to Reward Any Service Reduction or Limitation, Including Services Not Medically Necessary

In addition to the Stark law and anti-kickback statute, hospitals must  comply with the CMP law, which OIG interpreted in a 1999 Special  Advisory Bulletin (SAB) as prohibiting payments from hospitals to  physicians to induce a reduction or limitation in Medicare services for  hospital patients, even if the services are not medically necessary.violation of the CMP law may result if the hospital knows that the payment  may influence the physician to reduce or limit services, even if the  payment is not tied to a specific patient or to an actual diminution in care. On this basis, OIG has indicated  that it would not subject specific arrangements approved in advisory  opinions to sanctions. HHS Has Approved Otherwise Prohibited Financial Incentive Programs That Incorporate Safeguards, under Demonstration Project and Other Authorities

HHS has permitted implementation of certain financial incentive programs  that otherwise might not be permitted under federal fraud and abuse laws,  but it has required safeguards to protect program and patient integrity. CMS has conducted these programs through authorized demonstration  projects, the Medicare Shared Savings Program, and the Innovation  Center. CMS has conducted demonstration projects to test financial incentive  programs that include safeguards to protect program and patient integrity. According to CMS and OIG, the  waiver for the distribution of shared savings within the ACO is premised,  in part, on recognition that an award of shared savings necessarily  reflects the collective achievement by the ACO and its constituent parts of  the quality, efficiency, and cost reduction goals of the Medicare Shared  Savings Program. The federal fraud and abuse laws discussed  in this report apply variously to financial relationships among hospitals,  physicians, and health plans, among other entities. There are no exceptions and safe harbors specifically for financial  incentive programs, and the Stark law’s “no risk” requirement for new  exceptions, makes it difficult for CMS to craft an exception that allows for  innovative, effective programs while ensuring that the Medicare program  and patients face no risk from abuses. As such, the constraints of existing  exceptions and safe harbors make it difficult to design and implement a  comprehensive program for all participating physicians and patient  populations. Under the  Medicare Shared Savings Program, which is a permanent program, CMS  and OIG will waive fraud and abuse laws for financial incentive programs  under certain circumstances, but there may be limits on health systems’  ability to participate. Our work suggests that stakeholders’ concerns may hinder  implementation of financial incentive programs to improve quality and  efficiency on a broad scale. Different stakeholders—government agencies  and health care providers—will likely continue to have differing  perspectives about the optimal balance between innovative approaches  to improve quality and lower costs and retaining appropriate patient and  program safeguards. In its written comments, HHS sought to clarify the Department’s position  on CMS’s use of its authorities to permit certain financial incentive  programs—using regulatory exceptions and waivers—that the  Department did not believe we had clearly described in the draft. We  modified the draft to reflect the agency’s position on this issue. Medicare: Private Sector Initiatives to Bundle Hospital and Physician  Payments for an Episode of Care.
Why GAO Did This Study

GAO has long expressed concern that increases in Medicare spending are unsustainable and do not necessarily enhance health care quality. Traditional Medicare provider payment systems reward the volume of services instead of the quality or efficiency of care by paying physicians for each service provided. Some health systems, which can be hospitals, physicians, health plans, or a combination, use financial incentive programs to reward physicians for improving quality and efficiency with the goal of better outcomes for patients and savings for hospitals and payers. Federal laws that protect patients and the integrity of federal programs, including Medicare, limit health systems ability to implement financial incentive programs. These fraud and abuse laws include the physician self-referral law, or Stark law; the anti-kickback statute; and the Civil Monetary Penalties (CMP) law. The Centers for Medicare & Medicaid Services (CMS) and the Office of Inspector General (OIG) within the Department of Health and Human Services (HHS), and the Department of Justice oversee and enforce these laws.
GAO examined how federal fraud and abuse laws affect the implementation of financial incentive programs, stakeholders perspectives on their ability to implement these programs, and alternative approaches through which HHS has approved implementation of these programs. GAO analyzed relevant laws and agency guidance and documentation; and interviewed agency officials, legal experts, and provider stakeholders.

What GAO Found

Certain financial incentive programs are permitted within the framework of federal fraud and abuse laws, but stakeholders GAO spoke with reported that the laws, regulations, and agency guidance have created challenges for program design and implementation. The Stark law and anti-kickback statute, which restrict financial relationships among providers, have statutory and regulatory exceptions and safe harbors, respectively, that permit financial incentive programs that meet specific criteria. However, there are no exceptions or safe harbors specifically for financial incentive programs intended to improve quality and efficiency, and legal experts reported that the constraints of existing exceptions and safe harbors make it difficult to design and implement a comprehensive program for all participating physicians and patient populations. The CMP law prohibits hospitals from paying physicians to reduce or limit services, and OIG has interpreted the law to apply to the reduction or limitation of any services, whether or not those services are medically necessary. The CMP law does not include statutory exceptions to this prohibition, and OIG does not have the authority to create exceptions through regulation. Through its advisory opinion process, OIG, however, has indicated that it would not impose sanctions for specific financial incentive programs that otherwise violated the CMP law but presented a low risk of fraud and abuse. Legal experts stated that innovative arrangements are difficult to structure and that the advisory opinion process is burdensome.
Through alternative approaches, HHS has approved implementation of otherwise prohibited financial incentive programs that incorporate safeguards, under its statutory authority to conduct demonstrations and other initiatives. Specifically, CMS has conducted demonstration projects to test financial incentive programs that reward quality and efficiency. These demonstration projects included safeguards, such as linking payments to quality measures, to protect program and patient integrity. CMS has incorporated safeguards into the Medicare Shared Savings Program, which allows eligible providers to participate as accountable care organizations to share savings with the Medicare program. As specifically authorized for the Medicare Shared Savings Program, CMS and OIG will waive fraud and abuse laws for, among other things, the distribution of shared savings in the Medicare Shared Savings Program, subject to certain requirements. The Center for Medicare and Medicaid Innovation within CMS is also implementing programs to test financial incentives.
GAOs work suggests that stakeholders concerns may hinder implementation of financial incentive programs to improve quality and efficiency on a broad scale. Stakeholdersgovernment agencies and health care providerslikely will continue to have different perspectives about the optimal balance between innovative approaches to improve quality and lower costs and retaining appropriate patient safeguards. HHS reviewed a draft of this report and in its written comments, clarified its position on CMSs authorities to create exceptions and issue waivers to permit certain financial incentive programs, noting that its authority to issue waivers is broader than its authority to create Stark exceptions. We modified the draft to reflect the Departments position.