OIG Guidance on Comanagement Agreements

The U.S. Department of Health & Human Services (HHS) Office of Inspector General (OIG) recently issued Advisory Opinion 12-22 addressing an existing comanagement arrangement between a rural hospital and a cardiology group. Under the arrangement, the group manages the hospital’s four cardiac cath labs; recommends equipment, supplies, and devices; and provides strategic planning, medical direction, staff development, and other services. This is the first OIG opinion that specifically addresses comanagement arrangements. Advisory Opinion 12-22 provides useful guidance for structuring a comanagement arrangement, including compensation parameters and safeguards against the reduction of services and the inducement of referrals.

Under the arrangement, the hospital compensates the group with a guaranteed fixed fee and a potential performance-based payment. The performance-based payment is capped and based on achievement of employee satisfaction (5 percent), patient satisfaction (5 percent), quality (30 percent), and cost-saving (60 percent) measures. Thus, the comanagement arrangement includes a gain-sharing component through cost savings that accrue to the hospital.

Many features of the arrangement prevent the inappropriate reduction or limitation of services:

  • Cost-saving measures were developed by a team of members of the group, other members of the hospital’s medical staff, a nurse manager, and hospital administration.
  • A third-party utilization review firm monitors the clinical appropriateness of procedures performed in the cardiac cath labs and ensures that the arrangement does not adversely impact patient care.
  • The performance-based payment is contingent upon the cardiologists not stinting on care, increasing referrals, cherry-picking desirable patients, or accelerating patient discharges.
  • A significant performance-monitoring infrastructure is in place.

The arrangement prevents the inducement of referrals through the following:

  • Compensation paid to the group does not vary with the number of patients treated.
  • The performance-based payment rewards the achievement of specific satisfaction, quality, and cost measures – not additional volume.
  • The duration of the agreement is three years and thus limited in duration. The OIG noted that it would expect quality and cost measures under the arrangement to be subject to change over time to avoid payment for improvements achieved in prior years.

Although employment has become the integration vehicle of choice for most health systems, there are many situations where employment is not possible. In these cases, empowering physicians through a comanagement arrangement can align incentives toward reducing costs, ensuring coordination among providers, and adhering to protocols.

The table summarizes some of the benefits of comanagement arrangements for hospitals and physicians.

Benefits of Comanagement ArrangementsThis post was initially featured, January 18, 2013, on the hfm Healthcare Finance Blog.

This entry was posted in Physician Employment, Physician Strategy, Strategic Planning and tagged , by John Fink. Bookmark the permalink.

About John Fink

John assists healthcare provider organizations with strategic and business planning, hospital/physician alignment, new business ventures, and mergers and acquisitions. He uses his experience to effectively package communications to stakeholders and efficiently guide diverse groups of individuals as they make complex decisions. Over the last several years, he has focused on helping hospitals and physicians develop mutually beneficial financial relationships. John is certified as a Project Management Professional (PMP) by the Project Management Institute, Inc. (PMI) and received both a master of business administration degree and a bachelor of science degree in finance from Indiana University.

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