Update on Stark Gainsharing Exception

Despite its enthusiasm to craft an exception to the Stark Law for shared savings programs like gainsharing and pay-for-performance (P4P) arrangements, CMS delayed finalizing such an exception in the 2009 Medicare Physician Fee Schedule (MPFS) Final Rule.1  In the Final Rule, issued on October 30, 2009, CMS stated that it had received too few comments to craft an appropriate exception for shared savings programs that would not risk fraud to the Medicare program. 

One primary opponent of the exception is the medical device industry.  The Advanced Medical Technology Association (AdvaMed), a medical technology group, believes that gainsharing arrangements may create incentives for the use of less-expensive or older medical technologies.2  Because gainsharing is a way to provide incentive payment and cost-savings to be shared with physicians, board chairman of AdvaMed, Michael A. Mussallem, praised the decision to not finalize the exception, expressing concern that gainsharing arrangements may “compromise patient care by creating incentives for the use of less-expensive, older, outdated technologies when newer, better, technologies might be more appropriate.”3  He went on to state that “patients also may receive less care than appropriate under such a proposal.”  Mussallem, who also happens to be chairman and chief executive officer of Edwards Lifesciences, said also that the medical device industry would prefer that CMS review and completely evaluate the congressionally mandated gainsharing demonstration, along with two other demonstrations, before finalizing the exception to the Stark Law.4

According to the MPFS Proposed Rule, published on July 7, 2008, CMS believes that shared savings programs have the potential to “foster high quality, cost-effective care”5 but it also expressed concerns similar to those being voiced by the medical device industry over the issue of stinting, or “limiting the use of quality-improving but more costly devices, tests or treatments.”6  While CMS stated that the majority of the comments it did receive in response to the Proposed Rule favored the exception, it noted that many of those responses only favored finalizing the exception if substantial modifications were made to the originally proposed program conditions.7  Though it received numerous comments, CMS did not receive enough comments in agreement about how the exception should be structured, and accordingly, CMS has issued the rule with another comment period, soliciting further comments from the health care community so that it may finalize the exception in the future.  Ultimately, CMS would like to develop an exception that “would meet the ‘no risk’ standard, would be sufficiently bright line to be enforceable and to facilitate compliance, and would be sufficiently flexible to foster beneficiary arrangements.”8  

The Final Rule is set to be published in the Federal Register on November 19, 2008, and CMS will accept comments on this exception for 90 days after that date.9

1
“Medicare Program; Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2009; E-Prescribing Exemption for Computer-Generated Facsimile Transmissions; and Payment for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies; Final Rule with Comment Period,”  Department of Health and Human Services, Center for Medicare and Medicaid Services, October 30, 2008, available at http://www.cms.hhs.gov/physicianfeesched/downloads/CMS-1403-FC.pdf?agree=yes&next=Accept. (Accessed 11/11/08).

2
“CMS Seeks More Comments on Proposed Self-Referral Exception for Shared Savings,” BNA Health Law Reporter, 17 HLR 1449, Nov. 6, 2008.

3
“CMS Seeks More Comments on Proposed Self-Referral Exception for Shared Savings,” BNA Health Law Reporter, 17 HLR 1449, Nov. 6, 2008.

4
“CMS Seeks More Comments on Proposed Self-Referral Exception for Shared Savings,” BNA Health Law Reporter, 17 HLR 1449, Nov. 6, 2008.

5
Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2009; and Revisions to the Amendment of the E-Prescribing Exemption for Computer Generated Facsimile Transmissions; Proposed Rule,” 73 Fed. Reg. 38502, 38548, Department of Health and Human Services, Center for Medicare and Medicaid Service, July 7, 2008.

6
“Medicare Program; Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2009; E-Prescribing Exemption for Computer-Generated Facsimile Transmissions; and Payment for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies; Final Rule with Comment Period,”  Department of Health and Human Services, Center for Medicare and Medicaid Services, October 30, 2008, available at http://www.cms.hhs.gov/physicianfeesched/downloads/CMS-1403-FC.pdf?agree=yes&next=Accept. (Accessed 11/11/08).

7
“Medicare Program; Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2009; E-Prescribing Exemption for Computer-Generated Facsimile Transmissions; and Payment for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies; Final Rule with Comment Period,”  Department of Health and Human Services, Center for Medicare and Medicaid Services, October 30, 2008, available at http://www.cms.hhs.gov/physicianfeesched/downloads/CMS-1403-FC.pdf?agree=yes&next=Accept. (Accessed 11/11/08).

8
“Medicare Program; Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2009; E-Prescribing Exemption for Computer-Generated Facsimile Transmissions; and Payment for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies; Final Rule with Comment Period,”  Department of Health and Human Services, Center for Medicare and Medicaid Services, October 30, 2008, available at http://www.cms.hhs.gov/physicianfeesched/downloads/CMS-1403-FC.pdf?agree=yes&next=Accept. (Accessed 11/11/08).

9
“Final 2009 Changes to Payment Policies and Rates Under Medicare Physician Fee Schedule,” Centers for Medicare and Medicaid Services, Oct. 30, 2008, http://www.cms.hhs.gov/pf/printpage.asp?ref=http://www.cms.hhs.gov/apps/media/press/factsheet.asp?Counter=3333&chkNewsType=6&intPage=&intNumPerPage=10&srchOpt=0&checkDate=&checkKey=&pYear=&srchType=1&numDays=3500&showAll=&srchData=&keywordType=All&year=&cboOrder=date&desc= (Accessed 11/18/08).

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Todd A. Zigrang

Todd A. Zigrang, MBA, MHA, CVA, ASA, FACHE, ABV, is the President of Health Capital Consultants (HCC), where he focuses on the areas of valuation and financial analysis for hospitals, physician practices, and other healthcare enterprises. Mr. Zigrang has over 28 years of experience providing valuation, financial, transaction and strategic advisory services nationwide in over 2,000 transactions and joint ventures. Mr. Zigrang is also considered an expert in the field of healthcare compensation for physicians, executives and other professionals.

Mr. Zigrang is the co-author of "The Adviser’s Guide to Healthcare – 2nd Edition" [2015 – AICPA], numerous chapters in legal treatises and anthologies, and peer-reviewed and industry articles such as: The Accountant’s Business Manual (AICPA); Valuing Professional Practices and Licenses (Aspen Publishers); Valuation Strategies; Business Appraisal Practice; and, NACVA QuickRead. In addition to his contributions as an author, Mr. Zigrang has served as faculty before professional and trade associations such as the American Society of Appraisers (ASA); the National Association of Certified Valuators and Analysts (NACVA); Physician Hospitals of America (PHA); the Institute of Business Appraisers (IBA); the Healthcare Financial Management Association (HFMA); and, the CPA Leadership Institute.

Mr. Zigrang holds a Master of Science in Health Administration (MHA) and a Master of Business Administration (MBA) from the University of Missouri at Columbia. He is a Fellow of the American College of Healthcare Executives (FACHE) and holds the Certified Valuation Analyst (CVA) designation from NACVA. Mr. Zigrang also holds the Accredited Senior Appraiser (ASA) designation from the American Society of Appraisers, where he has served as President of the St. Louis Chapter. He is also a member of the America Association of Provider Compensation Professionals (AAPCP), AHLA, AICPA, NACVA, NSCHBC, and, the Society of OMS Administrators (SOMSA).

Jessica L. Bailey-Wheaton

Jessica L. Bailey-Wheaton, Esq., is Senior Vice President and General Counsel of HCC. Her work focuses on the areas of Certificate of Need (CON) preparation and consulting, as well as project management and consulting services related to the impact of both federal and state regulations on healthcare transactions. In that role, Ms. Bailey-Wheaton provides research services necessary to support certified opinions of value related to the Fair Market Value and Commercial Reasonableness of transactions related to healthcare enterprises, assets, and services.

She serves on the editorial board of NACVA’s The Value Examiner and is the current Co-Chair of the American Bar Association (ABA) Health Law Section’s Membership Committee and the Young Lawyer Division (YLD) Liaison to the ABA Health Law Section Governing Council. She has previously presented before the ABA, American Health Law Association (AHLA). NACVA, the National Society of Certified Healthcare Business Consultants (NSCHBC), and the American College of Surgeons.

Ms. Bailey-Wheaton is a member of the Missouri and Illinois Bars and holds a J.D., with a concentration in Health Law, from Saint Louis University School of Law.

Janvi R. Shah

Janvi R. Shah, MBA, MSF, CVA, serves as Senior Financial Analyst of HCC. Mrs. Shah holds a M.S. in Finance from Washington University Saint Louis and the CVA designation from NACVA. She develops fair market value and commercial reasonableness opinions related to healthcare enterprises, assets, and services. In addition she prepares, reviews and analyzes forecasted and pro forma financial statements to determine the most probable future net economic benefit related to healthcare enterprises, assets, and services and applies utilization demand and reimbursement trends to project professional medical revenue streams and ancillary services and technical component (ASTC) revenue streams.

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