Chapter 9.E.3 (3.E.3) --Capitation Payment and Financial Conflicts of Interest

Most states do not regulate physician incentives very aggressively, or at all. Texas is one notable exception.  There, the Texas Attorney General settled a suit against Aetna, which agreed to a wide range of restrictions and changes in various managed care practices and policies, including physician incentives.  A press release and copy of the agreement can be found at http://www.aetna.com/news/2000/pr_20000411.htm  For a thorough analysis, see Brant S. Mittler and Andre Hampton, The Princess and the Pea: the assurance of voluntary compliance between the Texas Attorney General and Aetna's Texas HMOs and its impact on financial risk shifting by managed care, 83 B.U. L. Rev. 553-590 (2003).

Starting in 2005, the OIG has issued a series of rulings (e.g., advisory opinions Nos. 05-01 to 05) that, while continuing to find gainsharing arrangements a technical violation of the anti-kickback statute, declined to impose any penalties because there were sufficient safeguards in place guard against patient harm and the incentives were limited to specifically described cost-savings measures, such as not opening more surgcical supplies than are needed for the operation, and using less expensive versions of particularly expensive surgical supplies.   Lawyers still complain that these rulings are not sufficiently protective to allow hospitals to safely adopt incentive programs that would improve quality and lower costs. Critics note in particular that the prohibition of gainsharing is in direct tension with widespread calls to adopt the “pay for performance” measures discussed in the notes to section E.1. See Catherine Martin, Incentive Payment and Shared Savings Programs: The New Gainsharing, 17 BNA Health L. Rep. 1011 (2008).

Nevertheless, the new reform law makes no changes in gainsharing rules.  Instead, it calls for initiatives to test and disseminate new organizational and payment structures under Medicare, which will allow gainsharing types of intenctives to be included, but only for participating andqualified arrangements, such as "accountable care organizations."  For instance, the reform law (sec. 3022) creates a "shared savings" program that shares with ACOs a portion of the reduced Medicare payments they are able to achieve, while maintaining quality of care. 

This graph illustrates the problem of risk selection created by the highly skewed distribution of health care costs across the population. It shows, for instance, that 70% of people account for only 10% of health care expenditures, and that the top 10% of people account for 69% of expenditures. (The graph is taken from John V. Jacobi, Consumer-Directed Health Care and the Chronically Ill, 38 U. Mich. J. L. Reform 531 (2005) and based on Marc L. Berk and Alan C. Monheit.  See Marc L. Berk and Alan C. Monheit, "The Concentration of Health Care Expenditures Revisited," Health Affairs, 20 (March/April 2001), 9, 12.) 

Return to home page.