Sustainable Growth Rate Legislation Refines Civil Monetary Penalties for Gainsharing

On April 16, 2015, President Obama signed into law the highly anticipated Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which, among other things, repealed Medicare’s controversial sustainable growth rate (SGR) formula and extended funding for the Children’s Health Insurance Program. Medicare Access and Chip Reauthorization Act of 2015, Pub. L. 114-10, 129 Stat. 87 (Apr. 16, 2015). Equally important but less advertised, one of the law’s antifraud provisions embraces the trend of promoting market-oriented hospital-physician relationships. The provision limits the scope of civil monetary penalties (CMPs) levied on hospitals for “gainsharing,” a practice where a hospital financially induces physicians to limit patient services and hospital costs. Specifically, section 512 of MACRA revises section 1128A(b)(1) of the Social Security Act (42 U.S.C. § 1320a-7a(b)(1)) and eliminates CMPs for hospitals that financially induce a physician to limit services that are not medically necessary. This provision codifies an idea that industry experts have long advocated: In the right environment, gainsharing can promote accountability, quality, and efficient cost control, while discouraging the fraud its prohibition was meant to prevent.