More Losses than Gains? OIG Declines to Approve Certain Medicare Advantage Gainsharing Arrangements in Advisory Opinion 24-08

Firm Publication

On September 13, the U.S. Department of Health and Human Services Office of Inspector General (OIG) published Advisory Opinion 24-08, in which it declined to approve a proposal by a Medicare Advantage organization (MAO) offering Employer Group Waiver Plans (EGWPs) to share savings with its contracted group health plans (Groups). This unfavorable advisory opinion is noteworthy because it sheds light on how OIG analyzes certain risk-sharing arrangements in the managed care space. Although OIG concluded that the proposed arrangement did not present sufficiently low fraud and abuse risk under the federal Anti-Kickback Statute (AKS), OIG emphasized that stakeholders may be able to structure other shared savings arrangements in a lawful manner.

The Proposed Arrangement

The requestor (Requestor) contracts with the Centers for Medicare & Medicaid Services (CMS) as an MAO to offer health insurance coverage, including Medicare Advantage (MA) and MA-Prescription Drug EGWPs to Groups, such as employers, trusts, and union groups. Under the proposed arrangement, Requestor would contract with Groups to provide basic benefits under Medicare Parts A and B, prescription drug coverage under Part D, and any negotiated supplemental benefits, and would negotiate any corresponding additional premium amounts.

Requestor’s contracts with Groups would give the Groups an opportunity to earn a negotiated percentage of Requestor’s savings as a gainshare payment. Groups would receive gainshare payments if they achieved a negotiated medical loss ratio (MLR), which would be calculated by dividing certain of Requestor’s expenses by certain of its revenues. Importantly, Requestor could modify or terminate the gainsharing arrangements under certain conditions, including instances in which the number of Group enrollees fell below a negotiated threshold. Groups would have full discretion in deciding how to use any gainshare payment received.

Although Requestor’s EGWPs are subject to requirements that are similar to those applicable to other MA plans, OIG highlighted important areas where the two plan types differ.

  1. MAOs offering EGWPs do not submit bids to CMS reflecting the anticipated cost of providing basic benefits to Medicare enrollees. Instead, an EGWP’s capitated payment amount is based on the average bids and benchmarks across all plans in the individual MA market at the county level.
  2. Whereas MA plans in the individual market are subject to uniform premium requirements for members in the same plan, EGWPs may negotiate with Groups on both the scope of benefits and any additional premium amounts owed by a Group or its enrollees under an EGWP.
  3. Because EGWPs receive a single capitated payment per enrollee without base payments and rebate funds broken out, CMS does not mandate how EGWPs rebate payments, if any, must be used. In contrast, MAOs offering plans in the individual market must use rebates for specified purposes (e.g., as payment for supplemental benefits, a reduction in enrollee Medicare Part B premiums, or a reduction in enrollee premiums attributable to prescription drug coverage).

OIG’s Analysis

OIG explained that the proposed arrangement implicates the AKS because Requestor would offer remuneration to a Group in the form of gainshare payments that could induce the Group to refer its enrollees to Requestor so that Requestor, via its EGWP, could, in turn, arrange for the furnishing of items or services that are reimbursable by a federal healthcare program.  OIG further concluded that the proposed arrangement would not qualify for safe harbor protection. While OIG did not analyze why no safe harbor would apply, presumably the proposed arrangement did not satisfy the requirements of the eligible managed care organization, outcomes-based payment arrangements, or value-based enterprise safe harbors. OIG also clarified that CMS’s beneficiary rebate regulations neither expressly permit gainshare payments nor insulate them from liability under the AKS.

OIG went on to conclude that the proposed arrangement would not present sufficiently low fraud and abuse risk under the AKS to garner a favorable opinion for the following reasons:

  1. The proposed arrangement presents a risk of patient steering, which could impact competition. OIG was concerned that the proposed gainshare payments would create an incentive for Groups to select Requestor’s EGWP over competing plans that do not offer such payments. The incentive was potentially problematic in this case because Groups could use the gainshare payments for purposes other than to benefit their enrollees. Further, Requestor’s ability to modify or terminate a contract involving gainshare payments in cases where the number of enrollees in a Group falls below a threshold was viewed by OIG as enhancing the overall risk a Group would steer its enrollees to Requestor’s EGWP.
  2. The proposed arrangement’s steering concern is not offset by any guaranteed benefits to enrollees. OIG expressed concern that it would be against a Group’s financial interests to negotiate for enhanced benefits for EGWP enrollees because the Groups would be more likely to receive gainshare payments if its enrollees generated lower costs. OIG further noted that the proposed arrangement could result in financial gain for Groups while resulting in fewer benefits for their enrollees because (1) the amount of gainshare payments received by a Group could exceed any additional premium amounts paid by the Group, and (2) gainshare payments could be paid to a Group that does not pay additional premiums to Requestor.

Takeaways

Advisory Opinion 24-08’s impact may, at first glance, appear somewhat limited because it relates to an MAO’s EGWP, which—unlike other MA plans—is unable to isolate its rebate amounts and can negotiate premiums.  However, this opinion highlights that not all managed care risk-sharing arrangements are created equal. Stakeholders should carefully consider the types of plans involved when offering or expanding existing value-based arrangements, particularly when looking to the AKS’s eligible managed care safe harbor for protection.

This opinion also offers insight into how OIG would assess similar arrangements between plans and risk-bearing entities. For example, OIG reaffirmed its concerns with gainsharing methodologies that could create an incentive to stint on care or to reduce benefits provided to members. When structuring a gainsharing arrangement, stakeholders should be cautious when using member minimums or other elements that may incentivize patient steering, especially if the recipient of a potential gainshare payment is in a position to influence member attribution.

Lastly, the opinion indicates stakeholders should consider including additional safeguards in proposed gainsharing arrangements, including reasonable caps on shared savings and calculations driven by quality-based metrics (as opposed to cost reductions alone).

If you have any questions about this advisory opinion, please contact the authors.

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Firm Publication

On September 13, the U.S. Department of Health and Human Services Office of Inspector General (OIG) published Advisory Opinion 24-08, in which it declined to approve a proposal by a Medicare Advantage organization (MAO) offering Employer Group Waiver Plans (EGWPs) to share savings with its contracted group health plans (Groups). This unfavorable advisory opinion is noteworthy because it sheds light on how OIG analyzes certain risk-sharing arrangements in the managed care space. Although OIG concluded that the proposed arrangement did not present sufficiently low fraud and abuse risk under the federal Anti-Kickback Statute (AKS), OIG emphasized that stakeholders may be able to structure other shared savings arrangements in a lawful manner.

The Proposed Arrangement

The requestor (Requestor) contracts with the Centers for Medicare & Medicaid Services (CMS) as an MAO to offer health insurance coverage, including Medicare Advantage (MA) and MA-Prescription Drug EGWPs to Groups, such as employers, trusts, and union groups. Under the proposed arrangement, Requestor would contract with Groups to provide basic benefits under Medicare Parts A and B, prescription drug coverage under Part D, and any negotiated supplemental benefits, and would negotiate any corresponding additional premium amounts.

Requestor’s contracts with Groups would give the Groups an opportunity to earn a negotiated percentage of Requestor’s savings as a gainshare payment. Groups would receive gainshare payments if they achieved a negotiated medical loss ratio (MLR), which would be calculated by dividing certain of Requestor’s expenses by certain of its revenues. Importantly, Requestor could modify or terminate the gainsharing arrangements under certain conditions, including instances in which the number of Group enrollees fell below a negotiated threshold. Groups would have full discretion in deciding how to use any gainshare payment received.

Although Requestor’s EGWPs are subject to requirements that are similar to those applicable to other MA plans, OIG highlighted important areas where the two plan types differ.

  1. MAOs offering EGWPs do not submit bids to CMS reflecting the anticipated cost of providing basic benefits to Medicare enrollees. Instead, an EGWP’s capitated payment amount is based on the average bids and benchmarks across all plans in the individual MA market at the county level.
  2. Whereas MA plans in the individual market are subject to uniform premium requirements for members in the same plan, EGWPs may negotiate with Groups on both the scope of benefits and any additional premium amounts owed by a Group or its enrollees under an EGWP.
  3. Because EGWPs receive a single capitated payment per enrollee without base payments and rebate funds broken out, CMS does not mandate how EGWPs rebate payments, if any, must be used. In contrast, MAOs offering plans in the individual market must use rebates for specified purposes (e.g., as payment for supplemental benefits, a reduction in enrollee Medicare Part B premiums, or a reduction in enrollee premiums attributable to prescription drug coverage).

OIG’s Analysis

OIG explained that the proposed arrangement implicates the AKS because Requestor would offer remuneration to a Group in the form of gainshare payments that could induce the Group to refer its enrollees to Requestor so that Requestor, via its EGWP, could, in turn, arrange for the furnishing of items or services that are reimbursable by a federal healthcare program.  OIG further concluded that the proposed arrangement would not qualify for safe harbor protection. While OIG did not analyze why no safe harbor would apply, presumably the proposed arrangement did not satisfy the requirements of the eligible managed care organization, outcomes-based payment arrangements, or value-based enterprise safe harbors. OIG also clarified that CMS’s beneficiary rebate regulations neither expressly permit gainshare payments nor insulate them from liability under the AKS.

OIG went on to conclude that the proposed arrangement would not present sufficiently low fraud and abuse risk under the AKS to garner a favorable opinion for the following reasons:

  1. The proposed arrangement presents a risk of patient steering, which could impact competition. OIG was concerned that the proposed gainshare payments would create an incentive for Groups to select Requestor’s EGWP over competing plans that do not offer such payments. The incentive was potentially problematic in this case because Groups could use the gainshare payments for purposes other than to benefit their enrollees. Further, Requestor’s ability to modify or terminate a contract involving gainshare payments in cases where the number of enrollees in a Group falls below a threshold was viewed by OIG as enhancing the overall risk a Group would steer its enrollees to Requestor’s EGWP.
  2. The proposed arrangement’s steering concern is not offset by any guaranteed benefits to enrollees. OIG expressed concern that it would be against a Group’s financial interests to negotiate for enhanced benefits for EGWP enrollees because the Groups would be more likely to receive gainshare payments if its enrollees generated lower costs. OIG further noted that the proposed arrangement could result in financial gain for Groups while resulting in fewer benefits for their enrollees because (1) the amount of gainshare payments received by a Group could exceed any additional premium amounts paid by the Group, and (2) gainshare payments could be paid to a Group that does not pay additional premiums to Requestor.

Takeaways

Advisory Opinion 24-08’s impact may, at first glance, appear somewhat limited because it relates to an MAO’s EGWP, which—unlike other MA plans—is unable to isolate its rebate amounts and can negotiate premiums.  However, this opinion highlights that not all managed care risk-sharing arrangements are created equal. Stakeholders should carefully consider the types of plans involved when offering or expanding existing value-based arrangements, particularly when looking to the AKS’s eligible managed care safe harbor for protection.

This opinion also offers insight into how OIG would assess similar arrangements between plans and risk-bearing entities. For example, OIG reaffirmed its concerns with gainsharing methodologies that could create an incentive to stint on care or to reduce benefits provided to members. When structuring a gainsharing arrangement, stakeholders should be cautious when using member minimums or other elements that may incentivize patient steering, especially if the recipient of a potential gainshare payment is in a position to influence member attribution.

Lastly, the opinion indicates stakeholders should consider including additional safeguards in proposed gainsharing arrangements, including reasonable caps on shared savings and calculations driven by quality-based metrics (as opposed to cost reductions alone).

If you have any questions about this advisory opinion, please contact the authors.

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