Compensation Management

Requirements for physician incentive plans.

(a) The contract must specify that an HMO or CMP may

operate a physician incentive plan only if—

(1) No specific payment is made directly or indirectly

under the plan to a physician or physician group as an

inducement to reduce or limit medically necessary

services furnished to an individual enrollee; and

(2) The stop-loss protection, enrollee survey, and

disclosure requirements of this section are met.

(b) Applicability. The requirements in this section apply to

physician incentive plans between HMOs and CMP and

individual physicians or physician groups with which they

contract to provide medical services to enrollees. The

requirements in this section also apply to subcontracting

arrangements as specified in § 417.479(i) . These

requirements apply only to physician incentive plans that

base compensation (in whole or in part) on the use or cost

of services furnished to Medicare beneficiaries or Medicaid

beneficiaries.

(c) Definitions. For purposes of this section:

Bonus means a payment an HMO or CMP makes to a

physician or physician group beyond any salary, fee-for-

service payments, capitation, or returned withhold.

Capitation means a set dollar payment per patient per unit of

time (usually per month) that an organization pays a

physician or physician group to cover a specified set of

services and administrative costs without regard to the

actual number of services provided. The services covered

may include the physician's own services, referral services,

or all medical services.

Payments means any amounts the HMO or CMP pays

physicians or physician groups for services they furnish

directly, plus amounts paid for administration and amounts

paid (in whole or in part) based on use and costs of referral

services (such as withhold amounts, bonuses based on

referral levels, and any other compensation to the physician

or physician group to influence the use of referral services).

Bonuses...