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The criteria included in the proposed exception are focused on three aspects that CMS considers "critical to a properly structured, nonabusive incentive or shared savings program: transparency, quality controls (for example, controls to prevent reductions in resource utilization that lead to a diminution in quality), and safeguards against payments for referrals (or influencing referrals)."

Some of the proposed criteria include the following:

1. To be protected, the incentive payment or shared savings program must be a documented program that seeks to achieve the improvement of quality of hospital patient care services through changes in physician clinical or administrative practices or actual cost savings for the hospital resulting from the reduction of waste or changes in physician clinical or administrative practices, without an adverse affect on or diminution in the quality of hospital patient care services.

2. Cost savings measures included in the program would have to use an objective methodology, be verifiable, be supported by credible medical evidence indicating that the measures would not adversely affect patient care, be individually tracked, and reasonably relate to the services provided.

3. The amount of the remuneration paid to the physician or qualified physician organization would be limited in duration and amount. The duration for protected programs would be nor shorter than one year and no longer than three years. There are two types of proposed amount limits: a flat 50 percent limit on the sharing of cost savings (regardless of the length of the program; and a limit that takes into consideration payments that have already been made for performance measures already achieved, or re-basing.

4. The written agreement between the hospital and participating physicians would have to document the performance measures against which performance will be measured. In addition, each performance measure (including, for example, specific cost savings measures) and the payments resulting from the achievement of established targets would have to be delineated separately and clearly.

5. Physicians would only be eligible for payments related to their own efforts, combined with the efforts of the other physicians in their pool, at meeting cost savings measures or achieving patient care quality measures; that is, a physician would be eligible to receive only a per capita share of that portion of an available incentive payment or shared savings payment attributable to the efforts of the pool. Further all measures would have to be uniformly applied to all patients, including Medicare beneficiaries (that is, the measures should not be applied disproportionately to Medicare beneficiaries).

Remuneration only in the form of cash or cash equivalent made by a hospital to a physician as part of a quality improvement gain-sharing program would be protected. "Nonmonetary remuneration, such as additional staff members, equipment, offer to reward achievement of quality or cost savings measures would not be protected," writes CMS.

The proposed rule is available in the Federal Register here (large PDF will download; proposal begins on page 38548).