In the context of your physician services budget, what impact does call coverage make on your overall spending? Are there particular services that can be costly than others?
Many MD Ranger subscribers face these difficult questions. Given that emergency call coverage is becoming an increasingly large portion of hospital budgets, anticipating overall costs is key for planning ahead.
According to our database of over 9,000 contracts, the below services have the most expensive median per diems.
Physician contracting and documenting FMV doesn’t have to be an expensive headache.
Make sure your physician contracts are all in one place, organized by expiration date.
When hospitals have dozens of physician contracts that renew throughout the year, keeping organized is critical for successful and timely renegotiations. If your hospital or facility doesn’t have a contract management system that allows easy retrieval, review, and analysis of physician contracts, consider getting one. This can help to automate the renewal process quickly. Using your contract management system to analyze your data will help you understand the scope of physician services you’re currently paying for, as well as identify potential gaps or duplicative services. MD Ranger provides comprehensive and summary reports and hospital-specific benchmarks to allow you to see contracts and costs across the entire organization.
Click on the image below to take a closer look at MD Ranger’s physician contract management system.
Are you preparing for what may be a difficult negotiation with a medical group or physician for either a new service or a renewal of an existing agreement? Here are some quick tips to help things move along smoothly:
1. Establish a negotiating objective. Know the market range that is applicable to the service of interest. Consider the entire market range, in particular the range between the 25th and 75th percentile. Remember: “Not everyone can get paid at the 75th percentile.” Enter the negotiation with a quantitative negotiating objective in mind. The objective should be consistent with fair market value, as well as your hospital’s overall financial resources. Data are now available to allow a hospital to see how the cost of each contract fits into its overall physician costs, which are a part of MD Ranger’s Total Hospital Spending Benchmark Reports.
2. Take care to avoid relying on market data alone when the situation is complex. The metrics of the service (such as intensity of workload, payer mix and professional revenue, etc.) may distinguish the contract in question from the contracts reflected in the market data. If that’s the case, unbeknownst to you, could result in an “apples and oranges” comparison. This could cause compliance risks—particularly if your contract has significantly less intense workload than the contracts in the market benchmarks or if your contract results in significantly more professional revenue than are in the contracts in the market benchmarks. Not even the very best market data survey can cover all situations. Care and experience are required to avoid this risk and to know when to undertake a different approach with the help of a valuation consultant or an internal expert.
3. Demonstrate and document that alternatives have been considered. Even if you would much prefer to wrap up the negotiation quickly, advise your counterparty that you need to at least consider alternatives. In only a fraction of agreements is there a RFP or other competitive process. Remember that the definition of fair market value includes the provision that “the price …between a willing buyer and a willing seller, neither being under a compulsion to buy or sell…” A good fair market value evaluation will simulate what would result from an actual competitive process.
4. Consider what scope of service you want to contract for, not just how much to pay. Often, hospitals assume that the scope of service is either the same scope as in the expiring agreement or that it is the scope that the physician or group tells you should be provided. In the case of a medical director position, for example, this could mean that the number of hours of service is not carefully assessed and the focus of the negotiations is on the hourly rate. However, there are now market data available on the number of hour per year for most medical director positions. This can provide you with objective basis to make sure the number of hours is unusually high—without a particular situation-specific exceptions.
5. Document your process for assuring compliance. Documenting compliance is essential for your compliance program, as our compliance materials (link to compliance page) at MD Ranger echo. However, documentation of paying a fair market value rate can also come handy during negotiations. By demonstrating to physicians that you take compliance very seriously and that these efforts are not only protecting your hospital but also protecting them, you will be well on your way to earning physicians’ respect (if you haven’t already).
6. If the agreement grants exclusivity to the group, consider and estimate the economic value such a provision. It is well established that exclusivity—effectively a limited monopoly—has economic value. Not only is it a core principle of economics, federal regulators cite it specifically hospital physician contracting. There are two methods to estimate the value of exclusivity. One is to compare compensation between exclusive and non-exclusive agreements. Data now exist to measure this, available through MD Ranger. The second is to have a valuation expert measure cost reductions and economies of scale in a cost model of the practice of interest.
 Estate Tax Reg. 20.2031.1-1(b); Revenue Ruling 59-60, 1959-1, C.B. 237
Pathology agreements with hospitals are for professional staffing and physician oversight of both anatomic pathology and clinical laboratory services. The clinical laboratory service may include “outreach” laboratory services as well. Note that outreach services often compete with commercial laboratory firms, providing services to physicians’ offices, industry, long-term care facilities or other entities thus encompassing a broader scope of service than a hospital-only service.
MD Ranger collects information on volume-related benchmarks that include total annual net payments excluding medical direction in ratio to the total number of anatomic pathology cases. We note that a large proportion of MD Ranger pathology contracts pay for medical direction services only. Payment of stipends, and the amount of stipends, appears to increase with a higher percentage of government payers.
Key Factors to Consider in Contract Analysis
- Is the number of surgical cases below 2,500 per year?
- Is there an outreach laboratory, and if so, do the tests from that service represent more than 30% of total tests?