Organizations that lack policies about when to pay for ED coverage run the risk of making decisions that aren’t always strategic. With the median MD Ranger hospital paying $3.5 million a year for ED call coverage, poor decisions can be costly.
Understanding the “facility profile” is key before developing a call pay strategy. Small hospitals with low ED volumes should have fewer positions that they compensate for call. On the flipside, busy urban trauma centers have high ED volumes where you would anticipate more specialities being compensated to provide coverage.
Though frequency of call is dependent on the services the hospital offers, its market, and other unique factors, there are a handful of specialties that we can assume will be called for coverage again and again. It is important to consider these specialities and determine if it is commercially reasonable to compensate physicians for coverage.
There are also physician specialities that don’t especially have a high volume of calls but are nonetheless typically compensated frequently (and handsomely). These specialties are often higher-paid; ED call stipends usually have to do with the opportunity cost to the physician.
Welcome back to our Compliance 101 series, where we simplify complicated compliance topics to help you review or better understand our corner of the healthcare world. This week we’ll be talking about fair market value, or FMV.
A hospital’s contracts with physicians must be compliant with federal regulations. Paying a physician within fair market value range for their services is a key component of what it means for an arrangement to be compliant. It is illegal to pay a physician too much for a service without a justifiable and documented cause. This ideology ties in with the Medical Practice Act, which we discussed last week; it’s all about restricting the potential for the commercialization and corruption of the practice of medicine.
Back to FMV range. Market data like MD Ranger benchmarks survey hospitals and physicians for information on how much physicians are paid for services. With a large enough sample size, compensation surveys can show the low, middle, and high ranges for how much physicians are paid for the different jobs they do. Hospital administrators use market data to decide how much they should be paying physicians. They also use the data as documentation to show that at the time of negotiation, the contract was considered within fair market value.
For example, a compliance officer might be renegotiating a contract for a physician to be on-call at the Emergency Department for General Surgery. The compliance officer’s hospital has procedures in place that designate that every call coverage contract be paid at the median market rate. The MD Ranger benchmarks report that at the 50th percentile, General Surgery call coverage is compensated $1,000 per diem. The compliance officer now knows how much to offer that physician, and how much room she has to negotiate. If the government ever performed an audit on that hospital and had questions about that contract, the compliance officer could show them those benchmarks (if she had documented FMV properly and kept the record) and prove that $1,000 per diem was at the 50th percentile at the time of negotiation.
Most healthcare organizations who use market data define FMV as falling somewhere between the 50th and 75th percentiles. They negotiate the majority of agreements in that range. There are sometimes outliers, but as long as the hospital can explain and document the particular reasons that they had to pay outside of normal FMV range, they should be in the clear. However, many healthcare organizations get in trouble with the OIG every year. These organizations may not have policies and procedures in place for defining, determining, and documenting the fair market value of agreements. Lacking a coherent compliance policy could cost millions of dollars in settlements, depending on the case and the different regulations violated.
Here are key take-aways to help ensure your contracts are being paid fairly:
- Define FMV: Consistently define fair market value across physician agreements at your organization.
- Determine FMV: Determine commercial reasonableness (is paying for the service necessary?), review the contract’s scope of services, and use market data to find the appropriate rate.
- Document FMV: Have a consistent process in place for documenting that every contract is fair and keep records.
Watch this helpful webinar on defining, determining and documenting FMV.
Welcome to MD Ranger’s Compliance 101 blog series, where we break down the basics of physician compensation compliance. This week, let’s discuss the legislature related to the corporate practice of medicine.
The Medical Practice Act, or the corporate practice of medicine doctrine, states that corporations cannot employ physicians to practice medicine. We know what you’re thinking: “Wait, what about hospitals?” Well, there are exceptions, aren’t there?
Why the Medical Practice Act?
The doctrine exists to restrict the commercialization of medicine as a practice. There are concerns about the differing obligations of a corporation and a physician. A corporation acts in the interest of its shareholders; a physician prioritizes his or her patients. Involving corporate interests in that physician’s practice could jeopardize the physician-patient relationship. A corporation might be tempted to involve itself in physicians’ medical decisions, which could endanger patients and the medical practice as a whole.
Every state has its own laws and exceptions regarding the corporate practice of medicine. Most states prohibit corporate employment of physicians, but with important exceptions. These exceptions include employment by professional corporations (like medical groups) and certain types of healthcare organizations (like hospitals). In fact, every state allows professional corporations to employ physicians, but with certain restrictions. They often delineate how medical groups must be structured and demand that a majority of members (if not all) be physicians. This limits the number of stakeholders with external, corporate interests.
Many states have exceptions allowing hospitals to employ physicians, although how explicit these exceptions are depends on the state. Written into many of these exceptions are clauses prohibiting hospitals from interfering with a physician’s professional judgment when it comes to the practice of medicine.
You might ask, how are hospitals less likely to involve commercial interests than any other corporate entity? The reasoning behind this exception lies in the laws preserving physicians’ independence as medical professionals. As long as the hospital does not interfere with a physician’s decision-making, the practice of medicine should remain safe from potentially harmful corporate interests.
Federal regulations like Stark Law and the Anti-Kickback Statute come to mind here; both of these laws exist to further manage the potential for illegal activity (such as rewarding referrals) that can come of these corporate relationships.
At MD Ranger, we survey physician compensation arrangements for non-employed physicians, or physicians who are not directly employed, but bill and collect for services they provide to a hospital or health system under a contract.
Welcome to MD Ranger’s Compliance 101 series, where we break down the must-know concepts regarding physician compensation compliance. Last week we discussed Stark Law. This week, let’s tackle Stark Law’s scary older brother: the Anti-Kickback Statute, or AKS.
The Anti-Kickback Statute states that it is illegal to exchange or offer to exchange anything of value in an effort to entice or reward the referral of federal health care services or business. An obvious example is one where a hospital blatantly offers to pay physicians for referring their private practice patients to the hospital. However, even if those physicians refused the offer, the offer itself is illegal. This can happen the other way around, too. If a physician mentioned that she would send more patients from her private practice to the hospital if the hospital gave her salary a boost, that physician is violating AKS.
There are exceptions (or “safe harbors”), of course. Examples include Electronic Health Record items and services, ambulatory surgical centers, and space rentals. You can see a full list of safe harbors here.
AKS is a criminal statute – meaning violators can go to jail. But before we get into that, let’s go over a few key differences between AKS and Stark:
- Stark Law is a civil statute, so jail time is not a risk.
- Because AKS is a criminal offense, the government must prove that violators intended to break the law (i.e. were aware that their activity was illegal) to find an organization or individual guilty. When it comes to Stark Law, intent does not matter, although it can affect the severity of the fines.
- AKS forbids soliciting referrals of all federal health services from any clinician, not just doctors. Stark Law restricts physician self-referrals only. Non-physician clinicians are not restricted under Stark.
Let’s get to it! What are the penalties?
- A charge of up to $100,000 plus a prison term of up to ten years per violation
- If found guilty for additional civil penalties (such as Stark violations), fines up to $50,000 per violation plus payment of three times the assessed cost to the government
- Providers involved can be excluded from federal health programs
Okay, so repeat after me: It is illegal to solicit or reward referrals for any sort of compensation. Just don’t do it! In fact, under the False Claims Act, someone within your organization can report AKS violations to the government and even share in the settlement. So the risk of getting caught can be quite high. But how can you make sure you’re always within the lines?
Staying out of trouble is where your organization’s physician contracting procedures become very important. The stricter an organization is about defining, determining, and documenting fair market value for every arrangement, the better. If a healthcare organization is diligent about keeping a detailed contract describing every service a physician provides (even unpaid ones), tracking time sheets, ensuring accounts payable is paying physicians the amount defined in their contract, and performing regular internal audits, that organization is in a great place and is unlikely to run into many compliance roadblocks. If not? Honestly, it’s normal. To create such a streamlined physician contracting process takes a lot of work. But when you consider the costs of violating AKS, it’s worth it.