Evaluating Stacked Agreements: Case Studies

Spotting physician overpayments is usually straightforward. Whether it’s compensating above fair market value, or paying for too much or for too many hours in an administrative position, compliance risks are clear and can be easy to identify. However, in some cases, overpayments can be hidden—particularly when there is “stacking” of physician agreements that results in total payments to an individual or group exceeding reasonable levels.

One of the best ways to understand how federal regulators view these risks is found in OIG Advisory Opinion 07-10 from 2007. The OIG calls “problematic compensation structures”: (a) “payment for lost opportunity cost that do not reflect bona fide lost income,” (b) “payment… when no identifiable services are provided,” (c) “aggregate on-call payments that are disproportionately high compared to the physician’s regular medical practice income,” (d) “payment…resulting in the physician essentially being paid twice for the same service.”

Many of the situations noted by the OIG above can be referred to as “stacking.” There are two typical ways that stacking occurs. The first is when a physician or physician group has two or more agreements with a hospital for coverage or administrative/medical direction services. When this happens, it is possible that the physician can coordinate his or her time to fulfill both responsibilities within a time frame generally understood as required to fulfill each agreement separately. Each agreement may be compliant when considered independently; however, however when taken together, payment may be greater than the 90th percentile or the time commitment, particularly in the context of the physician’s clinical practice, requires more hours per year than full-time. The second situation that may result in stacking occurs when an on-call payment rate is based on an estimated “opportunity cost” of lost private practice income, but the physician does not actually suffer losses.

CASE STUDY ONE: HOSPITALIST, ADMINISTRATOR, CONSULTANT

Dr. Sally Wong is a hospitalist at a 300-bed community hospital, covering shifts and serving as medical director of the hospitalist panel. Additionally, Dr. Wong serves as the Vice Chief of Staff and has a consulting arrangement with the hospital to assist with EHR transition. She is a huge asset to the organization and the rate for each position falls with the fair market value for that position.

Despite Dr. Wong’s talents, these responsibilities could be too much for anyone to handle, no matter how competent. If you take all of Dr. Wong’s payments and consider them together, she’s being paid more than the 90th percentile of the annual income for a full-time hospitalist. It also raises the question that if a hospital pays a physician to be a full-time hospitalist, and also pays that individual for three additional jobs, can the physician be effective? Furthermore, there is the issue of accurate time-tracking and reporting. There is a possibility that Dr. Wong could—in an admirable effort to be efficient and get the heavy workload done—perform additional administrative duties while she is on-duty and paid as a hospitalist. The takeaway here is that Dr. Wong’s total compensation must fall within FMV for the positions she fulfills, and justification for excess payment must be documented to demonstrate non-duplicative payments and duties.

CASE STUDY TWO: ENT AND FACIAL INJURIES

Dr. George Perez is one of the few ENT physicians on the medical staff who is trained and willing to handle major facial injuries. He staffs two separate panels at the same Level II trauma center: ENT and facial injuries. Both panels are paid at the 75th percentile of their respective fair market value ranges, and he is allowed to take simultaneous call for both specialties. While this might make sense to Dr. Perez, it contradicts the principals in the OIG advisory opinions and OIG guidelines if he is being paid for taking call twice.

How might the hospital compensate Dr. Perez fairly without overpaying? Some organizations pay physicians in a similar situation at the high end of the market range for the best paid position. Other organizations will choose to pay at the median for one position and at or under the 25th percentile for the second service. No matter what is chosen, be aware of paying for two jobs at the same time. Carefully justify and document whatever payment is made. Common service combinations where stacking most frequently occurs are the following:

  • Orthopedic surgery and hand surgery
  • Plastic surgery and hand surgery
  • Non-invasive and invasive cardiology
  • Stroke and non-stroke neurology
  • Trauma and general surgery

CASE STUDY THREE: NEUROSURGERY

Neurosurgery in trauma centers is particularly vulnerable to hidden compliance risks. Neurosurgery is one of the few specialties where there frequently is both a requirement for restricted coverage and most non-emergency private practice revenue comes from a relatively small number of surgical cases that are relatively easy to reschedule.

The standard for Levels I and II trauma centers is that neurosurgeons must be immediately available and cannot conduct private practice when on-call (“restricted call”). Thus, compensation benchmarks for trauma center neurosurgery assume physicians suffer lost private practice income given the restriction of the physician’s activities while on call. This assumption is based on the understanding that the neurosurgeon’s practice is busy and nearly all the physician’s time could be utilized for the private practice.

However, if a physician’s practice has slack capacity and the private practice cases can be juggled (or traded with a partner), the physician may not suffer any opportunity cost. It could be the case that aggregate compensation from trauma center call coverage and private practice would be significantly beyond the 90th percentile of benchmark annual neurosurgery compensation.

CASE STUDY FOUR: EMPLOYMENT “PLUS”

Dr. Grace Williams is a cardiologist that works with a medical group that has a professional services agreement with the local hospital. In addition to the PSA, Dr. Williams and her colleagues have negotiated both a co-management agreement and additional medical directorship payments, including ad hoc payments for meeting attendance and peer review participation. Though her per diem call coverage payment is quite small and falls in the 25th percentile range, she and her colleagues are paid call stipends.

Before even seeing payment rates, there is a cause for concern with these arrangements. Additional payments for services on top of employment arrangements could result in payments to doctors well above fair market value.

BEST PRACTICES

How should hospitals identify and prevent stacked physician arrangements? Here are some ideas:

  1. Develop a policy and review process regarding physicians who hold more than one position or perform more than one service with the hospital or affiliated organizations. If physicians are holding two call positions at the same time, set guidelines around how much they can be paid. If they are effectively an employed physician, set an aggregate payment cap from all sources.
  2. Ask physicians for time documentation that delineates activities for each role. Time tracking should be standard for all physician administrative positions.
  3. Be careful with restricted call payments. One best practice is to ask the physician to sign a statement to certify that his or her private practice cannot be rearranged to avoid lost income. Another way is to monitor physicians’ OR utilization to compare elective volume with and without on-call coverage.
  4. Don’t pay a physician to take call for two services at the same time.

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