While it is straightforward to identify whether your facility is a trauma center or how many beds it has, there are other factors that influence physician rates that will need to be considered on a contract-by-contract basis. These factors may have to do with the particular situation, like the credentials of a physician or the size of a service, or even the local market where your facility is located.
Burden of Call
In smaller facilities and for less emergent services, the burden of call coverage may be lower. In these situations, you may be able to negotiate a lower per diem rate or even consider paying per episode. Conversely, in larger hospitals with high volume emergency departments, it may be necessary to pay physicians a higher rate for the larger burden of call coverage.
Exclusivity
Granting exclusive rights to a physician group to provide a hospital-based service does have economic value, a factor cited by the US Office of Inspector General in several Stark settlements. In general, there are three possible approaches to determining what value exclusivity has in hospital-based agreements:
- Perform a cost valuation of the contract and include exclusivity as a consideration in determining the rate(s).
- Negotiate terms with the group that are in the lower range of fair market value. This helps account for the exclusivity of the terms.
- Discount payments between 5-15% to reflect exclusivity.
Physician Supply
The market for physicians is just like any other market: when the supply is low, you may have to pay more to acquire services. Though overall economic conditions are beyond control, it is important to understand the market as you negotiate a contract. Low supply can mean a higher call burden, but it also means a physician or group is able to demand a higher price. In these situations, you may need to go to bid to other groups in the region to document that the payment rate is reasonable. Further, consider overall market conditions on a case-by-case basis; if there is a short supply of gastroenterologists, that doesn't necessarily mean that there is also a shortage of trauma surgeons.
Physician Characteristics
Not all physicians are the same: some physicians have strong community or national recognition that bring value to a program. Exceptional credentials or a unique program may justify higher pay rates. Documentation of those characteristics will be important to document compliance of the appropriate payment rate.
Documentation of Unique Circumstances
If negotiations result in rates that exceed market benchmarks, the need for documentation increases. Issuing a credible Request for Proposals to outside groups for the contracted service may be needed to demonstrate that the hospital went through a competitive process to get the best rate. The RFP should be sent to several groups if possible and all responses should be reviewed. If your local group is the only respondent, then that may be the best price available, but it is important to extensively document the process for your files for future audits and compliance reviews. Seeking a third party to conduct the process, or prepare an independent FMV analysis of the situation may be your only option for some difficult situations.
In conclusion, there are a lot of variables that go into negotiating a fair rate for a physician contract. After weighing the many factors involved in determining a rate, it is essential to document the decision and the rationale behind it, including all pertinent benchmarks and relevant information about the specific contract.
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