Charity Elmer, Senior Vice President and General Counsel, Legal Department, Cox Health
Anna Grizzle, Partner, Bass, Berry, Sims PLC
Tizgel K.S. High, Vice President, Associate General Counsel, Legal, LifePoint Health
In looking at numerous recent settlements, we can see that physician compensation is a hot topic for hospitals. Recent settlements and cases show themes of:
- Non-FMV payment rates
- Contracts not being commercially reasonable
- Direction from senior management to gain referrals
- A, often secretive, system for tracking referrals after the agreement was signed
To avoid these pitfalls, develop a process for creating and negotiating contracts:
Contract management
In an electronic or paper system, track every arrangement and where payments are being made. Establish a centralized process for consistent review and approval of all contracts. Once contracts are signed, quickly enter them into the contract management system.
Template contracts
By developing contract templates for contract types which are frequently entered into, you save time by not recreating the wheel. Additionally, you can be sure that legal approves of the contract templates at the outset which streamlines the process of getting the contracts in place.
FMV
Of course, you should confirm the proposed payment rate in the contract in FMV. Be sure you aren’t shopping around for opinions because this could come back to haunt you if you are investigated.
Business justification
When entering into a physician arrangement, it is a good idea to carefully document the business case for the position. If referrals have anything to do with the business case, rethink the arrangement immediately. By documenting the justification behind the arrangement, you at least partially address the issue of commercial reasonableness.
Compensation structure
If your organization can agree on a handful of standard and simple compensation structures, it reduces the confusion internally and with physicians.
Consistent process
Allow the process to fit most situations with variance only when clearly and absolutely necessary and even then, keep it to a minimum.
Auditable
If the process is consistent and simple, the arrangements should be auditable by any auditor in the organization. Contracting should not be so complicated that only one or two people fully understand it.
Arrangement tracking
It is a good idea to periodically reevaluate FMV and commercial reasonableness across all contracts. FMV can change slightly over time, if you find that a contract to be a red flag, flag it for review.
Update arrangements
If a change in the relationship with a physician occurs, be sure to amend the contract or negotiate a new contract. For example, starting a service line is going to require many more hours of work than once the service line is up and running. Make sure the agreement reflects this.
Enforce tracking
Make sure that you are teaming up with accounts payable to pay only for appropriate services and within the payment structure outlined in the contract.
Is your organization at the front of the pack or are you missing some of these steps?
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