Medical directors play a key role in health care facilities. Their clinical knowledge ensures strong oversight and quality that is critical to accreditations, outcomes, and success in the market. Roles and responsibilities, as well as the minimum and maximum expected and paid time, should always be outlined contractually.
Despite the ubiquity of these arrangements, there are some common misconceptions about medical directorships. While it’s easy to assume that selecting the best physician for the job and having an agreement in place will keep your organization compliant, the devil is in the details.
MISCONCEPTION #1: As long as payment rates and hours are outlined in the contract, you don’t need a detailed job description.
The job description must explicitly define the duties and role of any medical director to meet compliance standards. Typical functions include developing clinical practice guidelines, overseeing program development, helping with accreditation surveys, budgeting, reporting to the hospital management, training/supervising APPs, nurses, as well as other clinical providers, and quality assurance. If you have a sense of the time commitment per month or per year for different elements of the job description, include those as well. Many systems develop a template for medical director agreements to simplify compliance, but each contract should be reviewed to ensure the description matches the requirements of the program.
MISCONCEPTION #2: It’s never OK to negotiate a rate over the 75th percentile for a Medical Directorship
Your organization should set a policy for the appropriate range of market-rate benchmarks for FMV compliance. The 25th to 75th percentiles are often considered an appropriate range. However, some situations warrant higher payment – exceptional credentials, unique program or market features, high time commitments due to program complexity or stage of development, etc. If you decide that a contract requires a rate above the 75th percentile for a medical directorship, be sure to document the reasons why it is necessary. For example, if the hourly rate is compliant and the job duties are expensive, a higher annual rate may be justified. We recommend having an “exceptions policy” in place that outlines the approval process and type of documentation needed for a rate outside of your organization’s definition of “Fair Market Value”.
MISCONCEPTION #3: As long as each medical directorship meets FMV criteria, it’s okay for a physician to have multiple medical directorships at the same time.
While there may be scenarios where this is true, negotiating multiple contracts with the same doctor is fraught with compliance risks. Although individual contracts may be compliant, if the cumulative payments or hours exceed a reasonable rate, you could have a problem. When taken together with other directorships, payments could be greater than the 90th percentile, or, in the context of the physician’s clinical practice, the total commitment may be more hours per year than full-time equivalency. This is called “stacking“ physician agreements and can occur when a physician has multiple directorships and a robust clinical practice. When a physician has multiple medical directorship agreements, the need for diligent time tracking and documentation becomes even more imperative.
MISCONCEPTION# 4: Once you have an executed contract with a rate that is FMV, you don’t need to worry about the directorship until renewal.
The fun doesn’t stop when the agreement is signed. If anything, once you have a signed contract, your organization must do even more work to ensure that payment is made only for duties and time that fall within the scope of the agreement. Diligent time tracking and reporting are critical. If a medical directorship is paid hourly, ensure that the hours worked are consistent with the signed contract. Accounts Payable should know the payment limits so that they do not pay for more hours than defined in the contract.
Lastly, don’t forget that a low or reasonable hourly rate could mask an unreasonable number of hours that drives up total annual payments. Contract terms should include hourly rates, maximum hours, and annual maximum payment limits.
MISCONCEPTION #5: Time tracking for employed medical directors or faculty physicians at AMC’s doing administrative or directorship duties isn’t necessary.
Compensating employed physicians for clinical care is different from compensating them for administrative duties. It should be standard practice to keep time logs even for employed physicians who serve as medical directors. If your facility is a teaching hospital, hours for teaching and residency are critical to both benchmark and track. If you are not tracking hours for these types of roles, you are not meeting acknowledged compliance standards; in the event of an auditor investigation, your organization may be at risk of non-compliance with Stark.
Hours and payment for administrative services should be defined within a PSA (Professional Services Agreement). Different specialties and services may be paid at different rates even when the same physician is involved (e.g., a surgeon may be paid one rate for clinical care and another for serving as a committee chair for peer review).
Do you have questions about medical directorships? Want us to help you myth-bust common misconceptions about these types of arrangements? Email us at info@mdranger.com today to see a demo of how the MD Ranger platform could help streamline the FMV documentation process at your organization.
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