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Avoid Cost Landmines: Assessing Trends in Payments for Hospital-Based Physician Services

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Avoid Cost Landmines: Assessing Trends in Payments for Hospital-Based Physician Services

Hospital-based services physician

Published: 09/20/2018 | Author: Luis Argueso

A glance at new data reveals interesting trends regarding payments for hospital-based professional service lines.  MD Ranger, Inc. publishes benchmark data related to total annual payments made by facilities to independent contractor physician groups who cover hospital-based service lines (e.g., anesthesiology, critical care medicine, emergency medicine, hospitalist medicine, and radiology).  In recent months, hospital-based service arrangements (also referred to as “collections guarantees” or “subsidies”) have been cited as a negative factor hindering the financial performance of publicly-traded health systems.  What does the data have to say?  MD Ranger’s 2017-2018 Benchmarks report sheds new light into trends HAI has observed regarding these arrangement types.

In recent years, various states, such as Texas, have taken steps to clarify the requirements needed for hospitals to obtain neonatal intensive care unit (NICU) designations.  This clarity has led to an increase in the number of hospitals entering into service arrangements with neonatologists to medically direct and staff their NICUs.  According to MD Ranger, the median annual subsidy for this specialty increased from $117,590 using 2016 data (31 respondents) to $128,000 using 2017 data (62 respondents).  Additionally, over the same time period the 90th percentile annual subsidy increased from $506,250 to $806,690. 

Trauma surgeons are another group of physicians who are sought after given the important role a trauma unit fulfills for the community and a hospital’s bottom-line.  HAI has observed an increase in the number of trauma surgeon service arrangements and the amount of financial support contained in these agreements.  The demand for trauma services has increased steadily in certain marketplaces, further increasing the cost of these contracts.  For example, over the decade from 2009 to 2018 in the state of Texas, the number of designated trauma centers increased from 249 to 280.  These observations are supported by the data reported by MD Ranger.  The median annual subsidy for this specialty increased from $855,340 using 2016 data (25 respondents) to $956,080 using 2017 data (31 respondents).  Additionally, over the same time period the 90th percentile annual subsidy increased from $2,089,870 to $2,579,240. 

In addition to increasing levels of financial support, HAI has observed an increase in the prevalence of specialty hospitalist programs.  These programs focus on compensating specialty physicians (e.g., general surgeons, orthopedic surgeons, neurologists, obstetricians, psychiatrists) in exchange for coverage of the hospital’s service line needs.  Unlike traditional on-call arrangements, these specialty programs require regular on-site coverage of the hospital due to the volume of unassigned and emergency patients.  The cost of these programs can be substantial, although they can represent the sole means of obtaining physician coverage.  As an example, MD Ranger reported an increase in the number of laborist arrangements from 22 to 36 using data from 2016 and 2017, respectively.  Additionally, in its latest report, MD Ranger added the specialty of orthopedic hospitalist medicine.  The data points further illustrate the expanding costs represented by specialty hospitalist programs.

FMV Pitfall:
Hospital-based physician service arrangements, which implicate the Stark Law and Anti-Kickback Statute, represent a growing cost center for hospitals.  In addition to the need to ensure compliance by entering into arrangements that are commercially reasonable and offer fair market value compensation, hospitals must be diligent in staying on top of the latest developments in the marketplace to avoid unexpected losses.
 

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