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On-Call Compensation for Hospital-Employed Physicians

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On-Call Compensation for Hospital-Employed Physicians

Given the increase in physician employment by hospitals, it has become increasingly common for specialty call coverage panels to include employed physicians. Hospital-employed physicians on a call panel require consideration of:

  1. Whether the employment agreements require the physicians to provide a specified number of uncompensated days of call coverage each month as part of their employment duties;
  2. Whether the physicians are exposed to collection risk for unfunded on-call patients; and
  3. The fact that, unlike independent contractor physicians, hospital-employed physicians are not responsible for paying their own payroll taxes and benefits and other costs.

It is typical for employment agreements to require physicians to provide a stipulated minimum number of days of call coverage per month without compensation, frequently five to six days per month. If an employed physician provides call coverage in excess of the required minimum, only such excess days should be compensated.Doctor Consulting On Phone.jpg

In establishing fair market value (“FMV”) for on-call coverage by employed physicians, there are two unique factors to consider. First, the employed physicians may or may not bear collections risk associated with unfunded patients.
For example, a physician paid based upon a percentage of collections model bears collection risk from unfunded patients, while a physician paid under a compensation per work relative value unit (wRVU) model does not. Typically, payment to “at risk” physicians will be higher than “not at risk” physicians.

Lastly, in contrast to independent contractor physicians, hospital-employed physicians are not responsible for funding their health and retirement benefits, professional liability insurance and self-employment taxes. Therefore, the FMV of on-call compensation to an employed physician is typically lower than compensation to an independent contractor physician.

FMV Pitfall

To ensure that on-call compensation to hospital-employed physicians is consistent with FMV, consideration should be given to the terms of the physicians’ employment agreements to establish whether on-call compensation can be paid. In addition, consideration should be given to employed physicians’ risk for collections related to unfunded patients and lack of responsibility for their own payroll taxes and health and retirement benefits.