LOOK BACK TO MOVE FORWARD
Historically, hospitals relied on physicians to provide call coverage without compensation. Over the years, the industry has changed, and physicians have become less willing to provide on-call coverage without some form of remuneration. Faced with these new demands, hospitals struggle to secure adequate coverage to meet patient needs, to be fair to the physicians, and to ensure that the call coverage arrangements pass regulatory muster. In September 2007, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued an advisory opinion approving payment of per diem fees to on-call physicians. While this advisory opinion was helpful, it by no means answered the array of compliance issues raised by the growing demand for call coverage compensation.
In recent years, number and complexity of on-call arrangements have increased significantly, as has the government’s scrutiny of these arrangements. As such, it is important that call coverage arrangements be structured appropriately and that compensation under the arrangements be consistent with fair market value (FMV). This article addresses the different mechanisms used to secure on-call coverage and discusses the variables that can affect the value of call coverage. In addition, we describe a robust methodology for arriving at payments that are individually tailored to respective arrangements within the appropriate market range.
Many hospitals are beginning to explore creative means to obtain call coverage, utilizing different methods of compensation. According to the Medical Group Management Association (MGMA) 2015 Physician Compensation and Production Report,1 on-call physicians are being compensated using the following methodologies:
- Daily stipend: 36.0%
- Hourly rate: 27.4%
- Per shift: 13.6%
- Annual stipend: 12%
- Other: 11%
Virtually all call coverage arrangements are between physicians and hospitals to which the physicians refer patients. The OIG has noted the inherent risk in call coverage arrangements that physicians may demand payment for coverage as a condition of doing business at the hospital. The OIG has also expressed concerns that the call coverage payments may be disguised kickbacks or exceed FMV for the actual services provided. The government’s position makes clear that the failure to set physician call coverage compensation at FMV could result in criminal and/or civil penalties based on health care fraud and abuse laws.
Some of the reasons for physicians’ reluctance to provide call coverage without compensation are the same considerations taken into account when determining the value of call coverage services: (i) the volume of uninsured patients treated; (ii) disruption of personal lives/frequency and nature of call events (i.e., burden on the physician); and (iii) declining physician supply. Accordingly, while not an all-inclusive list, the following should be considered when assessing compensation call coverage compensation arrangements:
- the general nature of the subject physician specialty (to help assess the expected urgency and the implications of on-call events, e.g., whether a surgical intervention is likely);
- the target hospital’s trauma designation and the applicability of trauma patients to the subject call panel;
- the number of specialists eligible or available to take call on behalf of the target hospital;
- the target hospital’s annual emergency department (ED) visit volume, and the historical or expected frequency of on-call events that require the subject specialist’s response by telephone;
- in light of the annual ED visit volume, the historical or expected frequency of on-call events that require the subject specialist’s response by presenting to the target hospital;
- the target hospital’s ED or applicable payor mix (specific to the subject specialty’s patients if available) to help assess the expected remuneration to be derived in connection with the subject specialist’s professional services rendered in connection with an on-call event; and
- other unique factors that may be relevant to the arrangement (e.g., abnormally high professional liability exposure, very short required response time, or a shortage of providers).
These factors capture data that is specific to the specialty coverage at the subject hospital. While market rates paid by other area hospitals are a useful “acid test,” the application of on-call compensation benchmarks as the sole indicator of FMV has its drawbacks for several reasons, including small sample sizes, wide variations among benchmark sources, reliance on dated information, and limitations of the benchmark data collection process.
WHERE TO START? COMMERCIAL REASONABLENESS
Call coverage arrangements trigger a host of regulatory considerations. While Stark law and the anti-kickback statute (AKS) generally require that the compensation paid to physicians be consistent with FMV, physician arrangements often must also be “commercially reasonable.” Neither the Stark law nor the regulations define commercial reasonableness. The commentary to the regulations, however, offers some guidance.
According to the agency, a commercially reasonable arrangement “appears to be a sensible, prudent business agreement, from the perspective of the particular parties involved, even in the absence of any potential referrals.”2 An arrangement will also “be considered ‘commercially reasonable’ in the absence of referrals if the arrangement would make commercial sense if entered into by a reasonable entity of similar type and size and a reasonable physician … of similar scope and specialty, even if there were no potential DHS referrals.”3
In sum, commercial reasonableness is the requirement that an arrangement make business sense even in the absence of physician referrals. Determining whether an arrangement between a hospital and a physician is commercially reasonable can be challenging, but understanding a hospital’s operational needs, and clinical requirements, as well as why an on-call coverage arrangement is needed in the first place are key considerations.
In many instances, physicians consider on-call coverage a source of inconvenience with inadequate remuneration. The undesirability of on-call coverage can be exacerbated by other factors, such as a high proportion of low reimbursement patients (e.g., Medicaid and indigent patients). The federal Emergency Medical Treatment and Labor Act (EMTALA) requires hospital EDs to provide emergency screening examinations and stabilizing treatment without regard for an individual’s insurance status ability to This requirement extends emergency backup services, or on-call services, which are provided by a physician on the medical staff of the hospital.
Hospitals must “adopt and enforce” policies and procedures to ensure compliance with EMTALA. This includes maintaining a list of physicians who are on-call and available to provide necessary stabilizing treatment to an individual with an emergency medical condition following the initial screening examination. Each hospital is required to maintain an on-call roster of its specialists “in a manner that best meets the needs of the hospital’s patients who are receiving services required under EMTALA, in accordance with the capability of the hospital, including the availability of on-call physicians.” In general, if a service or procedure is offered by a hospital on an inpatient basis, the hospital must arrange for medical specialists qualified to perform the service to back up the ED or have other backup arrangements in place with other hospitals.
Furthermore, under certain state regulations, hospitals that provide emergency services must ensure the provision of services based upon the capabilities of the hospital (e.g., as outlined on that hospital’s license in the respective state), 24 hours per day, 7 days per week. Hospitals can typically meet these state law requirements either directly or indirectly through call coverage arrangements, transfer agreements, or a combination of the two.
Additionally, facilities that are designated as trauma hospitals may be subject to additional call coverage requirements depending on the level of the trauma designation and the specific state requirements. Moreover, if hospitals require restricted (i.e., in-house) coverage for certain periods, such coverage is deemed necessary given the expected volume of emergent events coupled with hospital’s clinical focus on ensuring improvements in quality and efficiency for its medical services. Accordingly, in light of all these requirements hospitals are often able to substantiate a need for emergency care and therefore validate the proposed call coverage compensation as commercially reasonable.
CALL COVERAGE IN 2017: MECHANISMS TO EFFECTIVELY SECURE COVERAGE
Declining reimbursement and increased financial pressures have prompted hospitals to look beyond the traditional methods of securing call coverage. Although a daily stipend remains the most common means of paying for call coverage, there are several other approaches.
Physician shortages in some regions of the country have prompted hospitals to enter into “concurrent” call coverage arrangements. Concurrent coverage is defined as physicians providing coverage for multiple hospitals or multiple specialties, without having transfer arrangements in place. In other words, a call coverage agreement could require the physician to be available either to travel to multiple hospitals or to provide coverage of multiple specialties, during the same 24-hour on-call period. While this allows hospitals to leverage resources by implementing an agreement with hospitals in close proximity, it also significantly increases the probability of the physician having to respond to an on-call event, thereby increasing the burden associated with call responsibility. As such, this increased call burden may warrant a higher per diem compensation rate as compared to physicians who provide call coverage to a single hospital or for a single specialty at a time.
When a coverage arrangement includes an activation fee, the on-call physician is compensated only if an actual call event requires the physician’s emergent presence at the hospital. Activation fees are used by some hospitals as an alternative to traditional per diem payments, especially when call event frequency is relatively low. Given that activation fees are expected to paid with frequency per diem payments, the activation fees generally higher than a per diem payment. However, the total activation fee payments in most instances should not exceed the FMV of per diem payments on an annual basis.
Practice coverage serves to bundle on-call coverage with services beyond a hospital’s emergency room. In certain instances, the nature of a call coverage arrangement entails securing sporadic emergent call coverage for a hospital’s employed physician’s practice which is typically an affiliate of the hospital. Under this type of arrangement, a physician’s practice is in need of emergent call coverage during those occasional periods in which the physician is unavailable to provide care in the event the practice’s patients present at the ED or are otherwise in need of care.
Employed Physicians — Excess Call Coverage
It is common for hospitals to enter into on-call arrangements with their employed physicians. The hospital should first consider whether the employed physician’s employment agreement requires him or her to provide on-call coverage. Often, physician employment agreements require performance of a “minimum” number of uncompensated on-call days. Under this scenario, physicians are only compensated for those days of call coverage in excess of the required minimum. In these instances, the per diem provided to physicians must be consistent with FMV. In other words, a hospital cannot provide physicians with a “premium” per diem rate (i.e., above the indicated FMV range) since such a premium would negate hospital’s stated intent to require physicians to provide a minimum number of uncompensated days of coverage.
Locum tenens arrangements are sometimes necessary in order for a hospital to ensure that it has adequate coverage to meet its EMTALA obligation or to otherwise ensure appropriate access to care for patients in the hospital’s service area. Locums tenens physicians are temporary solutions to providing the requisite call coverage. While it is reasonable for permanent medical staff and employed physicians to receive compensation for call coverage, their rates will not be as high as locum tenens providing temporary staff. Furthermore, as a general matter neither the locum physician nor a locum agency would bill and collect from patients seen while providing locums coverage. As such, in order to account for temporary relationships, locums rates are often significantly higher than medical staff rates.
THE FUTURE OF CALL COVERAGE? — TELEMEDICINE COVERAGE ARRANGEMENTS
Telemedicine generally involves the furnishing of clinical services using some combination of phone or Internet communications as opposed to a face-to-face encounter. Despite immature payor reimbursement policies, physicians are working to monetize telemedicine encounters and receive compensation. Payment and coverage for services delivered via telemedicine are some of the biggest challenges for telemedicine adoption.4 While some states have enacted laws enforcing coverage for telemedicine-provided services, over 35 states have not taken any steps toward mandating coverage for telemedicine services. However, as states are increasingly using telemedicine to fill provider gaps and ensure access for certain specialties (i.e., neurology and psychiatry amongst the most prevalent), a national trend is emerging to allow state-wide Medicaid coverage of telemedicine instead of focusing solely on rural areas.5
Furthermore, the OIG Advisory Opinion, No. 11-12, published on September 6, 2011, provided helpful guidance with respect to neurology telemedicine coverage. In the Advisory Opinion, the OIG analyzed a neurology telemedicine coverage arrangement between local hospitals participating hospitals”) and a hospital that would provide comprehensive neurology telemedicine coverage services (“requestor”). Despite OIG concerns that the proposed telemedicine arrangement potentially implicates the AKS, the OIG concluded that the requestor would not be subject to administrative sanctions under AKS for the following reasons:
- requestor would be unlikely to generate appreciable referrals through the proposed arrangement; neither the participating hospitals nor their physicians would be required or encouraged to refer patients to the requestor’s hospital as a condition of participation;
- neither the volume or value of a hospital’s previous or anticipated referrals, nor the volume or value of any other business generated between the parties, would be a condition of program participation;
- the primary beneficiaries of the proposed arrangement would be the stroke patients who can be treated at the participating hospitals’ EDs through the telemedicine program; such treatment will be more timely and effective than transferring these patients to a comprehensive stroke center;
- neither the requestor nor any of the participating hospitals would be required to engage in any marketing activities, and each party would be responsible for the costs associated with its own marketing; and
- the telemedicine program is unlikely to result in increased costs to the federal health care programs because few, if any, of the consultations provided would be billable to Medicare; moreover, the program is designed to reduce the volume of transfers of stroke patients to the requestor’s hospital, and the costs associated with these transfers should correspondingly decrease.
While the opinion is not legally binding with respect to any other telemedicine coverage arrangement, these factors are worth considering when analyzing the regulatory implications of any proposed telemedicine coverage arrangement. The potential for referral opportunities between the parties will complicate the analysis.
Telemedicine is increasingly used in behavioral health, cardiology, and neurology programs to expand access and reduce the cost of care. Given its utility and growing popularity, it will be increasingly important for providers to ensure that telemedicine coverage agreements pass regulatory muster and that they develop a consistent methodology for determining the FMV of telemedicine coverage services.
UNIQUE VARIABLES AFFECTING ON-CALL COVERAGE
In addition to traditional variables such as call frequency, payor mix, and number of expected call days, a thorough analysis of an on-call coverage arrangement requires an in-depth understanding of the unique dynamics and structure of the specific arrangement, as well as knowledge of the characteristics of the particular marketplace. Providing valuators with as much detail as possible about each on-call arrangement will ensure that an appropriate and defensible FMV range can be established.
An analysis of the structure of a specific arrangement entails identifying the typical variables which affect the FMV range of a given on-call arrangement. As previously discussed, these variables include but are not limited to whether the facility is a designated trauma center, the number of coverage days required by each physician per month, the frequency and nature of call events to which the on-call panel is expected to respond, and the expected “minimal reimbursement” payor mix. Additional factors such as concurrent hospital coverage, ability to bill and collect for professional services rendered, and separate fee-for-service reimbursement for professional services provided unfunded patients are also commonly considered. While these variables are commonly considered in call coverage analyses, the following are additional factors that may be applicable to a specific arrangement.
Call Event Response Time Requirements
When a physician is required to adhere to an especially stringent response time, this generally increases the burden on the physician providing the coverage. Some causes of heightened response time include: the nature of subject specialty (e.g., neurology and the rapid need for tPA assessment), expected patient acuity, the hospital’s trauma designation, and/or facility bylaws among other reasons.
Furthermore, there are certain instances whereby a call event initially handled by telephone requires a physician to present to the hospital for an in-person consultation within 24 hours, thereby placing a greater burden on the physician than a call event which is handled solely via a telephone consult. While not rising to the level of a call event requiring the physician to immediately present to the hospital, the burden is increased if a telephonic call event requires a follow up face-to-face encounter within 24 hours.
Hospital’s Location in a Rural Area, Health Professional Shortage Area (HPSA), and/or a Medically Underserved Area/Population (MUA/P)
Hospitals that are located in HPSA or MUA/P areas may often face a shortage of physicians who are willing and qualified to provide the requisite coverage. Specifically, HPSAs and MUA/Ps are areas, populations, and hospitals designated by HHS as having met pre-determined criteria to indicate a significant need for additional primary health care resources. Whether a hospital is located in a HPSA or MUA/P is a factor in determining the fair market value of compensation to physicians for providing on-call coverage. However, hospitals that are or MUA but still located in a rural location may face similar difficulties in obtaining physician coverage for a variety of reasons, all of which the valuators may consider.
Restricted versus Unrestricted Coverage
It is common to distinguish between “restricted” coverage, where the physician is required to remain on the premises during the entire coverage period, and “unrestricted” on-call coverage, where the physician is not required to remain on the premises during the entire call period but is required to be capable of presenting to the premises as required. By way of example, arrangements which contemplate that during the period of onsite services (i.e., restricted coverage), physicians will be required to remain in-house during a scheduled shift, this significantly increases the burden under the coverage arrangement and, in some instances, will not allow physicians to realize opportunities for other billable activities. Therefore, as expected, FMV ranges for restricted on-call coverage arrangements are generally significantly higher than for unrestricted on-call arrangements due to the increased burden on the provider.
If a physician travels from outside the hospital’s service area in order to be able to comply with response-time requirements under a given on-call arrangement but is not “restricted” to the hospital, then a quasi-restricted analysis may be applicable. Given that physicians providing quasi-restricted coverage are generally traveling from outside of their service area, there are generally no opportunities for billable activities beyond those emanating from the call coverage. While the burden on the physician is greatly increased in this scenario, it does not rise to the level of a traditional restricted coverage arrangement, as previously discussed.
CALL COVERAGE ARRANGEMENTS: FINAL THOUGHTS
Given the increase in call coverage arrangements nationwide, heightened government scrutiny, and the fact that the use of on-call compensation benchmark data as the sole indicator of FMV can be problematic, securing an independent third-party FMV opinion may be the prudent course for many arrangements. Furthermore, a regulatory analysis of the call coverage should be undertaken at the onset. The regulatory analysis should consider the federal antikickback and Stark implications as well as state law restrictions. The third-party FMV opinions should cite the correct standards of FMV, be free of unnecessary or impractical limitations, and provide the broadest supportable FMV range — although confirmation that a particular rate is within the FMV range is common. In those situations where a consultant is not retained, the hospital should consider what type of process is appropriate for developing support for the FMV/commercial reasonableness of coverage payments. Whether supported by an independent valuation opinion or other data, it is advisable that the hospital maintain a written record of the rationale supporting the FMV of the call coverage compensation as well as its regulatory assessment the arrangement.