OIG Offers Hospitals Guidance on Call Coverage Arrangements With Physicians
In response to a hospital’s inquiry regarding its proposed compensation plan for on-call physicians, the Office of Inspector General (OIG) issued Advisory Opinion (AO) 09-05. The opinion, posted May 21, 2009, addressed on-call payments for physicians who provide services to uninsured hospital patients. Under the arrangement, the physicians would only be paid per call when patients were seen in person and were clearly uninsured.
In this opinion, the actual hospital payments were set based on four levels of flat fees dependent on the actual services or procedures provided. In return, physicians had to be on staff, sign and participate in the agreement, and respond within 30 minutes. In addition, the hospital certified that there was a clear need for the compensation to encourage physicians to take the call. The opinion stated that the OIG would not impose sanctions in this case.
Opinion 09-05 more conservative than No. 07-10
According to Alan B. Simons, lead health care valuation principal at LarsonAllen, the facts in this opinion seem conservative—that is, low regulatory risk—compared to OIG
Advisory Opinion 07-10. That opinion covered per diem on-call payments to physicians to compensate them for uninsured and under insured patients, and is referenced in the new opinion.
On-call payments should be based on need
According to Simons, this AO should be a reminder to hospitals that on-call payments ought to be based on real need, dependent on market conditions, and not on a demand from physicians as a prerequisite for doing business at the hospital, when neither the services provided nor market conditions (e.g., a physician shortage) warrant such compensation. A hospital should be able to document this need before contemplating on-call compensation arrangements.
Once a clear need is established, an on-call agreement that compensates physicians at fair market value can be put into place. According to the OIG in its Supplemental Compliance Program Guidance for Hospitals and repeated in both AOs:
The general rule of thumb is that any remuneration flowing between hospitals and physicians should be at fair market value for actual and necessary items furnished or services rendered based upon an arm’s length transaction and should not take into account, directly or indirectly, the value or volume of any past or future referrals or other business generated between the parties.
In other words, the on-call compensation arrangement must be set at fair market value for bona fide physician services without considering any other financial relationships between the hospital and physicians.
Warning signs for regulatory risk
The OIG recognizes in this AO that “each on-call coverage arrangement must be evaluated under the anti-kickback statute based on the totality of its facts and circumstances.” However, both opinions cite the following factors as possible disguises of kickback payments and thus indicating substantial regulatory risk:
- “Lost opportunity” or similarly designed payments that do not reflect bona fide lost income
- Payment structures that compensate physicians when no identifiable services are provided
- Aggregate on-call payments that are disproportionately high compared to the physician’s regular medical practice income
- Payment structures that compensate the on-call physician for professional services for which he or she receives separate reimbursement from insurers or patients, resulting in the physician essentially being paid twice for the same service
“It appears the OIG is carefully scrutinizing these call coverage arrangements, so you must carefully develop and document them,” Simons urges. “You might also consider reassessing your current on-call arrangements in light of this new guidance.”
Background
The question of whether and how to compensate on-call physicians has been an ongoing concern among hospitals. Market conditions are an influential factor, as bargaining power can vary greatly depending on, for example, the region or physician specialty.
Historically, most physicians would take call without asking for additional compensation. However, changes in the economics of running a medical practice have made it increasingly difficult for them to provide call coverage whether paid or unpaid.
Reimbursement for physician services has not kept pace with the rapidly increasing practice costs such as malpractice, labor, and technology. As a result, physicians are working harder and putting in longer hours in their practice just to keep up. This leaves them little time or incentive to take hospital call coverage, especially when many patients are uninsured or under insured.
In addition, physician shortages have increased the amount of hospital call that physicians are being asked to assume. "For most, the additional payments received do little to relieve the burden call places on them and their families," Simons says.
How we can help
We can help hospitals determine need, develop on-call arrangements, and establish fair market value for payments. We also recommend working with health care attorneys when contemplating call coverage arrangements.
For more information, contact Alan B. Simons, lead health care valuation principal, or read Advisory Opinion 09-05.