A large academic health system (“System”) needed to form a professional services agreement for on-call coverage services to a neighboring hospital (“Hospital”) which historically had been provided free of charge.
Situation
The System was located across the street from the Hospital and had various on-site professional service arrangements with the Hospital. Due to the proximity, the System would frequently receive emergent calls from the Hospital for life-saving support from System-employed physicians. The System wanted to engage an independent third-party valuation firm with extensive experience in on-call coverage arrangements to determine the fair market value (FMV) of the services they were providing to the Hospital.
Solution
As part of the FMV analysis, VMG Health considered clinical and on-call coverage compensation market survey data. In addition, VMG Health conducted a robust review of the services provided for life-saving support and the burden of the call coverage services in terms of supply and demand, frequency, and duration when called in. Since this would be a new agreement for both parties, VMG Health also provided compensation consulting services for how to structure the payments and scenario-tested compensation levels at different tiers of annual call-ins.
Success
VMG Health provided the System with a tool that outlined tiered hourly rates applicable for various specialties allowing the System to easily reference for initial contract negotiations. Then, upon client request, VMG Health would consider the specific details, facts, and circumstances of the arrangement and the physician’s experience and expertise to aid in the selection of a fair market value hourly rate for regulatory and compliance purposes.
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