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Fair Market Value Support Required: Physicians In Administrative Roles
June 1, 2009
Published by the American Health Lawyers Association Placing physicians in paid positions for administrative roles requires great care because failure to set compensation at Fair Market Value (FMV) could result in criminal and/or civil penalties based on healthcare fraud and abuse laws. If an agreement between a physician and healthcare organization is audited by federal or state healthcare authorities, the analytical process and documentation to justify the payment is FMV will be essential in defending the compensation level. The following discusses the growth of these positions and what organizations should consider when determining how to ensure the arrangement meets the FMV requirements.
Growth in roles triggered by physician interest, organization needThe American College of Physician Executives reports membership is up 12% for the first quarter of 2008, over 2007 figures. In addition, they have seen management/leadership training courses grow 5-7% over the past two years. The growth of administrative roles for physicians has been spurred by both a demand from physicians and healthcare facilities. The newest generation of physicians is not as tolerable of the hours physicians kept in the past and many are looking to administrative roles to achieve a better work-life balance. In addition, new publicity surrounding safety and quality issues has made healthcare organizations more accountable for quality care. As transparency becomes increasingly important, administrative functions required to implement and monitor quality metrics will increase. The Joint Commission also has demonstrated its recognition of this need by recently publishing 2009 requirements related to medical staff leadership. Since quality initiatives are typically managed by physician leaders, the transparency trend should continue to feed the growth of physicians in administrative roles.
Payment needs to be at FMVThe challenge of determining FMV for these positions is that there is little market data and guidance for physicians in administrative roles. This topic was specifically addressed in the most recent Stark II, Phase III update. When Phase III was released, it eliminated a Safe Harbor that determined a FMV hourly rate for physicians in either clinical or administrative roles. Compliance officers, attorneys, and analysts were forced to rethink their FMV approach. Phase III did provide some vague guidance to determining administrative compensation. The language included in the new regulations stated: A Fair Market Value hourly rate may be used to compensate physicians for both administrative and clinical work, provided that the rate paid for clinical work is Fair Market Value for the clinical work performed and the rate paid for administrative work is Fair Market Value for the administrative work performed. We note that the Fair Market Value of administrative services may differ from the Fair Market Value of clinical services. Based on these latest guidelines, healthcare organizations must carefully examine the list of services the physician will provide, preferably by reviewing the subject agreement, to best determine FMV compensation for administrative roles. Using this information allows healthcare organizations to make a supportable decision regarding what market data to base compensation on by asking two questions:
- Is a physician required for this service?
- Is the physician’s specialty required for this service?