A health system sought a fair market value (FMV) opinion on compensation for urgent care physicians across various employment arrangements. They aimed to establish FMV guardrails to assess each agreement internally for regulatory compliance and negotiation purposes, without needing external reviews for every contract.
Situation
The health system desired to expand its urgent care business, which would include the employment of more urgent care providers across its system. To create an efficient process for establishing FMV for these compensation arrangements, the health system wanted to engage a valuation firm to build a compensation tool that could demonstrate FMV for specific agreements without engaging the valuation firm to review each arrangement.
Solution
VMG Health began this engagement by working with the health system to understand the various components that could be included in the compensation structures intended for the urgent care physicians, which included base clinical compensation, incentive compensation, and administrative compensation, among other components. VMG Health used this information to build a template form with pre-outlined compensation components that the health system could fill out for each specific physician to memorialize expected compensation for a specific agreement. This allowed the health system to have a unique outline of compensation for each of their urgent care physician contracts, which could then be confirmed as FMV.
To establish its FMV conclusions, VMG Health reviewed the various components of the arrangements, including expected services and proposed incentive payments. This information allowed VMG Health to research market compensation data points that aligned with these services and incentives from various sources, which provided the market support for the ranges established by VMG Health. To confirm FMV for each agreement, a form completed for a specific physician and the resulting compensation for each arrangement would then be compared against the FMV compensation ranges established by VMG Health for the services in question.
Success
The form developed by VMG Health allowed the health system to easily input specific compensation components for a particular physician in a standardized way to generate an output that provided a complete picture of a specific physician’s expected compensation. The health system could then compare these compensation figures to VMG Health’s established FMV ranges to easily confirm FMV without needing to engage VMG Health to review every single agreement. This allowed the health system to more quickly confirm FMV for specific arrangements in a cost–effective way. Additionally, it was easier to pinpoint the employment of more unique physicians who required further review. This allowed VMG Health and the client to focus time on agreements with more potential risk, rather than expending energy and time on agreements with marginal risk.
