Health System Addresses Radiology Coverage Challenges with Fair Market Value Assessment

A regional health system (System) was seeking to enter into a professional services agreement (Agreement) with a multi-specialty radiology group (Contractor) for coverage services to its affiliated entities. The System engaged VMG Health to review the services provided and establish a fair market value (FMV) compensation level for the Agreement.

Situation

The Contractor is currently providing the services for the System, and the volume at the System was beginning to create issues with turnaround times for radiology reads. Due to the difficulty in recruiting new physicians to the market, many physicians employed by the Contractor had to work additional hours and shifts to provide the services as new physician recruits were sought. The System asked VMG Health to provide an FMV compensation level for the Agreement and assist in determining the appropriate staffing level based on current volumes. 

Solution

VMG Health reviewed the Contractor’s productivity, current staffing levels, benefits, malpractice insurance cost, and coverage requirements provided by the physicians. Based on this information, VMG Health also used published compensation and productivity data for the required specialties, specific market need data from community need assessments and the Contractor’s past recruitment efforts to determine an appropriate level of compensation for the physicians. VMG Health also worked with the System and Contractor to determine the appropriate staffing level by sub-specialty. 

VMG Health provided an FMV opinion that would support compensation for the Contractor based on the current level of services and staffing needs and compensation levels as newly recruited physicians were added. These scenarios ensured that, as physicians were added by the Contractor, the compensation structure was supportable from an FMV perspective. 

Success

VMG Health provided an FMV opinion that allowed for continued coverage by the Contractor and supported additional compensation as newly recruited physicians were added. This allowed the System and Contractor to negotiate a sustainable compensation structure for the Agreement.