Physician Income Guarantee and Subsidy Coverage Arrangements

Income guarantee and subsidy arrangements with physicians are essential for hospitals to ensure they have the proper coverage for service lines with a higher risk payor mix or need for on-site coverage coupled with low volume. Given their fixed expenses, physician groups oftentimes need guarantees or protection that their fixed costs will be covered reasonably to provide the required coverage. Considering the nuances involved with managing the risk spectrum between the costs the contractor is incurring compared to the costs incurred by the facility/system, ensuring the physician group is receiving financial support in exchange for the services rendered is vital. VMG has observed set-in-advance stipends, revenue guarantees, $/WRVU guarantees and move-able model subsidy fees depending on the client and situation.

VMG Health has insight into the latest trends and the various coverage guarantee compensation structures based on our extensive experience in valuing these types of arrangements. As a result, we can rapidly assist in confirming if a coverage arrangement with a physician, or other entity, is fair market value.

Compliance

Documentation illustrating that coverage compensation was set at fair market value represents best practice for compliance purposes. Based on regulatory guidance, fees should be derived based on a sound methodology reflecting the terms of the arrangement and relevant value drivers. Two examples of value drivers that should be considered in deriving a proper payment for coverage services include: 1) understanding the expected reimbursement retained by the physician or group in providing the required service, and 2) the coverage requirements incurred by the Group in providing the requested coverage. VMG has a keen understanding of these factors, and a myriad of other valuation drivers associated with coverage arrangements.