The following article was originally published by the American Association of Provider Compensation Professionals.

Hospitals compensating third-party provider groups for unassigned patient care can present unique challenges that demand careful analysis and structured documentation. Compensation for unassigned care, such as coverage subsidies, should correlate to the direct burden of providing care solely to the unassigned patients. Risk for scrutiny arises when provider groups cover both assigned and unassigned patient panels under a single payment arrangement that does not separate the associated costs and revenue.

Defining the Scope

The precision with which an organization defines “unassigned care” directly impacts compliance and subsequent fair market value (FMV) compensation. A proper definition must encompass specific circumstances that qualify a patient as unassigned (such as emergency department presentations without established primary care), clear exclusion criteria for patients with existing relationships within the health system or with the third-party provider group, and temporal boundaries defining when the unassigned status begins and ends.

Imprecise definitions represent one of the most significant risks in subsidy arrangements, as the definition often expands over time, potentially misaligning with initial FMV assessments. For example, assigned patient care can include existing relationships the third-party provider group has within the local community—an often-overlooked connection. Provider groups frequently have existing arrangements, outside of the contemplated agreement with the hospital, to service and bolster patient care for other local community groups experiencing challenges.

Quantifying the Unassigned Care Burden

Accurate compensation valuation requires robust methodologies focused on three key metrics.

  1. Direct time allocation captures documented physician time devoted to unassigned patient care.
  2. Resource intensity measures differences in resource utilization between assigned and unassigned patients.
  3. Coverage requirements identify specific obligations existing solely due to unassigned populations.
  4. Together, these metrics provide a comprehensive picture of the true burden of unassigned care.

FMV Framework

  • Cost Segregation: The cornerstone of FMV compliance lies in accurate cost segregation. The most common compliance vulnerability occurs when organizations fail to properly isolate costs specific to the unassigned patient care. The valuation approach must establish methodologies for separating direct costs attributable to unassigned care, exclude shared overhead costs unless demonstrably increased by unassigned patient care, and document the rationale for the allocated costs with supporting data.
  • Market Benchmarking: Unassigned care subsidies require a more nuanced analysis than standard physician compensation benchmarking. The best FMV approach considers market-specific factors affecting the burden of unassigned care, comparable subsidy arrangements in similar markets, and local payer mix impact on unassigned care economics. This comprehensive market analysis ensures subsidies reflect true market conditions rather than arbitrary determinations.
  • Documentation: Recommended documentation includes contemporary time studies focused on unassigned care, tracking unassigned patient volumes and characteristics, analyzing resource utilization patterns, and reviewing market conditions that affect subsidy rates. Thorough documentation not only supports compliance but also provides the analytical foundation for appropriate subsidy determinations.

Stark Law Considerations & Anti-Kickback Statute Protection

The personal services exception requires demonstration of FMV compensation, commercial reasonableness, independence from referral patterns, and objective basis for compensation rates. These elements must be comprehensively addressed in both the structure and documentation of the subsidy arrangement.

Anti-Kickback Statute compliance requires demonstration that subsidies reflect actual market conditions rather than inducement for referrals. To avoid potential non-compliance, hospitals and healthcare systems should create a defensible basis for the subsidy arrangement through market-based justification for subsidy amounts, documentation of legitimate business purposes, and regular updates reflecting changing conditions.

Monitoring & Adjustment Mechanisms

FMV compliance requires periodic reviews of unassigned patient volumes and characteristics, annual reassessment of market conditions, regular evaluation of resource utilization, and documented methodology for subsidy adjustments. This ongoing monitoring ensures subsidies remain aligned with actual unassigned care burdens and market conditions.

Conclusion

Maintaining FMV compliance for unassigned care subsidies requires a comprehensive approach beyond traditional physician compensation analysis. Hospital executives must ensure their compliance departments have the tools to properly evaluate and monitor these arrangements. By applying valuation principles specifically tailored to unassigned care and maintaining appropriate documentation, organizations can develop subsidy arrangements that both serve their communities and withstand regulatory scrutiny.

Author: 

Jonathan Geers