Physician Compensation and Compliance: More Than Just the Individual Components

Written by: Bartt B. Warner (VMG Health), Kimberly A. Mobley (SullivanCotter), Wesley R. Sylla (Hall Render Killian Heath & Lyman PC)

This Briefing is brought to you by the Fair Market Value Affinity Group of AHLA’s Hospitals and Health Systems Practice Group.

Compensation paid to physicians has been thrust into the spotlight as health care settlements continue to rise both in number and in settlement awards. This increased scrutiny on what physicians are paid has made all parties involved in the physician compensation contracting process wary. As a result, it is imperative to have appropriate protocols in place to ensure the necessary due diligence has been completed prior to executing any physician compensation agreements. Although the process may vary from organization to organization, there are certain elements that should not be neglected. This article is not designed to cover every element of the physician contracting process, but rather focus on key elements from both a valuator’s and an attorney’s perspective related to “stacked” physician compensation arrangements. Stacked arrangements are where a physician is paid for multiple types of services or receives multiple forms of compensation for the same services (e.g. a call stipend and work Relative Value Unit (wRVU) incentive credit).

Current Environment

The current health care environment has seen a surge in physician employment, new delivery models, payment reform, and regulatory scrutiny. Increased integration and financial relationships with physicians have created an opportunity for increased qui tam lawsuits. In addition, we have begun to see more focus on personal accountability which has been evident in recent court cases. As a result, the Justice Department has focused substantial time and resources in the health care sector. In Fiscal Year 2018, the Justice Department recovered over $2.8 billion from False Claims Act cases of which $2.5 billion were related to the health care industry.1 In addition, according to the Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2018, “The return on investment (ROI) for the HCFAC program over the last three years (2016-2018) is $4.00 returned for every $1.00 expended.”2 With increased enforcement and disproportionate penalties, both facilities and physicians are at risk if caution is not taken when entering into agreements. As a result, physician compensation arrangements must be compliant with the Stark Law,3 the Anti-Kickback Statute (AKS),4 False Claims Act,5 and other regulations designed to prevent fraud and abuse. As part of meeting the Stark Law, physician compensation arrangements must be commercially reasonable6 and consistent with fair market value (FMV).7

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