Public Healthcare Operators: Valuation Trends Summary
June 21, 2022
As the novel coronavirus (“COVID-19”) continues to spread throughout the United States and globally, patient populations in some facilities have reached unprecedented levels. As a result, staffing needs amongst the nation’s hospitals and emergency rooms are rising in return. Healthcare providers are a limited resource and become even more invaluable during a pandemic. To combat this issue while also considering what may be most financially viable, many facilities are considering the option of surge coverage to supplement their existing hospital-based coverage arrangements. The need for surge coverage requires healthcare facilities to expand or repurpose their available resources to accommodate the unique needs brought about by a public health emergency. When implementing surge coverage staffing arrangements, it is important to consider how best to utilize physical and financial resources, while also remaining compliant with the various rules and regulations governing provider compensation. In addition, facilities face the difficult task of transitioning out of these coverage arrangements once the Stark Law Waivers are gone and the pandemic has ended.
The healthcare provider shortage exacerbated by COVID-19 is most prevalently impacting coverage arrangements involved with the treatment of vulnerable patient populations, such as internal medicine, emergency medicine and critical care. Clinicians associated with these specialties and others may now be asked to provide services outside the scope of their current hospital-based arrangements, both in clinical and administrative roles. Many of these existing arrangements currently include set numbers of provider full-time equivalents, coverage hours, etc. and thus may require transitioning or temporarily amending to new, more flexible payment and staffing models.
One strategy that health systems are utilizing is contracting with surge providers via hourly rate models. This type of coverage allows flexibility to easily expand coverage in times of high-patient volume or scale down coverage when there is excess capacity. However, as the groups that are existing current arrangements may not have enough providers readily available, organizations may have to contract with additional groups or locum tenens physicians to secure adequate coverage. Due to the low supply of available providers, inherent hazardous conditions of the pandemic and typically lower reimbursement for COVID-19 cases, the level of compensation may be impacted.
Another surge coverage option is to engage providers utilizing unrestricted standby arrangements. Under these arrangements, the providers are inherently on-call and will need to present at the facility for shifts when provider availability is low or patient demand is high. These arrangements can be added as supplements to current agreements and typically include a daily stipend for availability.
In contrast, due to widespread deferrals of elective procedures, certain specialties such as neurology, orthopedics or anesthesia may be available to be temporarily repurposed to provide COVID-19 care or perform telehealth services. This method may be considered an alternative when outside resources are unavailable. When redeploying, it is important to be cognizant of how the compensation associated with the specialty of the repurposed physicians may compare with the current work effort.
When utilizing surge coverage, facilities must ensure their contracts are compliant with regulations both during and while transitioning out of the pandemic. Facilities should first try to align arrangements with existing Stark exceptions in order to avoid any gaps in compliance. While the Stark Law Waivers may offer flexibility and some relief during the COVID-19 pandemic, they will terminate once the public health emergency has ended. In addition, the Stark Waivers are limited in that their protection does not extend in cases the government determines to be fraud or abuse and do not cover arrangements that implicate the Federal Anti-Kickback Statute. Therefore, it is best practice to utilize these waivers only if absolutely necessary and to have a transition plan in place to ensure compliance with the Stark Law post pandemic. If taking advantage of the Stark Waivers, it is crucial that any modifications to current arrangements are documented appropriately including the reason for the change (COVID-19) and which Stark Law Waivers are being utilized. The arrangement should also detail how and when the compensation arrangement will be transitioned post COVID-19.
As the nation’s healthcare facilities continue to face a shortage of resources, creative staffing and other solutions may be necessary to secure adequate coverage amidst the COVID-19 pandemic. Through effective utilization of the Stark Law Waivers and proper, thorough documentation, facilities can ensure sufficient coverage while maintaining compliance with laws and regulations during and after the pandemic.