wRVU Compensation Formulas: Time to Review

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By Kim Stanger

Many hospitals, physician groups, or other providers compensate employed or contracted practitioners based on the work relative value units (“wRVUs”) they generate, e.g., a physician may be paid $x per wRVU performed. Depending on the contract terms, those wRVU values may soon be affected by the 2021 Medicare Physician Fee Schedule. If you have not already done so, you should review your wRVU compensation formula for the following issues:

1. Changes to RVU Values. The 2021 Medicare Physician Fee Schedule will increase the CMS-assigned wRVUs for several codes, including common E/M codes. (See https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched). If your wRVU compensation formula is based on the then-current CMS wRVU values or automatically incorporates the 2021 changes, you may soon owe your physicians more pay than you otherwise anticipated. You may want to adjust your contractual wRVU conversion factor to account for unanticipated and unwarranted increases in practitioner compensation. If your contract does not allow for unilateral adjustments, you may need to obtain the practitioner’s agreement to the change or, alternatively, invoke contract termination provisions. Going forward, you may want to tie the wRVUs to the CMS values that existed at the time the contract was executed rather than the operative CMS values, thereby avoiding the need to monitor or update CMS changes to wRVUs. Read more

Want to Hire an Employee Subject to a Noncompete Agreement?

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by Nicole Snyder

Republished with permission from Idaho Medical Group Management Association (MGMA). Original article appeared in Idaho MGMA’s May 2018 e-newsletter.

As the healthcare industry grows, and at a time when unemployment is low, it can be very frustrating to find potential employee candidates who are bound by noncompete agreements with current or former employers.

Medical practices shouldn’t be too quick to throw in the towel before rejecting candidates on the basis of having a noncompete agreement.  Here are some pointers to help with the hiring process in these situations: Read more

Physician Contract Checklist

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by Kim C. Stanger, Holland & Hart LLP

Regulatory Compliance. If the physician will be performing or referring items or services payable by government healthcare programs, you should generally structure the contract to satisfy applicable safe harbors under the federal Ethics in Patient Referrals Act (“Stark”), 42 CFR 411.355 or 411.357(c), (d) or (l), and the Anti-Kickback Statute (“AKS”), 42 CFR 1001.952(d) or (i). For information concerning those regulatory requirements, see our Client Alert, Stark Requirement for Physician Contracts. In addition, the federal Civil Monetary Penalties Law generally prohibits hospitals from offering inducements to physicians to limit services payable by government programs. (42 USC 1320a-7a(b)(1); 42 CFR 1003.102). If you are a tax-exempt entity, you will also want to ensure the compensation reflects fair market value to avoid 501(c)(3) tax issues. If your state recognizes the corporate practice of medicine doctrine, you may need to structure your arrangement to fulfill any unique requirements applicable to your state.

Written Agreement. Stark and AKS safe harbors generally require current written contracts for independent contractors. Although written contracts are not required for the employee safe harbors, it is usually a good idea to document the arrangement to avoid disputes, especially if there are special compensation requirements, employment is other than “at-will”, or you wish to include a restrictive covenant. Read more

Stark Requirements for Physician Contracts

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by Kim C. Stanger, Holland & Hart LLP

Entities that employ or contract with physicians must ensure their agreements are structured to comply with the federal Ethics in Patient Referrals Act (“Stark”)1 if they intend to bill Medicare for services rendered or referred by the physicians. Under Stark, if a physician (or a member of the physician’s family) has a financial relationship with an entity, the physician may not refer patients to the entity for certain designated health services (“DHS”)2 payable by Medicare unless the financial relationship is structured to fit within a regulatory safe harbor.3 Entities may not bill Medicare for services improperly referred and, if they have done so, the entity must repay amounts improperly received. Failure to report and repay within 60 days may result in additional civil penalties of $15,000 per claim as well as False Claims Act liability.4 Repayments can easily run into the hundreds of thousands if not millions of dollars. Given the potential liability, it is critical that physician arrangements be structured to fit within the regulatory safe harbors.
Read more

Paying for Call Coverage

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by Kim Stanger, Holland & Hart LLP

Hospitals increasingly pay physicians and other practitioners to participate in call coverage for emergency services. Last week, the Office of Inspector General (“OIG”) issued Advisory Opinion No. 12-15, which reminds providers of fraud and abuse parameters applicable to call coverage agreements.

Permissible Arrangements. Federal law does not require compensation for call coverage, nor does it prohibit paying for call so long as the compensation is not offered to improperly induce referrals for federal healthcare program business. The OIG recognizes that paying for call may be necessary to obtain services that may otherwise be unavailable because of, e.g., the lack of specialty services in an area or local physicians’ reluctance to take call because of practice demands, time commitments, or the probability of rendering uncompensated care. The key is to ensure that any call compensation paid (1) represents fair market value for actual and necessary services, (2) does not take into account the volume or value of referrals or other business generated between the parties, and (3) was not intended to maintain or generate future referrals from the physician for non-emergency patients. Common payment structures include hourly or “per diem” payments to be available for call, payment for time or services actually provided in response to call in exchange for assignment of the physician’s professional fees, etc.

 

Problematic Arrangements. Call compensation that exceeds fair market value or pays physicians for unnecessary or illusory services may amount to illegal kickbacks and/or Stark law violations. According to the OIG, suspect arrangements include:

  • “lost opportunity” or similarly designed payments that do not reflect bona fide lost income;
  • payment structures that compensate physicians even though no identifiable services are provided;
  • aggregate on-call payments that are disproportionately high compared to the physician’s regular medical practice income;
  • payment structures that compensate physicians for professional services for which the physician receives separate payments from patients or third party payors, thereby resulting in duplicate payment for the same services; or
  • payments made in response to threats that the physician will refuse to continue to use the hospital or refer non-emergency patients to the hospital unless call payments are provided.

Regulatory Compliance. Whatever its terms, the arrangement must be structured to satisfy Stark and Anti-Kickback Statute (“AKS”) technical requirements. For example, if the compensation is to be paid to a physician who is not employed by the hospital, the arrangement must satisfy the following:

  • The agreement must be documented in a written contract fully executed by the parties before any payments are made.
  • The compensation must represent fair market value for legitimate, needed services actually provided, and not offered to maintain, induce or reward the physician’s referrals to the hospital.
  • The compensation must not vary with the volume or value of referrals or other business generated by the physician except for services personally performed by the physician.
  • The compensation formula must be set in advance and be objectively verifiable.
  • Compensation-related terms may not change during the first year of the arrangement. If the agreement is terminated within a year, the parties may not enter a new agreement with different compensation terms within that year.
  • To avoid unintentional lapses, it is usually wise to include an auto-renewal or “evergreen” clause so that the agreement automatically renews unless terminated by the parties.

(See 42 C.F.R. §§ 411.357(d) and (l), and 1001.952(d)). Most call coverage arrangements will not satisfy an applicable AKS safe harbor because, e.g., the aggregate compensation is not set in advance. It is important that the parties consider and document the legitimate reasons for the call coverage arrangement, e.g., the hospital’s need for the contracted services, the financial or professional burden on physicians absent call compensation, and the physician’s reluctance to provide needed coverage absent call compensation that reflects fair market value for services actually provided.

For questions regarding this update, please contact:
Kim C. Stanger
Holland & Hart, 800 W Main Street, Suite 1750, Boise, ID 83702
email: kcstanger@hollandhart.com, phone: 208-383-3913

This publication is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal or financial advice nor do they necessarily reflect the views of Holland & Hart LLP or any of its attorneys other than the author. This publication is not intended to create an attorney-client relationship between you and Holland & Hart LLP. Substantive changes in the law subsequent to the date of this publication might affect the analysis or commentary. Similarly, the analysis may differ depending on the jurisdiction or circumstances. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.