Uncovering Red Flags in Physician Contracts
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This video discusses key signs an organization might have physician contracts that have Stark risk and solutions for reducing the risk.
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Uncovering Red Flags in Physician Contracts
- 1. 1 Uncovering Red Flags in Physician Contracts An MD Ranger On-Demand Educational Video
- 2. 2 Objectives: • Why identifying red flags in physician agreements is important • Identifying organizational behaviors and culture that could lead to risky deals • Finding risky elements in physician agreements
- 3. But first, a disclaimer • MD Ranger doesn’t give legal advice • Physician agreements should always be reviewed by an attorney (or two) • All matters regarding potential legal/compliance issues should go to counsel • A formal review and approval process is foundational to compliance 3
- 4. Physician contracts across the organization • It’s likely your facility has dozens, if not hundreds, of financial relationships with physicians • These personal services agreements may include emergency call coverage, medical directorships, administrative positions, hospital-based services, diagnostic test reading fees, leadership and hospital- based clinics 4
- 5. Physician payment rates regulated to prevent fraud and abuse • Stark Law limits physician self-referrals • Anti-Kickback Statute prohibits paying for or incentivizing referrals • False Claims Act allows government to pursue reparations for claims made while provider violated either of above two laws • Whistleblowers are often the source of investigations 5
- 6. Penalties steep for non-compliance • Stark Law: single civil violation could result in a fine of up to $15,000 for each service, plus overpayment obligation and potential for high civil monetary penalties assessment • AKS: single criminal violation could result in a fine of up to $25,000 for each instance (bill, encounter, payment, etc.) and imprisonment of up to five years, and, even absent conviction, violators may face exclusion from federal health care programs. • False Claims Act: amplifies above penalties 6
- 7. Identifying red flags is important because • Physician relationships key to running a successful healthcare organization • Financial and legal risks of having non-compliant agreements huge • Ensuring accurate documentation and approval process for all physician agreements should be central component of physician contracting compliance programs 7
- 9. Compliance-oriented culture? • Some organizations have a strong compliance-oriented culture, others do not • If you notice your organization commonly behaves in one or more ways that we’ll discuss, you could be at greater risk for non- compliant physician agreements 9
- 10. Assuming you must pay physicians when they ask • Strong physician relationships are key to a successful organization and they promote clinical excellence • However, not all payments are commercially reasonable • Establish both commercial reasonableness and a rate at FMV • Always explore alternative ways to compensate 10
- 11. Negotiating consistently high rates with physicians • As you review physician contracts, note how many contracts fall above the 75th percentile • There could be good reasons why several contracts are above the 75th or even the 90th percentile, but paying at this range should not be standard practice • Also, benchmarks can change, so be careful setting rates at the edge 11
- 12. Spending more in aggregate on physician contracts • Non-employed physician contracts are a sizable chunk of a hospital’s operating budget, usually falling between 4-6% of total operating expenses • Use benchmarks to compare your organization’s physician spending to peers, and see if you are average • Above average payments could indicate potentially non-compliant agreements • Checking into high spending is good financial management 12
- 14. Thinking your hospital is exceptional • All hospitals are different, yet not so very different that comparing like organizations isn’t helpful. • Benchmarks shouldn’t be the end-all, be-all, but they can be useful to understand how you compare to peers • Beware of overly-defensive reactions to benchmarks at your organization 14
- 15. Physician Contract Attributes: What’s Risky 15
- 16. The service might not be commercially reasonable • Just because you are paying a physician for a service doesn’t necessarily mean it’s commercially reasonable • Review commercial reasonableness documentation during audit to ensure argument still holds • No documentation? Use MD Ranger data to get a gut check • Percent paying • Payment rates • Number of positions • Overall service payments 16
- 17. No proof of FMV • All physician services agreements, in order to be compliant, must have documentation that payments are fair market value • Likewise, all payments must be commercially reasonable • Lack of supporting documentation could mean that the payment is not warranted or too high • FMV documentation could be: • High quality market data • Cost valuation • Evidence of extraordinary efforts or circumstances 17
- 18. Payments above the 75th percentile with no justification/documentation • Payments under the 75th percentile are generally considered within FMV; however, your organization could have a different policy regarding market ranges • Many organizations use the median since it gives room for growth or changes in benchmarks at contract renewal • Typically it’s okay to have a few agreements above the 75th or even the 90th percentile, if there is reasonable justification • High payments with no or poor justification should be analyzed further 18
- 19. Expired contracts 19 • Expired contracts mean that you do NOT have a contract in place with the physician and you are technically violating Stark if you continue to pay • Remember: contract terms must be set in advance • Calendar contract expirations and begin renegotiations early (at least 90 days)
- 20. Payments with no contracts • Cross check all payments to physicians from your AP department as part of routine audits • Payments to physicians with no contract in place is extremely risky and is a violation of Stark, like an expired agreement 20
- 21. Undocumented non-monetary payments 21 • Are you providing non-monetary payments to independent physicians that exceed the cap? • Parking spaces? • Meals? • Electronic health records? • Overhead from charity events involving doctors? • Joint marketing? • Office artwork? • Technology? • Infrastructure? • ….?
- 22. The service is not described in detail on the contract • Don’t forget important details, like number of hours in administrative agreements • Record keeping for time and performance of duties • When in doubt, spell it out 22
- 23. Lack of time cards or call sheet • Likewise, if no time cards or call sheets exist, your red flag should fly • Time cards are key for administrative contracts given that physicians are typically paid hourly or monthly based on a minimum and/or maximum number of hours 23
- 24. Too many positions for a single service • Some medical directorships might need several physicians serving in administrative roles (cardiology is a good example) • Many do not • If you have more than one medical director per service, investigate commercial reasonableness • MD Ranger’s number of administrative positions report can help! 24
- 25. Multiple contracts/payments to a single provider or group • Though payments might be warranted, check out physicians or groups that receive multiple payments • Compliance concerns mount when payments mount 25
- 26. Don’t know where you stand? We can help. Email inquiries@mdranger.com 26
Editor's Notes
- Hi there. Welcome to MD Ranger’s educational video series. Today we’ll talk about finding red flags in physician contracts. Feel free to share this on-demand webinar with anyone at your organization who might benefit from a quick review on how to zero in on potential compliance issues.
- Here’s what we’ll cover. First, we’ll make the case for why focusing on potential red flags within your contracts is important. Then, we’ll briefly discuss some organizational “bad habits” that could lead to risky deals. Then, we’ll turn to agreements themselves and cover a handful of things you should look for while negotiating or auditing a contract.
- So, before we begin a quick disclaimer about this educational video. First of all, MD Ranger doesn’t give legal advice. We aren’t lawyers. For all matters regarding physician contracts, we highly recommend involving your attorney.
- Non-employed agreements typically make up around 4-6% of a hospital’s total operating budget. Typically these are agreements for service like call coverage, medical directorships, administrative and leadership positions, and hospital based services. As physician relationships are key to your organization, as are these agreements.
- As you likely know, payments made to physicians are regulated to prevent fraud and abuse of government programs. Though we aren’t going to go into much detail on these regulations today, MD Ranger has resources on this topic you can find at mdranger.com/resources
- If your organization has non-compliant contracts, it’s taking on a lot of risk. The penalties for non compliant arrangements can be very significant and have huge financial implications for an organization.
- Addressing potential red flags in your physician contracts allow you to remove as much risk as possible from these essential relationships at your organization. I also want to emphasize how important documentation for your physician agreements is—especially fair market value documentation.
- Okay, we’ll start of discussing elements of organizational culture that could signal a compliance issue or problem.
- Some organization’s are very compliance oriented, while others are less than concerned. If your organization for whatever reason does not have a culture of compliance, or is tolerant of non compliant behaviors, you could be at a greater risk of non-compliant agreements
- Always assuming that physicians who ask for pay should be paid is definitely risky. Not all physician payments are commercially reasonable. Before paying a physician, your organization should establish both commercial reasonableness and a payment rate that’s FMV. Lastly, your organization should always consider alternative ways to compensate. For example, a per diem payment isn’t the only solution to physician compensation for call coverage. If poor payer mix is the issue, you could pay for uncompensated care. If you have low volumes, consider a per episode payment instead.
- Negotiating consistently high rates with physicians also put your organization at risk. While reviewing your contracts, check the frequency with which your contracts pay above the 75th percentile. There could be good reasons for why some contracts are paid at a higher rate, but it shouldn’t be a blanket policy at your organization to pay at the top end of the market.
- Costs can quickly rise when adding up physician contracts. We recommend that hospitals use benchmarks that look at total spending across physician contracting to compare yourselves to peers. Though it will take further analysis, if you fall higher in the benchmarks you could have more risky agreements than other hospitals. In addition to compliance management, this type of analysis is also good financial management.
- For MD Ranger subscribers use our Facility Benchmarks to determine where in the market your hospital falls.
- One of the behaviors we sometimes see is that hospitals believe that they are exceptional from others, thus having to pay rates that always trend high. Though there may be great reasons that this is true for some contracts, it shouldn’t be a pervasive mentality across your organization.
- Now we’re going to tackle physician contracts themselves and discuss the most important red flags to look for when negotiating, auditing, or reviewing contracts.
- You should always flag contracts where the services being paid for might not be commercially reasonable. Make sure to review all documentation to ensure that paying for the service makes business sense. ADD screen shot
- All physician agreements need to have documentation that they should be paid, and the fair rate at which they should be paid. MD Ranger helps hospitals document both commercial reasonableness and fair market value. If you’re not an MD Ranger subscriber, cost valuations can also serve as documentation.
- It can definitely be okay to pay a doctor more than the 75th percentile, but only if there’s a justified reason to do so. If there isn’t, or the reason isn’t great, then it’s a red flag that should be examined.
- Having expired contracts is fairly common across organizations given volume and resources; however, that doesn’t mean they aren’t very risky. If the service has been terminated, expired contracts are fine but if you’re still paying the physician while the contract is expired, that’s not okay.
- Subsequently, payments without contracts in place are huge risks for your organization. We recommend checking with AP to see if there are physician payments without documentation and a contract in your records. Those payments should be addressed immediately
- In general, non-monetary payments can be red flags because they are notoriously difficult to track. The payment cap, at 372 per year, is relatively low, and many things count for non monetary compensation. If you are confident that your organization is capturing these payments with great accuracy, great. If not, which is probably the case, these types of compensation should be on your red flag radar.
- Another red flag common to see if the service not being described in detail within the contract. It’s important that the specifics of the service get explained in the agreement, so that the reasons for payment are clear.
- Be on the lookout for absent call sheets or time cards. These are big red flags given that proof of work is essential to fair payments.
- Though sometimes services need more than one administrator, be aware of too many medical directorship positions for one service. It might not be commercially reasonable.
- Lastly, always flag multiple payments to one physician or group. Though payments could all be warranted, they should be considered in aggregate to ensure that total payments are within reason.
- Confused about compliance? Know that you have many red flags and need help? Don’t hesitate to contact us; we can help.