High-quality market data is a powerful tool for analyzing physician costs, negotiating competitive contracts, and documenting compliance of hospital-physician agreements. However, market data is not the all-in-one solution for every question or concern regarding physician contracting.
If your organization could use best practices for utilizing market data to evaluate physician contracts, view these slides which cover:
-Situations where market data excels
-When to consult an expert
-Understanding the limitations of market data
2. Allison Pullins
• Chief Marketing Officer at MD Ranger
• Decade in the industry, developed expertise specifically
pertaining to the hospital/physician relationship
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Your host
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• The limitations of market data
• When and how to use market data
• Best practices and case studies
Today’s agenda
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Things market data can do
• Provide a reasonably objective
standard
• Help evaluate commercial
reasonableness
• Find appropriate payment ranges
• Document market rates
consistent with fair market value
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But, IS survey data an objective standard?
Don’t throw the baby out with the
bathwater.
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Risks of survey data: technical challenges
• Incorrect labeling of agreements
• Including agreements that aren’t apples to
apples
• Inaccurate data input
• Other methodological problems
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Risks of survey data: poor sample size
Size does matter.
It doesn’t mean you should
disregard benchmarks with
adequate sample sizes.
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If anything, it’s a great gut check
• If a payment rate falls within reasonable ranges,
that is a good sign.
• If it doesn’t fall within a reasonable range, you
definitely must investigate and document the
reasons this particular contract is outside
standard FMV parameter
• It’s a sign you may need a valuation
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What would a professional say?
• Professional valuators use
market data as part of the
process to evaluate contracts
and render FMV opinions
• They are smart and savvy
enough to know what is
meaningful, what isn’t.
YOU can be smart and savvy, too.
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Approaches to valuation
The market approach is like using Zillow to
determine the value of a 4 bedroom house on a
quarter acre with a modern kitchen
The cost approach is like asking a contractor to
determine the cost of building a 4 bedroom house on
a quarter acre with a modern kitchen …with some
very specific and unique characteristics
18. Market approach
Approach
1. Find or a high-quality, robust
database of similar transactions
between hospitals and physicians
2. Select the service from that
database
that is a strong “match” in terms of
characteristics (such as specialty
and burden of service required)
3. Select a central range within the
market data—typically between the
25th and 75th percentile
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19. Market approach
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Guidance: If a sufficiently
strong “match” can be
found, the market
approach can effectively
be used to establish
FMV; if not, the cost
approach should be used
as well. Judgment must
be used to determine
how much weight to give
the results from each
approach
20. Cost approach
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This loss (if there is a loss) is the payment to secure coverage that
makes the group “whole;” this is FMV amount based on the cost
approach , assuming the ‘costs’ fall within market ranges
Staffing cost
Plus
Practice expenses
Total Expenses
Less
Net Professional Collections (with AR)
Gain (Loss, which is Cost to Provide Coverage)
$6,435,000 per year
14.3 FTE x $450,000 per FTE at median ($350,000 to $450,000, 25th-
75th)
Plus
$1,645,000
$8,080,000
$5,540,000
- $2,540,000 per year
For a group that has two parts of
its practice (a private office-
based practice or an agreement
to cover another hospital plus
the subject agreement), the
model is only for the portion that
is the subject of the agreement
Build a model of the financial performance of the practice
Illustration For A Typical Major Hospital-based Service
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Evaluating commercial reasonableness
• Market data can inform decisions
about commercial reasonableness
• It cannot tell you if a paid position is
commercially reasonable at your
organization
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Find appropriate ranges
• Market data is great at providing appropriate
payment ranges to use in negotiations
• 25th, median, and 75th percentiles provide good
information for many situations
• Don’t forget sample size checks
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Find appropriate ranges
Use judgement to determine the most
appropriate range given your
organization and your situation
26. Ideas for your organization’s approach
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• Organizations often define how FMV can be
documented for their physician contracts
• Many organizations define FMV as an agreement at
or below the 75th percentile for the comparable
service
• Some organizations don’t want to exceed median
benchmarks
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Set guidelines and review processes
• Make sure that your choice is supported and
documented
• Make sure all members of your team know and use
the standards and processes of the organization
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Be consistent
• Apply your organization’s
standards to each
physician agreement and
rate
• Involve senior
management and/or a
board committee, in the
approval process,
depending on the value
and hospital policies
• Create and use contract
templates
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Test commercial reasonableness
Before agreeing to pay and before payment
rates are set, determine if payment at all is
reasonable
CMS defines CR as "an arrangement will be considered
'commercially reasonable' in the absence of referrals if
the arrangement would make commercial sense if
entered into by a reasonable entity of similar type and
size and a reasonable physician (or family member or
group practice) of similar scope and specialty, even if
there were no potential designated health services
("DHS") referrals."
31. Review the contract’s scope of services
• Though most contracts are unique, it’s important to
compare similar positions
• Examine scope to ensure that hours per month are
reasonable; use historical time records and market data
to document
• Pay special attention to positions with burdensome
implementation or extended hours, including sunsetting
high hours following start-up investments
• Check restricted or in-house status for coverage
agreements since this may increase FMV
32. Identify benchmarks for the service
• Find the most appropriate match for the service
• Compare similar organizations
• Check sample size
• Examine the full market range, and ask:
• What’s the median? What is the 75th percentile?
• Are there reasons for my hospital rates to be higher than the median?
• Are there characteristics of my hospital, the service or the physician that could
impact FMV?
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Select your rate
• Remember your organization’s rules
• Your payment rate doesn’t have to be exactly the 75th
percentile; in fact, we don’t recommend it!
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Process is key
• Your organization should pre-determine a standard FMV
documentation process
• Don’t skips steps
• Consistency is key across the compliance function
• When audited, having a process documented is very
important
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Additional resources on mdranger.com:
• Building a Cost-Effective Physician Contract Compliance
Program Using Market Data
• Using Market Data for FMV
• Key Elements of Physician Contracting Compliance
Programs
• Using Market Data for Physician Contracting
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275+ Physician Benchmarks
• Call coverage rates
• Medical direction payments
• Administrative and leadership
services rates
• Hospital-based service stipends
• Diagnostic testing, etc.
• Clinic & hourly rates
Online Platform
• Benchmark lookups
• Contract proposal tools
• Contract reports by facility and
service
• Total facility costs + benchmarks
Research and Support
• Resources for education and
training
• On-call experts to help
subscribers use benchmarks
and tools
Compliance Documentation
• Contract-specific FMV
documentation reports
• Reports to assist with real-time
monitoring and annual reviews
Our platform
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• Call Coverage (55+)
• Medical direction (85+)
• Hospital-based services (15+)
• Administrative
• Medical Staff Leadership
• Diagnostic/other services
e.g. ROP, autopsy, dialysis
• Hospital-based stipends
• Clinics, professional services
• Telemedicine
• Residency/teaching/GME
• Uncompensated care
• Meeting attendance, peer review,
IT/EHR and quality initiatives
• 13 Pediatric services, with more
emerging each year
Hospital-characteristics drill
down for ADC, bed size, trauma
status, urban/rural, stroke
centers, and more.
Our benchmarks
Used in academic medical
centers, integrated delivery
systems, and hospital
organizations.
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Do you have confidence in your physician
contracting and FMV documentation
process?
Are you uncertain of how much to pay
physician leaders for their time?
Do you suspect your organization has
some risky agreements?
Reach out: apullins@mdranger.com or 650-
692-8873
Need help?