Nervous about the handful of arrangements at your organization that compensate physicians outside traditional FMV ranges? Even though many healthcare organizations adopt a single benchmark quantile as the standard for payments, there are times when a higher rate is justified. How do you determine what’s fair, and how do you standardize that process? This deck covers what to do when physician agreements fall outside of traditional FMV Range and how you can protect yourself and your organization against compliance risks, including: -Evaluating if contracts warrant a higher payment rate -Crafting policies and procedures for these types of arrangements -Strategies for efficient, compliant documentation -And more!

1. OUTSIDE OF FMV RANGE?
NOW WHAT?
September 26, 2019
www.mdranger.com

2. Disclaimer
• MD Ranger doesn’t give legal advice.
• All matters regarding potential Stark or
AKS violations (or questions) should go
to your counsel or compliance officer
under privilege.
• Fear overpayments based on being above
FMV? Talk to your attorney to consider
your options.

3. Nice to meet you!
Allison Pullins
• Experienced healthcare technology executive with 12+
years in industry
• 200+ hospital/health system clients
• Hosted 65+ educational webinars
• Published author, including Becker’s Healthcare
Fun Fact: Our family was featured on local Bay Area TV this
summer for our advocacy work to raise awareness and
fundraise for Marfan syndrome

4. Today’s agenda
• Intro and defining ‘fair market value’
• Policies, procedures, and documentation
• What to do when you’re out of FMV range
• Case studies

5. DEFINING FAIR MARKET VALUE

6. How is FMV defined in regulations?
FMV cannot be determined by taking into account the
volume or value or referrals to the entity
Stark defines FMV as “price that an asset would bring as
the result of bona fide bargaining between well-informed
buyers and sellers who are not otherwise in a position to
generate business for the other party, or the compensation
that would be included in a service agreement as the result
of bona fide bargaining between well-informed parties to
the agreement who are not otherwise in a position to
generate business for the other party, on the date of
acquisition of the asset or at the time of the service
agreement”

7. Why FMV is important
• If you are paying a physician more than
fair market value for services, you are in
violation of both Stark and AKS
• Paying too much for services is poor
financial management, even if FMV can
be documented
• Maintaining positive physician
relationships is essential for all
healthcare organizations
• Violations can incur both organizational
and individual fines and penalties
• Sometimes a payment rate may be within
FMV but the payment for that service is not
commercially reasonable.

8. Account for all payments to
the physician
• Aggregated payments for all administrative and
coverage services to a particular physician or even
group practice are important to determine for
compliance purposes
• Stacking is a compliance risk
• The risk of stacking exists with both employed and
non-employed physicians

9. CRAFTING POLICIES AND PROCEDURES

10. The goalpost
✓Policies and procedures in place that streamline physician
contracting and mitigate risk
✓Consistent, objective benchmarks or valuations to document FMV
and commercial reasonableness of all physician arrangements
✓Identification, monitoring and documentation of high-risk
arrangements
✓Awareness of what the organization spends on physician contracts,
and if that amount is appropriate given its characteristics
✓Strategic thinking, especially regarding:
•Evolving physician compensation structures
•Potential regulation changes
•Changing reimbursement
•Profile of physician community
•Competitive environment
•Unpredictable, dynamic industry

11. Best-practice policies include:
• Thresholds for payments are capped at
either the median or the 75th
percentiles
• Documentation required for all
agreements (e.g. market data or an FMV
opinion)
• How your organization will handle
“exceptional” agreements
• Sign off or certification from senior
leadership
• Instructions for the use of market data
(e.g. “must use hourly rate and annual
hours to establish medical directorship
payments”)

12. Step one:
Understand your organization
• Before you craft policies and procedures for physician
agreements, determine your facility (or facilities)
profile
• This is important because particular facility
characteristics, such as trauma status, have an
impact on physician rates

13. Consider the following for profiling
• Size
• Trauma status
• National reputation
• Academic medical center
• Your board and executive team’s comfort
with risk

14. 14
Work backwards and profile contracts – know where
you stand

15. When in doubt…
• If your organization isn’t equipped to profile your
facility, ask a professional
• Tip: look at past opinions by valuation experts and see
how they profiled your facility

16. Consider potential unintended
consequences
• Beware of “rate creep”
• The upper threshold you set will likely become where
everyone expects to get paid
• Flipside: opportunity to reduce costs with your
guidelines
• Also be aware that benchmarks can change, so
setting a contract right at the quantile carries some
risk

17. Policy template
✓ Clear process for contract negotiation
and approval that involves board and
senior management
✓ Standardized, objective benchmarks
across the organization
✓ Policies and procedures for dealing
with outliers, based on both dollar
threshold and comparison to
benchmarks
✓ Process and organization for
documentation
✓ Routine schedule for reviewing and
benchmarking all contracts

18. Make procedures simple and consistent
• Your policy should guide staff through
the contract process through
straightforward procedures
• Our experience shows that the simpler
and more streamlined, the better
• Balance efficiency, risk, and compliance
• Educate your entire management team
about the policies and processes – and
be sure they comply

19. WHAT TO DO WHEN YOU’RE OUT OF FMV RANGE

20. Sometimes agreements need to be negotiated outside of
the guidelines of your negotiation
Help…this contract’s above the 75th percentile

21. The nature of market data
• No matter what there may be one or two (perhaps a
handful) of agreements that simply do not fit your
organization’s definition of FMV, nor are they
appropriate to go through your typical “exceptions”
process and documentation
• No need to panic
• By definition, a quarter of all contracts that are in a
database that comprises a particular benchmark will
fall above the 75th percentile
• Your job is to determine if the payment truly is
appropriate and document why

22. When market data fails you…
• Go out to bid for the service
• FMV opinions can provide an objective
assessment of the particular
circumstances and participants
• Cost method of analysis may indicate a
need to pay higher rates than
benchmarks

23. Potential reasons for high payments
• Job description
• Start-up requiring extra work
• Physician credentials
• Market conditions: poor payer mix, high trauma demand
• Physician shortages
• Higher call burden
• National reputation of provider
• Trauma or other distinguishing characteristics
• Prolonged negotiations that fail to reach lower rates

24. Challenging or sensitive situations
• Difficult relationships with physicians
and/or groups
• Recruitment agreements or
negotiations
• Negotiating rates for distinctly different
facilities within the same system
• “Legacy” contracts
• Key services with high contract values

25. Exceptional agreements need a process
• Determine the valid reasons your
organization would consider a rate that
is above FMV
• Establish supporting records and
documentation needed to qualify for an
exception, which could be
documentation of the negotiation
process, responding bids to your RFP,
alternative survey data, custom surveys,
valuations/FMV opinions
• For consideration: thoughtfully design an
exceptions process that discourages
exceptional agreements

26. Consider for your policy:
• What standards and guidelines do you want to set
when you evaluate agreements that pay higher?
• Should there be a cost threshold?
• Should there be multiple levels of approval and
documentation?
• Are all components of the payment for this contract
justified?
• Hours?
• Hourly rate?
• Annual rate?
• Clinical rate?

27. A sample policy for exceptional agreements
If payment is above the 75th percentile of
the MD Ranger benchmark, apply the
following:
• Signed authorization from the
administrative executive of the facility or
service area
• Alternative documentation for
establishing FMV (e.g. additional
surveys, custom surveys, formal
valuation)*
• Written justification for the proposed rate
• Signed authorization from legal and/or
compliance plus a system executive
• Prior FMV opinion with validation that
considerations continue to exist
*Policies should include a
list of acceptable forms
of alternative
documentation

28. A sample policy for exceptional agreements
If payment is above the 75th percentile of
the MD Ranger benchmark, apply the
following:
• Signed authorization from the
administrative executive of the facility or
service area
• Alternative documentation for
establishing FMV (e.g. additional
surveys, custom surveys, formal
valuation)*
• Written justification for the proposed rate
• Signed authorization from legal and/or
compliance plus a system executive
• Prior FMV opinion with validation that
considerations continue to exist
What if benchmarks change for an old contract?
• Sometimes benchmarks shift—and it’s now outside the acceptable range
• Don’t panic – but plan well in advance of the renewal
• Evaluate the situation carefully , and work towards a compliant rate
• If that isn’t possible, document where the contract falls relative to the current benchmarks
and document the reasons for the exception.
• If the contract falls far beyond current benchmarks you may need to get an opinion.
• Some policies allow extension of their standard FMV for these scenarios

29. How to handle expiring
exceptional agreements
• Start early by reviewing prior FMV documentation and
current benchmarks
• Begin dialog well before expiration (90 days, at a
minimum)
• Know the current data and understand your
alternatives
• If benchmarks have changed, or the contract was
never reviewed, evaluate the situation carefully and
define the desired outcomes and needed review
resources early

30. Enforcement
• How do you enforce the process created
to determine and document exceptional
situations and agreements?
• Have defined approval procedures that
are more comprehensive than the
standard process, including senior
leadership review
• Periodically review and ‘audit’ contracts
to ensure the exception process has not
become ‘the rule’
• Have a regular process for review and
oversight by both executive team and
board

31. Best practices for
exceptional agreements
• Be clear with procedures; outline step by step what is
needed in this special situations
• Determine what additional documentation is needed
for agreements that fall outside your definition of FMV
• Additional documentation could include detailed
historical time logs, detailed job descriptions with
time requirements, RFP responses, cost method
analysis, FMV opinions…
• Bonus! Consider creating a “checklist” to ensure
every exceptional agreement has documentation

32. CASE STUDIES

33. Case 1: Dr. Sally Smith
• Dr. Sally Smith, expert neurologist
• On the ED call panel at accredited stroke-center
• Dr. Smith has a heavy case-load, with many
patients referred to her hospital to be treated by
her specifically
• Because of her expertise, she also serves as
the Stroke Medical Director
• Shortage of physicians in the market
• Taking into account all compensation, she is
being paid at the 95th percentile for neurologists

34. Case 1: payment above FMV likely justified
• Dr. Smith’s call burden is significant due
to ED’s stroke center status
• Her presence at the hospital’s stroke
center raises the prestige of the
organization and the expertise she
brings is unique
• Despite an above-FMV rate being
justified, the hospital must
thoroughly document why high
payment is justified
• Dr. Smith’s hospital decided to have
a cost analysis performed to help
serve as extra documentation of the
higher payments

35. Case 2: Dr. Robert Jones
• Dr. Robert Jones, orthopedic surgery medical director
• Paid for quality initiatives (above 90th percentile hourly rate)
• Paid for ED call (between 50th and 75th)
• Urban market with sufficient physician supply
• Are rates justified?

36. Case 2 verdict: compliance risk
• Dr. Jones, despite being an orthopedic
surgeon, should not be paid $250 an hour
for his work with hospital-wide quality
initiatives. The payment was re-
negotiated to $180, which is the 75th
percentile in MDR benchmarks
• Your policy should be designed to
highlight these types of situations and
prevent ‘non-exceptional arrangements’
from becoming ’exceptional’

37. ABOUT MD RANGER

38. 300+ Physician Benchmarks
• Call coverage rates
• Medical direction payments
• Administrative and leadership
• Hospital-based service stipends
• Diagnostic testing, etc.
• Clinic & hourly rates
• Telemedicine 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
Meet MD Ranger

39. Standardize
processes and
rates
Document FMV
Access 300+
payment
benchmarks
Review and
monitor
contracts
Have data-
driven physician
negotiations
Mitigate
compliance
risks
The foundation of your contracting process

40. Our database
• More than 250 subscribing facilities
• More than 36,000 physician contracts
across 350+ facilities
• Data covers 32 states
• 25% of reported data are from trauma
centers (Level I and II)
• Includes large systems, independent,
rural, and urban hospitals
• Multiple types of providers:
• Behavioral health
• Dialysis centers
• General acute
• Home health
• Hospice
• Long term acute care/ventilation
• Pediatric
• Rehabilitation
• Skilled nursing
• Telemedicine

41. • Call Coverage (55+)
• Medical direction (90+)
• Hospital-based services and
stipends (20+)
• Administrative (12+)
• Medical Staff Leadership
• Diagnostic/other services
e.g. ROP, autopsy, dialysis
• Clinical hourly 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,
teaching status, and more
Used in such diverse settings like
academic medical centers,
integrated delivery systems, and
critical access facilities nationwide
Our benchmarks

42. Let’s talk
⁃ Do you struggle with your physician contracting
policy and strategy?
⁃ Do you have agreements outside typical FMV
ranges?
⁃ Could your organization could become more
efficient with access to a streamlined platform
with benchmark lookups and autogenerated
reports?
⁃ Reach out: apullins@mdranger.com or 650-
692-8873