This document discusses trends in hospital-based physician agreements. It outlines components of these agreements such as payment types including stipends and collection guarantees. It discusses challenges like ensuring all payments to physicians are considered and analyzing insurance contracts and collection rates. Case studies examine issues like ensuring adequate staffing and services in agreements, and "stacking" of multiple payments. The document promotes using benchmarks to structure compliant, market-based agreements and avoid underpaying or overpaying physicians.

1. 1
Trends in Hospital-Based Agreements
July 2017

2. 2
Outline:
• Introducing MD Ranger
• Defining hospital-based services
• Components of hospital-based contracts, types of payments
• Challenges, trends, and case studies
• FMV and documentation options

3. 250+ 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
Compliance Documentation
• Contract-specific FMV documentation
reports
• Reports to assist with real-time
monitoring and annual reviews
Research and Support
• Resources for education and training
• On-call experts to help subscribers
use benchmarks and tools
3

4. The foundation of your compliance process
Standardize
processes
and rates
Document
FMV
Access 250+
payment
benchmarks
Review
contracts and
monitor with
ease
Have smarter,
data-driven
physician
negotiations
Mitigate
compliance
risks
4

5. Meeting the unique challenges of
healthcare organizations
Make data-driven decisions for
your organization
Stop relying on poor market
data sources
Streamline documentation and
ensure you are protected
against costly settlements
5

6. 6
Our subscribers

7. 7
Our benchmarks
• 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.
Used in academic medical centers,
integrated delivery systems, and
hospital organizations.

8. Our methodology: key differences
• Providers vs. facilities
• Verified data
• Thorough data audits
• Physician contract experts on-
call to review/advise on
challenging contracts
• Comprehensive scope of
benchmarks based on full
hospital contracting practices
8

9. About your host
9
• Chief Marketing Officer at MD
Ranger
• Decade in the industry,
developed expertise
specifically pertaining to the
hospital/physician relationship

10. DEFINING HOSPITAL-BASED
SERVICES
10

11. Defining hospital-based services: key
characteristics
• Restricted Coverage; that is 24-hour in-
house or in-house for at least a regularly
defined period (such as 12-hours) plus on-
call coverage for the rest of the day
• Specialization. At the least some of the
panel members have most of their practices
in the hospital-based service
• Patient Base: Contractual obligation to
treat a specified set of hospital patients –
e.g. ICU, pediatrics, neonatal or emergency
• Recognition. Not limited to certain
specialties but should be specialties for
which there is at least the beginning of
recognition by professional specialties
11

12. Emerging trend: bifurcation of practice of
medicine in the U.S.
• Office-based v. hospital-based
• Trend driven by:
• Physician interest and
• Hospital needs
• Outcomes from both clinical and cost perspectives are improved
with inpatient hospital-based physician model
12

13. Specific hospital-based services
13
Classic hospital-based services (pre 1990s)
• Emergency medicine
• Pathology
• Radiology
• Anesthesiology
Additional services (1990-2000s)
• Internal medicine hospitalists
• Pediatric hospitalists
• Neonatology
• Critical care
• Radiation oncology
• Trauma surgery
Examples of emerging specialties (2010s and beyond)
• Acute Care Surgery
• Pediatric intensive care
• Orthopedic surgery
• Neurology
• Cardiology
MD Ranger provides benchmarks
for hospital-based services

14. 14
COMPONENTS OF HOSPITAL-BASED
CONTRACTS AND PAYMENT OPTIONS

15. Ways to pay
• Not paying at all
• Paying for administrative and/or medical direction services
• Paying for coverage
• Paying a stipend to provide the service
• Offering a collection guarantee
• Incentives
15

16. Stipends and collections guarantees
• Payments are made to a
physician group (beyond
professional fee collections) to
cover a service
• If this is a specified amount per
year it is called a stipend
• If the hospital makes up the
difference between collections
and a target it is called a
collections guarantee
16

17. Hospital-based contract elements: 2017 v. 2015
• Administration only (33%)
• Coverage only (8%)
• Stipend only (23%)
• Stipend plus
administration or
coverage (17%)
• Unpaid (16%)
• Both
17
• Administration only (31%)
• Coverage only (17%)
• Stipend only (16%)
• Stipend plus
administration or
coverage (10%)
• Unpaid (19%)
• Both

18. Incentives
• Becoming more popular with migration to P4P
• Most contracts incent physicians on at least two of the below
components
18

19. MD Ranger 2017 benchmarks
19

20. Variety in terms
More than in other types of services
Anesthesia:
• Total annual payments (stipends), per diem equivalents, call
coverage rates, collection guarantees (total and per wRVU),
administrative/directorship services
• Scope of service (general, cardiac, OB, pain management, etc.)
• Payments for unsponsored patients (not as common)
• Incentive components (cost, quality, and patient satisfaction
being most common)
• Pro fee schedule and departmental coverage:
• Annual, monthly, daily, hourly
• Per episode or test or delivery
• Unit guarantee or collection guarantees
• Percentage of Medicare (fee for service)
20

21. Pathology:
• Total annual payments (stipend), administrative/directorship
fees
• Contract terms (histology, autopsy, blood bank)
• Compensation methods
• Clinical lab fees (who bills fees, retains fees)
• Technical service billing (who bills Medicare and Medicaid, who
bills other payers)
• Less likely to be paid (only 18% of MD Ranger subscribers pay)
21
Variety in terms
More than in other types of services

22. 22
CHALLENGES, TRENDS, AND CASE
STUDIES

23. 1) Getting level of service right
Be meticulous when drawing up a contract for a
hospital-based service. Vague, non-specific terms could
lead to:
• Understaffing
• Not having proper back-up
• Lower quality
• Patient satisfaction
• Staff discontent (nursing, tech and physicians)
23

24. 2) Taking into account all payments to a
physician or group across contracts
24
• Called either “stacking” or “double dipping”, it is when the
hospital hasn’t properly considered the cumulative value of all
payments to a physician or group, e.g.:
• Medical directorships
• Administrative payments
• Emergency call payments
• This is quite easy to overlook
• Payments like medical directorships can easily “get lost” within
the scope of a complex hospital-based agreement

25. 2) Taking into account all payments to a
physician or group across contracts
• When paying a physician group a stipend, always
consider:
• Other payments to group and/or members of group (directorships,
coverage)
• Pro fee collections
• Any “services” reimbursed (e.g. Nighthawk services, malpractice,
CNAs, NPs)
25

26. Case Study: Green Creek Hospital*
• 75 bed rural hospital contracts with a radiology group to provide
coverage. The contract pays only for medical direction
• Group asks for a new contract in which they are reimbursed for
the cost of “Nighthawk”
• The the physicians say:
• “The money would not go to us so it should not be an FMV
concern”
• “It benefits patients”
• “Most groups use Nighthawk these days”
• So—what do you?
26
*pseudonym

27. • Even though payments would go just to Nighthawk it is just another
way to provide off-hours staffing (group keep fees)
• What payments in radiology group contracts in MD Ranger say they are
intended for—
• Medical direction
• General coverage including general emergency coverage
• Interventional radiology coverage
• “Nighthawk”
• No definition
• So, the best way to test FMV for radiology is to test using “total
annual payments”
27
Case Study: Green Creek Hospital*
*pseudonym

28. 3) Don’t forget physician collections
• Understanding the economics of the physician groups you
partner with will help you determine if stipends or collection
guarantees are needed
• Sometimes hospitals provide a stipend when it’s not needed,
resulting in physician incomes exceeding market norms
• Other times, a hospital may underpay a physician group if
collections from payers are low due to poor payer mix, inefficient
or excessive coverage requirements (e.g. asking a group to staff
more operating rooms than the volume justifies)
28

29. 4) Investigating insurance contracts and
collection rates: always a good idea
• Benchmark professional collections rates from
commercial payers to ensure that the physician group
you contract with is getting reimbursed fairly
• Hospitals can end up subsidizing suboptimal rates
from insurance companies or poor collection
practices
• If you discover badly negotiated rates action should
be taken as soon as possible, however, recognize
that it could take a substantial amount of time
29

30. Case Study: Big Tree General Hospital*
• Big Tree has contracted with an anesthesia group to provide a
typical range of services
• The FMV analysis shows that payments appear fine
• But, buried in the analysis are commercial collection rates that
are too low
30
*pseudonym

31. Case Study: Big Tree General Hospital*
Many hospitals and their hospital-based groups “leave money on
the table”
• The hospital is, in effect, subsidizing insurance companies
• This creates a compliance risk
• The hospital could reduce its costs without reducing physician
income and could reduce its costs as well as pay the physicians
higher on the FMV range.
31
*pseudonym

32. 0
1
2
3
4
5
6
7
8
9
$10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120
Number
of
Health
Plans
Payment Per ASA Unit
Frequency Distribution of Rates for Paid Claims
Services Provided in 2011 at Big Tree General
Hospital
By moving to more competitive rates, an anesthesiology group stands to increase
revenue by $700K to $875K per year, translating to reduced contract costs for the
hospital and/or increased income to group.
All Paid
Proprietary
Median $64
Network
Published
Median $61
Contracts of
Concern
$30 and $37
Case Study: Big Tree General Hospital*
*pseudonym
32

33. Progress made, dollars uncovered
• For many hospitals this issue
can involve many millions of
dollars across several hospital
based groups
• Three strategies have been
shown to be successful
1. Data-driven negotiations
with health plan
2. Free group to become non-
participating
3. Propose mediation
33

34. 5) Always have objective assessments
before payments are made
• Ultimately, not every hospital-based service needs a
collection guarantee, stipend, or even additional
payments for call coverage
• Use benchmarks to determine if paying for a service
could be appropriate, and then follow up with due
diligence
• Commercial reasonableness is a key and necessary
finding for contract compliance
34

35. 6) Determining exclusivity
35
• Many, if not most hospital-based
agreements grant exclusivity
• Exclusivity has economic value because:
• Generally accepted principles of economics and valuation
say that exclusivity (or monopolies) have economic value
• The OIG says so

36. Exclusivity: a case study from the OIG
36
“OIG Supplemental Compliance Program Guidance for Hospitals,” published in
the Federal Register / Vol. 70, No. 19 / Monday, January 31, 2005.
We are aware that hospitals have long provided for the delivery of certain hospital-based
physician services through the grant of an exclusive contract to a physician or physician
group, which includes management, staffing, and other administrative functions, and in
some cases limited clinical duties. These exclusive arrangements affect the cash and
non-cash value of the overall arrangement to the respective parties. Depending on the
circumstances, an exclusive contract can have substantial value to the hospital-based
physician or group, as well as to the hospital, that may well have nothing to do with the
value or volume of business flowing between the hospital and the physicians. By way of
example only, an exclusive arrangement may reduce the costs a physician or group
would otherwise incur for business development and may eliminate administrative costs
otherwise incurred by the hospital. In an appropriate context, an exclusive arrangement
that requires a hospital-based physician or physician group to perform reasonable
administrative or limited clinical duties directly related to the hospital-based professional
services at no or a reduced charge would not violate the anti-kickback statute, provided
that the overall arrangement is consistent with fair market value in an arm’s length
transaction, taking into account the value attributable to the exclusivity. Depending on the
circumstances, examples of directly-related administrative or clinical duties include,
without limitation: participation on hospital committees, tumor boards, or similar hospital
entities; participation in on-call rotation; and performance of quality assurance and
oversight activities. Notwithstanding, whether the scope and volume of the required
services in a particular arrangement reasonably reflect the value of the exclusivity will
depend on the facts and circumstances of the arrangement.

37. Exclusivity: a case study from the OIG
37
“OIG Supplemental Compliance Program Guidance for Hospitals,” published in
the Federal Register / Vol. 70, No. 19 / Monday, January 31, 2005.
We are aware that hospitals have long provided for the delivery of certain hospital-based
physician services through the grant of an exclusive contract to a physician or physician
group, which includes management, staffing, and other administrative functions, and in
some cases limited clinical duties. These exclusive arrangements affect the cash and
non-cash value of the overall arrangement to the respective parties. Depending on the
circumstances, an exclusive contract can have substantial value to the hospital-based
physician or group, as well as to the hospital, that may well have nothing to do with the
value or volume of business flowing between the hospital and the physicians. By way of
example only, an exclusive arrangement may reduce the costs a physician or group
would otherwise incur for business development and may eliminate administrative costs
otherwise incurred by the hospital. In an appropriate context, an exclusive arrangement
that requires a hospital-based physician or physician group to perform reasonable
administrative or limited clinical duties directly related to the hospital-based professional
services at no or a reduced charge would not violate the anti-kickback statute, provided
that the overall arrangement is consistent with fair market value in an arm’s length
transaction, taking into account the value attributable to the exclusivity. Depending on the
circumstances, examples of directly-related administrative or clinical duties include,
without limitation: participation on hospital committees, tumor boards, or similar hospital
entities; participation in on-call rotation; and performance of quality assurance and
oversight activities. Notwithstanding, whether the scope and volume of the required
services in a particular arrangement reasonably reflect the value of the exclusivity will
depend on the facts and circumstances of the arrangement.

38. Is there a generally accepted way to quantify
the economic value of exclusivity?
• Three approaches
1. Have FMV documentation (internal documentation or valuation opinion by consulting
expert) recognize the exclusivity and that this has value
2. Negotiate a compensation level at discount lower point in the FMV range—than would
otherwise be the case
Most ranges from the market approach will already include the discount for exclusivity
Most ranges from the cost approach will not include the discount
3. Include a discount in the range of 5% to 10% to reflect value of exclusivity
38

39. FMV DOCUMENTATION OF HOSPITAL-
BASED PAYMENTS
39

40. Contracting tips
40
• Establish a contracting program at your organization, with staff
that can oversee day-to-day management.
• Outline a standardized FMV process for all contracts. All
hospital-based contracts, even “no cost” contracts, should have
FMV documentation.
• Documentation should be a valuation either using market data,
the cost method, or a combination of both.

41. Using market data
• Benchmarks can help with scoping and planning for the
contract.
• In some cases, market data will suffice for FMV documentation.
• More complex hospital-based agreements, particularly ones with
no market data available, will need a formal cost valuation.
41

42. But…is using market data for FMV okay?
• Absolutely!
• The OIG’s Advisory Opinion 07-10 (published
September 2007)
• Fraud Alert issued June 9th, 2015: the government is
scrutinizing physician compensation arrangements,
and no wonder—millions are recovered each year!
• Both the hospital and the physician may be at risk
42

43. Is a cost valuation needed?
43

44. Need help?
44
 Do you feel confident in your organization’s physician
contracting and FMV documentation process?
 Are you confused how much to pay physician leaders
for their time?
 Do you feel like your organization has risky
agreements?
Call us: apullins@mdranger.com or 650-692-8873