What You Should Know Regarding Hospital Payments to On-Call Physicians

November 20, 2012
Legal Updates

In follow up to OIG Advisory Opinion 07-10, the Office of Inspector General issued another Advisory Opinion 12-15 on October 23, 2012, which revisited the issue of per diem fees to on-call physicians.  Advisory Opinion 12-15 demonstrates that the OIG is scrutinizing these arrangements more closely and that it remains suspicious of payments to physicians for on-call services.  It is recommended that hospitals proceed very carefully in their arrangements with physicians for on-call services.  In Advisory Opinion 12-15, the hospital is offering a one-year agreement to all of its medical staff members to serve on the emergency department call panel for the hospital.  The hospital operates an emergency room that is open 24 hours 7 days a week and 19% of the patients seen in its emergency department receive uncompensated care. 

The hospital allocates a set amount of money each year for specialty on-call coverage payments to its participating physicians.  The aggregate amount is based upon (1) the likely number of days per month the specialty would be called; (2) the likely number of patients a participating physician would see per call per day and; (3) the likely number of patients requiring inpatient care and post discharge follow up care in a participating physician's office.  Once the aggregate amount is determined, it is divided by 365 days to create a per diem fee to be paid to the participating physicians in each particular specialty.  The physicians receive the payment for each day of coverage provided under the agreement and they receive the payment regardless of whether they are contacted by the hospital's emergency department to treat a patient during the period of their coverage.  The hospital, also, engaged an independent consultant to evaluate the per diem rates and compare them to National Survey data.  Based upon the independent evaluation, the hospital certified that the per diem rates were fair market value. 

The Inspector General recognizes that it is difficult for many hospitals to sustain the necessary on-call physician services without providing compensation for on-call coverage.  However, the OIG further affirms its traditional position that all remuneration flowing between a hospital and a physician must be at fair market value rate and based upon an arm's length transaction and should not take into account directly or indirectly the value or volume of any past or future referrals or other business generated between the parties. 

The OIG listed a number of compensation structures that it would deem to be problematic and they include (1) paying for lost opportunity or similarly designed payments that do not reflect bona fide lost income; (2) payment structures that compensate physicians when no identifiable services are provided; (3) aggregate on-call payments that are disproportionately high compared to the physician's regular medical practice income; or (4) payment structures that compensate the on-call physician for professional services for which he or she receives separate reimbursement from insurers or patients resulting in the physician essentially being paid twice for the same service.

Finding that this arrangement implicates the Anti-Kickback Statute, the Inspector General analyzed whether the personal services and management contract safe harbor was satisfied.  Since, however, the arrangement did not set compensation in advance nor did it specify the sporadic scheduling in advance, the safe harbor was not satisfied.  Despite its suspicion regarding on-call arrangements and the failure of this arrangement to satisfy a safe harbor, the Inspector General determined that this arrangement presented a low risk of fraud and abuse based upon the following enumerated protections:

1.      The requester certified that the per diem payments were based upon an independent valuation.

2.      The requester/hospital allocates the funds for call coverage for each participating specialty and calculates the per diem annually, in advance, based on the methodology created by the hospital.

3.      The participating physicians provide actual and necessary services for which they are not otherwise compensated.

4.      The hospital offers the opportunity to participate in the arrangement to all specialists on its staff who are required by its bylaws to take unrestricted call.

5.      The arrangement was structured so that the hospital incurred expenses do not accrue to the federal healthcare programs and are not included on its Medicare Cost Reports.

Conclusion

It is advisable that hospitals be very careful in structuring on-call payments for physicians to provide coverage to the hospital's emergency department.  It is recommended that the payments be determined in advance based upon a methodology that is grounded in a genuine fair market analysis.  Furthermore, the hospitals need to be aware that these on-call arrangements should be made available to all physicians on the medical staff and that they should not "cherry pick" certain physicians to participate.  Furthermore, the cost of the on-call funding should not be added to the hospital's Medicare Cost Report. 

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