Ensuring fair market value (“FMV”) in physician compensation is vital to healthcare compliance, especially physician administrative compensation, which is replete with complexities.
Administrative services arrangements, most frequently used for medical directorship services, often intersect with the Physician Self-Referral Law (“PSL”), commonly known as Stark Law, and the Anti-Kickback Statute (“AKS”). Separate medical director compensation, as well as for other roles, is common, but often not effectively incorporated into an overall compensation plan. Additionally, these arrangements have crucial compliance considerations for both FMV and in commercial reasonableness. It is essential to ensure that compensation is appropriate and that the services are sufficiently documented as being necessary.
Key Considerations for Call Arrangements
To begin, it is vital to consider the structural intricacies of administrative arrangements. Apart from the provider’s specialty, the key structural factors to consider include:
- Documentation, especially whether time sheets are utilized
- Total hours worked, and a mechanism to adjust this as appropriate
- Who is responsible for benefits and malpractice costs
- Stacking of other types of provider compensation
Beyond the structural elements of an administrative arrangement, several other factors influence the determination of compensation levels. The most common drivers of value are:
- Specialty
- Years of experience, especially similar administrative experience
- Research expertise
- Size of the service line/scope of work
- Local market factors
Building on the points above, it is essential to recognize the limitations of market survey data in the context of administrative services. Although such data can be helpful and should be utilized, it falls short of effectively showcasing how administrative pay varies based on specific value drivers.
Best Practices
When evaluating a health system’s administrative services arrangements, adopting a structured and consistent approach can promote fairness, competitiveness, and simplify compliance. Conducting a review of these arrangements is often beneficial and typically includes the following steps:
- Review all administrative services for needs
- Evaluate commercial reasonableness
- Understand any potential stacking issues with clinical compensation
- Ensure fairness between and within specialties
- Review of appropriateness of pay structures and amounts
- Review how work effort (hours) is tracked
- Establish a process for both regularly reviewing and adjusting current arrangements, as well as establishing new arrangements
Engaging a professional to review arrangements and processes can be advantageous for staying aligned with market norms, assessing whether compensation is fair and competitive, and ensuring the financial terms of the arrangements are justifiable.
Contact Us
For more information on this topic, please contact a member of Withum’s Healthcare Valuation Team.
