Client Alert

A recent advisory opinion by the Department of Health and Human Services Office of the Inspector General (OIG) gives hospitals valuable new guidance on establishing compensation arrangements for physician on-call and indigent care services.

The OIG examined the arrangement used by an unidentified hospital to compensate physicians for on-call and indigent care services. On Sept. 20th, the OIG issued an opinion that the hospital's arrangement did not subject the hospital to sanctions under the federal anti-kickback statute. Thus, the hospital's arrangement may be used as a guide for other hospitals facing similar questions about physician compensation.

Background
The hospital had difficulty finding physicians willing to provide emergency department call coverage and uncompensated inpatient follow-up care for patients initially presenting at the emergency department. So an ad hoc committee composed of staff, administration, and Board representatives developed a compensation arrangement under which physicians in a number of specialties receive a per diem payment in exchange for the following:

1. Sharing monthly call obligations as equally as possible with other physicians in the same specialty;
2. Providing inpatient care to patients seen in the emergency department while on call if the patient is admitted, regardless of the patient’s ability to pay;
3. Responding to the emergency department within a reasonable time;
4. Cooperating with quality initiatives and care and risk management initiatives; and
5. Documenting the services provided to all patients seen under this arrangement.

The hospital stated that physicians who do not adhere to the requirements of this arrangement are not paid until the physician demonstrates compliance.

The per diem rate for each physician is based on two factors: (1) the physician's specialty and (2) whether call coverage is provided on a weekday or a weekend.

The per diem rate for each specialty depends on certain factors, such as the severity of illness typically encountered by that specialty, the likelihood of having to respond when on call, and the degree of inpatient care typically required of the specialty for patients initially presenting at the emergency department. Furthermore, each participating physician must provide 1.5 days of uncompensated call coverage each month.

OIG's Analysis
The OIG noted that while legitimate reasons exist for arrangements in which hospitals pay for call coverage, such arrangements still pose a risk of fraud and abuse. However, the OIG determined that this arrangement was acceptable because it poses a low risk of fraud and abuse for several reasons, including the following:

1. The hospital had a legitimate and unmet need;
2. The payments to physicians are for substantial and quantifiable services;
3. The compensation arrangement is offered to all physicians on the hospital’s medical staff in the relevant specialties;
4. Monthly call obligations in each specialty are divided as equally as possible;
5. The per diem payments are administered uniformly for all physicians in a given specialty;
6. The hospital certified, and a third party concluded, that the per diem payments are fair market value for the services provided;
7. The compensation arrangement promotes a public benefit by facilitating better emergency on-call services and related uncompensated care services; and
8. The arrangement is structured so that all costs are absorbed by the hospital and none accrue to federal health care programs.

Please note that the hospital in the Advisory Opinion appeared to be unable to obtain on-call services without paying the physicians. If a hospital's medical staff bylaws require physicians to provide uncompensated on-call coverage as a medical staff obligation, the OIG may not reach the same conclusion. A careful consideration of this factor, as well as whether the desired call coverage and services are more than mandated by the medical staff bylaws, will be important in performing any compliance analysis.

In contrast, the OIG also listed several compensation structures that might be problematic. Hospitals and health care providers should exercise caution before engaging in any of these practices:

1. "Lost opportunity" 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 when compared to the physician’s normal medical practice income; or
4. Payment structures that result in the physician being paid twice for the same services (e.g., payment structures that compensate the on-call physician for professional services for which he or she receives separate reimbursement from insurers or patients).

You may read the full advisory opinion by clicking here.

Please note that this advisory opinion only addresses the federal anti-kickback statute and does not address the permissibility of the arrangement under the federal physician self-referral law (often referred to as the Stark law) or under any state anti-kickback or self-referral laws. Furthermore, a tax-exempt hospital should consider whether any payments for call coverage or indigent care could jeopardize the hospital’s tax-exempt status.

If you would like more information, please contact one of the members of Womble Carlyle's Health Care Practice Group.