Client Alert

On May 21, 2009, the Department of Health and Human Services Office of Inspector General ("OIG") issued its second advisory opinion addressing hospital payments to certain physicians for on-call services performed on the hospital's uninsured patients who present at the hospital's Emergency Department ("ED"). The OIG analyzed this arrangement (the "Arrangement") and concluded that while the Arrangement implicates the federal anti-kickback statute, the Arrangement would not subject the requesting non-profit hospital to sanction by the OIG.

In its analysis, the OIG recognized valid justifications for on-call coverage payments, including EMTALA compliance, the scarcity of physicians or specialists in some hospital service areas, and access to trauma services for patients. The requesting hospital, a recipient of disproportionate share funding for uncompensated services to indigent and uninsured patients, suffered from a chronic inability to provide necessary services for weeks because no specialists were willing to provide on-call services beyond the minimum required by the hospital's Medical Staff Bylaws. From the OIG's perspective, the legality of such arrangements depends on whether compensation for on-call services is (1) fair market value for actual and necessary services or items and (2) not determined in a manner that takes into account the volume or value of referrals or other business generated between the parties. The OIG highlighted that such arrangements could be structured to comply with the personal services safe harbor, although the Arrangement's failure to set the aggregate compensation in advance—a common problem for call coverage agreements—prevented its compliance with the safe harbor.

Specifically, the Arrangement included the following components, deemed by the OIG to reflect an "equitable mechanism" for the hospital compensation and minimize the risks of fraud and abuse. First, the patients for whom payment would be received are narrowly defined and the physicians may not receive any other compensation for the same services (by payer or other source). Second, physicians eligible for call compensation are limited to:

• Active members of the Medical Staff in non-hospital based specialties (excluded physicians include hospitalists, anesthesiologists, radiologists, ED physicians, and pathologists, but not the physicians who would refer patients for these services);
• Physicians who sign a letter of agreement with certain minimum terms, such as following hospital policies and procedures, responding timely (defined as within 30 minutes) to calls for consultation, and following the claim request process of the hospital for payment of the compensation;
• Physicians who perform the on-call services as part of an organized on-call schedule, with physicians providing services on a rotating basis of approximately one week’s worth of calls per month (as varied by the number of physicians in the specialty on Active Staff). Additional days or weeks of on-call coverage may be requested by the physician, but not required by the hospital.

Third, compensation would be limited to the following on-call services: (a) emergency face-to-face consultations, (b) admissions, (c) surgical procedure(s), or endoscopy procedure(s) performed on patients who had no eligible insurance [Medicare, Medicaid, workers compensation, motor vehicle or home owner's insurance coverage, private commercial] and ultimately qualified for a state program for uninsured patients (but not Medicaid).

Operationally, this Arrangement and similar compensation arrangements can run into difficulties. In this case, the hospital bears the initial onus of reviewing each claim request by the on-call physician to determine whether another payer exists and whether the patient to whom the services were provided would be deemed qualified and the services eligible under the de-identified state program. Where the hospital determines payment may be made by another source, the physician who provided the services must pursue payment. It is unclear how timing of Medicaid eligibility and eligibility for the state program will affect compensation payments to the physicians. No mechanism for returning payments made that later could have been paid by another source is discussed. Additionally, the Advisory Opinion makes it clear that the OIG expects the compensation to be based on a reasonable valuation methodology and would not seem to permit individual variation in compensation amongst physicians. Often, physicians try to negotiate a “better deal” based on specialty or availability and such practice would appear to conflict with the spirit of the Advisory Opinion. Finally, a conflict between specialties may be created or intensified by on-call compensation arrangements that exclude hospital-based physicians, but not their legitimate referral sources. The compliance of call compensation arrangements will be judged on a case-by-case basis.

As always, this Advisory Opinion, like OIG Advisory Opinion 07-10 which also addresses call coverage, is limited to the facts and parties presented, does not address permissibility of the Arrangement under the federal physician self-referral law ("Stark" law) or any similar state anti-kickback or self-referral law. Furthermore, a tax-exempt hospital must consider whether any payment for on-call services or indigent care would constitute private inurement or private benefit that could jeopardize the hospital's tax-exempt status. Hospitals considering entering into such arrangements should seek legal counsel to assess their options.

The full text of the Advisory Opinion is available by clicking here.

If you would like more information about on-call coverage compensation and the legal issues it raises, please consult with your regular contacts at the firm or in the Health Care Practice Group:

Tom Stukes at 336-574-8065
Tony Brett at 336-721-3620
Dick Vincent at 404-879-2422
Kim Licata at 919-484-2313.

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