Articles on Compliance Strategies

With Little Guidance on Fair-Market Value Call Payments, Try Surveys, Extrapolation

Reprinted from the August 22, 2005, issue of REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on false claims, overpayments, compliance programs, billing errors and other Medicare compliance issues.

With more physicians expecting payments for being on call to the emergency department (ED), pressure is growing on hospitals to fork over this money without running afoul of the anti-kickback statute and Stark self-referral law.

"It's an unsettled issue as to how much [hospitals] can safely pay people to be on call," says Mac Thornton, former chief counsel to the HHS Inspector General. "Cash is going to referral sources — and sometimes a lot of it — but you can only pay them fair-market value for what they do. It's one of those areas where there might be competitive pressure to increase payments beyond what is justifiable, and at some point the government could come roaring in."

Hospitals that pay physicians for call coverage to the ED must devise a method for establishing and documenting fair-market value for on-call payments, says South Bend, Ind., attorney Bob Wade. But this is easier said than done because so little data exist in this arena.

Physician payments for performing procedures are well established, but there are no generally accepted guidelines for on-call payments. "It's clearly legitimate to pay doctors to be on call, but what is the fair-market value of someone's free time?" Thornton asks. For example, how do you attach a price to being nearby and sober, and refraining from activities like mountain climbing and windsurfing? "There is no law on this," he says.

However, there is a law requiring hospitals to provide call coverage for the ED, and that's where this struggle begins. The Emergency Medical Treatment and Labor Act (EMTALA) requires hospitals to screen and stabilize all patients with emergency medical conditions regardless of their ability to pay, and forbids hospitals to transfer patients to other hospitals unless it's for medical reasons (vs. financial).

Under EMTALA, hospitals must maintain panels of on-call physicians that represent the specialties offered by the hospital. It means the ED can summon, for example, a neurologist or orthopedic surgeon after hours, and that an on-call doctor must come in and treat patients even if they can't pay for the services. Traditionally, physicians provided this service free, but in recent years, some physicians started demanding payment for it.

However, hospitals shouldn't open the on-call payment floodgates without reservation, says Wade, who is with the law firm of Baker & Daniels. If you start paying one set of specialists, the rest will clamor for payments, and, eventually, on-call payments for all specialists will become institutionalized in the hospital budget. "Seriously consider whether as a hospital you want to head down this road. There is no heading back. You will be locked into on-call payment forever," he says. "All other specialties will be asking for it."

Given EMTALA mandates and other imperatives, hospitals may have no choice but to fork over on-call payments to physicians.

Hospitals that balk may find themselves facing a medical staff full of doctors who have turned in their active privileges in favor of courtesy privileges — which jeopardizes the hospital's ED.

Between this rock and hard place, hospitals have to figure out the right amount of money to pay physicians for on-call service. A lack of benchmark data makes it hard to come up with a fair-market price, says Wade.

Determining Fair-Market Value

So what factors should be included and excluded when setting on-call physician payments? Thornton says competitive pressure is probably not a factor. The fact that several hospitals are competing for Dr. B. Cool's referrals wouldn't justify increasing her on-call payments. In fact, the competition for referrals "probably taints the fair-market-value process," says Thornton, who is now with the law firm of Sonnenschein, Nath & Rosenthal.

Supply and demand is a factor, Wade says. If there is a pressing need for a particular specialist, "that will affect how you document need for the on-call service and the on-call payment."

He also says hospitals and physicians have to let go of the myth that as long as you stay within the fair-market-value range, it's OK to pay an undeserving physician top-dollar. It's not true. If a physician doesn't warrant the high end of the range (e.g., a newly minted doctor with good connections), it will be considered abusive by the government to pay at the high end.

Some on-call payment innovations are cropping up. For example, the Oklahoma state legislature recently enacted a trauma statute that "attempts to spread the responsibility for call coverage among several hospitals," says a CMS official in Dallas. "The law requires hospitals that don't contribute doctors to the call rosters to pay money instead."

There are two major ways to document the fair-market value of on-call arrangements with physicians, Wade says.
The first method is to use existing on-call payment data. Either find out how much other hospitals pay their physicians for call coverage and pay the same or a similar amount, or benchmark on-call payments using survey data.
The second method is to grow your own payment data. There are assorted ways to do this, but Wade has devised an approach that is based on an extrapolation of the ratio of call pay to salaries.

Here are the details of both methods:

Though little survey data exist for on-call pay, expect more in the future. Meanwhile, a 2005 survey of hospital on-call physician payments from Sullivan, Cotter and Associates, a management consulting firm specializing in compensation, is available. For the survey, call coverage was divided into two categories: restricted and unrestricted. Unrestricted call pays less because the physician just has to be available by beeper and agree to not drink any alcohol, while restricted call pays more because the physician must be onsite.

Here are some average hourly on-call payments, according to the Sullivan, Cotter survey:

• Anesthesiology: Restricted pay is $76.62, unrestricted $30.01.

• Cardiology: Restricted pay is $93.63, unrestricted $21.45.

• Cardiothoracic Surgery: $13.96 (only unrestricted).

• Critical Care: $72.17 (only restricted).

• Family Practice: $22.60 (only unrestricted).

• Gastroenterology: $11.39 (only unrestricted).

• General Surgery: $30.61 (only unrestricted).

• Internal Medicine: Restricted pay is $65.09, unrestricted $22.63.

Wade says the Sullivan, Cotter survey "is a very good attempt to start to establish benchmarks for on-call compensation," but he cautions its sample size is small.

Wade has created alternate methods of determining a fair-market price for unrestricted call coverage when hospitals are unable to locate survey data. He suggests hospitals use fair-market on-call payments from specialties with survey data to determine cost for specialties without survey data.

The key: Determine the on-call hourly rate and what percentage of the normal hourly rate it represents, Wade says.

For example, Hospital ABC can't document fair-market value for certain specialties, so it gets survey data for an anesthesiologist. The data show an hourly salary rate of $150 and an hourly on-call rate of $20. That puts the on-call payment at 13.3% of regular compensation. He suggests hospitals apply that percentage to other specialties. In other words, the on-call payment rate for other specialties would be 13.3% of those physicians' salaries.

Another option: Extrapolate from the ratio that hospitals pay nurses to be on call. If on-call nurses in the market are typically paid $16 an hour for salary and $2 an hour to be on call, then their hourly call pay is 12.5% of their normal hourly rate. A hospital could apply that percentage to a physician, Wade says, as a fair-market value approach to on-call pay. For example, if the physician's normal hourly rate is $150, "then it may be commercially reasonable to pay the physician $18.75 to be on call," he says.

Wade says it's important to establish what the hospital is paying for when negotiating call coverage with physicians. Exactly how many hours is a physician tied to his or her beeper when on call? The whole night? A 24-hour cycle? After 5 p.m.? This is a contract service, so it must be specific. And when a hospital and physician sign a contract for a year, the answer to that question is critical. So Wade calculated how many hours constitute "nights, weekends and holidays" — typical on-call coverage periods.

There are 6,200 hours of nights, weekends and holidays in a year — assuming that a weekend lasts from 5 p.m. Friday to 7 a.m. Monday, a night is interpreted as 5 p.m. to 7 a.m. the next day, and a holiday is 5 p.m. the day before the holiday to 7 a.m. the day after the holiday.

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