addressing physician compensation within rural healthcare
TRANSCRIPT
Addressing Physician Compensation within Rural Healthcare
Fatema ZanziAttorney
Drinker Biddle & Reath LLP
Speaker
Panel
Jennifer JunisChief Nursing
Officer OSF Saint Luke Medical Center
Karen KoleManager
Huron Consulting Group
Kevin MarxChief Practice
OfficerKatherine Shaw Bethea Hospital
Agenda
1. Introductions
2. Physician Alignment Options
3. Legal Framework
4. Fair Market Value Considerations
5. Examples of Physician Compensation Models• OSF Saint Luke Medical Center: Medical Directorship and Mid-
Level recruitment
• Katherine Shaw Bethea Hospital: Physician Employment and Residency recruitment
3
Physician Alignment Options
4
LessIntegration
On-Call CoverageAgreement
MSOServices
JointVenture
ProfessionalServices
Agreement“PSA”
HospitalEmployment
FullIntegration
SpaceLeases
Medical Admin.Services
Agreement (Medical
Directorship)
PhysicianRecruitment
Medical StaffMembership
Captive PC orSubsidiary
Employment Model
Foundation/Clinic Model
Co-Management Agreement
Legal Framework
• The “Rule” Book
• Federal laws• Stark Law• Anti-Kickback Law• IRS Tax Exemption
• State laws• Illinois Medical Practice Act has a fee-splitting
prohibition• Illinois anti-kickback and self-referral prohibitions
5
Legal Framework: Common Themes
• Is the compensation consistent with the fair market value (FMV)?
• Value in arm’s length transactions, consistent with the general market value:
– General market value: The compensation that would be included in a service agreement as the result of bona fide bargaining between well-informed parties to the agreement who are not otherwise in a position to generate business for the other party, at the time of the service agreement.
– Fair market price: Generally based on bona fide comparable services agreements, where the compensation has not taken into account the volume or value of anticipated or actual referrals.
(42 C.F.R. 411.351)
6
Legal Framework:Common Themes (II)• Is the arrangement commercially
reasonable?• Assessing commercial reasonableness is separate
from the analysis of FMV:– While FMV applies to the level of compensation for the physician’s
services, commercial reasonableness applies to broader business issues related to the arrangement.
– Commercial reasonableness is especially important in arrangements that include compensation for administrative and other non-clinical services.
• The services covered by the arrangement should be essential to the operation of the hospital/system and/or to addressing specific community needs
• Services provided are fully described.
• Hospital demonstrates sound business reason/need for the services.
• Physician must actually provide the services as evidenced by records/reviews.
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Valuation Considerations• Document and define the need
• Review various methods of compensation:
• Determine financial pro forma with new compensation arrangement
• Determining fair market value• Reviewing multiple market surveys.
• Considering unique factors, including availability of such physician services in the rural market.
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Medical Directorships Co-Management Agreements On-Call Pay
Base Salary Productivity-Based Quality Bonus
Sign-on Bonus Relocation Bonus Performance Incentive
Drive Time Loan Forgiveness Benefits
Risks to Watch Out For
• Guaranteed Compensation
• Long-term Contracts
• Stacking payments
• Not including all aspects of compensation in fair market value calculations
• No compensation cap
• Proposed compensation and purchase price
• Inconsistency
9
OSF Saint Luke Medical Center
• Critical Access Hospital with 25 licensed beds
• Not-for-profit and tax-exempt
• Has a Rural Health Clinic onsite
• Located in Kewanee, Illinois (Henry County)• Serving Kewanee and surrounding towns
and rural areas since 1919• Built replacement hospital that opened on
May 31, 2008• Recently merged with OSF Healthcare
System on April 1, 2014
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Medical Director Model
• Dyad structure with aligned goals
• Medical Director compensation based on goal achievement
• OSF Saint Luke Medical Center Emergency Department Case Study
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12
30 - Overall, would you rate the quality of care provided as:
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Advanced Practice Nurse Model
• Inability to recruit Primary Care Physicians• Hospitalist Program started to allow
outpatient practice in clinic• Family Practice APNs as a foundation versus
extension• Rural Health Clinic Case Study
• Certified Diabetic Educator• Behavior Health Certified• Registered Dietician
14
Katherine Shaw Bethea Hospital
• Independent, Not-for-Profit Hospital Located in Dixon, IL
• 80 Licensed Beds
• $126M Net Revenue
• 65 Employed Physicians
15
Recruiting Journey
• Started in 1990
• Established “Center for Health Services”
• Leveraged Geography for Scholarship Recipients
• Networked with Illinois RMED
• Dixon Rural Training Track
• Developed Niche for International Medical Graduates
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Fair Day’s Work for a Fair Day’s Pay
• Employed Physicians are Salaried
• Work/Life Balance, Community Citizenship
• CPI and Occasional Adjustments
• All “One Off” Deals
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Burning Platform
• Growing Number of PCP’s
• Maturing Specialty Practices
• Varying Practice Styles
• Expected Cost Pressures
• Physician Engagement
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Transition to Value
• Tiered Salary with Bonus Potential
• 10% Tied to Quality
• PCP’s First, Then Specialists
• Larger Specialty Groups for Hospital-Based Services
• Expect Fall-Out
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QUESTIONS?
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Karen KoleHuron Consulting Group550 W. Van Buren Street Chicago, Illinois 60607(312) [email protected]
Kevin MarxKatherine Shaw Bethea Hospital403 E. 1st St. Dixon, IL 61021(815) [email protected]
Fatema ZanziDrinker Biddle & Reath LLP191 N. Wacker Dr., Ste. 3700Chicago, IL 60606-1698(312) [email protected]
Jennifer JunisOSF Saint Luke Medical Center1051 W. South St. P.O. Box 747 Kewanee, IL 61443(309) 852-7524 [email protected]