OVERVIEW
When speaking about a health system or provider compensation plan, it’s common to hear leadership reference Stark Law definitions as a point of guidance. While these definitions speak to intent, they don’t offer any actionable support for identifying whether a compensation model is legally compliant.
HSG assists healthcare organizations in these efforts by conducting internal compliance reviews on your physician and advanced practiced provider (APP) compensation models, providing your team with consistent, objective evaluations and fair market value determinations, and helping leaders address issues before they become critical.
Stark Law Common Definitions
Fair Market Value (FMV)
The value in an arm’s-length transaction, consistent with the general market value of the subject transaction.
General Market Value for Compensation
With respect to compensation for services, [general market value means] the compensation that would be paid at the time the parties enter into the service arrangement as the result of bona fide bargaining between well-informed parties that are not otherwise in a position to generate business for each other.
No Consideration of Referrals
Arrangements can’t take into account the volume or value of referrals or other business generated between the parties.
CHALLENGES
Problem Recognition and Reactive Solutions
Evaluating your provider compensation plans can feel like a daunting task, but even the smallest concern can become full-blown legal issue if it goes unchecked, causing a much bigger headache.
Some common reasons we see major compliance risks develop include:
- There is no set standard or internal process to create a culture of compliance.
- Existing FMV problems are not be perceived as significant enough to address (or they are willingly ignored).
- Leadership fears provider dissatisfaction, so they are slow to react when faced with a potential issue.
- Leadership has routinely been reactive instead of proactive when potential FMV compliance concerns are brought to their attention.
- Issues are left alone until they require legal counsel or have to be “self-reported.”
Because these behaviors tend to happen simultaneously, risks often do not get addressed until one major concerns becomes impossible to ignore.
APPROACH
HSG’s Insights to Action Methodology takes clients through six key steps to identify problems and create long-lasting solutions.
HSG partners with organizations to comprehensively evaluate and redesign provider compensation models, incorporating an ongoing, periodic FMV review. For the most effective results, we believe the reviews must:
- Be conducted annually or bi-annually
- Identify provider or specialty-specific issues and outliers
- Allow for proactive adjustments and changes to the compensation plan
Proactively reviewing plans helps to ensure FMV compliance, and severely reduces the need for urgent reactive measures.
DATA ACQUISITION
What data do we aggregate to solve the problem?
- Provider roster with clinical, administrative, teaching, or other FTE statuses, provider type (MD, DO, APRN, PA, etc.), specialty, and hire date.
- Total annual compensation by provider with detail by total compensation components (i.e., base salary, productivity bonuses, other/quality bonuses, and any addition compensation (medical directorships, call pay, APP supervisory stipends, etc.).
- Total annual Work Relative Value Unit (“wRVU”) production by provider (matching total compensation timeframe).
- Shifts/hours worked and hourly rates when applicable to providers, during the specific evaluation timeframe.
- Other compensation drivers including medical directorships including hours and hourly rate; call pay daily rate (or hourly rate) and days (or hours) of compensated call provided, and APP supervision stipends, stipend per APP FTE, and FTEs supervised.
- Current employment contracts including physician compensation model plus any active contract amendments/addendums, including key information like start date, end date, renewal terms, compensation details, and other contract details.
DATA TRANSFORMATION
How do we extract information from the data?
- Benchmarking and Percentiles: We compare productivity and compensation metrics against industry standards to determine the providers’ individual outcome and assign a percentile and related risk category.
- Risk Categories Include:
- No Concern. Providers’ compensation is within FMV parameters and compliance risk is minimal; no further action or explanation is needed.
- Base and Total Compensation < 75th Percentile, OR
- Total Compensation > 75th Percentile, but Total Compensation and Production = Reasonably Aligned (within 10 percentiles), up to the 90th Percentile
- Moderate Concern. Providers’ compliance risk is high and warrants consideration for a formally documented FMV and commercial reasonableness opinion.
- Base or Guaranteed Compensation > 75th Percentile of applicable Benchmark Data, OR
- Total Compensation > 90th Percentile
- Significant Concern. Providers’ compliance risk is significant and, in our opinion, requires corrective action to create compensation and FMV standards alignment.
- Total Compensation > 75th Percentile and Total Compensation exceeds wRVU production by +10 percentiles
- Monitor. There is no active compliance concern, but Providers’ should be monitored going forward to prevent any risks due to current Compensation levels compared to Production levels.
- Total Compensation <75th Percentile
- Compensation levels exceed Production levels by +10 percentiles, but Total Compensation <75th percentile
- No Concern. Providers’ compensation is within FMV parameters and compliance risk is minimal; no further action or explanation is needed.
PROFESSIONAL SERVICES
What expertise do we apply to find a solution?
- Provider Data Evaluation: Discussions take place around provider compensation data, and additional clarification questions around compensation outliers may be asked.
- Risk Assessments: Based on data findings, HSG assesses existing and potential compensation compliance risks based on each individual provider, suggest corrective actions, and identify areas for plan redesign. Providers’ risks is assigned according to their percentiles, as listed above. Assessments and related suggestions are based on our years of practical practice operations and provider compensation experience with specialties across the continuum.
PACKAGING
How do we structure and apply our expertise?
- HSG completes a front-end review of the underlying provider data sets and evaluates the outcomes for potential compliance risks.
- HSG provides FMV and Commercial Reasonableness Opinions when significant compliance risks are found. These serve as formal documentation that the compensation plan in question is, as deemed by a third-party, fair market value and commercially reasonable.
- Pricing is health system-based with consideration for provider network size and term length of project.
DELIVERY
When and how do you receive solutions?
- Detailed Draft Report, published in PDF, delivered to the client and reviewed with you by HSG experts during a meeting. We walk through our initial findings and recommendations, answer any questions, and gather any remaining information that might be needed to provide explanation or any outliers that can be justified.
- Final Report, published in PDF, is a finalized version of the draft report depicting all providers’ assigned risk category in a singular chart view. It also includes formal documentation for justifiable outliers, and official recommendations for corrective actions to address individual physicians’ risks.
IMPLEMENTATION & MONITORING
How do we provide ongoing support to your organization?
After the initial report is completed, clients typically engage HSG on an annual or bi-annually cadence for reviews, but even a one-time evaluation is important for maintaining the overall compliance of a health system.
- Periodic reviews typically demonstrate leaders’ desire for cultural change and serve to identify issues for expeditious solutions.
NEXT STEPS
During a review, it is common for HSG to identify other existing provider compensation-related and/or practice issues that require further consideration, such as:
- Mismatched compensation structure for the reality of practice utilization, or larger systemic issues
- Medical necessity coding and documentation issues, and/or a need for internal education and review
- wRVU calculation and/or billing modifier application issues.
- APP under- or over-utilization, or APP supervision and/or medical director compensation and program concerns
- Scheduling and/or access issues
Because our compensation and compliance experts come with years of practical practice operations experience, comprehensive specialty understanding, and clinical expertise, we are uniquely positioned to provide clients’ ongoing assistance to address these issues when identified.
So, are you ready to start being proactive about your potential compliance risks and protect your bottom line? Reach out to Neal Barker to start the conversation.
