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Essential Elements of

Physician Contracting

Compliance Programs

March 20, 2014

Allison Pullins

Director

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Outline:

• Key elements of physician contracting programs

• Ideas for structuring and implementing your contracting program

• Strategies for determining and documenting FMV

• Market data and compliance

• Uncovering whether or not your organization could be “high risk”

for compliance issues

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A Breakthrough in Physician Contracting

and Fair Market Value Analysis MD Ranger is a leading provider of data-driven physician contract and

compensation solutions that help hospitals and health systems analyze market and

internal data, negotiate competitive contracts, and document compliance.

MD Ranger provides:

• A secure, web-based Data Tool to collect and organize

contract data (uploads via Excel available, too)

• Benchmarks, available as reports and online queries, with

market data for call, medical direction, administrative services,

hospital-based services, uncompensated care programs, and

diagnostic testing services

• Web-based Analytic Tools to benchmark internal data,

identify compliance issues, and analyze where dollars are

spent

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MD Ranger Subscribers

Our benchmarks:

• 42 call coverage positions

• 65 medical directorships: hours,

hourly, and annual rates

• Hard to find leadership rates (Chief

of Staff, meeting attendance, EHR,

Quality Initiatives, Peer Review)

• Hospital-based stipends and

incentive payments

• Diagnostic and testing services

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Introducing Allison

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• Director at MD Ranger, Inc

• Background in physician marketing,

recruitment, engagement, compensation,

negotiations

• Helps MD Ranger subscribers leverage

the data, analyze internal costs

• Follow us on Twitter! @MDRanger

• Blog much? Visit us: blog.mdranger.com

Key Elements of Physician

Contracting Programs

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The Essentials:

• Executive oversight

• Contract management

• Financial oversight

• Compliance management

• Rigorous, consistent process for determining FMV

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Executive Oversight

• Designate an executive to take responsibility for

physician contracting at your organization • The buck stops with her

• All exceptions for contracts go through her

• Rates are set with her guidance

• The daily physician contracting director/manager reports directly to

this person (ideally)

• Involve your compliance committee on a quarterly or

half-yearly basis

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Contract Management

• Having a contract for all financial arrangements (even

non-monetary ones)

• Organizing your contracts

• Alerting your team to expiring contracts

• Renewal process • Updated or new contract

• Checking the rate

• Negotiation

• Sign-off

• Strategic contract management

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Financial Oversight

• Are all your contracts commercially reasonable?

• What benchmark do you aim for in individual (or

group) arrangements?

• How much are you spending, in aggregate, on

physician administrative services, call arrangements,

and hospital-based service contracts? Is this

comparable to your peers?

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Compliance Management

• Mandatory Stark training for all staff involved in the

process

• Understanding “fair market value”

• Creating a consistent, rigorous system for

determining FMV

• Deciding how you are documenting the compliance of

every arrangement

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Process to Determine FMV

• Discuss what’s best for your organization

• Research various approaches (pros and cons)

• Document your organization’s philosophy and

approach to FMV

• Record step by step the process you’ll use to

document FMV

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10 Ideas for Structuring and

Implementing your Program

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Contracting

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1) Have a contract for every service

• Many hospitals have a service or two that is not

outlined contractually

• Determine if your organization has any such services,

and create a contract immediately

• Don’t forget payments for services like: • Chief of Staff

• Medical staff positions

• Meeting attendance

• Other non-monetary compensation

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2) Get all your contracts in ONE place

• Use your contract management system and organize

all physician contracts in a unified fashion

• Don’t have a contract management system, or too

small to have one? • Create one in Excel

• MD Ranger has a contract management tool included in each

subscription

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3) Truly know your contracts

• How many do you have?

• How much are you spending, in aggregate?

• When are your “tricky” contracts expiring?

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4) Have a system for handling contract

renewals

• Automate the process as much as possible

• Designate roles within your organization for contract

renewal. You’ll need: • A new contract (or update current agreement with new dates)

• Checking the rate and potentially designating a new rate

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5) Create a process to handle

“exceptions”

• Define what makes an exception

• Determine the specifics of how to handle the

exception. Consider: • The upper limits for setting an exception rate

• Who approves the exception

• How to document the exception

• BONUS: how to prevent exceptions from happening in the first

place

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Compliance

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6) Create a foundational document

• Describe, in detail, your physician contracting

program—most importantly the steps you will take to

ensure compliance for all physician financial

arrangements

• Within the document, outline: • Accountable executive

• Day to day staff and their responsibilities

• Strategic goals

• FMV process

• Handling exceptions

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7) Communicate your compliance plan

• Accountable executive should receive blessing from

her peer colleagues

• Communicate your compliance plan throughout the

organization

• Ensure access to foundational document

• Emphasize transparency, consistency

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8) Determine how you’ll set rates

• Consider cost, efficiency, and the realities of your

organization

• How many contracts will you set rates for, and how

complex are they?

• What is most realistic for your organization?

Consider scale.

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9) Determine your rate benchmark

• Though you’ll have contracts over the 75th percentile

and above, generally this is not a good mark to aim at

consistently (should be an exception rather than the

rule)

• What’s your market like? Where are your current

rates? What’s your organization’s needs? What is

realistic AND compliant?

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10) Flag high-risk contracts in advance

• Don’t get caught just weeks before a complex

contract expires

• Determine which contracts are the most risky from

both a negotiation and compliance standpoint in

advance so that you have time to set your strategy

and your ideal rate

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Strategies for Determining and

Documenting FMV

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Three approaches to determine rates

• Market Data

• Internal or external proprietary formulas

• Internal or external Ad hoc FMV Opinions

(valuations)

Most hospitals use a combination of two or all three

methods above.

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All approaches have advantages and

disadvantages

• Market data: • Pros: Cost effective, flexibility, easy to scale

• Cons: Doesn’t work if you don’t have apples to apples comparisons

• Proprietary formulas: • Pros: Hands-off, easy to scale

• Cons: Proprietary formulas aren’t transparent to the user

• FMV opinions: • Pros: Most detailed and specific

• Cons: Can be hard to scale given the cost

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Most MD Ranger subscribers:

• Use market data from our reports for a vast majority

of their contracts

• Pull in valuation firms or internal experts for the

remaining complex agreements

• Always document their rates with proof of fair

market value, whichever method they choose

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Documenting compliant rates

• Ad hoc FMV opinions can be filed away to

demonstrate compliance

• Outline other processes in your compliance

document. Some ideas are: • MD Ranger individual contract reports (shown with market range

and specific contract’s rate)

• Internal certification document with market data

• Combination of the above

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Market Data and Compliance

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Can market data be used for

compliance purposes?

• Most of the time, yes

• High quality data is efficient and cost effective for

any organization

• OIG Advisory Opinion 07-10 (9/20/07)

• Phase II Stark safe harbor

• Sometimes you’ll need more than just data,

particularly for complicated agreements or situations

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High Risk? Potential Red Flags

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Make sure you need to pay

• Always ensure the

request to compensate a

physician is commercially

reasonable (and back it

up with data or other

evidence)

• Explore alternative ways

to compensate beyond a

“per diem” payment

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Are you the snowflake?

• Yes, all hospitals are different

• However, not very different

• Benchmarks aren’t the end-all, be-all—though they

are the only way we can truly compare ourselves to

peers

• Beware the defensive reaction

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Are your rates consistently high?

• There might be good reasons to have rates on the

higher side, though never always

• If you are in the beginning stages of a compliance

program, review all your physician contract rates and

determine where in the market data each one falls.

Consistently high rates might need revision or a plan

to lower rates

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Are you spending more in aggregate?

• Use benchmarks to compare yourselves in overall

spending to peers

• There might be a good reason for over-spending;

there might not

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We want to hear from you!

www.mdranger.com

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Allison Pullins

Director

apullins@mdranger.com

650-692-8873