OIG Issues Favorable Guidance on Per Diem On-Call Compensation Arrangements

On October 30, 2012, the OIG posted a favorable Advisory Opinion addressing a hospital’s (the “Requestor”) per diem on-call compensation arrangements with some of its staff physician specialists (“Participating Physicians”). The Requestor detailed a contractual relationship whereby Participating Physicians provide unrestricted on-call coverage for unassigned patients in the Requestor’s emergency department. The OIG ultimately determined that due to a number of safeguards, it would not impose civil monetary penalties or administrative sanctions in connection with the enforcement of the Federal Anti-Kickback Statute.

The Requestor is a charitable, tax-exempt, not-for-profit hospital that operates an emergency department (“ED”) on a 24/7 basis. The Requestor further provided that 19% of patients seen in the ED received uncompensated care by the Requestor with the balance of patients receiving coverage from the Federal health care programs or other third party payors.

The Requestor sought guidance on whether the payment of a per diem fee to specialist physicians in connection with the provision of unrestricted call coverage to the hospital’s ED violated the Anti-Kickback Statute (the “Arrangement”). The Requestor explained that the Arrangement was developed in response to on-call availability shortages in certain specialties and the fact that many physicians no longer wished to take call. The goal of the Arrangement was to ensure staffing of its ED in order to comply with the requirements of EMTALA and to increase overall physician morale.

The Requestor indicated that all specialists members of its medical staff who are subject to unrestricted call have the opportunity to participate in the Arrangement and that its existing Arrangement includes 130 physicians. The written agreements with the Participating Physicians are for one-year, contain automatic renewal provision and include a number of other requirements, such as specific response time availability, the preparation of all medical records and participation in medical staff committee appointments. Participating Physicians are not required to be on-site and will be compensated as long as they are able to respond within 30 minutes of a call from the ED.

The compensation paid to the Participating Physicians is calculated annually by taking into account various factors including: (1) the likely number of days per month the specialty would be called; (2) the likely number of patients a Participating Physician would see per call day; and (3) the likely number of patients requiring inpatient care and post-discharge follow-up care in a Participating Physician’s office. This figure is divided by 365 in order to formulate a per diem rate. Participating Physicians receive this per diem fee in accordance with the agreements even if they are not actually called by the ED during the contracted period. An independent valuation was conducted to assess the commercial reasonableness of the per diem fee, and the Requestor certified that the fees were administered without regard to a Participating Physician’s ability to generate referrals for the Requestor.

Over the years, the OIG has issued guidance with respect to the nationwide increase in paid call coverage arrangements. The OIG has repeatedly cautioned that on-call compensation arrangements should meet the key elements of the personal services and management contracts safe-harbor by being arms-length and fair market value compensation for actual and necessary services. It has also provided that "lost opportunity" arrangements, which pay more than FMV, or which pay physicians for services for which they already receive separate reimbursement, should be highly scrutinized or avoided altogether.

With respect to the Arrangement, the OIG provided that the Requestor would not be able to meet the most likely safe harbor candidate, personal services and management contracts, since neither the aggregate compensation, nor the periodic schedule for each physician, is set in advance in the written agreements.

The OIG analyzed the Arrangement on a facts and circumstances basis and ultimately determined that it presents a low risk of fraud and abuse for the following five key reasons:

1. Requestor certified that the compensation paid to the Participating Physicians is commercially reasonable and consistent with FMV and does not take into account volume or value of referrals. Additionally, the compensation remains consistent among Participating Physicians in the same specialty.
2. Requestor calculates and allocates the payments in advance each year without regard to physician referral patterns.
3. Physicians provide actual and necessary services for which they are not otherwise generally compensated. The OIG found this to be true even though Participating Physicians may receive separate reimbursement for the services provided. The focus remained on the fact that Participating Physicians provided a percentage of uncompensated care and that the per diem payment is the only compensation for that significant amount of care.
4. Requestor offers the Arrangement to all specialists on staff required to provide unrestricted call coverage under Requestor's bylaws without regard to referrals patterns.
5. Costs associated with the Arrangement are absorbed by the Requestor and are not passed on to federal health healthcare programs.

While OIG Advisory Opinions may only be relied upon by the party requesting it, it is likely that this opinion will provide hospitals additional comfort in entering into compliant compensation arrangements with referring physicians for the provision of on-call coverage.

A complete copy of the Advisory Opinion can be found here. If you require assistance in developing on-call arrangements with referring physicians or wish to have your current relationships reviewed, please do not hesitate to contact a member of Buchanan's Health Care Section.