Aristotle once said, “The whole is greater than the sum of its parts.” However, Aristotle wasn’t around during the time of patient referral kickbacks, Stark Laws, and Medicare fraud. The Office of the Inspector General (OIG) has made it clear – when it comes to physician compensation stacking, the whole arrangement is not worth more than, and may not even be equal to, the sum of its parts.

Hospitals and practices are increasingly concerned with both cost containment and regulatory compliance of physician services, and rightly so. When multiple service components or contracts exist with a physician (called stacked compensation or stacking arrangements), the potential for overlap and duplication of payments for services increases dramatically, which can result in Stark Law violations or, at a minimum, lead to greater scrutiny from the OIG.

A comprehensive understanding of all stacked contract components (both individually and collectively) and implementation of a formal contracting process can help ensure compensation is consistent with fair market value (“FMV”) and avoid scrutiny from regulatory authorities.

Stacking Arrangements

In isolation, payments for one service component, such as clinical or call coverage services, may appear simple. However, stacked components or contracts are more complicated, as they require a physician to provide services across multiple locations, organizations, service lines, and/or services types. Each clinical service, non-clinical service, and/or location of service (the “parts”) must be analyzed separately for FMV purposes. Then, all components should be evaluated together (the “whole”) to ensure total compensation is consistent with FMV.

To avoid overpayments, organizations should determine whether the total hours necessary to provide all services are achievable by an individual physician. Additionally, organizations should avoid full, separate payments for required services that may overlap or be concurrent.

For example, a physician may participate in call coverage panels for two specialties concurrently, in this case, the facility should not compensate the physician 100% of each compensation rate, as the physician only accepts additional call burden but no additional availability.

Stacking Examples

Stacked arrangements often include multiple components such as clinical services (often compensated through a base guarantee or compensation per wRVU), call coverage, medical directorship, mid-level provider supervision, telemedicine, and quality incentives. Stacking also considers:

  • Provision of the same service for multiple facilities (e.g., the physician provides urology call coverage at multiple campuses of a facility or at related facilities);
  • Provision of the same service for multiple service lines (e.g., the physician provides general surgery call coverage and vascular surgery call coverage at one facility);
  • Provision of multiple services at one facility (e.g., the physician provides clinical, neurosurgery call coverage and neurosurgery medical directorship services at the facility); and
  • Provision of multiple services at multiple facilities (e.g., the physician provides STEMI cardiology call coverage and medical directorship services at multiple campuses or related facilities).

Best Practices

Implementing best practices may protect against potential overpayments.

Create emphasis on and consistency with the contracting process. Consider centralizing physician contracting oversight and formalizing the contracting process. Formal and methodical contract reviews may include FMV and commercial reasonableness evaluation policies. To identify high-risk arrangements, organizations may need the expertise of an independent, third-party valuator as well as consultation with in-house and outside counsel. 

Consistently seek to understand contract components and related data. Are requirements of all contract components feasible (e.g., total work hours)? Have compensation limits been set for each component and for total contractual compensation? Does total compensation fall within FMV? When using market data to support compensation, it is important to understand how the market compensation is calculated (calculation may vary from source to source). Consider performing a time sheet analysis and comparing this analysis to CMS time studies.

Commit to proper documentation and pay physicians according to the documentation. Require physicians to document work for each role (e.g., time logs for administrative and call coverage services and, for clinical roles, documentation of wRVUs or patient volumes). Audit the documentation regularly and reconcile to services required and described in the contract.

As physician compensation arrangements are under increasing regulatory scrutiny, organizations must make systematic efforts to understand individual components of physician contracts, determine whether overlapping services or duties exist, and review the stacked compensation to avoid overpayment and ensure regulatory compliance.