Aristotle once said, “The whole is greater than the sum of its parts.” However, Aristotle wasn’t around during the time of Stark Law, the Anti-Kickback Statute, and increased regulatory scrutiny of physician compensation arrangements.
When it comes to physician compensation stacking, evaluating the individual parts isn’t enough. Healthcare organizations also need to understand the arrangement as a whole.
When multiple service components or contracts exist with a physician—often referred to as stacked compensation or stacking arrangements—the potential for overlap or duplication of payment increases. An arrangement may need to be evaluated not only for fair market value (FMV), but also for commercial reasonableness and compliance with applicable healthcare regulations.
A comprehensive understanding of all contract components, both individually and collectively, combined with a formal contracting and review process, can help healthcare organizations identify potential overlap and support defensible physician compensation arrangements.
What Is Physician Compensation Stacking?
In isolation, compensation for one service component, such as clinical services or call coverage, may appear relatively straightforward.
Stacked arrangements are more complicated because a physician may provide services across multiple locations, organizations, service lines, or types of services.
Each clinical service, non-clinical service, or location of service should be understood individually. The components should then be evaluated together to determine whether the total compensation arrangement is supportable.
This is particularly important when evaluating whether services or time commitments overlap.
For example, a physician may participate in call coverage panels for two specialties concurrently. Simply adding two independently determined compensation amounts together may not appropriately reflect the physician’s actual burden or availability.
LBMC discusses these issues further in Top Three Things to Consider When Setting Up On-Call Arrangements, including how physician availability, utilization, acuity, and concurrent coverage can affect fair market value.
Examples of Stacked Physician Compensation Arrangements
Stacked arrangements can include multiple components such as:
- Clinical services, often compensated through a base guarantee or compensation per wRVU
- Call coverage
- Medical directorships
- Advanced practice provider supervision
- Telemedicine services
- Quality or performance incentives
- Other administrative or leadership responsibilities
Stacking may also involve:
- Providing the same service for multiple facilities. For example, a physician provides urology call coverage at multiple campuses of a health system or related facilities.
- Providing the same service for multiple service lines. For example, a physician provides general surgery call coverage and vascular surgery call coverage at one facility.
- Providing multiple services at one facility. For example, a physician provides clinical services, neurosurgery call coverage, and medical directorship services at the same facility.
- Providing multiple services at multiple facilities. For example, a physician provides STEMI cardiology call coverage and medical directorship services at multiple campuses or related facilities.
The important issue isn’t simply how many agreements exist.
It’s whether the services, time requirements, and compensation associated with those agreements make sense when considered together.
Why Fair Market Value Alone Isn’t Enough
An arrangement being consistent with FMV does not necessarily mean the overall arrangement is commercially reasonable.
Healthcare organizations should consider both fair market value and commercial reasonableness when evaluating physician compensation arrangements. An individual compensation component may be supportable on its own, while questions can still arise when the business purpose, time requirements, or total compensation associated with multiple arrangements are evaluated collectively.
This is one reason physician compensation shouldn’t be evaluated solely by comparing an individual payment to a market survey percentile. For more on common benchmarking misconceptions, see Fair Market Value Myths Debunked.
Best Practices for Reviewing Stacked Physician Compensation
Create a Consistent Contracting Process
Consider centralizing physician contracting oversight and formalizing the contracting process.
Formal contract reviews should evaluate applicable regulatory requirements as well as fair market value and commercial reasonableness. Depending on the complexity or risk of the arrangement, organizations may need the expertise of an independent third-party valuation professional and consultation with in-house or outside legal counsel.
For a broader look at physician compensation governance and contract review, see Ways to Enhance Your Provider Compensation Program.
Understand Every Compensation Component
Organizations should understand what the physician is being paid to do under every agreement, not simply evaluate each contract independently.
Questions to consider include:
- Are the requirements of all contract components feasible?
- Do any responsibilities or time commitments overlap?
- Is the physician receiving compensation for concurrent services?
- Are compensation parameters established for individual components?
- Is the total compensation arrangement supportable?
- Is the arrangement commercially reasonable?
- Does the documentation support the services being compensated?
Market data also needs context.
Different compensation surveys may capture different forms of compensation, making it important to understand what is included in the benchmark before using it to support an arrangement.
Document the Services Actually Performed
Require physicians to document work associated with each compensated role.
Depending on the arrangement, that might include time records for administrative services, documentation associated with call coverage, or wRVU and patient-volume information for clinical services.
Organizations should periodically review that documentation and reconcile it with the services required under the applicable agreements.
Review the Entire Arrangement Periodically
A stacking analysis shouldn’t necessarily be a one-time exercise.
Physician responsibilities, service lines, locations, call burdens, productivity, and compensation can change over time. Organizations should have a process for periodically reviewing existing arrangements to determine whether the services are still needed and whether compensation continues to be supportable.
LBMC’s current provider compensation guidance recommends a formal process for reevaluating agreements and specifically considers continued need, commercial reasonableness, and FMV.
When Should You Consider an Independent Physician Compensation Valuation?
Not every compensation arrangement requires the same level of analysis.
An independent valuation may be particularly useful when an arrangement involves:
- Multiple compensation components
- High total compensation
- Multiple facilities or service lines
- Concurrent call coverage
- Administrative and clinical responsibilities
- Unusual or difficult-to-benchmark services
- Compensation outside commonly observed market ranges
- Significant changes to an existing physician arrangement
LBMC’s Healthcare Compensation Valuation team evaluates physician employment, independent contractor, and other healthcare compensation arrangements and provides FMV and commercial reasonableness analyses.
Physician Compensation Stacking: The Bottom Line
As physician compensation arrangements become more complex, healthcare organizations need to understand both the individual components of physician contracts and how those components work together.
A compensation amount that appears reasonable in isolation may raise different questions when combined with other clinical, call coverage, administrative, or incentive payments.
A consistent contracting process, clear documentation, appropriate benchmarking, and review of the entire compensation arrangement can help organizations identify potential overlap and support compensation that is consistent with fair market value and commercial reasonableness.
Organizations managing a high volume of provider arrangements may also benefit from tools that help standardize the evaluation process. LBMC’s Pulse FMV Calculator includes tools for physician employment arrangements, including stacking, as well as call coverage, medical directorship, academic, shift, and hourly arrangements.
Need help evaluating a physician compensation arrangement? Learn more about LBMC’s Healthcare Compensation Valuation services.
