On-call arrangements continue to be a challenge for hospitals and healthcare systems. Ensuring continuity of coverage for not only emergency departments but also for inpatient specialty practices has proven difficult for a variety of reasons.
What should you consider when setting up the fair market value of on-call arrangements?
Webinar Duration 41.26
During this webinar, we will discuss:
- Best practices for structuring arrangements to avoid any hint of improper payments and risk of Stark or AKS violations
- Methodologies for determining fair market value compensation for on-call arrangements
- Common differences in valuing unrestricted and restricted coverage arrangements
- Using technology to assist in valuing on-call arrangements
Speaker: Jessica Webster, Senior Manager, LBMC Healthcare Valuation Services
For hospitals and health systems, maintaining reliable physician call coverage is essential. It can also be expensive, difficult to staff and increasingly complex to manage.
That puts healthcare leaders in a challenging position. You need enough coverage to meet patient care, operational and regulatory needs. You need compensation that reflects the actual burden placed on physicians. And you need a process that supports fair market value (FMV) and commercial reasonableness.
The answer isn’t simply finding the right benchmark.
Every arrangement has its own facts and circumstances. That means healthcare organizations need to look beyond a percentile in a compensation survey and understand what physicians are actually being asked to do.
Start With the Business Reason for the Arrangement
Before determining how much an organization should pay for call coverage, start with a more basic question: Why does the arrangement exist?
Commercial reasonableness addresses the legitimate business purpose behind an arrangement. For call coverage, that purpose could include meeting EMTALA requirements, maintaining trauma certification or addressing another operational need.
That business rationale matters because physician compensation arrangements operate within a significant regulatory environment, including the Stark Law and Anti-Kickback Statute. Compensation arrangements may need to satisfy requirements related to FMV, commercial reasonableness and the volume or value of referrals.
For healthcare leaders, the practical takeaway is straightforward: document the “why” before focusing on the “how much.”
A strong internal process can include centralized physician-contracting oversight, defined approval procedures and regular reevaluation of existing agreements. Organizations should also have a process for escalating arrangements that fall outside established parameters or involve unusual facts and circumstances.
Fair Market Value Is More Than a Benchmark
Survey data can be useful. It provides context and a starting point. But it shouldn’t automatically determine the answer.
FMV analysis should consider the facts and circumstances of the specific arrangement. That distinction becomes particularly important with on-call coverage because two arrangements that look similar on paper may place very different demands on physicians.
Consider two physicians in the same specialty. One may receive relatively few calls and rarely need to report to the hospital. The other may be interrupted repeatedly throughout a shift, routinely come on-site and handle higher-acuity cases.
A single benchmark doesn’t tell that story.
Healthcare organizations should understand the operational reality behind the arrangement before reaching a compensation conclusion.
Understand What Kind of Call Coverage You’re Buying
On-call arrangements can take several forms, and the structure affects the FMV analysis.
Unrestricted coverage. The physician is available to respond but isn’t required to remain at the facility. The analysis may begin with compensation for availability and then consider the actual burden associated with the coverage.
Restricted coverage. The physician is required to remain at the facility. Because the physician’s time and mobility are more limited, the compensation analysis is different from unrestricted call.
Concurrent coverage. One physician covers multiple facilities or service lines simultaneously. This approach can help organizations manage limited physician supply, but it can also increase the burden on the physician.
Staffing coverage. An independent physician group may provide coverage for an entire service line, commonly in hospital-based specialties such as hospital medicine, anesthesia or critical care. These arrangements often include both clinical and call responsibilities.
Understanding the structure is the first step. Then you need to understand the work behind it.
Measure the Real Burden of Call
Availability alone doesn’t tell you how demanding an on-call shift is.
Healthcare leaders should consider factors such as:
- Frequency of telephone responses
- Frequency of required on-site responses
- Acuity of the cases involved
- Payer mix and potential reimbursement
- Uncompensated or undercompensated care
- Whether coverage involves one or multiple facilities or service lines
- Whether backup coverage may be necessary
Telephone activity can be especially easy to underestimate. A call may not result in an in-person consultation or procedure, but repeated interruptions still affect the physician’s time and experience during a shift.
On-site responses provide another important indicator. A physician who regularly has to report to the hospital is providing a materially different level of coverage from someone who is rarely called in.
The goal is to understand the arrangement as it actually operates, not simply as it appears in the contract.
Be Careful With Concurrent Coverage
Concurrent coverage can create operational efficiencies, particularly when physician supply is limited. But it also illustrates why FMV isn’t a simple addition exercise.
If one physician covers two facilities simultaneously, the appropriate compensation isn’t necessarily the sum of two independent call-coverage rates. There is still one physician providing the availability.
At the same time, covering multiple locations or service lines may increase the physician’s workload and responsibility. The additional burden should be considered.
This is also an area where physician expectations and an FMV analysis may differ. Clear communication about how the arrangement is structured, what responsibilities it creates and how those responsibilities affect compensation can help organizations manage those conversations.
Watch for Overlapping Compensation
Restricted coverage requires another layer of analysis: How is the physician already being paid?
An employed physician, for example, may receive salary plus production-based compensation. If the physician receives additional compensation for restricted call while also receiving production credit for services performed during the same period, the organization needs to understand how those payments interact.
Similar questions arise with independent contractors that bill and collect for professional services while also receiving payment for coverage.
Healthcare leaders should look at the entire economic arrangement rather than evaluating individual payments in isolation.
That becomes even more important when an agreement includes multiple forms of compensation, such as employment, administrative responsibilities and call coverage.
Staffing Arrangements Require a Broader View
For hospital-based specialties, call coverage may be part of a larger staffing arrangement with an independent physician group.
In these situations, the analysis may need to consider the number and type of providers required to staff the service, provider compensation, benefits, malpractice costs, the group’s operating margin and professional collections generated through the service line.
The fundamental operational question is whether the staffing model matches the hospital’s actual needs.
Too few providers can create obvious coverage problems. Too many can unnecessarily increase the cost of the arrangement. Understanding workload and staffing requirements is therefore an important part of evaluating the overall structure.
Organizations should also understand whether professional collections are reasonable. If a physician group is responsible for billing and collecting for its services, weaknesses in that process can increase the subsidy ultimately required from the hospital.
Build a Repeatable Process
Managing physician arrangements one spreadsheet and one contract at a time becomes difficult quickly, particularly for larger health systems.
A better approach is to create a consistent process for gathering inputs, evaluating arrangements, documenting decisions and identifying situations that need additional review.
Technology can help.
LBMC’s PULSE FMV tools were developed to help healthcare organizations evaluate provider compensation arrangements, including call coverage, employment, administrative, academic, clinical and supervision arrangements. For call coverage, organizations can incorporate factors such as specialty, geography, payer mix, frequency of in-person responses, call volume and trauma level.
The larger point isn’t simply speed. It’s consistency.
Technology can help organizations establish a repeatable process while preserving the ability to escalate unusual or complex arrangements for additional analysis.
Three Questions Healthcare Leaders Should Be Asking
For executives reviewing their physician compensation strategy, three questions are worth putting on the agenda:
- Do we understand why each arrangement exists? The business purpose should be clear and documented.
- Does our FMV process reflect the actual arrangement? Benchmarks are useful, but workload, acuity, coverage requirements, reimbursement and other facts can materially change the analysis.
- Can we consistently document how we reached our conclusion? A repeatable process can improve governance and make it easier to identify arrangements requiring deeper review.
Physician call coverage isn’t getting simpler. Hospitals continue to balance physician availability, patient needs, financial pressure and regulatory requirements.
The organizations that manage that complexity well won’t rely on a single benchmark or a one-size-fits-all answer. They’ll build disciplined processes around the facts of each arrangement, use technology where it makes sense and bring in experienced advisors when the circumstances require a closer look.
That approach gives healthcare leaders something increasingly valuable: a clearer understanding of what they’re paying for, why they’re paying for it and how the arrangement supports the needs of the organization.
