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By Scott M. Safriet, Principal HealthCare Appraisers, Inc. March 27, 2007

AHLA Teleconference Approaches to Ensuring ED Call Coverage — What's Working, What's Not, and What's On the Horizon. By Scott M. Safriet, Principal HealthCare Appraisers, Inc. March 27, 2007. On-Call Compensation Issues. Cost (and the slippery slope) Compliance with FMV

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By Scott M. Safriet, Principal HealthCare Appraisers, Inc. March 27, 2007

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  1. AHLA TeleconferenceApproaches to Ensuring ED Call Coverage —What's Working, What's Not, and What's On the Horizon By Scott M. Safriet, Principal HealthCare Appraisers, Inc. March 27, 2007

  2. On-Call Compensation Issues • Cost (and the slippery slope) • Compliance with FMV • Maintaining equity among the medical staff • Selecting from among various payment methodologies • Administrative difficulties

  3. Prevalence of Compensated Call CoverageArrangements • In a survey conducted by Sullivan & Cotter, 46% (of 167 surveyed healthcare organizations) reported that compensation is provided for on-call availability • Establishing the FMV of on-call arrangements is HealthCare Appraisers’ most requested type of analysis

  4. Most Difficult Specialties to Cover • Neurosurgery • Orthopedic surgery • Other trauma-related specialties (e.g., trauma surgery and oral maxillofacial surgery)

  5. Rationale for Providing On-Call Compensation • Professional liability crisis • Declining EDs and increasing unfunded populations • Physicians’ ability to uncouple from the hospital • No apparent regulatory resistance • Prevalence in the marketplace • It’s fair to the physicians

  6. On-Call Compensation Payment Mechanisms • Payment earmarked to defray professional liability expense • Payment for unfunded care (e.g., ranging from 80% to 120% of Medicare) • Hospital program to provide claims defense, indemnification or liability insurance for claims arising out of emergent care • Per diem (typically a 24-hour period) • Per diem plus payment for unfunded care • “Activation fee”

  7. Pros/Cons of VariousMethods of Compensation -Payment for Professional Liability Insurance • Pros • Relatively inexpensive • Simple to administer • Cons • Value to each physicians varies based upon days of call coverage • May be a short-term solution

  8. Pros/Cons of Various Methods of Compensation -Payment for Unfunded Care • Pros • Relatively inexpensive • Equitable among the various on-call physicians • Directly addresses the complaint regarding unfunded patients • Cons • May be a short-term solution • Requires claims adjudication (e.g., global coverage periods)

  9. Pros/Cons of Various Methods of Compensation -Per Diems • Pros • Easy to administer (unless uncompensated care is included) • The most prevalent form of compensation • Cons • Likely to be expensive; there is no natural ceiling for per diem rates (other than perhaps locum tenens rates)

  10. Pros/Cons of Various Methods of Compensation -“Activation” fee • Pros • Easy to administer • Directly addresses those days in which the physician has to present to the ED • Equitable among the various on-call physicians • Usually results in a cost savings to the Hospital • Cons • May not be viable if call frequency is active • Physicians may ask for an “unrealistically high” activation fee

  11. On-Call Approaches We Cannot Approve • Paying for call coverage when there is not a defined call schedule • Developing on-call coverage schedules for esoteric specialties with little volume (e.g. colo-rectal surgery, endocrinology, etc.) • Paying for “back-up” call when the call frequency does not warrant it • Paying for redundant specialties (e.g., facial plastics and general plastics) • Paying for call for normally compensable services (e.g., interpretation of echocardiograms)

  12. Innovative On-Call Compensation Arrangement • Use of an Activation Fee (as previously discussed) • Arrangements where Hospitalist or employed physicians can cover busy portion of day, and use off-site call for balance • Use of concurrent call schedules; more efficient and typically results in savings to Hospital

  13. Sources of Compensation Values • Sullivan & Cotter and other published surveys • Hospital and medical associations • Local, regional or national market values • Independent appraiser

  14. Factors Affecting the Value of On-Call Services • Frequency and nature of call events • Telephone consults • Required presence at the ED • Required response time • Integrity/availability of data • Call frequency surveys

  15. Factors Affecting the Value of On-Call Services • Nature of the specialty • OB (typically unfunded patients with no prenatal care) • Surgeons (a surgical procedure is likely required, including follow up care) • Compensation earned by such specialists for clinical work • Number of physicians available to participate in call rotation

  16. Factors Affecting the Value of On-Call Services • Exposure to unfunded care • Unfunded patients • Low pay patients (e.g., Medicaid) • Additional considerations • “Restricted” vs. “unrestricted” call • Required rapid response (TPA administration) • Professional liability exposure • Required coverage by medical staff bylaws

  17. Factors Affecting the Value of On-Call Services • Additional considerations • Compensation to employed physicians for “excess call” • On-call for inpatient needs may be met with regulatory resistance (a really slippery slope) • “In kind” compensation (e.g., reimbursement for CME) must be considered in arriving at FMV • Imbedded subsidies (e.g., proposed on-call rates look like a subsidy arrangement) • Concurrent call

  18. Establishing the Value of On-Call Services – Approaches to Value • There is no OIG safe harbor for on-call compensation • The Market Approach is the most viable valuation approach • A Cost Approach (i.e., hiring physicians) is generally impractical • An Income Approach is not applicable

  19. Establishing the Value of On-Call Services – Market Values are of Limited Worth • Generally, insufficient details are available to insure comparability • Two nearby hospitals may have significantly different operational characteristics • Frequency of call • Payer mix • Trauma status

  20. Establishing the Value of On-Call Services – Physician-Reported Data May Be Unreliable The rest of the story - • The physicians are actually employed • A certain number of days of call each month are uncompensated • The compensation includes other services (e.g., GME responsibilities) • The physician-reported values are simply incorrect

  21. Establishing the Value of On-Call Services – Proprietary Valuation Algorithm • “Scores” the factors described above in a consistent and objective manner • Certain factors are correlated. For example, if the call frequency is minimal, payer mix and professional liability may not be factors • Establishes the value of clinical “work time” • Determines the FMV range of “on-call time” as the product of the “score” and the value of “work time” • Market data is still pertinent to corroborate the “analytical approach”

  22. Establishing the Value of On-Call ServicesHypothetical Example • Specialty: General Surgery • Step One: determine salary range for clinical services of general surgeons

  23. Hypothetical Example • Step Two: “Gross up” salary range for benefits and taxes: • Low: $212,000 + $40,000 = $252,000 • High: $382,000 + $56,000 = $438,000 • Then, convert to an hourly rate: • Low: $252,000/2,080 hrs = $121/hour • High: $438,000/2,080 hrs = $211/hour

  24. Hypothetical Example • Step Three: Determine appropriate on-call factor using proprietary algorithm • Typical Factors: • Nature of specialty of General Surgery • Number of specialists on the call panel • Number of call shifts per physician per month • Call frequency • Events requiring physician presence at ED • Events requiring telephonic response • Payor Mix • % of poor payors (Indigent, Medicaid, etc.) • Other factors impacting the arrangement

  25. Hypothetical Example • Step Four: Calculate On-Call Rate • Proprietary algorithm result: • 10% On-Call Factor (for example) • FMV range for On-Call hourly rate: • Low: $121/hour x 10% = $12.10/hour • High: $211/hour x 10% = $21.10/hour • FMV range for On-Call per diem rate: • Low: $12.10/hr x 24 hrs = $290 /24 hours • High: $21.10/hr x 24 hrs = $510 /24 hours

  26. Hypothetical Example • Step Five: Consider Market Data • Sullivan Cotter on-call market data • Arrangements in our client database • Other arrangements not in our client database • Client/physician provided data for nearby hospitals

  27. HealthCare Appraisers, Inc. 75 NW 1st Avenue, Suite 201 Delray Beach, FL 33444 561-330-3488 858 Happy Canyon Road, Suite 240 Castle Rock, CO 80108 303-688-0700 www.hcfmv.com www.healthcareappraisers.com

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