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 1

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 2

Prevalence of Compensated Call Coverage Arrangements

 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 3

Most Difficult Specialties to Cover

 Neurosurgery  Orthopedic surgery  Other trauma-related specialties (e.g., trauma surgery and oral maxillofacial surgery) 4

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 5

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” 6



Pros/Cons of Various Methods 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 7

 

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) 8

 

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) 9

 

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 10

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) 11

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 12

Sources of Compensation Values

 Sullivan & Cotter and other published surveys  Hospital and medical associations  Local, regional or national market values  Independent appraiser 13

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 14

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 15

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 16

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 17

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 18

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 19

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 20

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” 21

Establishing the Value of On-Call Services Hypothetical Example

 Specialty: General Surgery  Step One: determine salary range for clinical services of general surgeons

MGMA SCA HCS AMGA WW Lowest Value Highest Value n= 918 369 441 783 118 2,629 Mean $308,000 $288,000 $219,000 $318,000 $281,000 $219,000 $318,000 25 th Percentile $223,000 $212,000 $174,000 $230,000 $237,000 $174,000 $237,000 Median $283,000 $270,000 $189,000 $294,000 $265,000 $189,000 $294,000 75 th Percentile $362,000 $333,000 $250,000 $382,000 $339,000 $250,000 $382,000 90 th Percentile $488,000 $397,000 N/A $458,000 $378,000 $378,000 $488,000

22

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 23

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 24

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 25

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 26

HealthCare Appraisers, Inc.

75 NW 1 st 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

27