Physician Compensation Analytics: What You Don’t Know Can Hurt You.
The compensation landscape is changing for providers. Consider these three developments:
- In 2018, the number of employed physicians (47.4%) surpassed the number of physician owners (45.9%).
- Value-based reimbursement is starting to replace traditional volume-based, fee-for-service payment.
- Healthcare organizations must now carefully track providers’ time, effort, and total compensation to maintain contractual compliance.
Many healthcare organizations lack awareness of provider total compensation—or even how many employed providers they have. Over time, provider compensation grows organically—and so do the number of paper contracts negotiated by different people. When these paper contracts—such as the original employment contract, medical directorships, call coverage arrangements, and resident supervision—are stored in different locations, tracking compensation data for hundreds of employed providers is challenging. As a result, you don’t have visibility into all the financial relationships that have been created.
In this case, ignorance isn’t bliss. Provider contracts are vulnerable to expensive regulatory violations (e.g., the Stark Law and Anti-Kickback statute). You must be able to examine the information that’s hiding in your provider contracts to comply with state and federal regulations around total compensation and Fair Market Value (FMV).
Healthcare organizations often face these challenges related to provider contracts:
Disorganized paper contracts and invoices. Many legal and medical staffing offices are full of boxes of paper—contracts that have no digital counterpart, so they’re impossible to review quickly. Those contracts are just sitting there, creating liability. One healthcare organization had years’ worth of paper provider invoices that weren’t linked to corresponding contracts. Providers submitted hours (for meetings, ER shifts, etc.) without justification (in a contract) for the compensation.
Lack of contract visibility. Without a centralized contract repository, it is very difficult to access and evaluate provider compensation data. In a merger or acquisition, providers can have contracts with multiple healthcare organizations. The acquiring organization needs to examine total compensation for the providers for whom it is assuming liability. Under the new value-based payment models, the new entity must pay FMV. The new entity cannot pay providers as much as they were being paid by 10 hospitals under the old, volume-based reimbursement model.
Conflicts of interest. Pharmaceutical companies and medical equipment manufacturers often compensate providers for participating in speaker bureaus, advising as medical directors, or running clinical trials. That third-party compensation, which is reported by the vendors to a national database, should be considered in FMV valuation and must not unduly influence purchasing decisions within your healthcare organization. Providers should disclose conflicts of interest on their annual attestations. Conflicts of interest are not reported 90 percent of the time. Stark Law and Anti-Kickback Statute violations are very expensive—up to $15k and $50k in civil fines per incident, respectively.
To address these challenges:
Centralize provider compensation information. The best way to do this is by storing digital provider contracts, including strategic investment guarantees, in a centralized database. If division chiefs cannot easily review all of a provider’s contractual obligations, they may overload providers with too many clinical and administrative duties. Providers may not have enough hours in their day to fulfill their commitments. If another department promised a gastroenterologist $500k for a research lab and included details in a separate contract, the gastroenterology department may not be aware of the agreement. To prevent these problems, keep all time/activity and compensation-related information together so you can effectively manage and standardize business relationships with providers.
Use provider analytics to review provider compensation. Provider analytics allows you to automatically search contracts and pull out the key terms and conditions that define your healthcare organization’s business relationship with providers. By using a provider analytics tool, you’ll be able to visualize the data in graphs—instead of trying to decipher rows and columns of data in a spreadsheet. You should examine this information:
- Non-compete language. Does your non-compete policy vary by specialty? What is the geographic radius (e.g., within 2 miles or within 40 miles)?
- Hourly rates for call coverage.
- The base compensation structure (e.g., salary, bonus, guarantee, RVU, draw). Does the structure change over time?
Examine variability in total compensation for providers in your healthcare organization. Why is one provider being paid significantly more than others in the same specialty? There may be a justifiable reason for payment that exceeds FMV, but you must document that reason to avoid running afoul of FMV standards.
Use Sunshine Act data to identify vendors that compensate your providers. The CMS Open Payments database is publicly available, but you have to look at one provider at a time—a cumbersome process. TractManager’s provider analytics tool gathers that data for you, eliminating the administrative burden and maintaining Sunshine Act compliance.
TractManager’s Physician Compensation Analytics provides unparalleled visibility into the total compensation relationship between your organization and its providers—including base compensation structure, medical directorships, call coverage arrangements, leased office space, and resident supervision.
For additional ways to gain visibility into your organization’s financial wellbeing, download our executive white paper titled “Measure it to Manage It: Beginning the Journey to Hospital Financial Health.”