Healthcare Provider Compensation Services Frequently Asked Questions
How do we know whether we need compensation plan design, an FMV opinion, or both?
Compensation plan design is used when an organization is creating or revising how physicians and advanced practice practitioners are paid. An FMV or commercial reasonableness opinion may be needed when the organization seeks an independent assessment of a defined arrangement, such as employment, professional services, medical directorship, call coverage, subsidy, co-management, teaching, research, or value-based compensation. Both may be useful when a new or materially changed model must be designed, financially tested, and independently evaluated. Legal counsel should advise on applicable regulatory requirements.
What is the difference between fair market value and commercial reasonableness in a provider arrangement?
Fair market value addresses the supportable range of compensation for the services and circumstances under review. Commercial reasonableness considers whether the arrangement itself advances a legitimate operational, strategic, or financial objective without taking into account the volume or value of referrals. The analyses are related but distinct, and satisfying one does not automatically establish the other.
Can compensation survey percentiles or a standard formula establish fair market value?
No. Survey data and formulas can provide useful reference points, but they do not establish fair market value on their own. The analysis should consider the provider’s specialty, duties, qualifications, work effort, location, practice setting, productivity, call or administrative responsibilities, compensation elements, benefits, and other facts specific to the arrangement. Compensation above or below a particular percentile may be supportable depending on the full facts and circumstances.
What should an organization evaluate before designing or redesigning a provider compensation plan?
Begin with the objectives the plan is expected to support and how providers actually deliver care. Consider recruitment and retention needs, specialty and market conditions, clinical productivity, quality and value-based measures, administrative or teaching duties, advanced practice practitioner integration, reimbursement, financial sustainability, available data, and governance. Before implementation, model likely outcomes and confirm that the calculation rules can be administered, explained, and monitored consistently.
When should an existing provider compensation arrangement or FMV opinion be reviewed again?
Review may be appropriate before renewal or extension and whenever material facts change, such as duties, schedule, coverage, productivity expectations, quality measures, compensation elements, benefits, provider qualifications, organizational need, reimbursement, or practice setting. Organizations should also compare actual payments and performance with the written agreement and maintain evidence that required services were performed. A prior opinion should not be assumed to remain applicable after the underlying facts have changed.
