Healthcare Provider Compensation Services Frequently Asked Questions
When does a healthcare organization need compensation design support rather than an arrangement-specific valuation?
Compensation design support addresses how physicians and advanced practice practitioners will be paid, including productivity and performance models, market assessments, financial modeling, plan documents, and committee support. An arrangement-specific valuation addresses the fair market value or commercial reasonableness of a defined financial arrangement. An organization may need one or both, depending on the work being performed.
Why should fair market value and commercial reasonableness be documented as separate analyses?
Fair market value and commercial reasonableness are separate concepts. Fair market value addresses the value of the compensation or arrangement, while commercial reasonableness considers whether the arrangement furthers a legitimate business purpose and is sensible in light of the parties’ characteristics.
Why is a survey percentile or standard formula not enough for an FMV conclusion?
Fair market value depends on the facts and circumstances of each arrangement and cannot be established by a generally applicable formula. Salary surveys and other benchmark data may inform the analysis, but they do not, by themselves, constitute fair market value.
What should be tested before a new provider compensation plan goes live?
Before implementation, organizations should test whether the plan supports strategic and provider objectives, how compensation changes under different productivity and performance scenarios, whether the model remains financially sustainable as reimbursement changes, and whether the rules can be documented and administered consistently. Governance, compliance risk, and compensation committee oversight should also be addressed before launch.
When should a provider arrangement be reviewed for fair market value or commercial reasonableness?
A review may be appropriate when an organization enters into, renews, or materially changes an arrangement involving provider compensation or other payments for healthcare services. Examples may include employment, medical directorships, call coverage, co-management, professional or management services, research and teaching, subsidies, and quality or value-based payments. The need for review depends on the structure, purpose, and specific facts of the arrangement.
