Disclaimer: To the best of our knowledge, this information was correct at the time of publication. Given the fluid situation, and with rapidly changing new guidance issued daily, be aware that some or all of this information may no longer apply. Please visit our COVID-19 hub frequently for the latest updates, as we are working diligently to put forth the most relevant helpful guidance as it becomes available.
As healthcare providers rapidly mobilize on the front lines of the COVID-19 response, the inevitable question arises as to the value of incremental compensation in the form of hazard pay. In fact, the Stark Law blanket waiver published March 30, 2020, (and effective March 1, 2020) cites the example of a hospital paying a physician above his or her previously contracted rate for furnishing professional services for COVID-19 patients “in particularly hazardous or challenging environments” as falling within the scope of the blanket waiver.
Since the prevalence of such pay is intensifying in both private and public sectors, within healthcare and non-healthcare organizations alike, PYA has summarized key considerations (not all-inclusive) for determining hazard pay compensation for physicians and advanced practice providers, as hospitals and healthcare systems navigate the ongoing risks and sacrifices made to fight COVID-19.
Further, while the Stark Law blanket waiver provides healthcare organizations greater flexibility in developing financial arrangements with referring physicians, as with any additional payment to providers, it is important to consider a variety of facts and circumstances that may materially affect any premium to compensation, including but not limited to, the total compensation paid to the individual, the specialty of a provider, and the types of services they provide. It is also important to maintain sufficient documentation as a best practice to meet the record requirements under the Stark Law blanker waiver.
What Is Hazard Pay?
As defined by the U.S. Department of Labor, hazard duty pay or hazard pay is “additional pay for performing hazardous duty work involving physical hardship. Work duty that causes extreme physical discomfort and distress which is not adequately alleviated by protective devices is deemed to impose a physical hardship.” A highly communicable disease combined with the increasing nationwide shortage of personal protective equipment may meet this criteria, and thus warrant consideration of additional compensation for those currently at the forefront of COVID-19 efforts.
Hazard Pay Industry Data
To determine the potential value of COVID-19 hazard pay to clinical providers, PYA reviewed both public and private sector pay practices.
Office of Personnel Management (OPM)
Per the OPM, hazard pay may not exceed 25% of an employee’s rate of basic pay (assuming the hazardous duty or physical hardship has not already been taken into account). Further, the pay only applies to authorized or assigned duties and may not be paid when an employee is paid annual premium pay (i.e., regularly scheduled “standby duty or administratively uncontrollable overtime work”).
U.S. Military
The U.S. military prescribes detailed and specific hazard pay scenarios and amounts for the various forms of duties its members, including healthcare professionals, are required to perform in times of need and shortage. Specifically, the Department of Defense has established certain maximum bonus rates for medical professionals who meet certain requirements. One of these is the critically short wartime accession bonus, which provides bonuses for professionals in specialties that the military has deemed to be essential during wartime. The bonus amounts for medical professionals range from $200,000 for an infectious disease specialist to $400,000 for specialties such as anesthesiology and orthopedics. Amortized over the time commitment, these amounts range from $50,000 to $100,000 annually, assuming the time obligation is met. Using national benchmark data,[1] PYA notes these amounts range from approximately 15% to 25% of the annual median salary for these positions.
Non-Healthcare Workforce
As many businesses are still considered “essential” during a pandemic, companies are beginning to deploy hazard pay strategies for their employees. Specifically, some nation-wide companies including Target, Amazon, Giant Food Stores, and Whole Foods have implemented an hourly hazard premium pay ranging from 10% to 15% of the standard hourly wage. Other companies, including Kroger and Smuckers, are also providing employees with a one-time bonus: full-time Kroger employees receive a $300 bonus, and Smuckers employees a $1,500 hazard pay bonus. If an employee earns the federal minimum wage of $7.25 an hour, working 40 hours per week, 52 weeks per year, his or her total annual wage is approximately $15,080. A bonus of $300 approximates 2% of total wages, and $1,500 equals approximately 10% of total wages.
Application to Clinical Providers
As the response to COVID-19 continues to evolve, hospitals and health systems will be faced with growing hazard pay requests necessitating questions about both the form and substance of the compensation. In the absence of specific definitive guidance, the frameworks discussed above contemplate either an hourly hazard pay premium or a one-time bonus payment (which may require forgiveness over time). While the rates included in these examples vary, there is evidence that it may be reasonable to consider a premium up to 25% of base pay.
Additionally, other unique and pertinent factors such as the number of infected patients a provider is expected to closely encounter, or instances in which providers may be isolated from their families, are key considerations. Further, such compensation is intended to be paid to providers and staff who work closely with patients during this particular crisis, and criteria (e.g. time period, etc.) for payment should be clearly identified and communicated.
Finally, as with any expenditure during a crisis, it is important for a hospital or system to consider the necessary funding for compensation. While there is some national discussion related to addressing such issues, including hazard pay, in upcoming stimulus packages, there is still a significant amount of uncertainty as to how COVID-19 will affect hospitals’ and health systems’ financial position.
We are providing this framework to illustrate a few options that may be available, but the guidance on hazard pay will likely continue to evolve over the coming weeks and months. PYA will continue evaluating this issue for our clients and stands ready to help as needed throughout this crisis.
If you have additional questions related to Stark Law blanket waiver and physician compensation, or need clarity on the latest COVID-19 guidance, visit our COVID-19 hub, or contact one of our PYA executives below at (800) 270-9629.
[1] Compensation benchmark data from Arthur J. Gallagher & Co.; Medical Group Management Association; Sullivan Cotter, and Associates, Inc.; and American Medical Group Association.
