Part 1 of a PYA Series: Call Coverage Qualms: Why is Call Coverage So Hard to Value?
PYA’s experience in providing fair market value compensation opinions for healthcare provider arrangements spans over three decades. These opinions can range from medical directorships to large system-wide compensation plans for physicians. Every provider arrangement has its challenges, and determining fair market value compensation for call coverage services is no exception.
This article is Part 1 of a PYA series, “Call Coverage Qualms: Why is Call Coverage So Hard to Value?,” discussing some of the challenges in determining fair market value compensation for call coverage arrangements. Specifically, a number of different balancing acts take place when determining fair market value call coverage compensation for a hospital-employed versus an independent physician.
For example, when one considers the applicable income, cost, and market approaches to determining fair market value compensation for a call coverage agreement, three key factors, among others, must be examined:
- the length of call coverage availability and its level of required restriction;
- the burden associated with the provision of call services (i.e., patient acuity, frequency of emergency department visits, call volume, etc.); and
- the likelihood of receiving reimbursement for the provision of clinical services provided while on call (e.g., the payor mix).
It is this third item—the likelihood of receiving or not receiving professional reimbursement for the provision of clinical services while on call—on which the remainder of this article will focus in a hospital-employed versus an independent physician call coverage scenario.
Generally, call coverage payment arrangements between physicians and hospitals (such as those structured as a per diem payment or the amount paid to the physician by the hospital for 24 hours of call coverage) allow for the independent physician to bill, collect, and retain their professional fees while providing call coverage services. In contrast, call coverage arrangements with hospital-employed physicians do not allow the employed physician to retain the collections its employer bills and collects.
In this situation, at first glance and all other factors being the same, one might assume the primary payment mechanism (e.g., the per diem rate in the example) for a hospital-employed physician should be higher than that for an independent physician because the independent physician is allowed to keep the professional collections in addition to receiving the call coverage per diem. This is one example of why there is sometimes a difference in the per diem, but at other times, no difference exists.
Several other facts and circumstances impact call coverage payment structures for hospital-employed versus independent physicians, including these and other examples:
- Though an independent physician may be allowed to bill, collect, and retain professional fees while on call, reimbursement is never guaranteed. The payor mix of the patient population covered by the arrangement may have a significant impact on revenue potential. For example, if the payor mix is largely self-pay or indigent care, professional collections will likely be lower than similar services provided in a service area with a greater percentage of commercial payors. The independent physician, however, will still incur the cost of billing and collecting regardless of receipt of payment.
- When accepting certain call coverage assignments, an independent physician may experience an increase in certain costs that health systems and/or hospitals who employ physicians already cover on behalf of a hospital-employed physician. These costs might include an increase in an independent physician’s malpractice and/or the supplemental cost of an advanced practice practitioner to help provide the call coverage. As such, these costs may lead to a legitimate reason for a per diem difference between hospital-employed and independent physicians and/or compensating each hospital-employed/independent physician the same per diem but allowing the independent physician to bill, collect, and retain the professional collections.
- When a patient is seen in the emergency department or on an inpatient floor by a physician on call, often the physician has an obligation to see that patient post-discharge, and the patient is encouraged to follow up with that physician in their practice for a period of time after the call event. These follow-up visits may generate additional expenses or reimbursement for the independent physician depending on the scope of services rendered and, if applicable, the patient’s ability to pay. While hospital-employed physicians share in the obligation for post-discharge care, their compensation is not typically at risk for these additional expenses or a patient’s ability to pay.
- In some instances, the hospital-employed physician may receive work relative value unit (wRVU) credit for professional services rendered while on call. If a physician is compensated based on wRVU methodology and receives a per diem for call coverage, the on-call services result in additional compensation for the employed physician when clinical services are rendered. Under the same per diem call pay methodology, independent physicians are not eligible for this wRVU compensation and must rely on their ability to bill and collect for services rendered while on call to be compensated an equivalent aggregate amount for call coverage services.
Based on these examples, the challenge with balancing the primary payment mechanism (e.g., per diem) with secondary payment mechanisms (e.g., professional collections and/or wRVUs) for hospital-employed versus independent physicians for call coverage becomes easier to see. To truly determine fair market value compensation for a hospital-employed physician versus an independent physician, one must consider all fair market value approaches along with the individual facts and circumstances of each specific call coverage scenario. For these reasons, determining fair market value compensation for call coverage can be more challenging than other provider arrangements with fewer factors to consider.
How PYA Can HELP
PYA has extensive experience determining fair market value compensation for call coverage arrangements. If you are interested in learning more, our executive contacts would be happy to assist. Contact them via email or by calling (800) 270-9629.
