Addressing Physician
Compensation within
Rural Healthcare
Speaker Panel
Fatema Zanzi
Attorney
Drinker Biddle & Reath LLP
Jennifer Junis
Karen Kole
Kevin Marx
Chief Nursing Officer
OSF Saint Luke
Medical Center
Manager
Huron Consulting
Group
Chief Practice Officer
Katherine Shaw
Bethea Hospital
Agenda
1. Introductions
2. Physician Alignment Options
3. Legal Framework
4. Fair Market Value Considerations
5. Examples of Physician Compensation Models
•
OSF Saint Luke Medical Center: Medical Directorship and Mid-Level
recruitment
•
Katherine Shaw Bethea Hospital: Physician Employment and Residency
recruitment
3
Physician Alignment Options
Medical Admin.
Space
MSO
Services
Leases
Services Agreement
Co-Management
(Medical
Agreement
Directorship)
On-Call Coverage
Medical Staff
Physician
Joint
Agreement
Membership
Recruitment
Venture
Less
Integration
Professional
Services
Agreement
“PSA”
Captive PC or
Subsidiary
Employment
Model
Foundation/
Clinic Model
Hospital
Employment
Full
Integration
4
Legal Framework
The “Rule” Book
•
Federal laws
•
•
•
•
Stark Law
Anti-Kickback Law
IRS Tax Exemption
State laws
•
•
•
Illinois Medical Practice Act has a fee-splitting prohibition
Illinois anti-kickback and self-referral prohibitions
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Legal Framework:
Common Themes
• Is the compensation consistent with the fair
market value (FMV)?
• Value in arm’s length transactions, consistent with the
general market value:
– General market value: The compensation that would be included in a service
agreement as the result of bona fide bargaining between well-informed parties
to the agreement who are not otherwise in a position to generate business for
the other party, at the time of the service agreement.
– Fair market price: Generally based on bona fide comparable services
agreements, where the compensation has not taken into account the volume or
value of anticipated or actual referrals.
(42 C.F.R. 411.351)
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Legal Framework:
Common Themes (II)
• Is the arrangement commercially reasonable?
Assessing commercial reasonableness is separate from the
analysis of FMV:
•
– While FMV applies to the level of compensation for the physician’s services,
commercial reasonableness applies to broader business issues related to the
arrangement.
– Commercial reasonableness is especially important in arrangements that
include compensation for administrative and other non-clinical services.
The services covered by the arrangement should be essential
to the operation of the hospital/system and/or to addressing
specific community needs
•
•
Services provided are fully described.
•
Hospital demonstrates sound business reason/need for the services.
•
Physician must actually provide the services as evidenced by records/reviews.
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Valuation Considerations
• Document and define the need
• Review various methods of compensation:
Medical Directorships
Co-Management Agreements
On-Call Pay
Base Salary
Productivity-Based
Quality Bonus
Sign-on Bonus
Relocation Bonus
Performance Incentive
Drive Time
Loan Forgiveness
Benefits
• Determine financial pro forma with new compensation
arrangement
• Determining fair market value
• Reviewing multiple market surveys.
• Considering unique factors, including availability of such physician services
in the rural market.
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Risks to Watch Out For
• Guaranteed Compensation
• Long-term Contracts
• Stacking payments
• Not including all aspects of compensation in fair
market value calculations
• No compensation cap
• Proposed compensation and purchase price
• Inconsistency
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OSF Saint Luke Medical Center
• Critical Access Hospital with 25 licensed beds
•
Not-for-profit and tax-exempt
•
Has a Rural Health Clinic onsite
• Located in Kewanee, Illinois (Henry County)
• Serving Kewanee and surrounding towns and
rural areas since 1919
• Built replacement hospital that opened on May
31, 2008
• Recently merged with OSF Healthcare System on
April 1, 2014
10
Medical Director Model
• Dyad structure with aligned goals
• Medical Director compensation based on goal
achievement
• OSF Saint Luke Medical Center Emergency
Department Case Study
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30 - Overall, would you rate the quality of care provided as:
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Advanced Practice Nurse Model
• Inability to recruit Primary Care Physicians
• Hospitalist Program started to allow outpatient
practice in clinic
• Family Practice APNs as a foundation versus
extension
• Rural Health Clinic Case Study
• Certified Diabetic Educator
• Behavior Health Certified
• Registered Dietician
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Katherine Shaw Bethea Hospital
• Independent, Not-for-Profit Hospital Located in
Dixon, IL
• 80 Licensed Beds
• $126M Net Revenue
• 65 Employed Physicians
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Recruiting Journey
• Started in 1990
• Established “Center for Health Services”
• Leveraged Geography for Scholarship Recipients
• Networked with Illinois RMED
• Dixon Rural Training Track
• Developed Niche for International Medical Graduates
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Fair Day’s Work for a Fair Day’s Pay
• Employed Physicians are Salaried
• Work/Life Balance, Community Citizenship
• CPI and Occasional Adjustments
• All “One Off” Deals
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Burning Platform
• Growing Number of PCP’s
• Maturing Specialty Practices
• Varying Practice Styles
• Expected Cost Pressures
• Physician Engagement
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Transition to Value
• Tiered Salary with Bonus Potential
• 10% Tied to Quality
• PCP’s First, Then Specialists
• Larger Specialty Groups for Hospital-Based Services
• Expect Fall-Out
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QUESTIONS?
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Fatema Zanzi
Drinker Biddle & Reath LLP
191 N. Wacker Dr., Ste. 3700
Chicago, IL 60606-1698
(312) 569-1285
Fatema.Zanzi@dbr.com
Karen Kole
Huron Consulting Group
550 W. Van Buren Street
Chicago, Illinois 60607
(312) 880-3457
kkole@huronconsultinggroup.com
Jennifer Junis
OSF Saint Luke Medical Center
1051 W. South St.
P.O. Box 747
Kewanee, IL 61443
(309) 852-7524
Jennifer.A.Junis@osfhealthcare.org
Kevin Marx
Katherine Shaw Bethea Hospital
403 E. 1st St.
Dixon, IL 61021
(815) 285-8510
KMarx@ksbhospital.com
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