I have been scanning the literature for articles describing OIG (Office of Inspector General) investigations and resulting fines related to the Stark Law and FCA (False Claims Act) as they relate to physician compensation. There seems to be more and more activity recently, including investigations in response to whistle-blower lawsuits.
The bottom line appears to be the following: hospitals and health care systems that use survey data (such as MGMA and AMGA) to set compensation levels for newly employed physicians seem to be under greater scrutiny if the collections generated by the employed physicians do not support the salaries being provided, or if the salaries as employees suddenly jump to a higher level than generated in their previous independent practices. This is a very common occurrence.
The Stark and FCA regulations require that physicians employed by systems that see Medicare patients do not refer patients for evaluation and treatment to the system in exchange for compensation. They must also pay employed physicians based on fair market value. In the past, it was assumed that direct evidence of payment for referrals (e.g., emails, memos, etc.) was needed in order to demonstrate such a violation.
More recent cases seem to demonstrate that if a practice is not profitable, and a hospital system continues to pay a physician in spite of chronically losing money on the practice, the OIG will infer that such losses are only being allowed as a result of referrals that otherwise benefit the system.
It is not uncommon for a procedural specialist such as a cardiologist or orthopedist to be paid at the median salary survey levels, even as their collections and worked RVUs only reach the 25th percentile. This may represent a loss to the practice in excess of $100,000 per year, when considering only the payments received for the care personally provided by the physician. I once asked a physician in a surgical specialty that was unable to build a practice (even though there was obvious demand for his services) to leave our medical group, in part because of his inability to generate the income needed to justify his salary. Such losses may be acceptable in situations where the system is the only provider of important services. But when system board members or executives indicate that those losses are balanced by “downstream” services like imaging and surgical care, the OIG may interpret that as a violation of Stark and FCA regulations.
What can we do with this information as we seek employment and start in our new careers? Here are five suggestions:
- Be aware of these issues and NEVER assume or imply that a health system can afford to pay a higher salary because of “downstream revenues” resulting from your employment. Instead focus on the actual patient encounters and procedures that you plan to provide to generate the collections needed to cover your salary. If you perform more complex and highly compensated procedures, those should be taken into account.
- Once in your new job, help market yourself and your practice so that you can build visits and worked RVUs as quickly as possible. Health systems can allow for a negative bottom line for a practice initially, but will strive for a financial break-even after a year or two.
- Work closely with the billing office and learn about billing and coding so that you can appropriately capture the payments for the work that you do.
- Demand that you receive regular (at least quarterly) reports listing encounter volumes, coding distribution, billings, collections, worked RVUs and income and expenses (profit and loss statement) for the practice. Learn how to interpret these reports.
- Meet with your management team regularly to go over your reports, track your performance, define goals for the practice and develop joint plans to meet those goals.
With a good team, clear communication, and effective goal setting and execution, you should be able to build a practice that you can be proud of, that reaches a financial break-even, and that enables you and your employer to avoid allegations of Stark and FCA violations.