AAOS Now

Published 9/1/2008

To pay or not to pay

By Kathleen L. DeBruhl, Esq., and David D. Haynes, Jr., Esq.

Structuring compensation to on-call physicians

The Emergency Medical Treatment and Active Labor Act (EMTALA) was enacted in 1986 in response to concerns that hospital emergency departments were improperly transferring or refusing to treat indigent patients. The purpose of EMTALA was to ensure that all individuals who went to a hospital emergency department for evaluation and treatment of a medical condition would be afforded a medical screening examination and stabilizing treatment for any emergency medical condition, regardless of their ability to pay.

Originally, EMTALA targeted hospital emergency departments, but many of the denial of care issues or improper transfer cases resulted from the failure of an on-call physician to provide care. The alarming number of these incidents resulted in amendments to EMTALA that required hospitals to provide on-call coverage, thereby subjecting on-call physicians to EMTALA penalties.

These penalties include civil monetary fines as well as termination of the physician’s medical staff privileges or exclusion from Medicare. The Office of Inspector General (OIG) may impose a $50,000 civil monetary penalty against a physician for a violation of EMTALA and the Centers for Medicare and Medicaid Services may exclude a physician from participating in Medicare for up to 5 years for “gross, flagrant, or repeated” violations. In addition, a hospital may terminate a physician’s medical staff privileges for an EMTALA violation.

On-call physicians and EMTALA
Under the on-call coverage requirement, hospital emergency departments should have a list of physicians who are available to provide necessary treatment to stabilize individuals with emergency medical conditions. Generally, if a hospital offers a service to the public, the same services should be available through on-call coverage of the emergency department.

The requirement, however, established a conflict between the hospital and the on-call physicians. Although EMTALA requires a hospital to provide on-call services, a physician is not required to accept on-call responsibilities. Historically, a physician accepted on-call duties as a responsibility of being on the medical staff of a hospital.

With the increased hospital oversight of patient care required by EMTALA, however, as well as potential EMTALA fines, liability for a patient the on-call physician never directly treated, and the physical toll of being on call, many physicians are seeking compensation for taking call. Hospitals have agreed to such compensation so that, among other things, it can fulfill its EMTALA on-call requirements.

EMTALA allows physicians to be paid for on-call services provided to hospital emergency departments. Any compensation arrangement, however, must be structured to comply with federal law, because the on-call physicians may refer patients to the hospital.

Compensation and antikickback statute compliance
The Federal Antikickback Statute (42 U.S.C. § 1320a-7b(b)) makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a federal healthcare program. On Sept. 20, 2007, the OIG issued an advisory opinion (Advisory Opinion 07-10) at the request of a tax-exempt, not-for-profit medical center. This advisory opinion provided guidance for compensating on-call physicians for their services to the medical center’s emergency department. Although the advisory opinion only applies to the requesting party, it may be used as a tool for properly structuring compensation arrangements between hospitals and physicians for on-call services.

Based on the OIG’s general rule of thumb in Advisory Opinion 07-10, any remuneration between a hospital and physician should meet the following requirements:

  • Compensation should be based on fair market value in an arm’s length transaction for actual or necessary items or services.
  • Compensation should not be determined in any manner that takes into account the value or volume of referrals or other business generated between the parties.

Furthermore, the OIG believes that many compensation arrangements for on-call services can receive complete protection from violation of the Antikickback Statute by meeting the Personal Services Safe Harbor. To fit within the safe harbor, a compensation arrangement must also meet the following requirements:

  • It must be in writing and signed by the parties.
  • It must cover and specify all of the services to be provided.
  • If the services are to be performed on a periodic, sporadic, or part-time basis, it must exactly specify the schedule, length, and charge for the performance intervals.
  • It cannot be for less than 1 year.

The services performed must not involve the counseling or promotion of a business arrangement or other activity that violates any federal or state law.

The aggregate services contracted for must not exceed those that are reasonably necessary to accomplish the commercially reasonable business purpose of the services.

Although failure to meet every element of the safe harbor does not mean a compensation arrangement is illegal per se, all compensation arrangements between a physician and a hospital for on-call services should be structured to meet as many elements of a safe harbor as possible to minimize the risk of an Antikickback Statute violation.

Suspect compensation arrangements
The OIG was particularly concerned that payment for on-call coverage could be disguised as covert kickbacks by the hospital for referrals from the on-call physicians. Specifically, the OIG identified the following examples in Advisory Opinion 07-10 that are considered covert kickback arrangements:

  • “Lost opportunity” or similarly designed payments that do not reflect bona fide lost income
  • Payment structures that compensate physicians when no identifiable services are provided
  • Aggregate on-call payments that are disproportionately high compared to the physician’s regular medical practice income
  • Payment structures that compensate the on-call physician for professional services for which he or she receives separate reimbursement from insurers or patients, resulting in the physician essentially being paid twice for the same service

Any compensation arrangement between a hospital and on-call physician for on-call services should be carefully analyzed to ensure it is not a kickback as described above.

Meeting a need and benefitting the hospital
The OIG recognizes that certain market conditions have forced hospitals to compensate physicians for on-call coverage. Such market conditions legitimize the need for such compensation.

The medical center that sought the advisory opinion needed to compensate on-call physicians to promote an obvious public benefit in facilitating better emergency on-call and related uncompensated care physician services at the medical center. The OIG concluded that the compensation arrangements between the medical center and its on-call physicians posed a low risk of violating the Antikickback Statute for the following reasons:

  • The arrangements were for fair market value (an outside consultant was used to determine fair market value).
  • A legitimate need existed for on-call compensation and uncompensated care physician services.
  • The medical center demonstrated improvements in these areas as a result of the ability to compensate on-call physicians.

In conclusion
A hospital may compensate on-call physicians for the services they pro­vide to its emergency department. Compensation arrangements should be structured to meet the described OIG standards to ensure compliance with the Antikickback Statute. In addition, the OIG advisory opinion is not carte blanche for hospitals to compensate all on-call physicians for their services. A hospital seeking to compensate physicians for on-call services must have a demonstrable need, such as large gaps in on-call coverage, to legitimize the purpose of such compensation.

More importantly, a physician who receives such compensation must also confirm that such compensation is needed to address a need of the hospital and is not a disguised inducement for referrals. Otherwise, a physician and hospital should provide on-call services to emergency departments based on the traditional model—as a responsibility of the physician for the privilege of serving on the medical staff of the hospital.

Kathleen L. DeBruhl, Esq., is a principal in Kathleen L. DeBruhl & Associates, LLC, located in New Orleans. David D. Haynes Jr., Esq., is an associate with the firm, which specializes in health-care corporate law and compliance. This article was prepared at the request of the Practice Management Committee.