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AAOS Now

Published 10/1/2015
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John Cherf, MD, MPH, MBA

A Look at Contemporary On-Call Compensation Arrangements

Balancing regulatory, strategic, and financial interests

The prevalence of compensating physicians for on-call services has increased over the past several years. It is estimated that as many as 35 percent of all physicians receive some type of compensation for call-related activities and that three-quarters of physicians who provide on-call coverage receive some type of compensation.

On-call pay ensures that hospital emergency departments have access to physicians who provide coverage. This is particularly important for specialists such as orthopaedic surgeons, who are essential to trauma teams. The reasons behind the trend to compensate physicians for on-call activity are many. The Emergency Medical Treatment and Labor Act of 1986 (EMTALA) requires most healthcare facilities that participate in the Medicare program to have physicians available to provide services to patients with emergency needs. Thus, hospitals must have consistent physician coverage for emergency departments (EDs).

Other reasons for compensating call include the following:

  • financial pressures on physician practices due to declining physician payments for professional services as well as increasing practice overhead expenses
  • the adverse impact on physician work-life balance resulting from travel and social restrictions while on-call
  • the medicolegal exposure of treating patients with acute and traumatic conditions
  • Regulatory considerations

Several strategies may be used to compensate physicians who provide call coverage, and all require compliance with Stark Laws and Anti-Kickback Statutes. Thus, physician compensation for on-call work must be within fair market value (FMV) and commercially reasonable.

Additionally, the Office of the Inspector General (OIG) of the United States Department of Health and Human Services has issued three Advisory Opinions regarding physician on-call compensation arrangements. These OIG opinions provide the following guidance:

  • Factors supporting the provisions of on-call pay should be well documented.
  • Compensation to physicians should be for “tangible” services and not “lost opportunities.”
  • On-call compensation should be calculated in advance of services being provided.
  • All qualified physicians providing particular specialty services should be included.
  • Payments should be proportionate to physicians’ regular practice income.
  • Physicians should provide both inpatient and follow-up care to patients admitted to the hospital without additional compensation.
  • Physicians must respond to call needs in a timely fashion.

Strict compliance with regulatory issues related to on-call compensation is important. Violations may result in fines as well as treble damages for false claims, potential exclusion from Medicare and Medicaid programs, intermediate sanctions, and possibly imprisonment.

Strategic considerations
Strategic options for structuring on-call compensation include a daily stipend or an hourly rate, payment per procedure or some type of activation fee, compensation for telephonic coverage and compensation for the underinsured and/or uninsured.
Table 1 lists several considerations that may be taken into account when selecting the optimal strategy. By far the most common strategy for on-call compensation is a daily rate. The typical daily rate for an orthopaedic surgeon can vary from a few hundred dollars to a few thousand dollars.

Several new on-call compensation strategies (defined below) are emerging. These include payment for excess call only, concurrent call coverage, per procedure or activation fee, tiered level of work, payment for uncompensated care, and telephonic coverage.

Excess call—A minimum threshold of call hours or shifts is required before call compensation is paid. This is a hybrid arrangement that begins with voluntary, uncompensated call and progresses to compensated call.

Concurrent coverage—Compensation is based on simultaneous on-call coverage of more than one hospital within a healthcare system. On-call coverage at hospitals that are not within the same healthcare system must ensure that “double dipping” is not occurring and the compensation is consistent with FMV.

Per procedure—Compensation is based on specific services performed by the on-call physician. This is also referred to as an “activation fee.”

Tiered level—Compensation is based on the frequency of being engaged. This may include ED call, as well as outpatient and inpatient care.

Uncompensated care—Compensation for uninsured patients that is typically paid on a fee-for-service basis for care delivered while on-call.

Telephonic coverage—Compensation is based on telephone consultation (“telemedicine”) that typically excludes traditional, in-person engagement with the patient or going to the hospital.

Call compensation strategies can also be included in broader physician-hospital alignment agreements such as comanagement agreements.

Financial considerations
Several potential compensation models for on-call services exist and may vary for different specialties. Overall, surgical specialists report the greatest amount of on-call compensation compared to other physicians.

A daily stipend is the most commonly used method for compensating both surgical and nonsurgical specialists, according to the 2014 Medical Group Management Association (MGMA) on-call compensation survey. On-call compensation for orthopaedic surgeons ranges from $500/day to $1,200/day in many markets, with median compensation in the range of $1,000/day to $1,200/day. However, per diem rates of $3,000 have been reported.

Higher daily stipends are associated with physicians in larger orthopaedic groups, larger metropolitan areas, restricted call that requires physician be on-site, greater frequency of clinical engagement while on call, and the supply of orthopaedic surgeons available to take call. Specialty training in orthopaedic trauma, hand, and spine may also favorably affect compensation rates.

Both the 2014 American Association of Orthopaedic Executives Benchmarking Survey and the 2014 MGMA On-Call Survey suggest that private practitioners from large groups who provide Level I trauma center care in large metropolitan areas receive some of the highest on-call compensation. Financial modeling may help individual physicians determine which financial model is ideal for their setting.

On-call compensation may be distributed in several ways. Most organizations (68 percent) direct on-call payment to the individual physician. Compensation can also be paid to the physician’s medical group for redistribution (26 percent) to the physician. An organization-wide pool for distribution at the service line or departmental level is less common (5 percent and 1 percent, respectively).

On-call arrangements will likely continue to evolve as the U.S. healthcare system transitions to value-based payments. Access to high-quality, cost-effective care will be important to providers managing emergent patient needs. Orthopaedic surgeons should periodically reevaluate their on-call arrangements to ensure that they are well positioned to optimize the operational, clinical, and financial performance of their practice enterprises when considering the treatment of patients with emergent needs. On-call arrangements should also be closely scrutinized and consistently monitored to ensure compliance with federal and state regulations.

John Cherf, MD, MPH, MBA, chairs the AAOS Practice Management Committee. He can be reached at jcherf@cioo.org

References

  1. 7 New Statistics on Physician On-Call Pay. Becker’s Hospital Review, April 24, 2013.
  2. Sullivan Cotter: Physician On-Call Pay: Compliance Considerations and Emerging Trends. (white paper) https://www.sullivancotter.com/wp-content/uploads/2014/06/2014_On-Call-Pay-Handout_Final.pdf (Accessed Aug. 26, 2015)
  3. Ferrari A, Safriet S: Compensated On-call Coverage: What’s New and What’s FMV? The Health Lawyer February 2011. http://www.healthcareappraisers.com/Publicationpdf/ABA_Health_Lawyer-OnCall-SS-AF_0211.pdf (Accessed Aug. 26, 2015)
  4. Mobley K: Valuation of Physician On-call Pay and Coverage Arrangements. AHLA Healthcare Transactions Resource Guide. https://www.sullivancotter.com/wp-content/uploads/2013/04/AHLA_2013_HC-Transactions-Guide_Valuation-of-Phys-OnCall-Pay-Coverage-Arrangements_Mobley.pdf (Accessed Aug. 26, 2015)
  5. MGMA: On-call Compensation: 2014 Report Based on 2013 Data, Key Findings Summary http://online.mgma.org/2014_OnCall-Key-Findings (Accessed Aug. 26, 2015)
  6. American Association of Orthopaedic Executives 2014 AAOE Benchmarking Survey