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OIG Approves Hospital’s Per Diem Payment for Emergency Room On-Call Coverage By Physician Specialists

In Advisory Opinion 12-15, issued October 23, the Office of Inspector General (“OIG”) approved a Hospital’s plan to pay specialists on a per diem basis to provide on-call coverage in its Emergency Department (“ED”). Requestor, a tax-exempt, charitable, not-for profit hospital had struggled to fill shortages in its ED for on-call coverage. To meet the ED’s needs, the Requestor sought year-long agreements with specialists to provide scheduled on-call coverage, who the receive compensation on a per diem basis. The arrangement only included specialists that could provide unrestricted coverage and other arrangements were made for specialties that required constant on-site coverage.

Under the arrangement, during each on-call shift, participating providers are required to provide one or more of the following:

• Over the phone consultation,

• In person consultation at the hospital, or
• Follow-up care with at least one follow-up visit that the patient will schedule.

To ensure that the per diem rates were Fair Market Value (“FMV”) and did not consider volume or value of referrals, the Requestor sought input from an independent consultant that compared the per diem rates to national survey data and its own proprietary data. Furthermore, Requestor certified that scheduling was divided equitably based on Requestor’s methodology, with every effort made to divide calls within a specialty evenly across the 365 days of the year.

The OIG approved the arrangement, noting that it was unlikely to result in fraud and it would, therefore, not impose sanctions on the Hospital for the arrangement under the Anti-Kickback Statute (“AKS”). In reaching its decision, the OIG examined whether the per diem was reasonable and at FMV as well as whether the compensation was based on an arm’s length transaction that does not consider past or future referrals or other business between the two parties.

The arrangement did not “fit squarely” into the personal services and management contracts safe harbor, 42 C.F.R. § 1001.952(d), because of the physicians varying payments and schedules; however, the Requestor’s arrangement presented a low risk of fraud and abuse because the Hospital had sufficient safeguards in place to ensure payments were equitable that scheduling was not based on the number of referrals for “Federal health care program business.”

Significant factors in the Advisory Opinion’s conclusion included:

• The Requestor certified that the per diem payments were for quantifiable services, which included services for uninsured patients.

• The Requestor certified that it allocated funds for each participating specialty and recalculated the per diem basis annually using an independent consultant to ensure per diem rates remained FMV. In addition, per diem payments were distributed uniformly within a specialty and were not based on the number of referrals or business generated by an individual provider.

• The Participating Physicians provide actual services that begin in the ED are at risk of furnishing additional services to the patients for no additional payment.

• The Participating Providers document their services in the patient’s records, providing transparency and accountability.

• The arrangement is not designed to provide complete compensation and while a Participating Provider may receive the per diem and bill separately for the furnished services, due to the percentage of uncompensated care provided in the ED, the participating physicians will likely provide a significant amount of care where the only compensation is the per diem.

• The Requestor offers the opportunity to participate in the arrangement to all specialists on staff who are required by bylaws to take unrestricted call.

• Scheduling is based on the Requestor’s by-laws and is uniform across all providers in specialty.

• The arrangement is structured so that the Requestor absorbs all costs of the arrangement and none accrue to the federal health care programs.

Advisory Opinion 12-15 makes clear that the OIG recognizes that hospitals face shortages of specialists for on-call coverage and highlights its belief that parties can structure arrangements for on-call compensation that pose minimal risk under the AKS (and possibly even meet the requirements of the personal services safe harbor). However, hospitals must ensure that the compensation arrangement is structured with sufficient safe-guards to ensure it is not misused to disguise payments for referrals.

For more information regarding this and related issues, please contact Adrienne Dresevic, Esq., or Carey Kalmowitz, Esq. at (248) 996-8510 or (212).734.0138, or visit the HLP website.

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