ABC’s of Documenting FMV On-Call Pay for Employed Physicians

With most hospitals paying for emergency department on-call coverage, it is important to understand the factors that influence the value of these arrangements. Following these simple ABCs make understanding and documenting fair market value a lot less complicated.

A - Avoid Double-Counting Pitfalls

On-call compensation is basically payment for physician availability and reimbursement for undercompensated care. Most employed physicians are only at risk for one of these pieces: availability. To avoid double-payment for undercompensated care, the physician employment agreement and market data need to be carefully evaluated.

For on-call compensation of hospital-employed physicians to be consistent with FMV, the following questions need to be considered:

• Does the physician receive a base or guaranteed compensation?
• Is the physician also entitled to a production incentive?
• If yes, what is the basis for the incentive?

If the employment agreement contains base or guaranteed compensation or a production incentive that is paid regardless of whether the hospital receives payment for the service, such as a work RVU-based incentive, the physician is not at risk for undercompensated care and should only be paid for availability. If the employment agreement does not have guaranteed compensation and the physician’s incentive depends on whether the hospital receives payment for the service, the physician is at risk for undercompensated care and can be compensated for both availability and uncompensated care.

The nuances of physician compensation survey data should also be carefully considered. Most surveys report total cash compensation, which includes all forms of compensation, including clinical, on-call, and administrative pay. Physicians receiving base or guaranteed clinical compensation determined using market data may already have a built-in market level of on-call pay, making it easy to inadvertently double-pay for on-call compensation when physicians receive on-call pay for the first day of call. Misuse of survey data or anecdotal information based on independent contractor rates can also result in overpayment, notably because independent contractor rates include built-in reimbursement for employer taxes, malpractice premiums, and benefit costs, when these costs are most likely borne by the employer in the employment setting.

B – Value of the “Beeper”

The beeper rate, also known as compensation for availability, is a point of contention when negotiating on-call compensation. Most emergency department calls occur on nights and weekends and are seen by physicians as detrimental to their quality of life. When call duties happen during office hours, they directly impact the income physicians generate from what would be more profitable activities.

Once it's been established that compensation can be paid for availability or “beeper” coverage, there are typically three factors to consider in the FMV analysis: frequency, intensity, and acuity.

• Frequency: the number of times a physician is on-call in a given period.
• Intensity: the number of times a physician is responsible for responding to calls, the required response time, whether activated to physically respond on-site to provide patient care, the extent to which responses result in surgical cases or admissions, and the length of time on-site once activated.
• Acuity: the level of acuity of patients being treated and the severity of cases.

As these increase, so too may the value of the physician’s availability.

C – Consult with the Experts

While it is commonplace to refer only to compensation studies as a basis for on-call pay, this practice is fraught with pitfalls, as noted above. There are a number of regulatory issues that must be considered when structuring on-call pay arrangements, such as the Stark Law and Anti-kickback Statute, which require that physician compensation arrangements be consistent with the health care regulatory definitions of fair market value. Therefore, to avoid improperly double-paying for on-call compensation in addition to employment arrangements that already account for physician availability and uncompensated care, it is recommended to seek the help of qualified healthcare legal counsel and valuation analysts.

Sticking to the ABCs of on-call pay fair market value builds a good foundation in creating fair, defensible agreements.