Understanding Compliance

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Negotiation Process

Negotiation Process

This section will provide physicians with an understanding of compensation-related regulatory compliance issues, the compensation decision-makers by employment setting and proven negotiation tactics and approaches that have resulted in increased or recalibrated compensation across various practice settings.

A. UNDERSTANDING COMPLIANCE It is important for physicians to generally understand the landscape around compensation and reimbursement regulatory compliance issues. All physician compensation arrangements can be scrutinized against specific government regulations. The individual who determines compensation or compensation frameworks for physicians at an organization (“decision-maker,” as defined in section IV.B) will almost always consider these regulations during a negotiation. For an ID physician to conduct a successful negotiation, the physician must understand these regulatory considerations as well. This section provides an overview of key regulations and their application to ID compensation and negotiations. Please refer to the “Physician Compensation Regulatory Compliance” webinar for additional details. 1. Key Regulations

a. Stark Law This law prohibits a physician from making referrals for certain designated health services ⁵payable by Medicare to an entity with which the physician (or an immediate family member) has a financial relationship (ownership, investment or compensation), unless an exception applies. There are 25 exceptions to the Stark law, with the most common exception being that compensation is deemed FMV and the arrangement is commercially reasonable and appropriate. Decision-makers overseeing compensation are concerned about this law due to the following liabilities: • Medicare and Medicaid will deny payment for designated health services that are furnished in violation of the Stark law; • Physicians who and entities that violate the Stark law can also be excluded from participating in Medicare and Medicaid programs; • There are civil monetary penalties of up to $27,018 per service in violation of the Stark law (as of 2023); • There is a penalty of up to $172,137 for entering an arrangement that circumvents the Stark law’s restriction on physician self-referrals; • Proof of intent is not required. b. Anti-Kickback Statute The Anti-Kickback Statute is a criminal statute that prohibits the knowing and willful payment of remuneration to induce or reward patient referrals or the generation of business involving any item or service payable by federal health care programs. It is important to note that the Anti-Kickback Statute is a criminal statute and is broader than the Stark law. Hospital administrators overseeing compensation are concerned about this law due to the following penalties: • Fines; • Exclusion from participating in all federal health programs; • Monetary penalties of up to $50,000 per kickback plus three times the amount of the remuneration; • Up to five years of imprisonment. Noncompliance can also lead to overutilization, increased program costs, corruption in medical decision-making, patient steering and unfair competition. For these penalties to be enforced, the intent of the parties must be proven, but it does not require proof of patient harm or financial loss. c. Fair Market Valuation IRS defines fair market valuation. FMV compensation is the compensation that would be paid at the time the parties enter the service arrangement as the result of bona fide bargaining between well-informed parties that are not otherwise able to generate business for each other.

FMV compensation is required by IRS and is an exception for both Stark law and the Anti-Kickback Statute. Organizations’ compliance policies typically require a fair market valuation from a third party to approve compensation arrangements when compensation is unusually high and/or the facts and circumstances of the arrangement are complex. An FMV assessment relies on a quantitative approach.

d. Commercial Reasonableness CR is defined by IRS, and in general terms, as an arrangement that furthers a legitimate business purpose of the parties and is sensible, considering the characteristics of the parties, including their size, type, scope and specialty. An arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.

CR is also a designated exception for compliance with Stark law and the Anti-Kickback Statute. An assessment of CR is highly subjective, and the law provides limited guidance on how to meet it. However, it does require an employer to have a rationale for transacting that does not hinge on referral considerations.

2. Enforcement Trends It is common for a physician compensation arrangement to be considered against the regulatory risk tolerance of the health system or AMC. Most organizations have a compliance policy to simplify the process for identifying higher-risk arrangements. However, despite efforts to comply with regulations, there are cases in which regulators have enforced Stark law and the Anti-Kickback Statute. Common red flags and circumstances can lead to investigation and, in some cases, enforcement actions. • The physician’s compensation is more than $1 million or above the 90th percentile per nationally recognized benchmarks. • There is a large year-over-year increase in the physician’s compensation. • The physician’s compensation involves stacking (i.e., there are multiple contracts or service components that may overlap and together determine a physician’s total compensation). • There are one or more bonuses in the physician’s compensation that are considered improper based on regulatory compliance standards. • There is a medical directorship or administrative role concern, which can include:

◦ A lack of monitoring or tracking service hours for the administrative role; ◦ A duplicate payment for the administrative service that overlaps with the physician’s defined CFTE; ◦ Improper documentation of the administrative agreement or the agreement not being reevaluated for several years.

3. ID-Specific Cases Stark law and Anti-Kickback Statute regulatory investigations related to ID physicians have involved payment for medical directorships or administrative roles. Below are a couple of examples that further highlight the importance of tracking effort and associated time to justify the appropriate payment. • Time sheets are required for medical directorships, and in one instance, physicians only provided hours and not the duties that were performed during these hours. A review uncovered that there was a misrepresentation of hours, as there had been a large increase in monthly hours with no change in duties. Additionally, some physicians reported administrative duties when patient care activities were performed. • A health system had paid monthly fixed payments to physicians for medical director, co-medical director or physician adviser roles when the physicians completed referrals to a health and rehabilitation center. This same health system paid for physicians to attend a celebrity golf tournament with a $25,000 attending fee with the expectation for the physicians to increase Medicare referrals.

5. Designated health services include clinical laboratory services; physical therapy services; occupational therapy services; outpatient speech-language pathology services; radiology and other imaging services; radiation therapy services and supplies; home health services; outpatient prescription drugs; inpatient and outpatient hospital services; DME and supplies; parenteral and enteral nutrients, equipment and supplies; and prosthetics, orthotics, and prosthetic devices and supplies.