With many physicians being asked to work well beyond a normal schedule to combat COVID-19, and many others seeing their incomes rapidly diminish as patient visits and procedures get canceled, typical compensation plan elements may not be applicable. As a result, provider organizations everywhere are or will shortly be considering physician compensation adjustments that are equitable and financially prudent but don’t run afoul of regulatory standards.
To mitigate the potential risk related to Stark and antikickback regulations, ECG provides the following guidance:
Strategies for Compensation Subsidies to Reduce Regulatory Risk
- Adhere to your contract draw rates
- Use market examples to set a compensation floor if one is not indicated in the contracts
- Apply any compensation interventions consistently across the group
Stick to Existing Draw Terms
Your administrative and legal teams took great care in developing the terms of your existing compensation agreements, so adhere to those terms to the extent possible. Many contracts identify a standard compensation draw or floor that protects providers at moments like this, and they usually have provisions in place through a preestablished term that will help assuage immediate concerns. Keeping the current draw levels through the duration of the crisis, based on volume that was established before the pandemic, is appropriate. Further, supporting a draw at higher levels than productivity indicates may be appropriate temporarily and should be tied to milestones marking the end of the crisis, such as national or state government guidance.
Look to the Market to Set Compensation Floor
When your contracts do not provide a draw or floor, it is commercially reasonable to set one that is consistent across your medical group. Groups nationally are setting these floor levels ranging from 50% to 80% of historical compensation. The exact amount for your medical group must consider the financial sustainability factors and circumstances in your market, which could differ from other areas. Further, setting compensation at the lower of a draw rate or a percentile benchmark rate per FTE, not to exceed the 75th percentile for the specialty, represents an acceptable method for setting maximum pay without regard to productivity under the COVID-19 situation.
Be Consistent across the Group
After selecting an approach that works for your organization, do not make special arrangements for a subset of providers within the group. Above all else, be consistent with the selected strategy and apply it to all physicians impacted by the crisis. Provider compensation should be tied to services or ready availability/coverage being provided, even if overall productivity is low. Paying providers to do nothing is not commercially reasonable.
Prioritize Financial Feasibility
An extended COVID-19 response period will have a significant impact on provider compensation and the financial stability of physician organizations. Implementing changes to compensation plans in the near term will require leaders to consider the stability of the provider workforce and financial implications, but also account for regulatory risk. Adopting an approach without regard for FMV and commercial reasonableness could result in potential exposure to regulatory scrutiny. Notably, CMS has provided an umbrella waiver to protect organizations entering into arrangements aimed at maintaining access and services in this crisis. Most of the potential strategies being considered by providers to maintain stability will fall under these waivers.
The current market conditions induced by COVID-19 are relatively unprecedented in scope and breadth, which makes an FMV comparison extremely challenging. Selection of the final approach for your group will require careful financial and operational analysis. In future posts we will explore specific situations that we are encountering amid this crisis.