A hospital compliance officer is playing tug of war with senior management over payments to full-time employed physicians for on-call services. Last month, the hospital began compensating three pulmonologists for call coverage, which the compliance officer frets may not be justified. Given the risk of Stark and kickback allegations, the hospital agreed to make the payments on a trial basis and evaluate how many on-call services the pulmonologists actually provide. The compliance officer is open to the possibility the payments are legitimate and understands that sometimes hospitals must open their wallets to ensure physicians will appear at the ER when summoned, as required to ensure quality of care and satisfy regulators. He just thinks the hospital should look before it leaps, especially because it has never paid for call coverage before.

“If you’re going to pay them for call [coverage], there has to be a need for them,” says the compliance officer, who requested anonymity. His experience underscores the persistent compliance challenges of on-call coverage for all hospitals.

To obtain medical-staff privileges at the hospital, all physicians agree to be on call for a minimum number of days per year, but it varies by specialty. For example, this particular hospital has 24/7 call coverage for pediatricians, orthopedic surgeons and obstetricians, which is essential to maintain its level-two trauma hospital designation, the compliance officer says.

Each of the three employed pulmonologists provides call coverage one out of every four days. A few months earlier, the chief medical officer decided the hospital should pay the pulmonologists—and only the pulmonologists — to provide round-the-clock call coverage.

That raised red flags for the compliance officer. “I am concerned because this is the first time we paid for physician call,” the compliance officer says. It’s debatable that 24/7 call coverage is necessary for pulmonology — it’s not a requirement to maintain level-two trauma certification or for Joint Commission accreditation. For one thing, pulmonologists don’t routinely get called to the emergency room at his hospital. He ran a report and found that his ER had summoned a pulmonologist only eight times in the first 10 months of 2011. “This is creating a new way to pay them that statistics say they don’t really need to get paid for,” he says.

There’s also anxiety about the slippery slope of paying one specialty for call coverage. Why wouldn’t other specialists subsequently demand payment?

At least the hospital used MGMA compensation data and an outside valuation group to come up with a fair-market payment amount for the pulmonologists. Still, it bothers the compliance officer that a 2007 HHS Office of Inspector General advisory opinion about on-call payments doesn’t mesh with his hospital’s payment plan, and that the payments may not be commercially reasonable because it’s possible the pulmonologists are rarely called to the ER.

Compliance Officer Won a Partial Victory

So the compliance officer trotted out his concerns for senior executives and won a partial victory. “This was about to slam through two months ago and I stopped it,” he says. The contracts are tentative — for six months — and include tracking “so we know what we are getting for the money.” The compliance officer says it’s plausible the data will prove the payments are appropriate, but he’s taking a wait-and-see attitude.

The ambiguities here underscore the challenges hospitals face ensuring they maintain the on-call panel required to meet regulatory obligations, such as the Emergency Medical Treatment and Labor Act (EMTALA), without paying physicians so much they violate Stark and kickback statutes. Hospitals and physicians have settled cases over excessive on-call payments (RMC 4/6/09, p. 1; 9/13/10, p. 3). “It continues to be a really hot issue,” says Cynthia Wisner, associate counsel at Trinity Health, an integrated delivery system based in Novi, Mich.

It used to be that physicians served on call panels as part of their jobs, with no expectation of payment beyond professional fees for treating patients. “But it’s no longer the standard that medical-staff members take call,” Wisner says. “It’s part of the changing culture of medical staffs.” Physicians are pulling back from unpaid call coverage partly because they may not get reimbursed for treating patients in the ER during off-hours if the patients have no insurance. Some physicians have relinquished their medical privileges or switched to courtesy status to evade on-call coverage, Wisner says. Others expect hospitals to open their wallets.

That leaves hospitals “between a rock and a hard place,” Wisner says. “The dilemma for hospitals is that to satisfy licensure and accreditation, they have to have a certain number of physicians to take call. But physicians say, ‘I am not going to come in unless you pay me.’”

Wisner says payments for on-call coverage must meet the usual Stark requirements. For example, the on-call compensation, as set forth in a written agreement, is set in advance, fair-market value, commercially reasonable and unrelated to the volume or value of the physician’s referrals. “This is a compensable service,” she says, and it’s acceptable to pay physicians for “restricted” and “unrestricted” call.

“Restricted” means the physician is at the hospital on standby to treat patients who come to the ER. “Unrestricted” means the physician potentially could be called to the ER and therefore must remain within shouting distance. “You’re responsible for dropping everything and responding immediately” if you are on call and get paged, she explains.

Potential for Calls Can Be Compensated

For example, even though the pulmonologists rarely wind up seeing patients in the ER, it’s permissible to pay them because being on call affects their lives. They can’t go out of town for the weekend, for example, or attend a football game an hour away. The specialists are on duty, and even if the call never comes, they are providing a service, Wisner says. Sullivan, Cotter and Associates, a human resources consulting firm, publishes data on restricted versus unrestricted payment rates to help hospitals calculate fair-market value payments for on-call coverage, she notes.

Wisner says hospitals should watch out for Stark when paying employed physicians for call coverage, but it can be done. Even if hospitals already have contracts in place, they can be amended to pay for call coverage if it’s warranted and implemented in a way that comports with Stark. The original compensation arrangement may be amended at any time — even before it’s in place for one year — but the amended deal must last for a year, she says. There’s nothing wrong with singling out a specialty for on-call compensation, Wisner notes. In fact, it may be riskier for hospitals to compensate physicians across-the-board because on-call coverage may be unwarranted for one or more of the specialties.

It’s increasingly common for hospitals that employ physicians to break up compensation into “buckets,” Wisner says. The bulk is base salary, but there are different buckets, and the goal is to reward productivity and quality of care. One bucket can be used to compensate physicians for on-call services. As long as it’s structured carefully, this kind of arrangement will pass muster under Stark (RMC 9/20/10, p. 1).

And some hospitals are trying to relieve the logistical, if not the financial, burden of on-call payments by bundling payment for all of a specialty’s coverage to one group, whether it’s in the form of per diems or hourly fees. “They decide within the group who has to take call,” Wisner says. “It transfers responsibility for scheduling to the group and payments are bundled based on the group being responsible for call.”

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