Physician Compensation Advice: Are Your Compensation Arrangements Fair Market Value and Commercially Reasonable?

A look at healthcare news articles should highlight the government’s focus on compliance with respect to physician compensation arrangements. Tuomey, Adventist, Halifax, Citizen’s Medical Center, Broward Health… the number of recent settlements are becoming too numerous to track. In response to this, health systems should increase their focus on compliance in this arena, looking to market experts for guidance. Really, any transaction between a health system and physician should be heavily scrutinized. This includes, but is not limited to the following:·        

  • Employment agreements
  • Call pay arrangements
  • Medical director services
  • Hospital-based subsidies
  • Distributions from ACOs/CINs
  • Co-management agreements
  • Physician lease arrangements
  • Professional services agreements

When assessing these types of arrangements for compliance, Coker recommends the following:

  • Understand the Situation: It may seem obvious, but the analytics (comparison to market data, etc.) are only part of the full story. It is important to understand the qualitative factors surrounding the situation and the “why” behind what is being valued to determine whether something is fair market value and commercially reasonable.
  • Consider All Components: When evaluating an arrangement, all components of compensation should be considered individually and together to see how the entire arrangement is impacted.
  • Involve Qualified Legal Counsel: Healthcare transactions can be complex. It is always advisable to work alongside qualified legal counsel with specific healthcare experience to ensure that all the fair market value and commercial reasonableness risks of an arrangement are being addressed.
  • Look for the High-Risk Components: Are there high rates per wRVU, high guarantees, unusually long terms, components of pay not tied to documented work effort, stacking of compensation, etc.? These high-risk components should be identified and addressed proactively.
  • Provide Good Documentation: A fair market value and commercial reasonableness analysis is only as good as the documentation that accompanies it. Meaning, if a report is provided that is hard to understand, incomplete, uses incorrect benchmarks, etc., it may not be helpful in supporting the proposed arrangement.

Get the Best In Compensation Valuation Services

While numerous consulting and CPA firms across the country provide compensation valuation services, not all valuation is the same. Coker has a long history of assisting clients across the country in the compensation valuation space. Coker's dedicated healthcare valuation experts have extensive experience valuing compensation arrangements for clients of all revenue sizes. Coker’s additional service lines set us apart by providing unparalleled healthcare business insights to support all aspects of our work, including practice management, coding audits, healthcare operations and information technology.

For more information about Coker's compensation and business valuation services, please call 678.832.2021 to speak with Justin Chamblee, CPA, Senior Vice President.

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