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Physician compensation continues to be on the radar as the Centers for Medicare and Medicaid Services announces intentions to modernize Stark Law

Health and Benefits|Total Rewards

March 21, 2019

The Centers for Medicare and Medicaid will be looking to alter the Stark Law to reflect the move from fee-for-service to value-based payments under Medicare.

According to Centers for Medicare and Medicaid (“CMS”) Administrator Seema Verma, the agency will be looking to modernize the Stark Law to reflect the move from fee-for-service to value-based payments under Medicare.

Several bills have been introduced in recent years that are still under consideration by the House and/or Senate that would solidify certain previous regulatory changes, provide small changes to the current law, or perhaps most importantly, give Health and Human Services (“HHS”) authority to grant waivers to fraud and abuse-related statutes for participants in the Medicare Shared Savings Program (“MSSP”) and covered alternative payment model (“APM”) entities.

What does this mean for your organization?

If your organization participates in an accountable care organization (“ACO”) or APM, there may be changes on the way if the Medicare Care Coordination Improvement Act of 2017 gains traction and HHS is able to grant waivers as indicated above…stay tuned. Regardless of the changes that go into effect, compensation for services will still be subject to fair market value constraints and need to be monitored, no different than before.

This attention to Stark Law, along with the increased frequency of whistleblower cases and settlements for fraud and abuse violations, should serve as a reminder to organizations of the importance of ensuring that compensation paid to physicians is being governed and reviewed internally or by an experienced third party. Willis Towers Watson recommends taking the following steps in order to help ensure that the organization mitigates risk from potential Stark Law and Anti-Kickback Statute violations:

  • Periodic audits (annual or biannual) of employed physicians’ compensation and productivity to assess alignment with fair market value and commercial reasonableness commonly accepted standards
  • Review of physician compensation models to ensure that they generate compensation, through all components, that will be consistent with fair market value and commercially reasonable
    • We also recommend that individual cash compensation components be reviewed to ensure that they are consistent with market and do not raise any compliance concerns (e.g., base salary/draw levels, production compensation payout rates, quality / performance incentive payments, payments for call coverage, medical director payments, advanced practice clinician supervision payments, etc.)
    • Special attention should be paid to any physicians or groups paid on revenue less expense models — these are generally riskier compensation arrangements that are being phased out in most organizations
    • Redesign of compensation models that are not generating cash compensation at desired market levels or that are not consistent with the organization’s goals may be an appropriate next step
  • Additional review of highly compensated physicians to document support based on their unique facts and circumstances
  • Review of any third party contractor or physician leasing arrangements in order to document that they are also consistent with fair market value and commercially reasonable

In addition to reviews of compensation arrangements from a regulatory compliance perspective, we also recommend that organizations perform some housekeeping in order to reduce recurring administrative headaches, including:

  • Review of physician employment agreements and taking steps to standardize agreements, and the language within, in order to reduce variation and make management of physician arrangements less variable, complex, and cumbersome
  • Establish a tracking process to alert for physician employment agreements that are coming to term in order to allow adequate time for review for renewal, terms changes, or termination

Due to the regulatory concerns around physician compensation and the myriad complexities of compensating these highly skilled and sometimes specialized and unique providers, maintaining consistent oversight can be challenging. Establishing some routine scheduled maintenance can make it significantly easier to ensure that your organization’s physician compensation program remains on track.

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