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To ensure access to physician specialty services, hospitals licensed to provide emergency care must maintain a roster of physicians available for on-call care or consultation, in accordance with state licensing regulations and the federal Emergency Medical Treatment and Active Labor Act ("EMTALA"). The responsibility for compliance rests with hospitals, yet hospitals have little control over physician participation on call coverage panels. More and more frequently, hospitals are finding themselves unable to provide 24-hour physician coverage in the emergency department due to the lack of physician willingness to take call coverage. To maintain their call rosters, many hospitals have had to provide or guarantee compensation to physicians providing call-coverage.

On September 27, 2007, the Office of Inspector General of the U.S. Department of Health and Human Services ("OIG") published Advisory Opinion 07-10 in which it approved an Arrangement in which a not-for-profit medical center compensated physicians for emergency department on-call coverage, for uncompensated care provided to uninsured and underinsured patients who presented to the emergency department, and for follow-up care of emergency department patients subsequently admitted as inpatients (the "Arrangement"). Despite its concerns about the potential risks of on-call payment programs, the OIG said this particular Arrangement contained numerous safeguards and provided a public benefit by providing uncompensated care to the community.

Demonstrated Need for the On-Call Coverage Compensation Program

The hospital noted that it developed the Arrangement in response to a growing unwillingness among certain specialists to provide on-call coverage, largely because of uncompensated care physicians often must provide to patients who come to hospital emergency departments and continuing care requirements for patients who are admitted as inpatients.

According to the advisory opinion, "[t]he Medical Center consequently had to transfer ED patients to other medical facilities both for emergency treatment and necessary inpatient care that might have been handled more conveniently and efficiently at the Medical Center. Given the special role of the ED in caring for the underinsured and uninsured, the shortage of available physicians hindered the Medical Center in fulfilling its charitable mission."

The OIG noted that the Arrangement addressed a real need of the hospital to meet on-call coverage and uncompensated care needs, thus lowering the risk that it was "instituted as a way to funnel unlawful remuneration to physicians for referrals."

The Hospital On-Call Coverage Compensation Program

The Arrangement was a joint effort by the hospital's Board, medical staff and administration. It was offered to all physicians in 18 specialties on the hospital's medical staff. Each physician who participated entered into a two-year contract which specified that the physician would meet five basic obligations (listed below). If the physician did not meet any of the following five criteria, the hospital could withhold payment until the physician is in full compliance:

• All of the physicians in each specialty are eligible to divide the monthly on-call coverage to the emergency department, as equally as possible
• A participating physician is obligated to provide inpatient care to any patient who the physician sees in the emergency department if the patient is admitted to the hospital (this applies regardless of the patient's ability to pay, and continues until discharge)
• Each participating physician is required to respond to the emergency department on-call in a timely manner, as determined and monitored by the hospital
• Each participating physician is required to participate in various hospital committees involving quality care, discharge planning and utilization
• Each participating physician is required to document the services provided in patient medical records in a timely manner

A daily per diem payment rate was developed for each specialty. Physicians were paid the daily rate for each day they were on-call, except for one and one-half days per month when they were required to be on-call for no charge. The per diem rate was different for each specialty based on the severity of illness encountered by that specialty; the likelihood of that specialty having to respond to an on-call request at the emergency department; the likelihood of having to provide inpatient consultative services for uninsured patients while on-call; and the degree of inpatient care normally required by the specialty. In addition, there was an increase in the per diem rate for on-call coverage during weekends.

The OIG's Analysis of Fraud and Abuse Concerns

While similar programs could potentially comply with the anti-kickback safe harbor for personal services and management contracts, the OIG said the Arrangement did not comply because daily payments to doctors could vary from month-to-month, and therefore were not set in advance.

In its review of the Arrangement, the OIG relied on the hospital's representation that the payment rates would be fair market value for services provided, and would not account for either party's referrals or other business either party generated. The hospital certified to the OIG that the per diem payments were at fair market value, and obtained an opinion from a consultant that they were at fair market value. The OIG stated that the following features of the Arrangement appeared to support the hospital's certification:

• The per diem rate paid to physicians appears tailored to reflect the burden on a physician and the likelihood that a physician in a particular specialty will be required to respond while on-call, as well as the likelihood he or she will have to provide uncompensated treatment, and the likely extent of that treatment
• Physicians continue to provide inpatient follow-up care until discharge and remain at risk of having to furnish additional services for no additional payment
• Physicians provide eighteen days per year of uncompensated on-call services; and
• Physicians assume responsibility for recording their services in medical records and cooperate with the hospital's care, risk management, and performance improvement efforts

The OIG noted that it does not opine on fair market value issues, and did not express any opinion about whether the per diem Arrangement in fact represented fair market value.

The advisory opinion stated that the risk of fraud and abuse was minimized not only as a result of the hospital's manner of determining each specialist's per diem rate, but also because the hospital offered the per diem payments uniformly to all doctors on its medical staff and in the specialty at issue, without regard to individual physicians' referrals to, or other business generated for, the hospital. In addition, the OIG favorably noted that the circumstances giving rise to the Arrangement suggest that the hospital had a legitimate, unmet need for on-call coverage and uncompensated care physician services; the Arrangement was offered to all physicians in the relevant specialties; it promoted an obvious public health benefit in facilitating better emergency on-call and related uncompensated care physician services at the hospital; and it was structured so that all costs are absorbed by the hospital and none accrue to Federal health care programs.

Evaluating On-Call Coverage Arrangements

The OIG recognized that on-call coverage arrangements can create significant risks of abuse and be structured in a manner that violates the anti-kickback statute. It indicated that call coverage arrangements may be the result of physicians' demand for compensation as a condition of doing business at a hospital, even when neither the services provided nor external market factors warrant it. In addition, the OIG noted that (a) hospitals may use such arrangements to entice physicians to join or remain on the medical staff or generate additional business; and (b) physicians may use such arrangements to induce referrals from the hospital (i.e., by offering to provide call coverage at below fair market value rates). The OIG gave the following examples of compensation structures that might disguise kickback payments:

• Payments for "lost opportunity" that do not reflect bona fide lost income
• Payments structures that compensation physicians when no identifiable services are provided
• Disproportionately higher aggregate on-call payments compared to the physician's regular medical practice income; and
• Compensation structures that result in the physician being paid twice, (i.e., that allow the physician to receive separate reimbursement from insurers or patients for the same services)

On-Call Coverage Compliance Tips

Each on-call coverage arrangements must be evaluated based on the totality of its facts and circumstances. All on-call coverage arrangements should be documented in a written agreement and structured in a manner that complies with the anti-kickback law safe harbor for personal services and management agreements. If compliance with the anti-kickback law safe harbor is not possible, then the arrangement should get as close as possible to compliance with the safe harbor criteria. In addition, the following legal issues should be considered an structuring an on-call coverage Arrangements:

• Anti-kickback law issues (i.e., fair market value, payments in excess of Medicare?)
• Stark law issues (i.e., personal services exception, indirect compensation exception, fair market value exception)
• Private inurement and benefit issues
• Corporate practice of medicine issues
• Evaluate and adopt compensation methodology
• Anti-surchage laws (i.e., document that part of payment is for availability)

Key contractual issues that should be considered when developing an on-call coverage services agreement include:

• Specificity regarding (i) location, (ii) days and hours, (iii) timing and response requirements, and (iv) scheduling
• Term and termination
• billings and collections for professional services
• Dispute resolution
• Restrictive covenants

Conclusion

As with all OIG Advisory Opinions, No. 07-10 is applicable only to the hospital that requested the opinion. However, as with all advisory opinions, it provides guidance for other hospitals that are searching for solutions to develop on-call compensation programs. In light of the advisory opinion, all hospitals should re-evaluate on-call compensation Arrangements to ensure that they are not inconsistent with the guidance provided in the advisory opinion. Our firm has assisted numerous clients with EMTALA compliance and physician on-call coverage Arrangements.

If you require our assistance or have any questions please contact Michael Dowell at mdowell@tocounsel.com or the lawyer in the firm who generally handles your health care legal matters.