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On May 14, 2009, the Department of Health and Human Services Office of Inspector General (OIG) issued Advisory Opinion 09-05, a hospital's proposal to compensate physicians for on-call services provided to the hospital's uninsured patients (the "Proposed Arrangement"). In this Advisory Opinion, the OIG found that the Proposed Arrangement (i) would not constitute grounds for the imposition of civil monetary penalties (CMP) under 42 U.S.C. 1320a-7a, and (ii) could implicate the anti-kickback statute if the requisite intent were present, but would not result in civil monetary penalties or administrative sanctions under 42 U.S.C. 1320a-7b.

The Opinion requestor was a nonprofit hospital that received funding from its state agency as part of the disproportionate share program for uncompensated services to the indigent and uninsured (DSH). The OIG noted that physicians do not receive any funding similar to DSH for physician services rendered to the indigent.

Although the hospital's medical staff bylaws required its active medical staff to provide call coverage, many of the hospital's physicians cut back their call coverage to the minimum required under the bylaws, leaving the hospital with a shortage of on-call specialists. To address this problem, the hospital developed a new on-call coverage policy and program (Program) that included the following components:

• Eligible Patients. The Program will only cover patients without insurance coverage (including Medicare or Medicaid) and who eventually qualify for the DSH program
• Eligible physicians. Physicians must be on the hospital's active medical staff
• Compliance with Requirements. Physicians must sign a letter agreement in which they agree: to comply with the hospital's policies; to respond timely to requests for call when scheduled; to evaluate patients in person; to provide requisite follow-up care; to provide call coverage pursuant to the medical staff's organized call schedule, which includes a rotation system applicable to all physicians; and not to bill or collect from the Eligible Patient or any other third party or payor.
• Documentation Requirements. After a physician has treated an Eligible Patient, the physician submits a claim form to the hospital detailing the services provided
• Absence of Other Payor Sources. If the hospital identifies any payor source (including where the Eligible Patient ultimately qualifies for Medicaid), the physician's claim form is returned, and the physician must seek reimbursement from the payor source
• Fair Market Value Payment. If the Eligible Patient qualifies and the claim form is otherwise approved, the hospital will pay the physician a fair-market-value flat fee based on a schedule allocating set amounts for four defined service categories (e.g., ER consultation, inpatient care, surgical procedure, and endoscopy procedure)

The OIG first noted that it is aware of the proliferation in call coverage compensation arrangements. The OIG cautioned, however, that such arrangements must be scrutinized on a case-by-case basis to ensure that they are not simply mechanisms for rewarding referrals. The OIG noted particular concerns regarding per diem and annual payment methodologies for on-call physician services. In analyzing the Arrangement, the OIG noted that while the personal services and management contracts safe harbor could potentially apply, the Arrangement did not fall within the safe harbor because the aggregate amount of compensation was not set in advance. Under the Proposed Arrangement, physicians would be compensated according to the following fee schedule:

• Emergency consultations on an Eligible Patient presenting: $100 flat fee
• Care of Eligible Patients admitted as inpatients from the Emergency Department (the admission to physician's service must be while physician is on-call for Requestor's Emergency Department, and includes inpatient care and management, history and physical, daily rounds, discharge summary, etc.): $300 per admission
• Surgical procedure or procedures performed on an Eligible Patient admitted from the Emergency Department: $350 flat fee for the primary surgeon of record
• Endoscopy procedure or procedures performed on an Eligible Patient admitted from the Emergency Department: $150 flat fee for the physician performing the endoscopic procedure

The OIG concluded that the aggregate fee was not set in advance since it was not clear how many patient visits each physician would be reimbursed for. The hospital further certified to the OIG that the payment amounts were within the range of fair market value for services rendered. The Hospital calculated the compensation amounts set forth in the fee schedule above by using a valuation methodology that took into account the following factors: patient acuity levels for Emergency Department patients; a blended fee incorporating fees across public, private, and self payers; an overall average length of stay based on actual average lengths of stay for public, private, and self payers; payer mix; and physicians' likely time commitment for the service.

The OIG then reviewed the Arrangement, taking into account the facts and circumstances, and determined the risk of fraud and abuse to be low for the following reasons:

• The payments are for services rendered without regard to referrals. The hospital certified that the payments were consistent with fair market value. The claim forms and verification system ensure that payments will only be made for in-person services actually rendered to uninsured patients. Additionally, the fee schedule helps ensure that the payment is consistent with the level of service provided.
• There is a need. The hospital reported that it was having a difficult time providing certain services due to the physicians' unwillingness to provide uncompensated call coverage
• The Program includes additional protections. The Program is offered uniformly to the entire medical staff (except for provider-based physicians). Physicians must respond in a timely manner, and the scheduling includes an equitable rotation system. In addition, the claim form system promotes transparency.
• The Program promotes a public benefit. Because the Program allows the hospital to provide services necessary for it to remain eligible for DSH funding, the Program promotes a public benefit by facilitating better care for uninsured and indigent patients

The OIG concluded the Opinion by noting that the Opinion should not be construed as requiring any hospital to pay for call coverage, and that any call coverage arrangement should be scrutinized carefully to avoid fraud and abuse. The OIG also gave the following examples of problematic on-call compensation structures that might disguise kickback payments, and therefore should be avoided:

• "Lost Opportunity" or similarly designed payments that do not reflect bona fide lost income
• No Identifiable Services. Payment structures that compensate physicians when no identifiable services are provided
• High Payments. Aggregate on-call payments that are disproportionately high compared to the physician's regular medical practice income
• Double Payment. Payment structures that compensate the on-call physician for professional services for which he or she receives separate reimbursement from insurers or patients, resulting in the physician essentially being paid twice for the same service

Conclusion

With respect to compensation for on-call coverage, the key inquiry is whether the compensation is: (i) fair market value in an arm's-length transaction for actual and necessary items or services; and (ii) not determined in any manner that takes into account the volume or value of referrals or other business generated between the parties. Advisory Opinion 09-05 recognizes the potential for abuse for paying physicians to provide on-call coverage at hospitals to which they admit patients, but also recognizes the difficulties all hospitals have had securing appropriate call coverage in a changing environment in which physicians no longer voluntarily assume the burden of providing on-call coverage. Hospitals and physicians should bear in mind that OIG Advisory Opinions are legally binding only on the requesting entity, and further that Advisory Opinion 09-05 does not speak to the application of the Stark Law. Therefore, any hospital on-call coverage arrangement with a physician who admits patients to the hospital must satisfy a Stark law exception for compensation arrangements. Theodora Oringher Miller & Richman has substantial experience in advising health care organizations regarding compliance with Anti-Kickback Law and Self-Referral Prohibition laws. If you have any questions about Advisory Opinion 09-05, federal anti-kickback law or physician on-call compensation programs please contact Michael Dowell at mdowell@tocounsel.com or the lawyer in the firm who generally handles your health care legal matters.