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7 Best Practices for Addressing Physician Compensation During a Crisis

April 9, 2020

The healthcare community saw the first warning signs of a pandemic that has upended the nation. As some providers race to the front lines to care for those most in need, others have been left with declining patient volume and dwindling cash flow.

As normal operations have changed, questions have been raised about physician compensation. While there are still more questions than answers, the following best practices can help healthcare providers navigate physician compensation issues during this crisis.

1. Make No Promises (Yet)

The effects of COVID-19 have been felt for weeks, but it is still early in the crisis. It would be unreasonable to make any wholesale promises to employed physicians regarding compensation (e.g., making them whole) until further internal evaluation can be done.

2. Communicate, Communicate, Communicate

Develop a communication plan to inform your employed physician network that their efforts during this crisis are valued and that leadership is evaluating the impact on physician contracts. An FAQ document is a good approach. Plan to eventually address questions about matters such as base compensation reset provisions, quality or programmatic goals, income protection, redeployment, compensation caps, and contract renewals.

3. Document, Document, Document

COVID-19’s impact on physician operations is being felt in a variety of ways, including practice closures, cancellation of non-emergent appointments and elective surgeries, redeployment to other hospital service lines, expanded advanced practice clinician oversight, and increasing utilization of telemedicine services. It is important to adequately document what has, is, or will happen to a physician’s scope of practice. A key point in this documentation is to determine when the COVID-19 impact materially began and ended, specific to each individual physician. When all is said and done, having a document trail in a physician’s contracting file will provide compliance support for the business decisions ultimately made.

4. Assess the Impacted Production-Based Compensation

Some clinical specialties are experiencing a radical decline in patient volume, which stands in stark contrast to the flood of patients being seen in emergency departments and intensive care units. Seemingly overnight, physicians saw their patient appointments and surgical procedures cleared from their schedules.

If there is a silver lining, it’s that there is time to find a reasonable contracting solution before the full impact of a loss in production is felt. A loss of production in the last two weeks of March may not materialize in a contract production incentive reconciliation until a few months later.

Take the time to properly evaluate individual physician contract terms and the timing of production reconciliations. Ultimately, one solution may be to consider pre-COVID-19 levels of production annualized for the current contract period, thereby ignoring any production impact from the designated COVID-19 period. Disregarding production during the COVID-19 period would be similar to a production credit during an electronic health record implementation or a practice location move – but on a potentially larger scale.

There is little room for argument that any such production impact is largely out of the physician’s control. No one is suggesting physicians pay a disproportionate penalty resulting from a global pandemic and a seismic shift in the delivery of care to patients most at risk and in need.

5. Evaluate At-Risk Incentives

Much like the production consideration, contracts that include at-risk performance, quality, or other incentives should be evaluated and may need to be modified to exclude measurement during the designated COVID-19 period. For example, quality metrics may need to measure only pre-COVID-19 outcomes and achievements.

6. Consider Premium Pay

The federal government has existing guidance with respect to hazard pay, notably in situations involving virulent biologicals and where there is known exposure to serious disease for which adequate protection cannot be provided. As the pandemic continues, premium or hazard pay associated with physician efforts during this crisis will warrant a deeper discussion.

7. Comply With New Regulatory Guidance

On March 30, 2020, the Secretary of the Department of Health and Human Services used his authority under Section 1135 of the Social Security Act and issued blanket waivers of Section 1877 (also known as the physician self-referral or Stark Law). These blanket waivers are retroactively effective to March 1, 2020, and they may be used without notification to the Centers for Medicare and Medicaid Services (CMS). Additionally, they waive self-referral sanctions under the Stark Law in areas where both a public health emergency and a national emergency have been declared. CMS typically considers such Section 1135 waivers on a case-by-case basis. Providers are expected to come into compliance with any waived requirements prior to the end of the emergency period. Additionally, the Office of the Inspector General announced on April 3 that the waivers will also apply to the Anti-Kickback Statute, which relates to all federal healthcare programs. Our recommendation is to consult your in-house or outside legal counsel on the application of these blanket waivers and how they impact your physician compensation arrangements.

Returning to Normal

No one knows exactly when normal operations will resume. There is no guarantee that a physician’s patient volume will return to pre-COVID-19 levels, and it’s possible that patients may seek a different physician. There is also the possibility that communities and physician practices across the country will resume normal operations at varied times.

As our healthcare system grapples with the realities of COVID-19, and our nation copes with federal, state, and local directives for social distancing, we at KSM stand ready to guide you through these uncharted waters. If you have questions or concerns, please reach out to your KSM advisor or complete this form.

Visit the KSM COVID-19 Resource Center

Brad Reay Director, Healthcare Consulting

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