Physician Compensation

Long gone are the days when drug reps enticed physicians with extravagant meals at five-star restaurants and box seats to the Phillies’ playoffs (and sadly, gone are the days when the Phillies actually made the playoffs).

According to a recent study published in the journal, JAMA Internal Medicine, physicians who are provided a meal for less than $20 from drug reps are more inclined to prescribe that rep’s name-brand drug, which is not always covered by insurance, over the less pricy bioequivalent generic.

Researchers from the University of California, San Francisco, the University of Hawaii, and the Pacific Health Research and Education Institute examined data from 280,000 physicians in Medicare’s prescription drug program from August through December 2013.  Four top-selling name-brand drugs were considered: Benicar and Bystolic, both of which are used to treat high blood pressure, Pristiq, used to treat depression, and Crestor, used to treat high cholesterol.

The study revealed that doctors who received a meal linked to Benicar and Bystolic promotion were 70% and 52%, respectively, more likely to choose the name-brand than those doctors who did not receive a free meal.  Those who received a meal linked to Pristiq were 118% more likely to prescribe Pristiq, and Crestor was linked to an 18% prescribing increase over the bioequivalent generic Lipitor.

Further, an alarming $73 billion per year is spent on name-brand drugs for which there is an equally effective generic, with patients themselves spending $24 billion of that amount.

Dr. Adams Dudley, the study’s lead author, remarked, “Doctors are human, and humans respond to gifts.”

Forgive me for being a skeptic, but isn’t it also quite possible that the sales pitch given during the meal was what actually influenced physicians’ prescribing habits? Call it naiveté, but let’s hope it takes more than a measly slice of pizza to buy our healthcare providers’ loyalties.

–Alexandra L. Sobol, Esq.

(Click here to view Ms. Sobol’s biography)

The deadline for providers to file a hardship exception application to the electronic health record (EHR) meaningful use requirements for the 2015 reporting period is July 1, 2016.

If you have any concern that your practice or certain eligible professionals in your practice may have been unable to meet the meaningful use requirements for the 2015 reporting period, it may be appropriate for the applicable provider to file a hardship exception application with CMS to avoid future payment adjustments.  Note also that certain provider types may automatically qualify for a hardship exception for the 2015 reporting period without the need to file an application.

For more information, please see the Health Law Practice Alert recently published by Fox Rothschild LLP on this topic, accessible at this link:  Fox Rothschild LLP Health Law Practice Alert – Hardship Exception (June 17, 2016).

The Affordable Care Act (ACA) requires Medicare providers to return overpayments within 60 days of the date they are identified in order to avoid liability under the False Claims Act.  Four years ago, CMS issued a proposed rule to implement this statutory requirement that would have placed a substantial burden on providers to identify and return overpayments within the 60-day period.  Last week, CMS issued its long-awaited “final rule” on the matter. The final rule is substantially less burdensome than the proposed rule would have been and offers providers a clearer view of their obligations to investigate and report overpayments.

Here are five key aspects of the final 60-Day Overpayment Rule that physicians and medical practices should keep in mind:

  1. What It Means to Identify an Overpayment

CMS clarifies that identifying an overpayment requires reasonable diligence and quantification of the overpayment.  Specifically, a provider has “identified” an overpayment when the provider “has or should have, through the exercise of reasonable diligence, determined that it has received an overpayment and can quantify the amount of the overpayment.”  In contrast, the proposed rule would have held providers to a “deliberate ignorance” or knowledge standard regarding the existence of an overpayment and would have included no leeway for quantification of the overpayment.

  1. The New Timeframe In Which Providers Must Identify Overpayments

One of the biggest questions that arose from the proposed rule was: “When does the 60-day clock to identify overpayments start ticking?”  The proposed rule called for providers to act with “all deliberate speed” to identify overpayments once they became aware of a possible billing error.  In its final rule, CMS provides a clearer answer to the question.  Providers will have up to 6 months to investigate a possible overpayment before the 60-day reporting period begins.

  1. The “Look-Back Period” Is Shortened

Part of a provider’s obligation with respect to overpayments under the ACA is to search through past records for overpayments after a provider identifies that it has received at least one overpayment.  CMS originally proposed a requirement that providers “look back” 10 years in their records for other overpayments in order to comply with this rule.  Acknowledging the unreasonable burden such a time period would impose on providers (both in effort and cost), in the final rule CMS has reduced the duration of the look-back period to 6 years.

  1. Documentation of Reasonable Diligence Is Advisable

In prefatory comments to the rule, CMS stated that it is “certainly advisable” for providers to document their diligence in investigating possible overpayments.  While documenting an investigation may not make a provider’s diligence “reasonable” per se, it may provide strong evidence of the provider’s efforts.

  1. Proactive Compliance

CMS emphasizes in the final rule that “reasonable diligence” requires not only reactive activities, such as a good faith investigation of potential overpayments by qualified individuals, but also “proactive compliance activities conducted in good faith by qualified individuals to monitor for the receipt of overpayments.”

The full text of the final rule may be accessed here:

Be sure to consult experienced legal counsel if you would like further guidance on the Medicare 60-Day Overpayment Rule, including what steps your practice should take to proactively and reactively address potential overpayments.

A new article in the online journal, JAMA Internal Medicine, highlights the importance for physicians of keeping valuable non-public information confidential.  Under insider trading laws, it is illegal for anyone to trade securities based on non-public information and for anyone to supply information to others who trade on such information, if the person sharing the information has an obligation to keep it confidential.  Examples of valuable confidential information to which you might be privy include data and opinions regarding unpublished or ongoing clinical trials or new medical equipment, and information regarding acquisitions involving public health care companies.

Physicians may share their opinions with investors about medical research or other valuable information that is already public knowledge, but the line quickly becomes blurry when it comes to non-public information.  If you are asked to share information with a potential investor that you think may violate insider trading laws, it would be best to consult your legal counsel before disclosing the information.  This includes instances where you are asked to disclose information to, or participate in, “expert consulting networks” and online physician forums.

The line is also blurry for physicians when disclosing non-public information to other physicians and scientists for medical research purposes.  Be careful to disclose such information only  for research purposes.  If you become aware that one of the recipients of the non-public information may be using such information to trade securities, cease disclosing the information immediately and consider seeking legal counsel.

The online JAMA article is accessible in full at this link:

Many physicians pay very little attention to their managed care participation agreements.  In fact, some simply sign these agreements without ever reading them.  I think this apathy stems from the fact that managed care plans generally refuse, at least for smaller practices, to “negotiate” their fee schedules.  But, even if a payor won’t negotiate fees, participation agreements typically include other significant legal provisions worthy of review and, in some cases, negotiation.  Here are just a few:

Definitions.  State law may mandate that plans adopt specific definitions for certain key terms such as “medical necessity”, “clean claims”, covered services” and emergency services”.  It is important to review and understand these and other critical terms used in the agreement and make sure they confirm to state law if applicable.

Billing for non-covered services.  If you want to be able to bill patients for non-covered items and services like completing forms or preventive care, knowing how and when this is permissible may be spelled out in the agreement.

Benefit plans and programs.  More and more often managed care companies are contracting out their network to various other benefits plans.  In addition, through mergers and consolidation, plan affiliates and subsidiaries change quite frequently.  In order to know how much you are entitled to be paid and who is responsible for paying you, it is important to know what plans, programs, and affiliates may be covered by the particular agreement.

Policies and procedures.  Many participating agreement reference and incorporate a host of policies and procedures (sometimes referred to as a provider manual).  Because these are usually made legally binding on participating physicians by virtue of incorporation into the agreement, physicians should be sure to obtain and review these.

Overpayments.  Some participation agreements give the payor the unilateral right to recoup overpayments from future payments to a practice.  This can cause significant confusion when it comes to reconciling payments as it is not always clear when a payment has recouped or to which patient the recoupment relates.   Moreover, the practice does not have an advance opportunity to review and challenge the overpayment determination.  When it comes to overpayments, my recommended approach is to require payors to notify the provider an an overpayment and allow the provider a period of time to review and dispute it.  No recoupment should occur until any disputes are resolved.

Curious what the future of medicine will look like?  According to this recent article on, it appears that for many physicians it will involve a boss, a timeclock and a steady paycheck.  Not surprisingly, as the legal and administrative burdens of running a private practice continue to increase, more and more seasoned physicians are making the leap to hospital employment.  And, according to the CNBC article, it appears that a new generation of physicians is bypassing the private practice model altogether and heading right into hospital employment.

Unfortunately, in my experience, many hospitals are not prepared to accommodate physician employees on a large scale and often lack the expertise to manage physician practices efficiently.  After all, hsopitals are in the business (often not-for-profit) of running hospitals, not doctors’ offices.  As a result, hospital-owned physician practices can quickly become money-losing propositions.  While some hospitals may be willing to subsidize physician practices for a period of time, in my experience, they may try to play “catch-up” in the contract renewal period – imposing unrealistic performance targets on physicians or tying compensation to expenses or other factors beyond physician control.

Hospital employment can be a long-term career option but physicians should understand that most initial hospital employment terms will be less than 5 years and are commonly only 3 years.  It is critical therefore that when negotiating your initial hospital employment agreement, you try to build a framework for negotiation of renewal terms.  This may involve caps or floors on compensation adjustments, realistic performance criteria and mechanisms to overcome negotiation impasses such as reliance on independent third party valuation experts.

As the implementation of the federal Affordable Care Act (ACA) continues in fits and starts, healthcare providers are scrambling to best position themselves to accommodate anticipated and developing payment models.  Unfortunately no one really knows what these new payment models will look like or how they will ultimately work.  It is apparent, however, that most of them (such as the accountable care organization model and bundled payment models) will require some level of increased clinical or legal integration between and among providers.  Given the general state of confusion around payment reform, it is  not surprising that many physicians and other providers are perplexed over how best to integrate.   Despite the common thinking among many physicians, integration does not necessarily mean that all physicians must be employed by hospitals.  In fact, there are a number of potential integration strategies worth evaluating before making the leap to hospital employment. Some of these models include the following:

1.            Practice Lease.  Under this model, a hospital or health system leases the entire medical practice including the space, equipment and personnel, and engages the physicians on an independent contractor basis to staff the leased office.

2.            Clinical Co-Management.  Under this model, a hospital or health system would engage the practice physicians to manage the clinical aspects of a department or service line of the hospital or system.  In exchange for the management services, the physician may be paid through a fixed compensation component and perhaps some quality or performance component.

3.            Professional Services Agreement.  Under this model, a hospital or health system would lease the services of one or more of the physicians of a practice to see and treat hospital patients at the hospital or in hospital facilities.  The hospital would pay the practice fair market value compensation  and would be entitled to bill and collect payment for all services rendered by the physicians during the lease periods.

4.            Medical Director Services.  Under this model, a hospital or health system can engage practice physicians to serve as medical directors of a service line or department as a means of enhancing the delivery of care with close physician oversight and involvement.  As with all of these arrangements, care must be taken to ensure that the services are necessary, commercially reasonable and actually performed.

5.            Network Affiliation.  Under this model, a medical practice or its individual physicians would sign participation agreements to participate in a hospital’s/system’s provider network (e.g., an accountable care organization).  The participating network providers do not become employees of the hospital or network but merely agree to participate in the payment arrangements entered into by the network.

It goes without saying, of course, that all of these integration models are subject to much federal and state regulation and therefore must be carefully evaluated and structured to comply with applicable law.  Nevertheless, it is important to know that a variety integration options exist for physicians who may wish to remain in private practice.

A recent whistleblower case out of the federal 3rd Circuit in Pennsylvania highlights some of the dangers in not properly documenting financial relationships between physicians and hospitals. Specifically, in US ex. rel. Kosenske v. Carlisle HMA, Inc., a Qui Tam lawsuit brought by the former member of an anesthesia group, the 3rd Circuit Court of Appeals reversed a US District Court’s summary judgment in favor of the defendant hospital and anesthesia group.

The anesthesia group in question had a written exclusive contract with the hospital for anesthesia services but, subsequent to entering into the exclusive agreement, began providing pain management services at the hospital’s freestanding pain center. The hospital did not charge the anesthesia group rent for use of the space in the pain center and the qui tam relator claimed that the arrangements failed to meet the Stark exception for personal service arrangements (and therefore that claims for services referred by the anesthesia group’s physicians to the hospital were in violation of the federal False Claim Act).


Continue Reading Pennsylvania Qui Tam Case Highlights Dangers in Physician/Hospital Arrangements

So it’s stressful, expensive and the hours stink — accordingly to an article on, medicine is still a pretty good gig.  In what will undoubtedly add fuel to the already raging debate over who is responsible for the high cost of health care, health care-related occupations fill the top 15 slots on Forbes’ list of the top 25 best paying jobs in the nation.  Here’s the breakdown:   

1. Anesthesiologists
2. Surgeons
3. Obstetricians And Gynecologists
4. Orthodontists
5. Oral And Maxillofacial Surgeons
6. Internists
7. Prosthodontists
8. Psychiatrists
9. Family And General Practitioners
10. Chief Executives
11. Physicians And Surgeons, All Other
12. Pediatricians, General
13. Dentists, General
14. Airline Pilots, Copilots And Flight Engineers
15. Podiatrists
16. Lawyers
17. Air Traffic Controllers
18. Engineering Managers
19. Dentists, All Other Specialists
20. Natural Sciences Managers
21. Marketing Managers
22. Computer And Information Systems Managers
23. Sales Managers
24. Petroleum Engineers
25. Financial Managers