Deferred Compensation for ER Call
Audio Conference
Recorded May 25,
2006
Faculty: Dan
Mulholland & Max Worth Consulting
Group, LLC principals, Max Hockenberry and Steve Worthy
Emergency room call coverage is one
of the most perplexing problems facing hospitals. Complicated EMTALA
rules, increased malpractice exposure, shortages of specialists
and competition from physician-owned entities have forced many
hospitals into a corner. They are now paying or considering paying
for what used to be a voluntarily-assumed responsibility of medical
staff appointment.
Paying for call coverage is obviously not an ideal solution. If one specialty
is paid today, nine others will be at the CEO's door tomorrow looking for their
money. Payment methodologies are often very complicated, and can lead to billing
problems for both the hospital and the doctor. Once payment for ER call begins,
requests for payment in the future will only go up, not down. In the end, the
hospital can find itself being sucked into a financial black hole from which
there is no escape.
It obviously is better not having to pay for call. But, if you are going to
pay for call, it pays to do it the right way. Recently, a few hospitals have
been considering a novel concept - paying for ER call coverage through a deferred
compensation program.
Similar to nonqualified supplemental retirement programs for
health care executives, this concept uses the tax deferral provisions
of Section 457(f) of the Tax Code to pay doctors later for ER
call coverage today. Money is credited to the doctor's account
as services are provided and kept in a "Rabbi trust." The
doctor can direct the investment of the money in his or her account, which
builds up tax-free until a vesting date five or ten years following the year
in which call coverage is provided. At that time, the money is distributed
to the doctor and subject to tax, but with the advantage of tax-deferred accumulation.
Like all deferred compensation programs, there must be a "substantial
risk of forfeiture" in order to take advantage of the deferred taxation
feature of Section 457(f). In this plan, the doctor can forfeit the amount
in his or her account by failing to take call in the future, dropping out of
Medicare or Medicaid, refusing to treat charity patients or investing in a
competing facility. Thus, what otherwise was an onerous responsibility for
the doctor and potential financial disaster for the hospital now becomes a
way to align the incentives of both parties.
Max Worth Consulting Group, LLC
principals, Max Hockenberry and Steve Worthy, along with HortySpringer
partner Dan Mulholland, discuss the following topics regarding
deferred compensation for ER call:
• Traditional
ER call payment methods
• Why they don't work well
• Basic principles of deferred compensation
• Applying deferred compensation to ER call
• Possible events of forfeiture
• Vesting options
• Who gets paid?
• How much can you pay?
• Structuring the transaction
• Personal services agreement
• Deferred compensation plan
• Rabbi trust
• Using company-owned life insurance ("COLI") to reduce the hospital's
financial exposure
• How to present the program to your medical staff.
Audio CD: $225
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