May 28, 2020

QUESTION:        We have a physician who is up for reappointment and when we started to pull the credentialing, peer review, and quality information together we realized there were very serious concerns that might warrant an adverse recommendation.  We were wondering, do we have to start a formal investigation or, if warranted, can we just make an adverse recommendation at reappointment?  Are there any steps we should follow to make sure we are being fair to the physician and protecting ourselves at the same time?


ANSWER:           Reappointment should be an opportunity to make an evidence-based decision that reflects data that has been gathered during the most recent appointment period.  (You can certainly look back further if you need to gain perspective or discern if there are patterns of care or conduct that have been developing.)  Ideally, you will address issues as they come up through the peer review process.  But sometimes, even with a robust peer review process, you don’t see the whole picture until reappointment.

Certainly, if, in looking at relevant information at reappointment, you are concerned enough to consider an adverse recommendation because a lesser action will not be sufficient to protect patients, you have the authority to make that recommendation.  To answer your specific question, there is generally no reason why you would have to commence a formal investigation, separate and apart from the reappointment process.  While many bylaws require that the Medical Executive Committee commence an investigation before making an adverse recommendation, that step would not be required if you are already in the midst of the reappointment evaluation.

In most organizations, the Credentials Committee would do the heavy lifting at reappointment.  That means the Credentials Committee would evaluate the information including documents from the peer review process, incident reports, letters, minutes, and reports.  The Credentials Committee can also rely on the clinical expertise of the department chairperson at reappointment.

As a matter of fairness and good practice, even if your bylaws (or credentials policy) don’t require it, we strongly recommend that the Credentials Committee meet with the physician before it makes an adverse recommendation.  The physician should be given advance notice of the concerns and at the meeting (or in advance of it) the physician should have an opportunity to respond to the concerns.  It will be very helpful to keep a detailed summary of this meeting, including the physician’s response.  The minutes should also reflect, in some detail, the reasons for the adverse recommendation – you’ll need that when you get to the hearing.

One issue that sometimes comes up in difficult reappointment matters is timing.  If the physician’s current appointment is set to expire, you may need to grant a short-term conditional reappointment to give you time to conduct the evaluation and assessment, meet with the physician, and prepare a report of concerns to support an adverse recommendation.  The report and recommendation of the Credentials Committee will need to be forwarded to, and acted on, by the Medical Executive Committee.  If the Medical Executive Committee upholds the adverse recommendation that will trigger the physician’s right to a hearing.

Remember, the hearing and appeal processes are going to take months to complete.  The Credentials Committee and Medical Executive Committee should consider whether there are any conditions that need to be put in place while the processes are being carried out to keep patients safe in the interim.

January 9, 2020

QUESTION:        Why can’t someone come up with a straightforward definition of what it means for a physician’s compensation to vary with, or take into account, the volume or value of the physician’s referrals to a hospital?

ANSWER:          Good question.  CMS is trying, but the federal courts continue to make this analysis much more complicated than Congress intended when it adopted the Stark Law.

Some courts have mistakenly held that if a physician is employed by a hospital in a hospital-based service, and is paid on an RVU basis, then since the more professional services that the physician personally performs, the more referrals they will make to the hospital and as a result, the physician’s compensation varies or takes into account the physician’s referrals to the hospital.

This is incorrect and is part of the reason that the Third Circuit had to reissue its decision in U.S. ex rel. Bookwalter v. UPMC (discussed in this week’s HLE).

CMS has apparently heard these concerns.  On October 17, 2019, CMS published proposed Stark regulations that will provide clear, helpful guidance on this and many other aspects of the Stark Law if they are adopted in final form as proposed.

As CMS has repeatedly stated, the requirement that compensation not vary with or take into account the volume or value of physician referrals, which appears in a number of statutory or regulatory exceptions, should be uniformly interpreted wherever it appears.  Such uniform interpretation is essential.  However, as pointed out in the Preamble to the Proposed Regulation, some courts have interpreted the volume or value standard to consider the subjective intent of the parties, rather than applying an objective “bright line” test as Congress intended, making compliance with the statute much more difficult and uncertain than intended by the statute.

CMS wants to address this confusion by proposing a much clearer definition of the volume or value standard in the regulations.  CMS has stated that this vital term should be interpreted to mean that the volume or value standard will be violated only if the amount paid to the physician or the amount due from the physician (i.e., a rental payment) will increase or decrease in correlation to the referrals that the physician makes to the hospital.

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CMS then gave the following examples of the types of compensation arrangements that will violate the Stark Law.

To illustrate, assume a physician leases medical office space from a hospital.  Assume also that the rental charges are $5000 per month and the arrangement provides that the monthly rental charges will be reduced by $5 for each diagnostic test ordered by the physician and furnished in one of the hospital’s outpatient departments.  Under proposed § 411.354(d)(6)(i), the compensation (that is, the rental charges) would take into account the volume or value of the physician’s referrals to the hospital.  The mathematical formula that illustrates the rental charges paid by the physician to the hospital would be:  Compensation = $5000 – ($5 x the number of designated health services referrals).  The policy at § 411.354(d)(6)(ii)(A) with respect to when compensation from a physician (or immediate family member of the physician) to an entity takes into account other business generated would operate in the same manner.

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As another example, assume that a physician leases medical office space from a hospital and the rental charges are as follows:  $2000 per month if the physician is in the top 25 percent of admitting physicians at the hospital (measured by the gross charges per inpatient admission); $2500 per month if the physician  is in the second quartile of admitting physicians on the hospital’s medical staff (measured by the gross charges per inpatient admission); and $3500 per month if the physician is in the bottom half of admitting physicians at the hospital (measured by the gross charges per inpatient admission).  Under our proposed additional approach to the volume or value standard and other business generated standard, the compensation (that is, the rental charges) would be determined in a manner that takes into account the value of the physician’s referrals and other business generated for the hospital.

These proposed amendments to the Stark Volume or Value Standard, as well as the proposed definition of fair market value and commercial reasonableness (which recognized that it does not violate the law to lose money on a physician’s practice and that published salary surveys are to be used as benchmarks only), will make compliance with the Stark Law much more straightforward.  These proposed regulations also provided valuable guidance on value-based arrangements and recognize that the fair market value of the physician’s input and cooperation with a value-based enterprise is generally not reflected in the hourly payment rates for the services actually performed by the physician.

The comment period for these proposed regulations ended on December 31, 2019.  We have urged CMS to issue the proposed regulations in final form without delay so that providers and the federal courts can begin to take advantage of this guidance.

If you want to learn more about value-based compensation, these regulations or the proposed Safe Harbor regulations that were issued on the same day, join Dan and Henry in Chicago on April 23-25 for the Hospital Physician Contracts Clinic.

December 12, 2019

QUESTION:        What is a “curbside consultation” and will providing such expose a physician to liability?


ANSWER:            A “curbside consultation” is an informal consultation in which a treating physician or practitioner seeks informal information or advice about patient care or the answer to an academic question from a colleague and the colleague provides it.  These consultations are usually based on the treating practitioner’s presentation of the case or posing direct questions.  The colleague doesn’t see the patient or review the chart, nor is he or she paid for the consultation.

Although it would seem the risk for liability would be low as the consulting physician is not technically the treating physician, this varies state by state and usually depends on the extent to which each state considers a consultation to amount to creation of a physician-patient relationship.  The majority of states have ruled that consultants, whether informal or formal, are not liable if they do not personally examine the patient.  However, there are exceptions, and in some states, courts have found that consultations may amount to “directing the care” of a patient and thus imposed liability on those consultants.  Therefore, it is important to review the law and cases within your state to determine if these types of consultations or similar informal consultations expose a physician to potential liability.

November 30, 2017

QUESTION:        Is McRib really back?

ANSWER:            You bet it is! (for a limited time only, of course)

And so is Horty Springer’s Physician-Hospital Contracts Clinic — back by popular demand!

Join Henry Casale and Dan Mulholland in Austin in March for the latest legal developments affecting hospital-physician financial arrangements — and a Whole Lot More. But hurry. Just like that saucy sandwich we all love, the Contracts Clinic only comes around every couple of years. Don’t Miss It!

August 24, 2017

QUESTION:        Our hospital-affiliated group has identified a new candidate that they are very interested in employing.  The candidate disclosed that she had a problem in the past that has been resolved.  It turns out that, three years ago, the physician was arrested and charged with second degree cruelty to children, a felony.  The charges were filed after the physician brought her infant daughter to the ED with a fractured femur.  According to the affidavit filed in support of the arrest, the injury, along with others suffered by the child, raised a concern about child abuse.  The charges were subsequently dismissed.

Our group knows about the charges, but says all of her references are outstanding.  They are willing to give her a chance.  What do we do?

ANSWER:            Whenever there is an issue or a concern with an applicant, we recommend you pause and remember to keep “the burden on the applicant.” The applicant has the burden to address and resolve any questions that are raised during the initial appointment process.

When an applicant has had a recent criminal arrest, especially for a felony, you will want to explore, with the applicant, issues surrounding the charges, including the resolution of the charges.  Make sure you check state law first to see if there is a prohibition against asking questions about criminal matters when the charges have been dismissed.  Consider asking the applicant about the charges, the ultimate disposition of the charges, and the conditions pursuant to which the charges were dismissed.

Also consider whether the charges might have triggered an obligation on the part of the physician to notify the state medical board or the hospital where the physician was practicing and ask the physician whether she provided the required notice.  If the physician did not provide notice, especially if required, this should be explored as well.  You might also inquire about steps the physician has taken to address underlying issues that contributed to the criminal charges.   Consider requiring the physician to provide the hospital with correspondence to and from the prosecuting attorney regarding the charges and the dismissal of the charges and any conditions that were imposed.

Minor criminal offenses, especially when the matter is old and there has been no repeat offense, may not derail an application or a favorable employment decision completely.  However, serious charges, especially when the charges are recent, go to the issue of a physician’s reputation, character, ethics and perhaps integrity and require careful review and consideration.