Does Geographic Region Matter?

Do regions affect physician payment rates?  While many hospital executives answer with a resounding yes, consultants with nationwide practices often feel that variance by region is overplayed.

With the growth of its customer base, MD Ranger has considerable geographic diversity, with hospital contracts from 27 states covering dozens of MSAs, rural and urban areas. To investigate possible systematic variation, we pooled all MD Ranger’s contract data, over 10,000 records, and then joined it to data from various state and federal agencies, including CMS cost report data, BLS Occupational Employment Survey, various BLS price indices, etc. A multivariate approach modeled contract rates on hospital, contract, and market characteristics, and both linear and nonlinear techniques were employed. After extensive testing of a variety of geographic clusters defined by MSA’s and combinations of MSA’s, along with urban/rural distinctions, MD Ranger data scientists found no statistically significant geographic variation. More important factors influencing rates are trauma status, whether the hospital is urban or rural, and its size.

Want to read more?  Download our guide on geography here.

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Our Approach to Calculating Benchmarks and Market Data

Stark Law requires hospitals to pay doctors fair market value.  The appropriate fair market value can be determined by utilizing benchmarks calculated from robust market data.  We have found that many hospital executives who are charged with making sure these compensation rates are compliant don’t have information on how benchmarks are calculated and what the best benchmark for their situation could be.

Federal Antitrust Safety Zone guidelines require that market data collects from at least five different “providers”.  Many market data surveys interpret this as meaning five physicians.  MD Ranger interprets the Antitrust guidelines conservatively and takes this to mean five different health systems or corporations/owners.  This ensures a particularly large, robust data set that often includes scores of individual physicians.

The Antitrust guidelines also mandate that no more than 25% of the data in each statistic come from one provider.  MD Ranger again considers that no more than 25% of the data come from any one health system, as opposed to an individual physician.  If a given health system has more than 25% of the data, MD Ranger weights these data points to make up only 25% of the statistic.

Want to know more about how we collect our data?  Click here.

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Critical Care Agreements: Key Considerations

Critical Care agreements represent formally organized services staffed by intensivist physicians with special training (usually pulmonary and/or critical care) to manage acutely ill patients in a critical or intensive care unit. Physicians are contractually obligated to spend a portion of each day on-site in the ICU serving as the primary attending physician for patients receiving critical care in the hospital. Critical and intensive care coverage contracts are most common in larger hospitals. Many hospitals only pay for medical direction for critical care units, but some pay for coverage.

Key Factors to Consider in Contract Analysis:

  • What is the average daily census of patients covered by the service and what fraction of the hospital’s total ICU census is attended or covered by the contracted physicians?
  • For those patients not attended by contracted physicians, is there a payment arrangement with the hospital?
  • Are the contracted physicians required to be board-certified in critical care, pulmonary critical care, or surgical critical care?
  • Is there an electronic ICU (eICU) service that provides back-up or after-hours coverage?
  • Is the in-house coverage requirement for less than 6 hours per day or 42 hours per week?
  • Is the proportion of Medicaid, Medicare, or unsponsored patients extremely high or low?

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What’s The Best Benchmark To Use When Using Market Data For Physician Contracts?

When using MD Ranger data, you must decide which range of the market data is most appropriate for setting your physician contracting rates. While taking into account compliance, physician requirements, and the realities of your market, things quickly get complicated.

In general, the 75th percentile is a decent guideline for compliance and FMV. If your contract falls at or beneath this benchmark, your contract is most likely within fair market value. If your contract rates fall above the 75th percentile, you’ll need to properly document the reasons for paying this particular rate, just in case of a dispute or audit.

Establishing an overal policy that includes a particular benchmark is a good choice for many MD Ranger subscribers. Whether it’s capping physician contracts at the 50th percentile to control costs, or setting the limit at the 75th because you are in a competitive market, many options can be functional and compliant.

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