Hospital-Based Agreements Often Only Pay for Direction

We recently looked at both call coverage and medical direction analysis from MD Ranger’s 2017 physician contracting benchmarks. Let’s examine hospital-based service contracts and what components make up these sorts of agreements.


As the graph displays, the plurality of hospital-based service contracts for all services pay for only medical direction, with 33% of agreements involving only this component in the contract. However this component type breakdown varies significantly by service. For instance, stipends are the most common payment type for Hospitalists, Laborists, and Intensivists. For some services, such as Emergency, Pathology, and Radiology, agreements with only medical directorship payments or unpaid agreements are common.

The percent of contracts in each component combination have remained stable year over year in our benchmarks. The largest drop we have seen this year, when compared with 2016, is a drop in coverage only components from 16% to 8%.

Conversely, hospital-based contracts involving stipends saw slight increases since last year. Stipend only components jumped from 19% up to 23% while agreements containing stipends and other components rose from 13% to 17%.

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Research/Data Management Paces Leadership and Administrative Roles for Most Hours Worked

Last time, we tracked which medical directors worked the most hours annually by using MD Ranger’s 2017 Physician Contract Benchmarks. Let’s take a look at agreements for physician leadership and administrative roles and examine which services reported the highest median hours worked per year.


This graph shows the top six leadership and administrative roles with the highest number of annual hours. They are Chief of Staff, Utilization Management, Information Technology/EHR, Residency/Teaching, Case/Care Management, and Research/Data Management. Comparing the number of hours to benchmarks from previous years, you can see that there have been increases for several physician administrative roles in 2017, such as Residency/Teaching, Case Management, and Research/Data Management. However, after two years of increases, Chief of Staff hours have decreased from 2016 to 2017.

The set of leadership and administrative positions with the most annual hours remained relatively stable from 2016 to 2017. Quality Initiatives saw its annual hours dip in 2017 and is the lone service to no longer appear on the chart.

With the notable exception of Chief of Staff, most administrative and leadership positions have seen either a stabilization or a slight increase in the number of hours worked annually. This drives the trend in slight growth in annual payments made for these physician leadership and non-director administrative positions.

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Emergency Medicine Medical Directors Top the Charts for Most Hours Worked

Previously, we have investigated key trends in call coverage arrangements using MD Ranger’s 2017 physician contracting benchmarks. Now, let’s look at medical directorship agreements and examine which services reported the highest median hours worked per year.


This graph shows the five medical directorships with the highest median hours reported per year. They are Emergency Medicine, Ambulatory Services, Pathology, Trauma Surgery, and Cardiology - Heart Center. Comparing to the benchmarks from the past four years, you can see where hours have increased or decreased in scope. As you can see, the most dramatic changes are in Emergency Medicine, especially over the past two years.

The list of medical directorship positions with the highest reported hours remained mostly the same as last year, when Emergency, Trauma Surgery, Pathology, and Cardiology-Heart Center all also featured. Ambulatory Services, the only new service in the top 5, replaced Pediatric Surgery from the 2016 list.

One major trend we see is a continuing spike in hours worked in medical directorships in Emergency Medicine, well beyond the other top 5 services by hours per year. This stands in sharp contrast to the rest of the top services where the trends are leveling off or even decreasing.

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Operational and Financial Management of Physician Agreements

We recently spoke with Gail Peace, CEO of Ludi, about how hospitals are managing physician contracts from both an operational and finacnial perspective. Gail helps us understand why management is so important and what can happen if you aren't paying careful attention.

1. Ludi helps hospitals operationally and financially manage agreements, what does that mean exactly?

Gail: When hospitals and physicians sign a contract, the real work begins! In all seriousness, the care that was taken to setup that contract needs to be taken to be sure the contract is followed exactly as written over time.

Contracts usually have all duties and compensation clearly outlined, but these details can be hard to keep track of by the physicians completing the work, the service line leaders, approvers and finance. Managing all these details is critical to paying physicians correctly and keeping hospitals out of trouble.

2. Hospitals have so many fires to put out daily, why is it important to operationally and financially manage physician payments?

Gail: Physicians are referral sources to hospitals which means they can’t legally contract with a hospital unless certain conditions are met called safe harbors. There are 7 safe harbors where 5 happen at the time of contract execution-those are easier to setup right in the first place. The other 2 safe conditions need to be monitored over time and are absolutely the easiest to break. If you break these 2 conditions, you have a Stark Law and potentially an Anti-Kickback Statute violation. Perhaps even a False Claims violation. The aftermath is frequently a costly settlement.

3. What are the 2 most common violations?

Gail: The payment needs to be made at fair market value and should only be paid for services defined in advance in the contract. These 2 things are usually responsible for compliance issues. Just to give a bit more detail on this, if the contract says the doctor can be paid up to $2,000 a month, but you’ve approved payment at $2,500 for a time log, that’s a Stark Law violation. The second example is related to the more common issue, the physician is writing down duties that aren’t in their contracts and these are being approved anyway. You have to keep close watch of the amounts and the duties being paid, they have to match the agreement. Currently we see that so much of this tracking is done manually, that’s a recipe for disaster.

4. This kind of sounds like a contract management system’s capabilities, how does your automated solution differ?

Gail: Good question, we get this one a lot. Contract management systems are really important for housing a hospital’s vendor agreements, everything from linens to device companies and physician contracts. These systems are critical to help manage the workflow involved in setting up and renewing contracts, but they can’t make sure parameter of contracts are followed to a T. You can’t document the work being performed or the calculation of the payment within a contract management system, because of that, storing them in a contract management systems just isn’t enough. When you manage your contracts operationally and financially, automation is really a necessity to keep executives and physicians within law.

5. What’s your recommendation to hospitals related to paying physicians?

Gail: People, process and structure need to support accurate following of agreements. It’s important to recognize this entire function is a huge area of risk for hospitals, one of the top four. The work process should include checking the duties being performed and the actual payment against the contract every time a payment is made It’s also important to assign an executive to oversee the entire function and then provide that person with the people and structure to appropriately manage. 5 years ago, software in this space was cutting edge. Today, it’s rapidly becoming imperative to have software to ensure success.


About Ludi

Ludi works with healthcare organizations to strengthen physician alignment and administer the complex financial arrangements that are the infrastructure of healthy physician integration strategies. Pairing technology with deep industry knowledge, Ludi offers software as a service (SaaS) solution, DocTime Log®, as well as consulting services to build the trust and efficiency into the relationship between organizations and their physician partners.




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