Using Market Data for Physician Contracting

MD Ranger is the premier source for hospital-physician contract data. Our proprietary database provides information on the specific terms of agreements between health facilities and physicians for emergency call coverage, medical direction and other leadership positions, and hospital-based services like pathology and anesthesiology. The vast majority of contracts that a health system or provider has with physicians fall under this category.

High-quality market data is rich in contract detail and contains a large sample of all contracts from a diverse set of hospitals. It includes information on services that are paid and unpaid, is collected consistently, and is thoroughly audited. MD Ranger is the only source for such quality market data.

High-quality market data is a powerful tool for analyzing, negotiating, and documenting hospital-physician agreements. Providers can use MD Ranger's robust market data to establish FMV, as well as determine if paying for a given service is commercially reasonable. This guide will illustrate the steps an organization should take as it creates a system to organize and document its physician contracts and comply with federal regulations.

Testing Commercial Reasonableness

Federal regulations maintain that physician payments must be consistent with fair market value. However, before specific values are determined, it is important to determine if the service should be compensated in the first place. Assessment requires that the provider have data on total hours served (for medical directorship positions), or explicit information on whether or not the service is provided at a given facility and if so, any associated call coverage compensation. Because of our subscription-based methodology, only MD Ranger can help organizations test commercial reasonableness for dozens of services and positions. Providers can use the MD Ranger's Percent of Providers Paying table to look up services and easily determine if they should pay for a particular service. Testing commercial reasonableness is an essential and early step in determining FMV.

Applying Market Data and Establishing FMV

Once commercial reasonableness has been established, providers can use MD Ranger benchmarks to determine appropriate compensation. Providers must understand the contract’s scope of services and identify any unusual circumstances that could affect how the physician is compensated. Because each facility is unique, the scope and intensity of arrangements could vary between hospitals. However, according to several studies produced by MD Ranger statisticians, there is overwhelming evidence to show that as long as there is enough data, FMV for straightforward coverage, direction, and hospital-based agreements can be established through the use of market data without employing other valuation techniques, like the cost method.

Once the most appropriate service and specialty has been identified, providers simply look up the compensation distribution ranges calculated by MD Ranger experts.

Organizations must establish what will be considered “fair market value” for their physicians, and keep it consistent. Some providers choose to make all agreements that fall between the 25th and 75th percentiles “compliant”, and document their reason for doing so. Others take a more conservative view and mandate that the mean or median be used with all agreements. MD Ranger leaves this decision up to providers themselves, because only they know the nuances of the situation. As long as organizations standardize a reasonable process to select metrics for contracting, there should be no glaring compliance issues.

Documenting Compliance with Stark and Federal Regulations

Once commercial reasonableness has been determined and an appropriate market range is identified, providers must ensure that they document compliance within their organizations. There are many ways providers document compliance with Stark and prepare themselves for the possibility of an OIG audit. No matter how an organization decides to approach compliance, it is important that a process be determined and adhered to consistently and methodically. MD Ranger customers typically develop a process that uses predetermined distribution ranges as well as the product’s reporting functionality to print and file adherence to outlined procedures.

Questions? Contact our resident FMV Expert, Michael Heil, who has over 20 years of writing FMV opinions and valuation at This email address is being protected from spambots. You need JavaScript enabled to view it..

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