Episode 27: Subsidy Arrangements Between Hospitals and Physician Practices: What You Should Know
In this episode, partner Jana Kolarik of Foley’s Health Care Practice Group, and Angie Caldwell, Consulting Principal and Tampa’s Office Managing Principal of PYA, discuss subsidy arrangements between hospitals, health care systems, and physician practices.
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Jana Kolarik
Hello and welcome to Let’s Talk Compliance, a special Health Care Law Today Podcast Series presented by Foley & Lardner and PYA. I’m your co-host, Jana Kolarik, a partner in Foley’s Health Care Practice Group.
Angie Caldwell
I’m your other co-host, Angie Caldwell, Consulting Principal at PYA. We are excited to announce the Let’s Talk Compliance Podcast Series where each episode a Foley attorney and a PYA advisor will address hot compliance topics.
Jana Kolarik
So before we begin our show, we want to remind you to subscribe to Health Care Law today, either on iTunes or your preferred podcast app. Please visit healthcarelawtoday.com or pyapc.com.
So today, Angie and I are actually going to be presenting and we’re going to be talking about subsidies. So Angie, you and I have had, gosh, I can’t count the discussions about subsidy arrangements between hospitals, health care systems, and physician practices. I’m going to do a little bit of foundational discussion, and I welcome your thoughts just even on this foundational discussion. Really thinking through a subsidy should be in part looking at what is commercially reasonable – what have we seen experientially in the market and what are the other alternatives – because subsidizing a physician practice can create issues under the fraud and abuse laws – under the Stark Law and under the federal anti-kickback statute in particular. So let’s dig in a little bit. Let’s dig into what we’re seeing, what you’re seeing, what we’ve seen in the past, for example, and then what are areas of increased subsidies and where are we seeing things that are somewhat unusual that may deserve some additional attention. Why don’t you give us some of the specialties that you’ve seen in the past [be subsidized] and what you’re seeing as hot right now?
Angie Caldwell
Yeah, and I think, Jana, too, what drew us to this topic specifically is that this topic isn’t new. It’s just that we are seeing more activity in the space. We’re seeing increased subsidy amounts and because of the increased subsidy amounts, more questions have arisen as to the nature of the arrangement, the, “Why,” behind the arrangementand in some cases, does the continued arrangement still make sense? Because this type of arrangement has been out there for a while, people are now asking the question for new specialties, should we try a subsidy or a financial assistance arrangement for some other type of specialty because it has worked so well for these others in the past?
So I think that’s what drew our attention to this really to talk about and frame up the hot topics around subsidies. So to your question, what specialties do we normally see that received this financial assistance? Anesthesia, emergency medicine, hospitalist, critical care, and trauma surgery, just to name a few , but generally your hospital-based specialties are most likely to receive a subsidy. Of course, there are many reasons for that. The primary one being that professional collections generally don’t cover the costs of the practice, particularly one of the largest costs being the fair market value compensation for the physicians.
Jana Kolarik
Absolutely. One of the things I didn’t blink or think twice about frankly, I have been dealing with subsidies during my career, which is 20 plus years, in the emergency medicine space because it’s a 24/7 concept and it’s a difficult line of business to manage effectively from a staffing perspective. It’s needed, right? You can’t [operate] without your emergency department if you’re a typical hospital, shall we say. Then some of those practices because of EMTALA concerns, because they are treating any patient or stabilizing patients that come through the door, there is frequently a gap in exactly what you said in that cost issue. [The practice] has to cover the cost for the staffing, they’ve got to cover the cost to have the people there to do it, and it amounts to, or results in a much more, shall I say, intimate relationship from a financial perspective between the practice and the hospital or health system.
Intimate because you really, at that point in time, when you’re saying, “Look, we cannot cover costs, we need help. We need some type of subsidy from you, hospital/health system.” It becomes a proving up of some of that information. You and I have talked about the proving up piece of it and what’s commercially reasonable and having those discussions at the beginning: What have you seen? I have seen true ups happen – look backs every month; I’ve seen look backs on a quarterly basis; I’ve seen look backs at end of the year. Tell me what you’ve seen and does it happen less frequently than that? Because you would think with that skin in the game and with the dollars involved with some of these subsidies, that some oversight would be demanded frankly by the hospital and health system. Tell me what you’re seeing with that.
Angie Caldwell
Yeah, and we can call it financial intimacy.
Jana Kolarik
There you go. I hear you.
Angie Caldwell
So I think for the practice, sharing as much information as possible about that financial situation is really important. From a valuation perspective, and I’m sure from your perspective as well, where things get tricky is when a practice or even the hospital is not willing to share enough information to really see all sides and to answer the questions. So then related to the reconciliation, which requires a lot of that sharing of information, that financial intimacy. From a reconciliation perspective, we’re seeing mostly an annual reconciliation, but with no surprises along the way. So what do I mean by that? So that means everyone is looking throughout the year at what the run rate is of the subsidy compared to the payments that they’re receiving from the hospital so that when they get to the annual reconciliation, they’re able to justify and to explain they know why they’re different from what was originally set forth in the agreement because no one wants a surprise – the parties have worked very hard to come together to agree to that monthly subsidy amount, the fixed payment, if you will, and then only to be surprised at the end of the year is then very, very frustrating. So we mostly see an annual reconciliation, but I will say that we are seeing more [fixed arrangements] because of the time that it takes to negotiate through the reconciliation, perhaps some of the disagreements that occur along the way, [because] it’s sometimes perhaps a bunch of difficult conversations and it becomes uncomfortable, that we’re seeing some organizations push out their reconciliation past a one-year period and trying to fix that for a two-year period. I would love to hear your thoughts on this, but from our perspective, to have a longer reconciliation period requires a more stable environment, a more stable operating and collecting and coverage model environment. So the longer you push it out, the more stable that you need to be, which from my perspective is getting more difficult to prove, especially in this environment that we’re in right now as professional collections continue to decline for these specialties.
Jana Kolarik
No, I totally agree. I think we had a lot of stability in the past, frankly, pre-No Surprises Act for emergency medicine and frankly, anesthesia wasn’t really even part of this because they were supporting themselves on what they were making or how they were operating pre-No Surprises Act. But I think it’s really been in the last year or so that things have gotten more incredibly volatile, not only from an emergency medicine perspective with those changes, but again with anesthesia because the payer landscape is quite different. The inability of those lines of business to bill the patient for the difference between what the payer was or was not paying. All that has changed. So it’s created, I think, much more volatility than anyone expected because I think people, not only practices, but also payers, are really having to come to the table, are really having to change past practices and I’ve seen some slowness in the change. And let’s get into some specific examples.
Because I think fundamentally, I mentioned the Stark Law and I mentioned the Anti-Kickback Statute at the beginning. Commercial reasonableness is an aspect to those analyses. And when you’re talking about paying a subsidy to a practice, it’s a financial relationship, and it’s a financial relationship that means that that practice is not, through professional collections, able to make itself whole or cover costs. That’s really the foundational understanding or reason for a subsidy and [further] that we [hospital] need the service. We hospital, we health system need this service and you practice are giving us information that shows that you cannot afford to supply it just within yourself. So we [hospital] need to come to the table, we need to help. So it is, as we said, that financial intimacy, that collaboration that has to take place. But what’s key in that analysis at the beginning is really an understanding of what is the service line at issue. Because you mentioned the main ones that you’ve seen, I’ve seen some of those, I haven’t seen others, but it happens in other areas as well. When it happens with practices that are outside of more hospital-based practices like emergency medicine, like anesthesia, like hospitalists, it deserves a closer look. It deserves a proving up in documentation of what the need actually is and the scarcity frankly of that resource internally. Because some of these hospitals and health systems – and I’m sure you run into this, Angie, and I welcome your thoughts on this as well – these specialties are rare or they’re moving or they’re volatile because of all the reasons that we talked about and so there’s a need to really to support that. So it’s a different level, it’s a different level of financial arrangement, it’s a different level of financial intimacy than you see in a run-of-the-mill [situation where the] practice supports itself; Hospital supports itself; and you move on with your day. These are needed things from a health system/hospital perspective. What are your thoughts on that and what have you seen over time maybe change or be affected by things?
Angie Caldwell
Absolutely. Most of it, it starts at the top of the income statement with the practice. It starts with that collections amount. So in the current environment as the collections are declining, rule number one of this subsidy is to make sure that you understand what the true professional collections are. So as we ran down that list of specialties most likely to get a subsidy, the billing and collection process for these specialties is complex. Anesthesia, oh, my goodness, the complexity and the billing there! So from a understanding perspective and a sharing of information perspective between the practice and the hospital, for the hospital, it would not be commercially reasonable for the hospital to pay the practice to have poor or subpar billing and collection performance. So then you have to be able to share and demonstrate and prove that within the reconciliation, then you create a solid commercial reasonableness argument for the arrangement of, “Yes, we can prove that they really cannot make it on their own without support from the hospital.”
Jana Kolarik
One of the things that I’ve seen, and I wonder if you’ve seen different permutations – or I’m interested again in your thoughts on this – is if you are seeing collections issues on the practice side, which frankly can happen, as you said, some of the billing is difficult and the collection piece is challenging. The subsidy provides a cushion to that practice. So sometimes the concern going into it is you want to make sure that there’s some incentive there to continue to collect and not just rely on the subsidy to make up for, shall we say, less than adequate business practices on the collection side.
So have you seen – because I’ve seen – a lesser than, so talking about subsidies, subsidy is, as you said, expense minus collection in its purest form. What are your expenses? Let’s minus out what your collections are. That’s the [amount] that we need to subsidize as a hospital or health system. I’ve seen an assumption of, look, let’s do a lesser than, so we are going to assume that you’re going to collect at least X. So we’re going to assume that the subsidy is going to be no more than whatever [X] dollar figure. I hate to quote the, “millions,” but that’s frequently what we’re seeing. So X dollars or that expense minus collection [formula], but [whichever is] the lesser number. So tell me what you’ve seen to control for some of that, the business practice issue, shall we say?
Angie Caldwell
So one of the things that is increasing in popularity is creating some kind of a band around collections. So we start with an estimate going into the subsidy calculation, and then we’re seeing a trend to create a band around that collections amount. That’s almost what I call the “do nothing band.” So if collections are X percent higher or X percent lower than that initial estimation, nothing changes in the subsidy reconciliation – practice, you absorb the lesser collection up to a certain percentage and hospital, you pay the subsidy amount even if the practice was able to collect a little bit more. So of course the setting of that percentage then becomes really important from a commercial reasonableness perspective as well as from an FMV perspective, understanding that any increase in collection is likely to go to the compensation of the physicians. So then of course you have to be careful with that. So we’re seeing an increase in trend related to that.
One of the best things to look at is the net collections percentage, and have it as part of the reconciliation process, with the practice explaining or creating a threshold if the net collections percentage falls below 95%, 96%. I believe 96% is one of the standards in the industry – if it falls below 96%, then what happens? Well, the hospital might not pay any more as part of the reconciliation because then that would be an indication that the collections process is not as efficient as it could be. Then payer mix – so that’s something that you and I have talked about as well, looking at that payer mix and ensuring that the payer mix is going to drive the collections. So if you have more self-pay, if you have governmental payers, then likely you can expect that your subsidy may be a little higher than what you want or what you’ve intended. So Jana, let’s go from the revenue side of the subsidy calculation to the expense side of the calculation. So within the expenses, what are you seeing as some of the tripping points on the expense side that are creating problems and contractual arrangements or reconciliations?
Jana Kolarik
Well, I think how the practice is staffed that can create not necessarily tripping points, but I would say points of discussion between how the practice has managed itself [up to] today and what the health system or hospital’s expectation may be with regard to some of those costs. To put a finer point on it, physicians versus advanced practice professionals. So APPs, does the mix make sense, not only from a quality of care perspective and the licensure requirements or requirements from a payer perspective, but also from a cost perspective? Because I think gold standard is physicians for everything, right? “Yay, love them, wonderful care,” but obviously our APPs are knocking it out of the park as well. So making that transition from a practice perspective to the use of more APPs, I’ve seen as maybe a pain point or maybe – not to be quite as dramatic – a point of discussion for wanting some transition in how things have happened in the past and the expectation on a go-forward. So trending-wise, baking in some expectation for increased use of APPs on a go-forward basis has been something that’s been quite discussed.
The other thing that I’ve heard discussed, which I find interesting is also PTO, expectations for time off for physicians and just different thought processes by the different specialties frankly, about what is a reasonable amount of time off. That trending, I think frankly clinicians need time off depending upon the specialty, some more than others. So that’s also been a point of discussion and really helpful to have a third party in there to be a resource for the health system/hospital and the physician group, and not so tied to obviously the physicians want their time off and the hospital may have a different perspective on some of that. To have somebody to come in to say, “Look, here’s what the trend is, here’s what the average is, let’s talk about what’s reasonable on this in this instance.” I welcome your thoughts on that too, for tripping points in the discussion.
Angie Caldwell
Absolutely. So PTO, clearly commercially reasonable to allow the physician paid time off so that they can perform in an excellent manner in the hospital facility and in performing their services. But then you do have to look at how many weeks are expected and is it within the norm or is it outside of the norm? To the extent that it is outside of the norm, it’s perfectly acceptable for the practice to continue to allow paid time off in excess of what the industry norm may be. But then that’s an adjustment in the compensation calculation within the subsidy. Of course then it all starts around the coverage model itself, which you mentioned related to the number of locations, the number of hours, the number of shifts that have to be covered in the emergency room, all of these things, that’s the starting place.
Then determining who’s going to provide the services, and at what time and then at what cost. So then the other thing – because of the environment that we’re in with physicians – it’s difficult to find physicians. Physician recruiting continues to be just at a stranglehold on our practices and on our hospitals to find providers to provide the service. So of course we’re needing to consider locum tenens costs within the subsidy calculations. So Jana, we’re seeing that, what are you seeing?
Jana Kolarik
Yes, absolutely. Especially with some of these subsidies increasing with certain areas, though anesthesia is an area which has had high need because it’s top of mind for me right now. Locums have become very important because of a lot of movement of those individuals and because of a lot of changes related to the practice and also compensation, et cetera. Then it becomes the sharing of the cost. Is it fair? Is it something that the health system is expected to cover because of recruiting issues by the practice? Again, I say this broadly, so this isn’t just anesthesia-based, but again, this is just locums cost generally, how much of that is shared? Is all of it shared? Is there an expectation that the practice will build its practice, so will be employing more individuals long term so that subsidy related to the locums can be shared at some point or become frankly not important at some point. But that has been a point that has been heavily discussed with obviously the hospital not wanting to pay as much on the locums side, but understanding I think in the end based on physician input and practice input. Look, we need help here because some of them, and especially from a geographic perspective, certain areas of the country are really struggling with staffing certain of these specialties. So how about you? What are you seeing from a locums sharing or cost perspective?
Angie Caldwell
So one of the key questions around locums is whether the locums coverage is for a new service, additional coverage, or is it to replace a physician or other provider that was already within the subsidy calculation? If it’s already within the subsidy calculation, then really part of that locum tenens cost is already built into the subsidy. So then the hospital and practice then need to negotiate how they’re going to share the incremental cost of that locums, who will cost more than likely the provider that’s in the subsidy calculation already. For a new service, that’s a whole different question, because it’s extended, it’s coverage not already considered in the subsidy analysis, so then it’s a new discussion as to how the new service is going to be provided. So what sometimes we will do in some of our calculations is we’ll do an additional financial assistance calculation showing what happens if you add an anesthetizing location, if you add coverage hours – what is the incremental subsidy for a new provider? You could do the same calculation using the locums costs because again, you have to consider the collections that the practice is going to get on that locums position. So it continues to be a hot topic and locum tenens costs of course continue to rise. Another item that we continue to see related to professional services and the cost of providers are recruiting incentives. So what are you seeing there?
Jana Kolarik
Yeah, it’s interesting. So they exist because it’s necessary, as I mentioned, especially certain specialties, are really running into a lack of providers in those areas. So they’re needing to recruit, they’re wanting help doing that because obviously they’re already, typically already in a subsidy type arrangement with the hospital or health system. So because there is this pain, and we’ve seen it again right now and because of the NSA [No Surprises Act] and those specialties that I had previously mentioned, some of that recruitment and those costs are being shared, so either shared or taken on by the hospital or health system, there are really dependent in part on state law, some if you’re helping from a hospital or health system query whether or not that affects the non-solicitation provisions and your arrangements or potentially the non-compete arrangements between that practice and the physician. But without getting too much in the weeds there, I just mentioned that is one of the things that’s discussed when those conversations are happening. Are you seeing that, are you seeing this recruitment be part of what’s subsidized in your world?
Angie Caldwell
Absolutely, absolutely. Of course best practice on recruiting incentives as always is to have some kind of a clawback on that provider. It’s not free money just to come in and work for a year – it should really be amortized over a certain period of time in the life of the arrangement between the practice and the provider. I think too, a point on recruitment incentives, especially as it relates to CRNAs, because CRNAs are increasingly difficult to find and recruit, compensation is increasing rapidly for CRNAs. I think new employers of CRNAs need to keep in mind that many of the CRNAs in the market now are working under independent contractor models, so there might need for some education between the compensation that they’re receiving now as a fully loaded independent contractor and the compensation that they’re getting which would include a consideration for benefits.
They have to pay on their own both sides of employer and employee payroll taxes, et cetera. But when they become employed by your practice or your health system for that matter, those benefits are taken care of by you or a portion of those benefits are taken care of by you. So it’s just good to remember that you might have to help them through that reconciliation process because to them, that compensation’s going to just immediately “look lower.” I’m doing air quotes and people can’t see me do air quotes, but it, “looks lower.” So you just need to provide that reconciliation for them and help them rationalize and think through that.
Jana Kolarik
So I want to say, you mentioning that sort of reminds me yet again, as I am frequently reminded when dealing with these types of arrangements, of the administrative burden related to not only … well, the prep time, take your time to really do the analysis with somebody on your financial side of your hospital health system, but also potentially I think and frequently beneficial with somebody outside – like you guys – a valuation consultant – to really get the experiential understanding that you guys have of what is typical or what you’ve seen before to be able to benefit the client. Also, from a finance perspective, those are the people who are frequently having to do the reconciliation and the more complicated these types of arrangements are, the more painful they are on the admin side. Again, I welcome your thoughts with regard to that. It’s a challenge.
Angie Caldwell
Agree, agree. That time equates to more administrative cost, HR burden, and all of that. Which then gets us into our next topic on the income statement for the subsidy. So we’ve talked about collections, we’ve talked about provider costs and benefits, and now let’s get into the administrative costs. So Jana, I know you and I have talked about –
Jana Kolarik
Ugh, I have a visceral reaction. Okay. I know where you’re going to go. I know where you’re going to go. You’re going to go to profit margin.
Angie Caldwell
Yes.
Jana Kolarik
So I find this fascinating because frequently, my perspective is that this [subsidy] is really supporting costs, this is covering costs, that is the intent of this arrangement, but profit margin? Please tell me your experience with regard to this because I find this fascinating that profit margin is being incorporated into a subsidy arrangement.
Angie Caldwell
Yes. So if you think about it from the practices’ perspective, and if we can put on a valuation hat for a minute, this is an arrangement between a willing buyer and a willing seller, and for the willing seller of the services, it would be commercially reasonable for that practice as a for-profit independent practice to expect some level – reasonable level – of profit margin. Now, that’s really important because from the hospital or health system side of this where they can see their profit margins dwindling and becoming less and lower every single day, then it really becomes a question of how much profit margin is commercially reasonable to expect, number one. Number two, how much of that profit margin really is somewhat of a buffer between the estimates that the practice has provided in their categorization of other administrative expenses? So knowing that they provided an estimate, it’s not going to line up dollar for dollar to that estimate. So how much wiggle room could be in those numbers? Many times, I’ve seen it go both ways in the practice providing information.
Sometimes, they’ll just lay it out, “Here’s our line item for our profit margin, and it’s right there for everyone to see.” Other times, they’ve built it in to their administrative expense load, and you don’t see it. So it is a question, it is definitely something from a valuation perspective, from an administrative perspective to be aware of how much is it? Is it there? Is it not there? What’s reasonable? If it’s unreasonable, then an adjustment would need to be made from a financial assistance calculation perspective because you have to assume that to the extent that profit margin is real where it ends up. Well, then you have to question – then why did you have a subsidy to begin with and where is that really going? Is it going to end up back in the hands of the owners of the physician practice? Again, is that reasonable? So there’s a lot to think about. So profit margin -I don’t think it’s a bright line. I think it’s a gray area.
Jana Kolarik
No. I think you’re your commentary around it, much more understandable from my perspective in thinking about your bands that you described earlier and really that it is a proxy for that type of more nuanced subsidy arrangement. I think that makes it super understandable. Very helpful for me to understand.
So talk to me, because I know from an admin perspective scribes are super important to a lot in the emergency room. They’re used for other specialties as well. I just see them all the time for [emergency physician]. So incorporating the cost of scribes, have you seen that on the admin side? Tell me what you’re seeing.
Angie Caldwell
Absolutely. Then it becomes a question as to commercial reasonableness. How many scribes and what’s the compensation level of the scribe? You don’t want to be paying a scribe the same level as an RN or an APP. So you really get down to cost – benefit as it relates to the scribes and really lining that up with the number of providers. But it’s a necessary cost in some scenarios. You just have to understand why, and how they’re being used, and think through the cost. That’s a trend. Like you said, we mostly see them in the emergency room. But with that, Jana, what other trends are you seeing as it relates to subsidies? I know that we’ve talked about a few of those recently. Things that we’re seeing more often?
Jana Kolarik
I think we’ve seen, again, to me, specific geographic regions of the country, big hikes in subsidies, like marked differences in subsidies. Again, I think in looking at it, and I know my clients are open to those discussions with the physicians who may be struggling given the regulatory or frankly now financial issues. So it used to be regulatory – the NSA or No Surprises Act came out, but now it’s like these impacts are not regulatory issues, they are financial issues that are impacting them. So I’ve seen a very large spike in anesthesia subsidies recently and what those are looking like and having to come to the table in a way that I think is – although they existed in the past – much bigger in, again, certain areas a bigger ask than what has happened before and concerns are, I think a lot from the hospital or health system side, about whether or not that’s fair market value, whether or not are they, because this is hiking like it is and spiking like it is, should they be worried about fair market value related to these subsidies and this being reasonable?
I personally, as you know and probably most people who are listening to this can gather, am very comfortable talking to and bringing in valuation experts into arrangements because I am a lawyer. I can look at what the risk is from a legal perspective under Stark and Anti-Kickback, but from an evaluation of fair market value or frequently looking at commercial reasonableness – although that is something that can happen within the system – you guys are frequently helpful because of your experience and understanding what is commercially reasonable as well. I bring you in with the changes that are happening, to me, that’s speaking just top of head, top of mind related to this, as that’s happening right now. How about with you? What are you seeing?
Angie Caldwell
You’re absolutely right. Geographic hotspots are real and they happen with specialties in certain markets. The trick with that is to really know your local market. When the practice and when the physicians are describing their difficulty recruiting in that local market, and they bring forward local market comparable data points, you want them to do that. You want them to share that information, and to the extent possible, you want them to prove it. You want them to provide the offer letter. You want them to provide the information supporting those other local offers that are perhaps higher than what you anticipated. But they are real. They do happen. For those that are going through them right now that are listening, they don’t last forever. It’ll seem like forever, but they do not last forever. The market will adjust. The market will eventually adjust. The providers will be attracted to the area because of the increase in compensation and the supply and demand economic forces will work to bring things back to where they need to be.
So as painful as it is, it will eventually level out and go away. Because of this where possible, in states where it’s possible, we’re seeing more employment of hospital-based specialties than we have in the past, which is very interesting because then all of a sudden a hospital or a hospital-based medical group is now being asked to bill for – we’ve used anesthesia as an example a lot today, but I’m going to use it again – now, they’re having to bill for anesthesia services within their medical group that they haven’t had to do before. It’s a new skillset; it’s a risk area. While it makes sense to employ these physicians to help them stabilize, to help the hospital and the community stabilize the service from a need perspective, it does create some additional administrative burden and educational burden, frankly, to understand how these practices work.
Jana Kolarik
Yeah. Amen. Amen. Amen. Because part of this is in understanding, people say, “Okay, yeah, well, you have to bill for it,” but that’s a benefit, billing is like a benefit now to the hospital. Yeah. So again, you’ve been subsidizing the practice. So that indicates that this may be a bit of a loss-leader, but it does stabilize, as you mentioned, the service for the community for the hospital. It stabilizes the service. From a compliance perspective, please, as you’re bringing in new billing services, please get experts in those areas. Please audit. This compliance hat is on for me as outside counsel. Please bring in someone and inform all of those different layers in your organization about the changes. Bring them on board holistically to make sure that those are supported. So you bring in the billing expertise, you bring in the audit expertise – you are sensitive to how this is going to change and how you need to take a pulse on it, probably on a more frequent basis when you’re taking the pulse on stuff that you’ve been dealing with in the past because this is new and it’s challenging. So, yeah. Amen.
Angie Caldwell
Absolutely. We’ve been really quiet about radiology as a hospital-based service. So what we are seeing in radiology, and then I’ll turn it over to you to comment and explain what you’re seeing. Radiology in general has not been subsidized, but we’re seeing a bit of a shift where some general radiology practices are coming forward now where they perhaps had not in the past. Interventional radiology is very interesting, specifically in instances where you need the service – interventional radiologists provide a very specific service. They take a unique call coverage panel. So they are needed in perhaps rural areas or areas where the community cannot support the full service of an interventional radiologist, but yet the community needs, the volume isn’t there, to support the full compensation of that radiologist.
So we’re actually seeing some interventional radiology subsidy questions come forward and thinking through, does it make sense to subsidize the interventional radiologist and for how much? I think the trick there is really determining the need, supporting the need, and then also determining, is there something else that that interventional radiologist could do when they’re not providing interventional services? Could they also be providing and supporting general radiology or other areas just to ensure that you’re maximizing the resource, the physician resource? But I would love to hear your comments and what you’re seeing there.
Jana Kolarik
No, I agree. Agree with the need, agree with the fact that it’s coming up and that we hadn’t really seen it in the past. I think that foundationally what you mentioned is, again, take it back. Take it back to the beginning, take it back to – is it commercially reasonable to be subsidizing it? What is the need? What are your other possible avenues for service providers? Are you in an area that has limited availability of specialists that do a very needed service? As you mentioned, it comes back down to basics. So having those very detailed discussions, frankly, IR is a proceduralist. So in the past that’s been unusual to see as a subsidized arrangement. But again, it really does come back to what is the need and does the facility need that service and how frequently – really getting down to brass tacks, so to speak, on that very detailed analysis.
Angie Caldwell
So Jana, I think we’ve covered it. Do you have any thoughts before we wrap it up?
Jana Kolarik
Yes, Angie. As a final thought, really, these valuation concepts that we’ve been talking about address a part of the overall analyses of compensation arrangements under both the Federal Physician Self-Referral Law, it’s commonly known as the Stark Law, and the Anti-Kickback Statute, as well as their state corollaries. Folks, please take the time to carefully walk through those analyses on the front end. The Federal Physician Self-Referral law is a strict liability statute, so it’s really better to address any issues before the first dollar is paid than to have to deal with penalties down the road.
Also, please discuss these laws with someone who is familiar with those particular healthcare laws, just because they are very complicated, Angie, as you and I have discussed many times. I think the other thing that I would say is we welcome people’s topic suggestions for future podcasts, and frankly, future presentations that we do under Let’s Talk Compliance. So please reach out to both Angie and I via email or give us a call and let us know any thoughts that you have for the future. So, Angie, thank you as always for doing this with me. I enjoy our talks very much, enjoyed the topic, so thank you.
Angie Caldwell
Absolutely. I agree with that 100%. Thank you so much for joining me today – for going through this topic together. Jana and I, on behalf of Foley & Lardner and PYA, want to thank all of you for listening to the Health Care Law Today Podcast, your connection to timely legal updates in the health care industry. We encourage you to subscribe to this podcast. Please visit Foley’s Health Care Law Today, blog at healthcarelawtoday.com and pyapc.com. On behalf of Angie Caldwell and Jana Kolarik, thank you.
Jana Kolarik
Thank you.
