Physician Compensation and COVID-19
Updated: Apr 6
Hospitals, health systems and providers of all types are facing unprecedented challenges as they respond to the COVID-19 pandemic, and almost all aspects of healthcare have been affected. In response, we have seen HHS, CMS and other regulators take broad measures to bypass regulatory uncertainties by issuing waivers and providing guidance that allows flexibility for healthcare providers to respond to the crisis based on the unique facts and circumstances they currently face.
Although the priority has been ensuring the resources are available and in place to provide care, and rightfully so, setting the appropriate compensation for physicians and non-physician providers poses its own uncertainties and challenges. Providers on the frontlines are facing a surge in demand, while others are much more idle as elective procedures are canceled or postponed and many patients in general are avoiding seeking healthcare services for non-urgent issues.
To facilitate real-time decisions and ensure continuity of care, on March 30, 2020 CMS issued blanket waivers of sanctions under the physician self-referral law, also known as Stark Law. The blanket waivers apply to certain financial relationships and referrals related solely to “COVID-19 Purposes” and are intended to provide additional flexibility for physicians and providers to provide sufficient healthcare items and services in instances that may not normally comply with Stark Law.
The waivers address and apply to a wide array of compliance issues that would normally constitute violations under current law. These range from hospitals providing excess benefits to the medical staff such as meals, comfort items, and/or on-site child care, to the temporary ability of physician-owned hospitals to convert observation beds to inpatient beds or otherwise increase their inpatient bed count to accommodate patient surge during the COVID-19 outbreak. Perhaps the most widely applicable wavier applies to the remuneration from an entity to a physician (or an immediate family member of a physician) that is above or below the fair market value (“FMV”) for services personally performed by the physician (or the immediate family member of the physician) to the entity.
Furthermore, the guidance can be applied retroactively to March 1 and covers compensation arrangements that commenced prior to the required documentation of the arrangement in writing and the signatures of the parties, but that satisfies all other requirements of the applicable exception. It should be noted that while these waivers provide flexibility for hospitals and healthcare providers to operate under during the pandemic, each financial relationship should be evaluated independently and comply with other federal, state, and local regulations.
These regulations and temporary waivers create a new altered framework to answer which financial arrangements CAN be compensated during the Covid-19 pandemic. However, the next question is how, and how much, SHOULD you compensate providers during this temporary crisis and what are the potential long-term implications. The answer to these questions requires careful consideration of the specific facts and circumstances and the application informed judgment. Importantly, steps should also be taken to revisit these arrangements after the crisis has passed to ensure that temporary emergency compensation measures are in fact temporary and do not create compliance risks downstream.
Root Valuation is committed to helping the clinicians and healthcare organizations on the front lines in our fight against the coronavirus pandemic. If you or your organization needs valuation support for COVID-19 related compensation arrangements we will donate up to 2 hours of our time for consultation and discount our fees by 50% for any associated FMV opinion required.