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Contracting for DirectorshipsContracting for Directorships FREE TO VIEW

Donna K. Knapp, MA
Author and Funding Information

From DK Knapp & Associates, LLC., Reno, NV

Correspondence to: Donna K. Knapp, MA, 59 Damonte Ranch Pkwy, Ste B122, Reno, NV 89521; e-mail: Donnakay50@charter.net


Reproduction of this article is prohibited without written permission from the American College of Chest Physicians. See online for more details.


Chest. 2013;143(5):1472-1477. doi:10.1378/chest.12-1969
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Hospitals are required to have a medical director of respiratory care as a condition of their participation in the Federal Medicare and Medicaid programs. This gives physicians opportunities to improve the quality of care for the patients in their community, to diversify income streams, and to assist hospitals to meet regulatory requirements for quality. The contracts for these positions are usually provided by the hospital, so it is imperative that physicians know how to protect their interests, what is expected of them, if they are being paid fairly, and that the contract is compliant with all regulatory issues. The directorship relationship with the hospital that provides designated health services and the “stand in the shoes” definition of direct compensation also gives physicians and physician practices guidance to determine if their group and individual physicians are compliant with Stark and antikickback regulations. This article guides physicians through the process of reviewing a contract for medical directorship or service line management services. Information on compensation in the directorship market can be found in at least two standard surveys. Duties and compensation vary among entities and frequently include incentive-based compensation for improving quality measures and operations. Directorships are evolving to service line management as more of the hospital’s reimbursement is linked to clinical quality and patient satisfaction. This article does not offer legal advice, nor is it meant to be all inclusive. Physicians should consult a health-care attorney for any questions before signing any contract.

Although reimbursement continues to decline, opportunities exist outside direct patient care that are professionally satisfying and fiscally rewarding. Medical directorship positions are needed in entities that serve the general public. These positions have been created by regulation and a desire for high quality scores, community profile enhancement, superior service, patient satisfaction, and cost-effective use of resources.

Hospitals that serve Medicare patients are required to have specific medical director positions as a condition of participation in the Medicare program. The Code of Federal Regulations, under chapter 4: Centers for Medicare and Medicaid Services, part 482, Conditions of Participation for Hospitals, Section 482.57, states that “there must be a director of respiratory care services who is a doctor of medicine or osteopathy with the knowledge, experience and capabilities to supervise and administer the service properly.”1 Similarly, other departments, such as the transplant center, nuclear medicine services, inpatient psychiatric services, rehabilitation services, and food and dietetic services, must designate a “director” staff position. The requirements for leadership in other areas of the hospital, such as surgical services, radiologic services, and emergency services, do not precisely designate a director position but give specific qualifications for the supervisor of the services.2 The Final Rule in the Federal Register, dated May 16, 2012, under Medicare and Medicaid Programs; Reform of Hospital and Critical Access Hospital Conditions of Participation eliminated the requirement for a single director of outpatient services, allowing one or more individuals to supervise outpatient services. The same Final Rule also permits the role of other health-care practitioners, such as advanced practitioners of nursing, physician’s assistants, and pharmacists, to be considered for medical staff membership, a status formerly held only by physicians,3 which may allow a more relaxed interpretation of leadership positions when the Code of Federal Regulations states that a service line “must be supervised by a qualified member of the medical staff” as in the Condition of Participation for Emergency Services.4 The May 16, 2012, Final Rule also created more opportunity for medical directors and service line leadership to serve critical access hospitals by eliminating the requirement that certain services in critical access hospitals be provided by employees of the hospital only. These services can now be provided through contractual arrangements with community physicians and entities such as laboratories or radiology services.5

Assisting the hospital to meet/exceed the Medicare core quality measures is now the emphasis in many medical director contracts. Hospitals are being measured on many different quality parameters. A current list of Centers for Medicare and Medicaid Services measurements can be found on the Hospital Compare website at http://www.hospitalcompare.hhs.gov/Data/AboutData/Measures-Displayed.aspx, and a list of measures potentially being added to the Hospital Value-Based Purchasing Program6 can be found at http://www.hospitalcompare.hhs.gov/Data/VBP/value-based-purchasing.aspx. The Joint Commission, formerly the Joint Commission on Accreditation of Health Care Organizations, one of the accreditation bodies for hospitals, has its own set of quality measures that a hospital must demonstrate to maintain Joint Commission certification.7

Directors are true partners with the hospital system, and both duties and compensation emphasize the importance of demonstrating measurable quality on government, accreditation, and payer-defined core/care measures, whether those directors are employees of the hospital or independent contractors. Knowledge of evidence-based medicine related to the core measures and all specialty-specific clinical competencies are essential for medical directors. Realistic goals for quality measures should be mutually agreed upon, with clear objectives for improving community and patient services and enhancing value-based purchasing reimbursement.

One of the most difficult areas of negotiation for medical director services is the compensation for duties when the physician or physician group is on the medical staff and admits and/or refers patients to the hospital. Countless levels of regulations govern who is eligible to receive compensation, how their compensation is to be provided, and how much compensation is granted. The definition of “fair market value” in the Code of Federal Regulations refers only to “the compensation that would be included in a service agreement as the result of bona fide bargaining between well-informed parties to the agreement who are not otherwise in a position to generate business for the other party.”8 Because potential exists between the parties for mutual referral compensation arrangements, regulations called the “Stark Laws” (phases I, II, and III) were created to amend and augment the Code of Federal Regulations that apply to physician compensation. Exceptions to referral prohibition related to compensation arrangements can be found in part 411 of Title 42: Exclusions from Medicare and Limitations on Medicare Payment, Subpart J-Financial Relationships Between Physicians and Entities Furnishing Designated Health Services.8 Some of the most important areas of the regulations that the compensation arrangements must address are as follows:

  • Services must be identifiable and legitimate and necessary for the business purpose of the arrangement.

  • Compensation must be consistent with fair market value, commercially reasonable, and set in advance.

  • Compensation cannot be based on the volume or value of any referrals.

  • Compensation may include a physician incentive plan if no direct or indirect payment is made as an inducement to reduce or limit medically necessary services with respect to a specific individual, and the plan complies with all requirements concerning physician incentive plans.

  • Services to be furnished must not violate federal or state law.

  • The arrangement must be in writing and signed by both parties.

  • The term of the agreement must be for at least 1 year without renegotiation of terms.

These terms are not all inclusive and should not be taken as legal advice. Each compensation arrangement should be evaluated against the regulations and/or submitted to the Office of the Inspector General for an advisory opinion. Additional Stark information can be found on the American College of Chest Physicians website in an article by Carolyn Buppert, JD, MSN, “Job Offers From Hospitals: Sorting Out Stark Issues.”9

Phase III of the Stark regulations10 eliminated the “safe harbor methods” for determining fair market value presented in phase II but added a more direct compensation relationship with the new ‘‘stand in the shoes’’ provisions that closed unintended loopholes by treating compensation arrangements between designated health service entities and group practices as if the arrangements were with all of the group’s referring physicians. When a physician stands in the shoes of his or her physician organization, he or she will be deemed to have the same compensation arrangement (with the same parties and on the same terms) as the physician organization has with the designated health services entity for the purpose of compliance with anti-kickback regulations. There is now a “direct” relationship between the designated health service entity and all individuals in the physician organization when the contract is with the group practice or an individual physician of a group.

The Medical Group Management Association’s “Medical Directorship and On-Call Compensation Survey: 2012 Report Based on 2011 Data” shows that the vast majority of medical practices reported annual median compensation levels of < $50,000. Hourly rates ranged from $100 to $260, depending on the specialty. Most medical directors spent between 4 and 8 h per week on directorship duties.11 Annualized compensation for pulmonary medicine directorships compared with all nonsurgical specialists from this survey is included in Table 1. There were not enough data to determine significant results for critical care or sleep medicine specialists. Integrated Healthcare Strategies also publishes a Medical Director Survey, available as of August 2012.12 The methodology for calculating compensation changed from the 2011 study, with annual stipends dropping by 37.59%, monthly stipends increasing by 12.89%, and hourly stipends increasing by 24.7%.11

Table Graphic Jump Location
Table 1 —Annualized Directorship Compensation and by Compensation Method

Data are presented in US dollars. NA = data not available. (Source: Medical Directorship and On-Call Compensation Survey 2012 Report Based on 2011 Data. Reprinted with permission from MGMA-ACMPE, 104 Inverness Terrace East, Englewood, Colorado 80112. www.mgma.com).11

The duties outlined in the contract should be mutually agreeable and written with enough detail to determine performance expectations. Professional duties require special consideration. Professional liability carriers need to be contacted to review for risk assessment any professional duties that are not within the scope of the physician’s regular practice. Written confirmation that administrative duties including peer review are included in the facility’s directors’ and officers’ coverage should be garnered.

The qualifications required of the medical director are typically outlined in the terms and/or description of duties of the agreement. Recent agreements have required that the medical director be board certified in the specialty of the department and have medical and administrative experience in that specialty.

The responsibilities of medical director positions vary at each facility, depending on the strengths and weaknesses of the entity, the specialty of the department, and the relationship it has with its medical staff. Key areas of responsibility are as follows:

  • Assisting in implementing medical/administrative policies

  • Formulating strategic development for the department

  • Ensuring the safety of patients and employees in the department

  • Providing evidence-based medicine standards of care

  • Creating and validating criteria for the evaluation of quality of services and reporting of core/care measures

  • Assisting with the development of protocols for and the education of department staff

  • Providing guidelines and leadership for staff performance

  • Analyzing data and data collection methods to evaluate clinical outcomes and department performance

  • Acting as the liaison between the department and the medical staff

  • Coordinating patient care with other departments to enhance outcomes (multidisciplinary rounds)

  • Providing consultation to medical staff regarding the appropriateness of departmental services

  • Keeping abreast of new equipment advances and making equipment recommendations

  • Presenting case reviews and performing clinical peer reviews

  • Attending all relevant meetings

  • Preparing and presenting departmental reports

  • Recommending changes for cost-effective administration of the department

  • Maintaining current knowledge of federal, state, and accreditation regulations

  • Advising on community and consumer relationships

  • Being a role model of successful leadership

All time commitments, including regular meeting requirements, should be agreed to in writing in advance to facilitate physician scheduling. A definition of a qualified medical director of respiratory care can be found on the website of the National Association of Medical Directors of Respiratory Care at www.namdrc.org/medical-director-respiratory-care. A list of responsibilities of the medical director of respiratory care can be found at www.namdrc.org/medical-director-respiratory-care-responsibilites.

The Medical Group Management Association survey shows that nonsurgical specialists’ compensation increased with the number of responsibilities. Nonsurgical specialist directors with physician education and provider of last resort/call availability earned the highest compensation in their category.11

It is advised that documentation of all hours spent on any duties of the contract be recorded, even if there is a limit on the number of hours paid. Actual documentation of all hours worked should be used during the next round of negotiations as evidence that duties may take longer than previously allowed for in the contract.

As hospital and physician incentives start to align, medical directorships are turning into “service line comanagement arrangements” with both fixed/time-based and incentive-based compensation components. Incentive is presented as an added bonus for reaching a goal or a penalty subtracted from the total package for not reaching a goal. “Intensivist programs” have replaced the medical director of the ICU to expand the duties of managing this special line of service in the hospital. Added duties involve overseeing operations, cost effectiveness, and communication improvement, as well as initiating more quality parameters. With these types of agreements, it is essential that all the deliverables be clearly defined and mutually agreed upon before the contract is executed. Each goal must be measurable, and the data and the formulas that determine the success of the goal must be trustworthy and transparent. As improvement is shown, the goals and incentives paid should be renegotiated from the new and improved base as the contracts are renewed.

The “MGMA Medical Director and On-Call Compensation Survey: 2012 Report Based on 2011 Data” shows this trend to service line responsibilities in the change of the percentage of specific categories of duties and responsibilities from 2010. Community relations, regulation, licensure and credentialing, strategic development, equipment selection, maintenance and planning, physician relations and/or representation, recruitment, attending standing meetings, monitoring quality and appropriateness of medical care, and providing guidance and leadership for performance guidelines are all up by 10% to 24%.11

The rest of the contract should define the expectations and obligations of each party from partnership and accountability perspectives. Examples are shown in Table 2.

Table Graphic Jump Location
Table 2 —Expectations and Obligations of Each Party

HIPAA = Health Insurance Portability and Accountability Act

Physicians with demonstrated leadership skills who communicate effectively and provide results in a timely manner will be in demand for practice and health system medical directorship positions and service line management. Clinical expertise, with knowledge and application of evidence-based medicine, is essential to achieve regulatory quality measures. Fair compensation for work provided is a challenge in these times of cost-reduction initiatives and changing employment models. Aligned incentives will illuminate the paths to success and guide action toward areas of the national health-care system that are not working for patients, providers, communities, the country, or businesses. Teamwork within the departments, with the entity partner, and the entire medical community is critical to creating local changes that make attaining the goals of quality-improved medicine and patient satisfaction in our health-care system a reality.

Financial/nonfinancial disclosures: The author has reported to CHEST the following conflicts of interest: Ms Knapp provides consulting services for the Medical Group Management Association Health Care Consulting Group and is chair for the American College of Chest Physicians’ Practice Management Committee.

Other contributions: Donald E. Knapp, MD, and Michael V. Jackson, MD, reviewed the manuscript and offered suggestions.

US Government Printing Office. Electronic Code of Federal Regulations. Title 42: Public Health. Part 482-Conditions of Participation for Hospitals, Subpart D-Optional Hospital Services, Section 482.57-Condition of Participation: Respiratory Care Services.http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=1&SID=63de611ed14630b3efff78fe81411ff7&ty=HTML&h=L&r=PART&n=42y5.0.1.1.1#42:5.0.1.1.1.4.4.7. Accessed January 9, 2013.
 
US Government Printing Office. Electronic Code of Federal Regulations. Title 42: Public Health. Part 482-Conditions of Participation for Hospitals, Sections 482.1-482.104.http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=1&SID=63de611ed14630b3efff78fe81411ff7&ty=HTML&h=L&r=PART&n=42y5.0.1.1.1#_top. Accessed January 9, 2013.
 
Department of Health and Human Services. Centers for Medicare & Medicaid Services. Medicare and Medicaid programs; reform of hospital and critical access hospital conditions of participation. Fed Regist. 2012;77(95):29034. [PubMed]
 
US Government Printing Office. Electronic Code of Federal Regulations. Title 42: Public Health. Part 482-Conditions of Participation for Hospitals, Subpart D-Optional Hospital Services, Section 482.55-Conditions of Participation: Emergency Services.http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=1&SID=63de611ed14630b3efff78fe81411ff7&ty=HTML&h=L&r=PART&n=42y5.0.1.1.1#42:5.0.1.1.1.4.4.5. Accessed January 9, 2013.
 
Department of Health and Human Services. Centers for Medicare & Medicaid Services. Medicare and Medicaid Programs; reform of hospital and critical access hospital conditions of participation. Fed Regist. 2012;77(95):29035.
 
Centers for Medicare & Medicaid Services. Hospital value-based purchasing. Centers for Medicare & Medicaid Services website.http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html. Accessed July 30, 2012.
 
The Joint Commission. Core measure sets. The Joint Commission website.http://www.jointcommission.org/core_measure_sets.aspx. Accessed January 9, 2013.
 
US Government Printing Office. Electronic Code of Federal Regulations. Title 42: Public Health. Part 411-Exclusions from Medicare and Limitation on Medicare Payment, Subpart J-Financial Relationships Between Physicians and Entities Furnishing Designated Health Services, Section 411.351-Definitions.http://www.ecfr.gov/cgi-bin/retrieve ECFR?gp=1&SID=888eeb4b02541e28d129c36568fa65c5&ty=HTML&h=L&n=42y2.0.1.2.11&r=PART#42:2.0.1.2.11.10.35.2. Accessed January 9, 2013.
 
Buppert C-JD. Job offers from hospitals: sorting out stark issues. Chest. 2011;139(1):195-199. [CrossRef] [PubMed]
 
US Government Printing Office. Electronic Code of Federal Regulations. Title 42: Public Health. Part 411-Exclusions from Medicare and Limitations on Medicare Payment, Subpart J-Financial Relationships Between Physicians and Entities Furnishing Designated Health Services, Sections 411.350-411.362.http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=1&SID=5888eeb4b02541e28d129c36568fa65c5&ty=HTML&h=L&n=42y2.0.1.2.11&r=PART. Accessed January 9, 2013.
 
Medical Group Management Association. Medical Directorship and On-Call Compensation Survey 2012 Report Based on 2011 Data. MGMA website.http://www.mgma.com/store/Surveys-and-Benchmarking/Medical-Directorship-and-On-Call-Compensation-Survey-2012-Report-Based-on-2011-Data/?kc=MD12PR. Accessed July 30, 2012.
 
Integrated Healthcare Strategies. Medical director survey. Integrated Healthcare Strategies website.http://www.integratedhealthcarestrategies.com/surveys/surveys_compensationsurveys.aspx. Accessed January 9, 2013.
 

Figures

Tables

Table Graphic Jump Location
Table 1 —Annualized Directorship Compensation and by Compensation Method

Data are presented in US dollars. NA = data not available. (Source: Medical Directorship and On-Call Compensation Survey 2012 Report Based on 2011 Data. Reprinted with permission from MGMA-ACMPE, 104 Inverness Terrace East, Englewood, Colorado 80112. www.mgma.com).11

Table Graphic Jump Location
Table 2 —Expectations and Obligations of Each Party

HIPAA = Health Insurance Portability and Accountability Act

References

US Government Printing Office. Electronic Code of Federal Regulations. Title 42: Public Health. Part 482-Conditions of Participation for Hospitals, Subpart D-Optional Hospital Services, Section 482.57-Condition of Participation: Respiratory Care Services.http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=1&SID=63de611ed14630b3efff78fe81411ff7&ty=HTML&h=L&r=PART&n=42y5.0.1.1.1#42:5.0.1.1.1.4.4.7. Accessed January 9, 2013.
 
US Government Printing Office. Electronic Code of Federal Regulations. Title 42: Public Health. Part 482-Conditions of Participation for Hospitals, Sections 482.1-482.104.http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=1&SID=63de611ed14630b3efff78fe81411ff7&ty=HTML&h=L&r=PART&n=42y5.0.1.1.1#_top. Accessed January 9, 2013.
 
Department of Health and Human Services. Centers for Medicare & Medicaid Services. Medicare and Medicaid programs; reform of hospital and critical access hospital conditions of participation. Fed Regist. 2012;77(95):29034. [PubMed]
 
US Government Printing Office. Electronic Code of Federal Regulations. Title 42: Public Health. Part 482-Conditions of Participation for Hospitals, Subpart D-Optional Hospital Services, Section 482.55-Conditions of Participation: Emergency Services.http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=1&SID=63de611ed14630b3efff78fe81411ff7&ty=HTML&h=L&r=PART&n=42y5.0.1.1.1#42:5.0.1.1.1.4.4.5. Accessed January 9, 2013.
 
Department of Health and Human Services. Centers for Medicare & Medicaid Services. Medicare and Medicaid Programs; reform of hospital and critical access hospital conditions of participation. Fed Regist. 2012;77(95):29035.
 
Centers for Medicare & Medicaid Services. Hospital value-based purchasing. Centers for Medicare & Medicaid Services website.http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html. Accessed July 30, 2012.
 
The Joint Commission. Core measure sets. The Joint Commission website.http://www.jointcommission.org/core_measure_sets.aspx. Accessed January 9, 2013.
 
US Government Printing Office. Electronic Code of Federal Regulations. Title 42: Public Health. Part 411-Exclusions from Medicare and Limitation on Medicare Payment, Subpart J-Financial Relationships Between Physicians and Entities Furnishing Designated Health Services, Section 411.351-Definitions.http://www.ecfr.gov/cgi-bin/retrieve ECFR?gp=1&SID=888eeb4b02541e28d129c36568fa65c5&ty=HTML&h=L&n=42y2.0.1.2.11&r=PART#42:2.0.1.2.11.10.35.2. Accessed January 9, 2013.
 
Buppert C-JD. Job offers from hospitals: sorting out stark issues. Chest. 2011;139(1):195-199. [CrossRef] [PubMed]
 
US Government Printing Office. Electronic Code of Federal Regulations. Title 42: Public Health. Part 411-Exclusions from Medicare and Limitations on Medicare Payment, Subpart J-Financial Relationships Between Physicians and Entities Furnishing Designated Health Services, Sections 411.350-411.362.http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=1&SID=5888eeb4b02541e28d129c36568fa65c5&ty=HTML&h=L&n=42y2.0.1.2.11&r=PART. Accessed January 9, 2013.
 
Medical Group Management Association. Medical Directorship and On-Call Compensation Survey 2012 Report Based on 2011 Data. MGMA website.http://www.mgma.com/store/Surveys-and-Benchmarking/Medical-Directorship-and-On-Call-Compensation-Survey-2012-Report-Based-on-2011-Data/?kc=MD12PR. Accessed July 30, 2012.
 
Integrated Healthcare Strategies. Medical director survey. Integrated Healthcare Strategies website.http://www.integratedhealthcarestrategies.com/surveys/surveys_compensationsurveys.aspx. Accessed January 9, 2013.
 
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