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Audit Smart: Best Practices for Auditing Your

Physician Contracts October 23, 2014

Allison Pullins, Director

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Outline:

• Introducing MD Ranger

• Why audit your physician contracts?

• Planning and timing the project

• Who should be involved in contract review?

• Straightforward auditing process guidance

• Documentation and follow up post-audit

This webinar will

• Share best practices for internal audits or “reviews”,

which are periodic, informal examinations of

physician contracting program and individual

contracts

• Show how MD Ranger subscribers use benchmarks

and online analytics platform for auditing activities, in

particular: • High-level benchmarks for total spending

• Percent of subscribers paying for services

• Analytics that reveal total costs across services, specialties, and

facilities

• Individualized contract reports for compliance purposes

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This webinar will not

• Substitute for your organization’s attorney

• Substitute for a formalized, external audit

• Demo MD Ranger product capabilities and features

(though will be referenced for the benefit of MD

Ranger subscribers joining us)

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MD Ranger

MD Ranger is a market data company that collects non-employed

physician contract data directly from hospitals. Our approach to

capturing all contract data from an organization allows us to not

only determine what to pay, but also when to pay.

We help hospitals analyze their internal physician contracting costs

to enable negotiation of competitive rates with physicians, and

documentation of FMV and compliance with Stark.

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MD Ranger Includes:

• A secure, web-based Data Tool to collect and organize contract

data (uploads via Excel available, too)

• Web-based Analytic Tools to benchmark a hospital’s individual

contracts, identify compliance issues, and analyze where dollars

are spent

• Benchmarks, available as full reports and online queries, with

market data for call, medical direction, leadership and other

services, hospital-based services, uncompensated care

programs, and diagnostic testing services

• Contract Reports to document FMV compliance and assist in

audits

• Consultations with our experts

MDR Benchmarks:

• 80+ administrative services: hours, hourly and annual rates

• Includes hard to find data on: • Committee and meeting attendance

• Quality initiatives

• EHR and IT initiatives

• Department chairs and section chiefs

• Medical staff officers and leadership

• 50+ emergency call coverage services, including

uncompensated care rates

• 15 hospital-based services (pathology, hospitalists, etc.) • Stipends

• Methods of payment

• Incentives

• Diagnostic and testing services: EEG, EKG, stress, autopsy, etc.

• Key contract terms: payment type, scope of service, incentives 7

Introducing Allison

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• Eight years experience in

healthcare consulting and

technology; specializing in

physician marketing,

recruitment, engagement,

compensation, negotiations

• Helps MD Ranger subscribers

leverage data, analyze internal

costs and structure physician

contract compliance programs

Goals of an Internal Audit

• Provide overview and oversight of organization-wide

contracting practices

• Uncover potentially non-compliant agreements, and

bring them to the attention of your legal and/or

compliance team

• Ensure all agreements have necessary

documentation and are accurate

• Check for duplicative services

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Why audit?

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Uncle Sam says…

• Federal regulations govern physician payments

• Goal is to reduce/eliminate fraud

• Vague language, legal complexity, and physician

relationships themselves can make adherence

challenging

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Physician Self-Referral Law (AKA Stark

Law)

• Limits certain physician referrals of DHS if a

physician or the physician’s family members have a

financial relationship with that entity, unless an

exception applies

• Limited to Medicare and Medicaid programs

• Liability statue, so proof of specific intent to violate

the law is not needed

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Anti-Kickback Statute

• Prohibits the exchange or offer to exchange anything

of value in an effort to induce the referral of health

care services (any items) from any person or provider

• Much more broad than Stark

• Applies to all federal health care programs

• Intent must be proven

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And lastly…. The False Claims Act

• Enacted during the Civil War, the law imposes liability

on people/organizations who defraud government

programs

• Payments to a hospital for services that violate both

Stark and AKS could be subject to penalties because

they defraud the government

• Allows whistle-blowers to bring qui tam lawsuits and

sue on behalf of federal government for both Stark

and AKS violations

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Penalties steep for non-compliance

• Stark Law: single civil violation could result in a fine

of up to $15,000 for each service, plus overpayment

obligation and potential for high civil monetary

penalties assessment

• AKS: single criminal violation could result in a fine of

up to $25,000 for each service and imprisonment of

up to five years, and even absent of conviction,

violators may face exclusion from federal health care

programs.

• False Claims Act: amplifies above penalties

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Internal Audits = strong financial and

compliance controls

• Ensure all contracts are paying “fair” rates

• Identify redundant or excessive contracts

• Find opportunities for efficiency

• Determine appropriate leadership staffing levels

• Benchmark against similar facilities

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Maintain key physician relationships

• Strong physician relationships key to a successful

organization and to promote clinical excellence

• Compensation decisions impact physicians

immensely: be deliberate, thoughtful and consistent

• Remember that all physician financial relationships,

even non-monetary compensation, should have a

contract and FMV documentation

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Planning and timing your audit

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How often should audits occur?

• Check your organization’s policy

• Understand how other departments and business

functions are audited at your organization

• Depending on your facility, you might hold audits

every other year or yearly

• Audit to prevent surprises

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Take both top-down and bottom-up

approach

• Bottom-up:

individual review

of contracts for

compliance

• Top-down: use

benchmarks and

comparisons to

see how your

agreements and

spending look in

total

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Top-down audit suggestions

• Check total hospital-wide payments for physician contracts

across different types of contracts (coverage, administration,

etc.) and use MD Ranger benchmarks for comparison

• Review how much is being spent per specialty or service line

across agreements with MD Ranger Analytics

• Determine if number of medical directors for each

specialty/service is appropriate using MD Ranger tables

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Additional top-down audit suggestions

• Net professional collections for hospital-based groups

• No hours minimums/maximums for administrative

contracts

• Medical directors when specialty is staffed by just

one doctor or just one practice

• Multi-campus deals

• RFPs in contentious/excessive situations

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Outcomes from top-down audits

• Uncover underlying compliance issues

• Reveal duplicate or excessive payments to

individual physicians or groups

• Serve as a financial management

• Help plan your budget

• Negotiation support (comparisons in rates across

specialties, consistencies, etc.)

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Large organization or health system?

• Determine appropriate timeframes, taking into

consideration both the number of contracts and the

estimated time it will take to perform the audit

• Decide at what level of the organization the audits

need to take place

• Facility-level audits could be more practical on a

yearly basis, involving corporate office in line by line

reviews less frequently

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Who should be involved?

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Know your team and your resources

• Your audit process depends on your organization

• Previous audits: figure out what worked, what didn’t

• Involve staff with contract oversight responsibility and

if you can, integrate other staff or contractors to

assist

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If resources are limited…

• No auditing team? No problem!

• You don’t need much infrastructure for a successful

internal audit

• High quality market data and analytics can support

your internal auditing efforts

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Executive involvement and support

• A member of the hospital’s executive team is typically

accountable for the audit

• The individual should have the authority to execute

follow up steps

• Executive should report the audit’s results to other

hospital management and determine if external audit

is warranted

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The auditing process:

guidelines and suggestions

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Current auditing procedures?

• Determine if your facility or health system has

procedural guidelines for internal audits

• If there are steps in place, read carefully to see if

additional steps need to be considered and if the

current process takes into account physician

contract-specific needs (such as Stark violation

considerations, AKB risks, etc.)

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Check processes in your contracting

program

• Document outlining contracting guidelines

• FMV process

• Review specifics • Is time commitment specified consistently in contracts with hourly

payment rates?

• Are time records kept and submitted?

• Are contract renewals timely?

• What is the approval process?

• Is FMV documented at the time of approval?

• Consistent application

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Essential questions for teams auditing

contracting teams

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Do you have a written and signed

contract?

• Stark and AKS require written contracts for physician

services with payment terms set in advance!

• Both the hospital and the physician must sign the

agreement

• Though this step is obvious, sometimes it can be

quite challenging to determine if a contract exists. Do

your homework.

• PRO TIP: show me the money. Check with AP and

contract manager; if there is a monetary exchange,

there should be a contract

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Is the contract current? Expired?

• Expired contracts are more common than you’d think

• Expired contracts mean that you do NOT have a

contract in place with the physician and you are

technically violating Stark and AKS.

• Contract terms must be set in advance

• PRO TIP: use your contract management software to

set alerts at least 3-6 months in advance to negotiate

deals (longer for more sophisticated hospital-based

agreements)

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Are you providing non-monetary

compensation to the physician, and if

so, is it documented?

• Are you providing non-monetary payments to

independent physicians (that you aren’t providing to

the entire medical staff) that exceed the cap? • Parking spaces?

• Meals?

• Electronic health records?

• Overhead from charity events involving doctors?

• Joint marketing?

• Office artwork?

• Technology?

• Infrastructure?

• ….?

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Is the service provided defined in

detail?

• The services to be provided must be described in

detail in the contract.

• Don’t forget important details, like number of hours in

administrative agreements

• Record keeping for time and performance of duties

• Periodic ‘audits’ of time cards to see if they are

accurate, meetings attended, reports filed, etc.

• PRO TIP: When in doubt, spell it out

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Is paying for the service commercially

reasonable?

• Just because you are paying a physician for a service

doesn’t necessarily mean it’s commercially

reasonable to do so

• Review commercial reasonableness documentation

during audit to ensure argument still holds

• No documentation? Use MD Ranger data to get a

gut check: • Percent paying

• Payment rates

• Number of positions

• Overall service payments

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Has the rate changed within the first

year of the agreement?

• Are there any amendments to the agreement that

alter the payment rate less than a year from the start

of the contract?

• Contact AP to ensure that payments remain

consistent for contracts within their first year (Stark

mandate)

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Is your rate within fair market value?

• Check the fair market value documentation with the agreement

to ensure that methods/data are sufficient

• If documentation or methods are questionable, look up market

data for the service

• If no documentation exists and payment rates were determined

by something other than fair market value, flag the contract for

follow up

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Did you apply your organization’s

“FMV Process” to this contract?

• Your organization should have a thoroughly

documented process to determine FMV, and all

contracts should have gone through the steps of the

process as they were negotiated

• If the contract doesn’t have all steps or

documentation, or seems suspect for other reasons,

flag the agreement for later follow up

• PRO TIP: Need help with a physician contracting

process? We have resources at

www.mdranger.com/resources

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Could a contract imply that you are

paying for referrals (in any way)?

• Paying for referrals or bribing physicians in any way

is illegal

• Due diligence is required when reviewing contracts to

ensure that the payments are not for referrals; lack of

documentation leaves you vulnerable to technical

Stark violations

• Remember: the government doesn’t have to prove

intent for Stark violations

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Is everyone complying with the

agreement?

• Ensure that the hospital is paying the appropriate

rates as per the agreement

• Check physician documentation is up to standard

(medical directorship hours especially)

• Read through the description of the service and

ensure it is not only being adhered to, but if it is also

still needed

• PRO TIP: Check up on ‘special deals’ that didn’t

follow standard procedures or legacy contracts that

haven’t changed in years

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Documentation and follow-up

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Documentation

• Review the entire auditing process and document

what you did step by step

• Create a file or document to capture your internal

process. Include: • Memos written by responsible executive or leader

• Minutes from meetings

• Flags and notes

• List of follow up items in one place, as collected from above

documents, notes, memos, and emails

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Red flags?

• Every organization has a few; don’t panic

• Someone has to be at the 90th percentile: it might be

this contract

• Nothing found? Check contracts negotiated under

tough circumstances or odd agreements that have

been in place for years again. Due diligence is often

required for these types of agreements.

• Loop in compliance

• Loop in legal

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Follow up

• Execution and accountability are essential for a

successful audit, which is what makes follow up so

important

• Track all next steps in one document; review

progress weekly in the month following the audit and

monthly post-audit

• Good project management is key

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Get organized with MD Ranger support • Top-down and bottom-up internal audits supported by MD Ranger benchmarks

and online tools

• Use Total Facility Reports for high-level spending analysis and comparisons with

other hospitals’ payments

• Use Benchmarks to check each contract for FMV, and document compliance

with Standard Contract Reports

• Spreadsheet can be helpful for tracking questions will be available for MD

Ranger subscribers by end of year

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Your turn

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Does your organization need help with reviewing

contracts?

Do you need better resources for physician contracting?

Email or call me—we can help you!

apullins@mdranger.com or 650-692-8873