A hospital may compensate on-call physicians for providing medical services to uninsured patients, according to an advisory opinion published by the Office of Inspector General of the U.S. Department of Health and Human Services (the “OIG”) on May 21, 2009.

A not-for-profit general hospital, which received funds through its state’s disproportionate share program for providing services to indigent and uninsured patients, had difficulty ensuring that certain specialists were available on-call, as physicians tended to provide only the minimum amount of call coverage required under the hospital’s medical staff bylaws. This is perhaps because physicians do not receive payments similar to the disproportionate share program for providing medical services to the indigent.

The hospital developed a new call coverage program to address this problem. Physicians on the hospital’s active medical staff who wish to be compensated by the hospital for providing on-call services to patients without insurance coverage, must: enter into an agreement that requires them to comply with the hospital’s policies; respond in a timely manner to requests for call when scheduled; evaluate patients in person; provide any necessary follow-up care; and not bill or collect from any uninsured patient or third-party payor for services provided under the on-call compensation program. After rendering treatment, a physician submits a form to the hospital that describes the services he or she provided to the uninsured patient. If the hospital is unable to identify a payor source, including Medicare or Medicaid, the hospital pays the physician a fair-market-value flat fee according to a schedule of defined services categories.

The OIG will not impose sanctions on the hospital, even though the arrangement could potentially generate prohibited referrals and does not fall within any applicable safe harbor to the Anti-Kickback Statute, because:

• Compensation is in exchange for in-person services actually rendered, verified through claim forms and paid according to a fee schedule that helps to ensure that payment is consistent with fair market value;
• Compensation is necessary, where the hospital had difficulty providing certain services due to physicians’ unwillingness to provide on-call coverage to uninsured patients;
• The program includes protections that lower the risk of fraud and abuse, such as availability to the entire medical staff (other than provider-based physicians), an equitable rotation system, claim forms to document services rendered, and a requirement that physicians respond in a timely manner; and
• The program allows the hospital to provide care to indigent and uninsured patients consistently, thus promoting a public benefit.

Through this and other related advisory opinions, the OIG has recognized that hospitals need to compensate physicians in exchange for providing on-call coverage. But it also notes that such compensation can create a risk that physicians may demand payment for providing on-call coverage as a condition of doing business at the hospital, even if neither the services provided nor any market factors would support such compensation. Therefore, on-call coverage compensation arrangements must be carefully scrutinized on a case-by-case basis to ensure that they are not simply rewards to physicians for referrals.

Compensation by hospitals to on-call physicians for providing medical services to uninsured patients is permissible under this advisory opinion only if there is a demonstrated inability to provide necessary services to patients without such payments. Also, sufficient safeguards must be in place to ensure that payments are fair market value for actual and necessary services, and that payments are not determined in any manner that takes into account the volume or value of referrals by the physician to the hospital. If these factors are not present, on-call compensation may not be appropriate.

For further information, please contact Michael P. Davidson or your regular Hinshaw attorney.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.