Many early career interventional radiologists want to practice in an OBL. And why wouldn’t they? The ability to do high-end cases and have a clinical practice without any of the demands of hospital based work with dependence on diagnostic radiology should make any interventional radiologist interested in utilizing their skills to the fullest potential want to seek out an outpatient practice.
There has been a lot of hype about OBLs. The SIR has put out some webinars with key opinion leaders. There have been plenty of medical student symposia with private practice IRs discussing their OBL practices. And of course, I’ve been screaming from the mountaintops for a minute about how the OBL is perfect for interventional radiology. What is likely not being made explicit are the real reasons why anyone in IR would want an OBL practice.
Surprise, but it’s money. It’s amazing how no one will tell you that directly.
When it comes to the OBL the financial aspect drives the overall avantages (patient convenience, physician convenience, low-cost to society, increased efficiency etc). The office is an opportunity for an owner to run a business and make a profit. Ideally while I strongly believe that the owner should be a physician, often it isn’t. Like any business, you keep costs low and do what you can to drive revenue. Whatever is left over is profit for you and your shareholders.
The way to make money in any business is through ownership. Without significant ownership, you are not entitled to the profits in any meaningful fashion.
Unfortunately, for many physicians, particularly early-career physicians, we are simply labor costs for organizations including many OBLs where we lack meaningful equity ownership.
So how do you as a physician get paid in the OBL? There are two ways. The first answer?
- OWNERSHIP.
This is simply a math problem which happens to be supported by very convoluted Stark and Anti-kickback laws. If you are an OBL owner and you have an IR who works for you as an employee, you are making a ton of money off of their work provided you can bring in referrals and keep the procedure room busy (either through your connections/ability to market, the efforts of your physician worker bee or through investor referring physicians). Let’s use embolization as an example, because it is the service line I know best. The main CPT is 37243. The Medicare payment average is around $9,000. You as a practice owner will use a part of that payment to pay overhead including equipment costs, employee salary and benefits, billing fees, rent etc. Whatever is left will be your profit. It is obviously in your interest to keep your costs as low as possible which include physician professional payment. On average, your profit margins should be around 30% or higher if you are particularly efficient. That’s a lot of money. Can you imagine if your embolizations are for commercial payers who can pay upwards of $15,000 plus for the same code? Can you imagine if you are both the owner and the physician? This is how you make real money in the OBL.
- PROFESSIONAL SERVICES
The second way to get paid in an OBL is to be paid money for professional services rendered. You can be paid a set salary with perhaps a production bonus. Or you can work as an independent contractor by establishing a professional services agreement (PSA) with the practice owner. Regardless, you better believe that your payment will be a mere fraction of what the practice owner will generate for the services you provide. While it’s easy to get all up in arms about how you are making other people rich for the hard work you do, the fact of the matter is your payment will often be limited for two reasons: 1.) Profit motives and 2.) Concern for Stark Law and Anti-Kickback Statute violations.
Now profit motives are what they are. Good old capitalism and all.
Concern for Stark Law and Anti-Kickback Statute Violations is incredibly fascinating, frustrating and infuriating. How do I know? Well, because I have lived these discussions with respect to my own payment in the OBL setting.
Hey Line Monkey, Dr. R is so excited to have you joining him as a partner in the OBL. I wanted to reach out to initiate a discussion about how you’d like to be paid. I went online and Googled interventional radiology salaries. How does an annual salary of $350,000 sound? We can include a production bonus.
That is literally how my discussion with a nurse turned middle manager for the MSO contracting with my last OBL turned out. We ended up agreeing on a payment for CPT professional services agreement which clearly had some key negative features which I’ll discuss. Figuring out how to pay me as a minority owner was a herculean task which required significant discussions about legal implications and of course clouded in the undercurrent of profit motive which often goes unstated during contract negotiations. And of course, with me not having any knowledge of the framework required to have meaningful conversations other than my belief that I’m a skilled IR and I should get paid as much as humanly possible for the business that I am bringing into the center! I ended up paying a lawyer more money than I should have to review my contract and I still ended up feeling screwed at the end.
While you would think that the ability to control payment in the OBL setting would result in increased physician payment compared to a hospital setting given the overall efficiencies of the office compared to the hospital and it’s army of administrators and ancillary support staff, without a clear understanding of Stark and AKS it is impossible to frame this discussion in a way that is actually productive. In usual fashion, I will lay out the facts then give you my opinion.
What is the Stark Law?
I am by no means a legal expert. I am a Line Monkey. Tunneled lines in under 5 minutes or your money back. Everything I discuss from this point on is not legal advice. It’s information I learned from living my own experience trying to establish an OBL private practice including discussions with CPAs, my own attorneys, MSOs, other OBL owners and of course the internet. Please consult a very expensive healthcare attorney if you have specific questions pertaining to your contracts. With that out of the way, here we go.
The Stark Law was introduced by US Representative Pete Stark in 1988 as a means to limit the ability for a given physician to refer Medicare or Medicaid patients to an entity they have a financial interest in for the provision of Designated Health Services (DHS). DHS means a lot of things, but broadly refers to a wide range of medical and health related enterprises including clinics, imaging facilities and laboratories. Imagine if you are a physician and you owned a separate imaging center. You can imagine being financially incentivized to send your own patients to the imaging center you own. The government obviously does not want to pay a ton of money for unnecessary services so this law really came to be as a means to control the healthcare budget. Stark Law may not apply to all OBLs and ASCs because non-hospital outpatient procedures and surgeries generally don’t count as DHS, though radiology services such as ultrasounds do. Nevertheless, an understanding of this law is important because it closely relates to Anti-Kickback Laws which are applicable.
Opponents of the Stark Law argue that physician owned services are important in areas where there is reduced access to care. They also argue that independently owned facilities are often more economically efficient than large hospitals and can save the healthcare system significant money. As you can see, there are clear reasons to be opposed to the Stark Law, but physicians are not immune from corrupt behavior and the reality is likely that there is a role for physician owned facilities, but we also need to make sure they are appropriately regulated to protect patients and the American taxpayer.
What happens if one violates the Stark Law? Again, the answer is money. It’s $15,000 per violation and 3x the value of the improper payment the entity received from the referral. You can also be kicked out of the Medicare/Medicaid program as a provider and be fined civil penalties up to $100,000 for each “circumvention scheme.”
So in summary the Stark Law is aimed to prevent 1.) self-referral of Medicare and Medicaid patients and 2.) billing of services for those self-referred patients. The Stark Law only applies to physicians.
What Is the Anti-Kickback Statute?
The AKS in many ways is similar to Stark Law with a couple distinctions. The entire goal of AKS is to reduce fraud and overutilization by prohibiting the exchange of anything of value for referrals or inducement of referrals. Unlike the Stark, the AKS has a broader scope and applies to anyone involved in the healthcare landscape, not just physicians. It only applies to federal healthcare programs, however many states have their own versions of AKS which can prohibit inducement of referrals for provision of services for commercially insured patients.
Unlike the Stark Law, the AKS is an intent-based statute. Simply paying for referrals is not enough to violate the AKS. There has to be an intent, or clear purpose to pay for referrals. Very few of course would ever want to be in a position where they are arguing over intent as the financial implications for violating AKS are pretty drastic as they are for the Stark Law. The cost here is $25,000 per occurrence, possible imprisonment for up to 5 years, in addition to other civil and criminal penalties. One would also be subject to fees under the False Claims Act (another $20,000 + out of your pocket). Of course, you can and likely would be kicked out of the Medicare/Medicaid program as a provider.
When the AKS was first devised, it turned out that there were some legitimate business arrangements that seemed to violate the rules resulting in the creation of “Safe Harbor” provisions. If you want to take a look at all the Safe Harbors, it can make for very riveting bed-time reading.
https://www.ecfr.gov/current/title-42/chapter-V/subchapter-B/part-1001/subpart-C/section-1001.952
Safe Harbors are important to understand, and I will focus on them in another post as in the context of OBLs the relevant ones relate to investor relationships and how referrals are obtained.
Why and How Stark and AKS Impacts Physician Reimbursement In The OBL
When you are an owner in an OBL, you will often be paid for your professional services in addition to a distribution of profits based on your equity stake in the practice. As a majority owner of a practice, you tend not to really care how you are paid for professional services since the distribution component will drive the majority of your take-home income. There are certain tax implications depending on how you structure your practice (S-Corp vs. LLC generally), but overall you tend to worry less about the exact formula used to derive your compensation as long as you claim a “reasonable salary” to pass IRS muster.
The issue with compensation however is when you are a minority partner, or simply a non-owner employee or contractor for a practice. How do you derive a compensation plan that appropriately values you for the work performed in the OBL and for the fact that you may be bringing your own patients to that center?
This is a huge gray area where different OBL owners will give you different answers depending on advice received from their legal team. Per Stark, several provisions have to be met:
- An employment or professional services agreement must be signed by both parties.
- Aggregate compensation must be
- Set in advance
- Consistent with “Fair Market Value” (FMV)
- Not take into account the value or volume of referrals for federal healthcare plans.
- The aggregate services contracted for do not exceed those which are reasonably necessary to accomplish the commercially reasonable business purpose of the services.
Lots of terms and jargon here which I can spend days dissecting. I want to focus on what’s relevant. The hardest component to really pin down is the concept of “Fair Market Value.” Unfortunately, the government does not give us clear guidance on what FMV really means. Here’s what they say:
FMV means the value in an arm’s length transaction, consistent with the general market value of the subject transaction.
Within the definition of FMV is the term general market value. Well, what does that mean, exactly? CMS in 2021 created an update to provide some guidance on this term:
With respect to compensation for services, the compensation that would be paid at the time the parties enter into the service arrangement as a result of bona fide bargaining between a well-informed buyer and seller that are not otherwise in a position to generate business for each other.
I guess this provides a bit more clarity, but what exactly does compensation look like when we are talking about a bargained agreement where a well-informed buyer (OBL owner) and seller (interventional radiologist) are not in a position to generate business for each other? We are basically talking about the market value of interventional radiology skills.
And this is the problem. This data simply does not exist! It’s like asking your employer to value you based on your ability to cross chronic total occlusions or catheterize type I prostatic origins. Back in the real world the fact of the matter is our value is either directly or indirectly tied to reimbursement which is all related to one’s ability to generate referrals and for that entity to bill.
What does exist though is what one would get paid providing professional services in other sites of services including ASCs and hospitals. Again, let’s use the embolization code as an example. Here is what Medicare payment would look like across three different sites of service (courtesy of Cook Medical, though keep in mind all device manufacturers make this data easily digestible):
You can see that when this procedure is performed in the hospital or ASC, physician payment which is billed separately from the facility payment is $559.24. The $9321.53 paid to the owners of the OBL where this procedure is performed is a global payment of which only a part will be paid to the physician providing the service. With respect to OBL payments, how much of that global fee should be paid to the physician providing that service?
Based on Stark Law, CMS makes it clear that physician compensation for a given service should be valued no differently across different employers. This is what they say verbatim in the 2021 update:
Compensation to or from a physician should not be inflated or reduced simply because the entity paying or receiving the compensation values the referrals or other business that the physician may generate more than a different potential buyer of the items or services. This means that a hospital may not value a physician’s services at a higher rate than a private equity investor or another physician practice simply because the hospital could bill for designated health services referred by the physician under the OPPS, whereas a physician practice owned by the private equity investor or other physicians would have to bill under the PFS, which may have lower payment rates. Put another way, the value of a physician’s services should be the same regardless of the identity of the purchaser of those services.
This language might be the clearest thing I’ve ever seen from CMS with respect to compensation. They state that just because a hospital can bill under OPPS (hospital outpatient designation, i.e the $10,258.49 facility payment for embolization) whereas your local rad group who contracts for professional services can only bill the PFS (professional component, i.e the $559.24), compensation for the physician should be valued the same across both settings. Naturally, you would imagine that it should also apply to the OBL.
Because of this, many corporate OBL and even physician owned OBLs are moving towards independent contractor payment based on wRVUs or professional fees like you’d see for hospital based radiology group billing. Of course the whole concept of wRVUs clearly results in the undervaluation of IR services which prompted those in IR from leaving the hospital to begin with! Please see my earlier blogs for more details.
How Should You Get Paid?
When I was negotiating my OBL professional services agreement with the MSO tasked by the majority cardiology owner to “deal with this stuff,” the COO of that organization and I had a lot of back and forth about what constitutes reasonable pay. At first, the company proposed a set salary based on survey data which was quickly shot down by both my former partner and I. I didn’t want a salary because I felt that I could bring in big business and do better eating what I killed. I just hate the idea of salaries in general and clearly have developed a reputation and risk tolerance for middle fingers to the sky, watch me fly kind of approach to life. My former partner clearly didn’t want to support me with any base salary. The MSO argued that a salary is a clean way of forming compensation because it raises the least red flags based on Stark and AKS. Of course then the discussion of what would be a fair salary is opening up a can of worms in its own right.
We decided that an eat what you kill model based on my production in the OBL would be fair for all parties. For legal reasons I cannot disclose exactly how exactly this compensation formula looked like, but in general I was paid for common CPT codes in the OBL with payments amounting to 15-20% of overall OBL global payments per code. You can look up the codes yourself on the CMS database and see what this looks like. When asked why reimbursement is limited to 15-20% of OBL revenue I was told that payment above this level may raise questions with respect to the “value of referrals,” and subsequent concern for “inducement.” Inducement? You mean inducing me to bring patients to the OBL instead of the 5 area hospitals I was denied privileges courtesy of the local radiology groups? You could imagine I found this laughable. Of course some may question, does the Stark law even apply to outpatient image guided procedures which are not technically designated health services (DHS)? It’s very interesting because when you seek your own legal representation, chances are your lawyer will have a very different interpretation than the lawyer for the OBL ownership.
Ultimately my former partner refused to deviate from the MSO derived compensation plan. I pushed back and was able to negotiate slightly higher rates, but likely not as much as I truly felt I was worth.
What I Really Think
Stark and AKS, while intended to weed out bad apples and protect the American taxpayer, perpetuate the overall theme in American medicine that physicians only exist to take care of patients and must simply put up with the value the government and insurance companies decide they are worth. This of course all while providing essential services which are leveraged by non-physician entity owners, pharmaceutical companies and medical device manufacturers who are not subject to the same level of legal oversight, medical board/regulatory oversight or moral standards as physicians are. Simply an insane system full of waste. Yes we get paid well as physicians, but at the cost of significant financial and practice autonomy. Simply put, I’m tired of non-physicians and in some cases physicians, from taking advantage of our moral obligation to patients to make significant money. It’s not what I signed up for. My apologies to the administrators and industry folk out there who are in it for the right reasons.
What I Think We Should Do About It?
Excellent patient care always, take solace in the good that you do for humans every day, but this does not mean you should ignore everything else like many employers, administrators or practice owners want you to think. Never feel bad talking about money, asking about money, questioning the value of non-physician (and physician) owners/administrators or raising concern for your economic potential. Become owners to control your financial destiny. Support ownership of the next generation of IRs. Continue to lobby for reimbursement in the office setting because ultimately outpatient care saves the healthcare system tons of money. Never stop learning about this stuff, ever.
Comments below.
More to come soon on Stark/AKS.
References:
- https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/index
- https://www.federalregister.gov/documents/2020/12/02/2020-26140/medicare-program-modernizing-and-clarifying-the-physician-self-referral-regulations
- https://www.jonesday.com/en/insights/2021/01/cms-finalizes-and-clarifies-key-valuation-terms-in-the-stark-law
- https://healthcareappraisers.com/the-long-awaited-new-stark-and-antikickback-rules/
- https://oig.hhs.gov/compliance/physician-education/fraud-abuse-laws/
1 thought on “How You Get Paid In The OBL: Stark and AKS”