Orthopedic Surgery Call Coverage Payments: Understanding and Applying Survey Data

Statistics show orthopedic surgeons are paid for call coverage more than any other specialty. According to a 2009 Sullivan Cotter Survey, approximately three out of four hospitals, who report on-call payments to physicians, provide payments for orthopedic surgeons. Health systems struggling with what to pay these physicians can take some comfort in the fact that compensation survey data for this specialty has remained relatively stable for the past four years. The following outlines compensation survey data findings, along with valuation considerations, when determining if an orthopedic surgeon warrants compensation at the low-, mid- or high-end of survey data.

Market data on orthopedic surgery call payments

Most valuation experts advise health systems to steer clear of relying on survey data alone when it comes to determining call coverage payments. Reasons this data is considered unreliable include:

• low number of survey respondents;
• large variance in reported fees;
• lack of information related to volume of call (the OIG suggests this be considered);
• lack of information related to payor mix (OIG suggests this be considered);
• no details related to the agreement terms; and
• the data is based on hospital-physician relationships, which is considered risky to rely upon based on guidance from healthcare regulations (Stark).

However, orthopedic surgery consistently has the most respondents in the on-call surveys and the least amount of variability in observed fees. This conclusion is based on VMG Health's internal database of on-call valuations for orthopedic surgery and is further supported by six annual on-call surveys produced by two organizations over the past four years. Survey findings show 24-hour call coverage rates for orthopedic surgery have remained relatively stable, with median compensation ranging from approximately $800 to $1,100 per day from 2006 to 2009. It is important to note that the most recent data shows a decrease in overall call coverage payments for the specialty.

The following table summarizes 2008 and 2009 weighted average 24-hour call coverage compensation data, based on the number of respondents, from two national surveys for orthopedic surgery: Sullivan, Cotter and Associate's Physician On-Call Pay Survey Report and MGMA Medical Directorship and On-Call Compensation Survey.

The consistency in reported fees assists health systems in documenting supportable payments for this specialty. However, it is extremely important to consider other factors including volume, payor mix, acuity and specific terms of the arrangement when determining if these rates are consistent with FMV. It is recommended that all of these factors be considered, as well as additional valuation methodologies.

However, based on VMG Health's experience, we understand many health systems rely on survey data alone when determining payments for call coverage. The following provides guidance as to what percentile of data might be most applicable based on various facts and circumstances when relying on survey data.

Determining low, mid or high payments for orthopedic surgery call coverage

Although it is not prudent to rely upon survey data alone, many health systems do rely on these surveys. The following should provide some insight as to what a hospital should consider when looking to compensate an orthopedic surgeon based on this data. Specifically, one should consider the following three value drivers in choosing a reasonable percentile from the survey data:

1. Payments should be weighed towards the lower end (25^th percentile) of observed market data if the following hold true:

• Low volume of call
• Favorable payor mix
• Guaranteed payments for uninsured payments (for example, indigent care paid at Medicare rates)

2. Payments should be weighed towards to the middle (50th percentile) of observed market data if the following hold true:

• Normal volume of call
• Normal emergency department payor mix

3. Payments should be weighed towards to the higher end (75^th percentile) of observed market data if the following hold true:

• High volume of call
• Unfavorable payor mix
• Physician assigns the ability to bill and collect to the hospital

As mentioned previously, relying on market survey data alone will not provide a comprehensive valuation to determine fair market value for call coverage payments. All facts and circumstances should always be considered when determining FMV for any physician-hospital arrangement. However, many health systems rely on this data and do not obtain a third-party opinion for their on-call arrangements. Based on VMG Health's experience, orthopedic surgery provides the best on-call survey data of all the specialties. If relying on this data, health systems should also consider the guidelines above when selecting the appropriate percentiles of market data.

This article is not to be construed as legal advice, nor does it determine FMV for any particular arrangement.

Jen Johnson oversees the valuation of professional service arrangements at VMG Health, a national health care transaction and advisory firm in Dallas. Prior to that she was a finance professor at the University of North Texas and worked in KPMG's forensic and litigation department. She may be reached by e-mail at jenj@vmghealth.com or at (214) 369-4888.