Part A and Medical Directorship contract review requires knowledge of pertinent information to be used for determining compensation for services rendered by a pathology practice and for the oversight of the laboratory and its staff. The term 'Part A' refers to the global payment received by the hospital for clinical pathology for governmental carriers. These carriers include, but are not limited to, CMS, Champus, ChampVa, TriCare, and state Medicaid programs that do not recognize the professional component of clinical pathology. The Medical Directorship is the fee the pathology group is reimbursed for providing the oversight of the laboratory and its staff and the liability incurred as Medical Director.
The contract between the hospital and the pathology group, therefore, is a very important document that is used to define expectations from each entity. It is important to review the proposed document thoroughly and define items that are potential hazards to a group's revenue stream.
The steps listed below are potential roadblocks and should be examined closely. This is not a legal review of the document but an experienced review of items that are seen most often in hospital contracts and that can be potentially damaging.
1. Read through the document in its entirety and note any items that do not meet your approval.
- Is the hospital asking for copies of the group's financial statements?
- Is the hospital stating that the group needs the hospital's approval before it can change its fee schedule?
- Is the hospital requesting a copy of the group's fee schedule?
- What are the termination clauses?
- Is the hospital requiring the group to provide time sheets?
- What are the hours that the hospital is requesting the group being available for service? On call 24-7? At the hospital on weekends?
2. Go back over the document and begin going through section by section to define the issues.
3. Contracts are set up in sections with definitions of each party's rules according to the agreement. Both sets of rules must be examined for required elements by part.
- The hospital is one party and can be defined as the 'facility,' etc.
- The pathology group is the other party defined as the 'group,' 'the Contractor,' etc.
General Obligations
1. Review the obligations of the group.
- Look for wording that addresses medical staff privileges.
- What type of documentation is required for the hospital to allow privileges?
- What is required of a new physician to the group?
- How long before/after hire date is the documentation required to be provided to the hospital?
- Is quality control addressed?
- Does the hospital have a quality control initiative for this department?
- Is there a monthly/quarterly/other timely benchmark to be met?
- Is the benchmark attainable/acceptable?
- What type of notification is required of the group if they have to get another pathologist or pathology group to cover services for vacations and/or emergency situations?
- Is hospital approval required?
- What if the hospital does not approve the choice made?
- Does the hospital require the pathology group to assist in laboratory inspections and/or licensing procedures?
- CAP / JCAHO inspections.
- New labs / joint ventures.
- Other accreditations/licenses/permits as necessary
- Conflict of Interest
- Does the group have any other agreements or associations that may conflict with their duties under this agreement?
- Compliance
- Guidelines for federal, state, and local laws are standard for compliance.
- Group needs to review the hospital medical staff bylaws for any item(s) they feel may be untoward.
- No Right to Bind
- Wording will state that the group has no right to bind the facility in any contractual arrangement.
- Additionally, you must look for wording that states that the facility does not have the right to bind the group contractual without prior written consent from the group.
- Availability of Records
- There are governmental guidelines that require records availability including contracts, books, documents, and records that may be necessary for audits, etc. Just be sure this is for governmental purposes/requirements and not the hospital's own rules
Medical Director Requirements/Staff Requirements
1. This is sometimes included in the body of a contract and sometimes attached as an addendum.
2. The requirements usually list the types of degrees, board certifications, fellowships, etc. that a physician must possess to be either medical staff or Medical Director.
3. The duties to be performed are listed. These are many and will vary from contract to contract. Here are some typical duties:
- Assist in establishing clinical services
- Advise hospital administration of problems or policy questions as they relate to the laboratory.
- Oversee the laboratory staff and provide feedback to the hospital on issues or concerns with employees.
- Participate in medical staff conferences and boards.
- Consult with other physicians on cases as necessary.
- Respond to patient complaints.
- Work with the hospital and its employees to render quality medical care to patients.
- Assist in providing reporting/suggestions for new equipment or ways to increase/improve services in the laboratory.
- Participate in educational programs offered by the hospital.
- Ensure overall compliance with federal, state, and local guidelines in the laboratory.
- Perform other such duties as may be requested by the CEO from time to time.
- Participate in long range planning.
- Provide in-service training.
- Cooperate with hospital regarding administrative, operational, or personnel problems.
- Assure the maintenance of accurate, complete, and timely patient records.
4. Medical Judgment is solely the control and responsibility of the group.
- The sole interest of the hospital is to be sure all laws and regulations are adhered to.
5. Marketing is not required of the pathology group but the hospital may use the group's name/likenesses in their promotions of the hospital and physicians on staff.
Insurance and Indemnification
1. The group must carry their own professional liability insurance.
- The hospital may have required minimums for coverage. Basically we see $1,000,000 minimum per occurrence, $3,000,000 minimum in aggregate.
- Watch for wording that says that the group must name the facility as an additional insured on the liability policy. This is NOT acceptable. The facility should carry their own liability policy(s).
2. Indemnification simply says that each party will protect, indemnify, and hold the other party harmless for any claims, demands, lawsuits, settlements, etc., arising from damages to persons or property in connection with the services provided by the indemnifying party.
Terms and Termination
1. The terms of the contract list the effect date and renewals.
- Typically there is an initial term of the contract which could be anywhere from one to three to five years.
- There may be a clause that renews the contract automatically each year until/unless one or both parties propose a change in any shape or form to the original contract.
- Termination with cause is found in every contract and lists the reasons that a hospital may terminate the contract immediately.
- Reasons typically include, but are not limited to:
- Loss of physician license;
- Arrest, indictment, or conviction of a crime;
- Judgment of loss of competency;
- Failure to maintain liability insurance;
- Inability to perform duties of the Medical Directorship;
- Failure to comply with terms and conditions of the agreement.
- Termination with cause with a cure period allows either party to try to cure the issue prior to the requested termination goes into effect.
- A cure period can be anywhere from 15 to 30 to 60 days and usually requires some type of written plan of action and affectation before it is accepted.
- Termination without cause typically says that either party can terminate the agreement by providing written notice.
- The written days' notice changes from contract to contract and can range from 60 to 90 to 120 to 180 days.
- Immediate termination is typically the result of one of the following:
- Facility's loss of certification as a Medicare provider;
- Closing of the facility;
- Death of pathologist (if sole proprietor)
- Group is suspended, excluded, or debarred from participating in any government payor program.
- Note that this wording should be reviewed to ensure that if there is more than one pathologist in the group that the entire group will not be terminated - just the affected pathologist.
- Effect of termination explains what happens at termination - meaning that there are no rights or obligations of either party except those accruing prior to the termination date.
Compensation
1. The most important wording to look for in the paragraph is the right to bill for the professional component of anatomic pathology and clinical pathology services.
- Anatomic pathology will be billed to all carriers, networks, and self pay accounts.
- Clinical pathology will be billed to non-government carriers and self pay accounts.
- Note that commercial Medicare and Medicaid product lines cannot be billed for the professional component of clinical pathology.
- If the group cannot bill for the professional component of clinical pathology, try to negotiate a payment from the hospital from these services. It is difficult but worth a try.
2. The amount that is negotiated as compensation for the oversight of the laboratory (Medical Director) and payment from the hospital for Part A services (professional component of clinical pathology for governmental carriers). There are several ways that compensation can be determined: 1) by hourly rate, 2) by number of hospital beds, or 3) by RCE - relative compensation equivalent.
- Calculating by number of beds is multiplying the number of hospital beds by $500. This is the national average that CMS (Medicare) is paying hospitals per bed. For example a 250 bed hospital would yield a Part A payment of $125,000 (250 x $500).
- Compensation by the hour requires a manual process. To determine the hours spent overseeing clinical pathology work, time sheets or logs may be used. These can be completed daily, weekly, monthly, or quarterly. The national averages for hourly rates for pathologists are $100-$200 per hour. If the pathologist calculates monthly, for example, the time sheet would indicate that the pathologist spent 25 hours per month providing clinical pathology services, compensation would be between $30,000 and $60,000. This was determined by multiplying 25 hours by the hourly rate by 12 months.
- To calculate by relative compensation equivalent, or RCE, is to determine the percentage of time spent by the pathologist performing clinical pathology services and multiply that by the base figure. For pathologists the figures were $208,000 for those practicing in nonmetropolitan areas, $219,500 for those practicing in areas with a population of less than 1 million, and $215,700 for those practicing in areas with a population greater than 1 million. For example: a pathologist in a metropolitan area of fewer than 1 million people spends 30% of his time on clinical pathology. Presume that the hospital has a 60% Medicare population. Multiply .3 (30% on clinicals) by .6 (the Medicare population), then multiply that figure by $219,500 (the predetermined RCE for one FTE pathologist). The figure yielded, $39,510, is the relative compensation equivalent that should be paid to that pathologist for time spent on clinical pathology. This should be calculated for each physician in the group.
3. Along with the compensation listed above, several other factors should be considered and included in the negotiated compensation for Part A services:
- COLA - Cost of Living Adjustment
- Autopsies - a rate should be established and written into the contract. This can be anywhere from $750 - $1800 per autopsy.
- Consultation reimbursement - this is the rate that the hospital will pay the pathology group for consultations performed on referred cases. Rates range from $175 - $350 per case.
- Purchased services arrangements or global billing arrangements. This indicates that there is an agreement between the two entities that one will bill services globally (usually the pathology group) and pay the other entity (usually the hospital) a per specimen, per slide, or per block rate. The rate of payment back to the other entity is usually 75% of CMS.
- Client billing - this is typically set up for a specific outreach facility, such as an ambulatory surgery center, or for a specific subset of patients. Most often, the pathology group will create a monthly invoice of all patients for which services were rendered and submit that to the hospital for payment. The rates vary from current CMS to a flat rate per patient to a rate that is agreed upon by both parties.
4. Managed Care clauses are very important when negotiating a Part A contract for a pathology group. These clauses can bind a group's power to negotiate with commercial carriers on their own behalf because the wording is unfavorable.
- Watch for wording that says that a group must participate with all carriers and networks with which the hospital participates.
- Ideally, wording should allow the group to:
- Negotiate with carriers and networks for their own behalf.
- Accept contracts that are fair market value.
- Opt out of participating with carriers and/or networks that will not negotiate a favorable rate.
- Set a benchmark for the lowest rates they will accept from a carrier or network in terms of reimbursement rates. (Ex: 175% of current CMS or 165% of 2009 CMS)
- The hospital cannot negotiate or sign any agreements on the group's behalf.
5. Billing for the professional component of pathology services should be the responsibility of the group and should be stated as such in the contract with the hospital.
- The hospital should provide the necessary data needed for billing in a format that is acceptable to both parties.
- Typically the format is electronic for demographic data.
- Clinical pathology is also delivered in electronic format.
- Anatomic pathology is preferred is some electronic variation - PDF, text, etc., - however not all hospitals are able to provide electronic data from their Laboratory Information System (LIS). Hard copy reports or faxed reports are also acceptable formats.
6. Exclusivity is important wording to include in the contract. This states that the pathology group is the exclusive provider of services for the hospital(s) and/or hospital system.
- Look for wording that says the group will be given first right to accept/refuse any new business that comes into the hospital.
- Look for wording that says the group will have the first right of refusal for any new ventures the hospital enters into.
Non Compete
1. There is typically a paragraph that addresses what guidelines the group (or individual pathologist in the group) must follow once the contracted is terminated or dissolved.
- This includes (but is not limited to):
- The radial distance in which the pathologist or group can look for work in the region. (Ex: nothing within 25 miles of current hospital)
- For how long the restrictions are in place.
- Sometimes what facilities, systems, or independent laboratories the exiting pathologist/group can be employed by.
While there may be many other sections and paragraphs included in the hospital contract, these are some of the most important that need to be addressed. Always, the most important thing the group must do when negotiating the Part A/Medical Directorship is to have an attorney review the contract - preferably one well-versed in healthcare and healthcare contracting.
Mick Raich owns Vachette Pathology and works with pathologists, laboratories and hospitals nationwide in the area of strategic management, and revenue cycle management. Mick can be reached for comment at 866-407-0763 or 517-403-0763 or via e-mail at mraich@vachettepathology.com or visit www.vachettepathology.com.
End of Management of Pathology Practices > Part A and Medical Directorship Contracts
