Fair Market Value Compensation Analysis for a Telestroke Program
Client Profile: Middle Atlantic academic medical center
Project Type: Fair Market Value: Physician Compensation, Directorships and PSAs
Challenge: To develop models for compensating faculty consulting physicians working in a web-based consultation program for their on-call and patient assessment time. The AMC was implementing a telemedicine program to facilitate remote consultation by faculty neurologists and neurosurgeons with emergency medicine physicians and stroke patients at area hospitals that lack 24 hour/7 day specialist coverage.
The program uses a mobile cart/robot to provide two-way audiovisual communication between the consulting physician and patient via a web-based portal. Faculty neurologists and neurosurgeons provide dedicated beeper call coverage for the program.
DGA Solution and Results: We researched and contacted several other telestroke programs to obtain information about models for compensating consulting physicians.
Based on that research and our experience in preparing compensation valuations, DGA developed two compensation models for consideration.
An opinion letter with supporting documentation for each model was prepared and presented to AMC leadership for their use in negotiating a contract for establishing this service. The program was implemented, using a variation of one of the models presented.
Compensation Analysis for a Concierge Practice Model
Client Profile: Northeast academic medical center
Project Type: Fair Market Value: Physician Compensation, Directorships and PSAs
Challenge: To assess the reasonableness of the proposed annual compensation amount to be paid by the AMC to a private practice physician providing services under a concierge model.
Concierge medicine refers to primary care physicians providing enhanced care in exchange for an annual fee defined as a retainer. Concierge physicians typically guarantee 24-hour, 7-day a week ("24/7") access for their patients and provide special service to them.
DGA Solutions and Results: Since published compensation benchmarks are not available for concierge practitioners, DGA used a two-part alternative analysis. Using results from a United States' Government Accountability Office (GAO) survey of concierge practice characteristics, we benchmarked the proposed practice against concierge practice characteristics from the survey. We verified that the proposed concierge practice was within the parameters of the practices surveyed in all characteristics.
DGA then prepared a practice overhead and net revenue benchmark analysis using private practice overhead metrics normalized for a concierge practice expense structure. DGA determined that the planned annual revenue at full capacity was reasonable when compared to the GAO survey of concierge practice membership fees and panel size. Furthermore, the practice overhead analysis supported the proposed annual payment to the physician as a reasonable compensation level.
Cardiology Practice Valuation
Client Profile: A large not-for-profit health system, recognized as a center of excellence in cardiology, cancer, and women's health services.
Project Type: Fair Market Value: Physician Compensation, Directorships and PSAs
Challenge: Determine the fair market value of selected assets of an 11-location, full-service cardiology practice. Develop a fair market value post-transaction compensation model that would be acceptable to the majority of physicians who opted to stay in the practice.
DGA Solution and Results: DGA worked closely with practice management to develop credibility, as pre-valuation expectations are often not met and it was important that this not result in physician rejection of DGA's work.
The transaction closed and the health system ultimately employed 19 adult cardiologists, two pediatric cardiologists, and approximately 165 support staff in nine locations.
Business Valuation for a Joint Venture Rehabilitation Hospital
Client Profile: Community hospital that is part of a regional health system in Pennsylvania
Project Type: Healthcare Business and Medical Practice Valuation
Challenge: To prepare a business valuation for the hospital's acute rehabilitation service line in preparation for a joint venture with a national rehab provider.
The rehabilitation unit was being managed by the national rehab provider. The unit was consistently running near full occupancy and there appeared to be enough market volume to support a bigger unit. The hospital client and the management company were considering a joint venture for a freestanding rehabilitation facility that would include a 40-bed acute rehabilitation unit.
Typically, valuations are prepared for a complete enterprise, rather than an operating department. Our work needed to consider the implications of facility cost and overhead allocations, and ensure that the revenue streams were correct. DGA also had to consider the potential impact of reimbursement changes in acute rehab care. Finally, since the joint venture partner was an experienced provider of rehab services, DGA had to establish credibility with the company in terms of the valuation process and results.
DGA Solutions and Results: DGA completed the valuation under significant time constraints, and arrived at a valuation conclusion that was acceptable to all the parties. The joint venture partner was very positive about doing a venture with our hospital client. DGA's valuation was used exactly as it was calculated and served to facilitate negotiations between the parties.
Establishing a Fair Market Value Fee Schedule and a Collaborative Climate for an Under-Arrangement Imaging Center
Client Profile: The main hospital in a multi-site health system
Project Type: Fair Market Value: Business Arrangements
Challenge: To develop a fair market value fee schedule for the technical component of imaging services to be provided under a proposed two-year agreement between the hospital and a joint ventured rural imaging center owned by the hospital and a physician group.
The imaging services were to be treated as hospital services and billed by the hospital under the hospital's outpatient Medicare rates and existing hospital commercial payer agreements. The hospital was to retain all revenue and pay the joint ventured imaging center a contracted fair market value fee for each imaging procedure.
DGA Solutions and Results: DGA provided a thorough analysis of the imaging center's current fee schedules. Through a rigorous analytic process, we developed a FMV all-payer fee schedule that would reflect the costs of the imaging center and the risks associated with the provision of the services. In addition, DGA developed a methodology to establish fees for new services where no fees previously existed.
DGA's work led to the creation of a collaborative climate of trust and credibility between all parties, including hospital and imaging center management. The management teams of both the hospital and the imaging center embraced the resulting fee schedule as fair, and it served as a key component of the final joint venture agreement.
Reviewing Physician Compensation Using a Local Market Survey
Client Profile: A large suburban tertiary care teaching hospital employing over 200 physicians
Project Type: Physician Compensation Fair Market Value
Challenge: To develop a local market physician compensation database to provide more relevant comparable data to complement the available national benchmarks in use. The hospital board’s Compensation Committee has directed the hospital to conduct a yearly compensation review process for all physician compensation arrangements, including administrative and clinical full-time, part-time and independent contractor compensation arrangements. DGA was engaged several years ago to continue the annual compensation review based in part on more local data.
DGA Solutions and Results: DGA initiated a physician compensation survey of employed physicians in the greater Philadelphia, Southern New Jersey and Delaware market. The survey included approximately 3,000 physician compensation citings in over 85 specialties from medical schools, academic medical centers, health systems and large hospital-owned physician networks.
This local survey data has now become an integral component of the client’s annual physician compensation review. The client and other survey participants have exclusive access to valuable local market compensation benchmarks for use in their physician recruitment and retention initiatives, as well as internal compensation planning and administration.
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