Exceeding your “fair market value”

[Nash22]

Agree with all the above.

Ultimately, most administrators seem to be incentives/rewarded on meeting budget rather than generating revenue… and the easiest way to meet budget is to keep physician salaries in check (regardless of what they can generate for you on the backend).

I am glad others have shared my observations. I wish I knew this sooner, though.

It was a real wake-up call for me to come out of training and into the corporate hospital environment. I expected the hospital to be enthusiastic about my ideas to increase patient volume and revenue. It turned out that they had zero interest in anything that involved additional capital expenditure even if it meant it would be profitable. I anticipated that they would be happy if I increased patient throughput to the point that I would be making enough RVUs to be in bonus territory as that would also mean more money for them. It turned out that they wanted my patient numbers to be low enough so they wouldn't have to pay me beyond my base salary, and I learned that it was not a coincidence that my RVU numbers almost always came out to just below the bonus limit. They had done that math.

Then I heard the admins talk behind closed doors and use terms like "physician salary expense" and realized that there was something else going on that explained why they were so disproportionately focused on minimizing payments to employed physicians even if it wasn't necessarily in their best financial interests to do so.

The theme was spending the bare minimum to keep the equipment functioning and working the physicians just hard enough to keep them at their contractual minimum incomes. As far I could tell, these two tasks were the primary responsibility of each department admin.

I can also say with certainty there was a factor of outright incompetence that played into it at my old shop. The administrators all graduated from local high school and went to local nursing and therapy programs before getting an online MBA and getting promoted. They were not bright people and carried a chip on their shoulder against the physicians.

[Sundance]

Hospitals get weird about highly compensated physicians, even if they are earning the high compensation through very high production. I don't fully understand it, but I think at least some of it has to do with pettiness/jealousy from the part of upper level admin. The CEO is not going to be happy if he is making 800k but is having to pay you 1M because you busted your butt and produced at the 95%-tile. I have definitely seen this before. Some hospital contracts will put a firm income cap on you that says no matter how much work you do, you cannot be paid more than $792,438 (or whatever the 90th percentile MGMA level is for your specialty), and they whittle away at how much you get paid per RVU as you approach this limit. So effectively, you are working more for less, and beyond a point you are working for free. This is opposite of the way that it should be, and we should all reject these offers outright.

Bizarrely, I have seen these hospitals be totally fine about paying a low volume physician very high for what they produce. For instance, if a department produces 10,000 wRVU per year, they would have no problem paying 2 physicians $400,000 each ($80/wRVU) or maybe even slightly more and spend most of their time hanging out in the lounge but would absolutely refuse to let one physician be busy and operate solo for $800,000/year ($80/wRVU) because that number just looks too bad.

Working for hospitals sucks. Physician services generate a lot of revenue in our country and it's no secret. The eventual goal of the hospital is to obfuscate this by employing us with set hours and fixed pay. The RVU system is a stepping stone to get us off of the fee for service expectation. In private practice you collect the whole fee. Now we get paid a portion of the fee for the service (which is usually kept in secret from the physician) at the administration's discretion. Eventually we will just get a fixed paycheck no matter how much work we do.



This may be true, but it is not the primary reason why they do it. It is a tool to reduce physician salary expense, what admin views as their biggest "cost center" on their budget even though they just ignore the fact that the physician services they bill for is what generates the revenue, and that admin salaries are not being supported by services they bill for.

Agree with all the above.

Ultimately, most administrators seem to be incentives/rewarded on meeting budget rather than generating revenue… and the easiest way to meet budget is to keep physician salaries in check (regardless of what they can generate for you on the backend).

[Nash22]

I had recent issues with this exact problem and had to hire an attorney.

I was under a 5 year contract and my RVU reimbursement was the 75th percentile per RVU. Due to working in an underserved area, in regards to my specialty, I produce >90th percentile RVUs. Trust me, this isn't by choice as I'd much rather have more time off than work excessive hours, but the only way to do that is to refuse care to my patients. In any event, I was told I exceeded my FMV and needed to take a ~20% pay cut or I'd be fired (30 day notice was given to me that day). I was told I was in violation of Stark Law and over my FMV. Things I learned from the ensuing legal discussions:

1. FMV is calculated by either the hospital or a consultant hired by the hospital. Thus, it is incredibly bias toward paying you less. You can hire your own consultant for an independent calculation of FMV but I highly doubt the hospital would give it any consideration. In my case, when I was initially hired the 75th percentile was used to justify FMV compliance (ie it wasn't 90+ percentile). A few years later it was used against me as a Stark Law violation claim.

2. I was provided several examples of Stark Law violations that were egregious and claimed to confirm my violation of Stark Law. These included doctors getting cheap office space rent for referrals, paying for referrals, and surgeons producing low volumes but being paid exorbitant salaries. I was never provided a Stark Law violation case that showed a high producing physician being paid at a reasonable (75th percentile/RVU in my case) RVU rate. I don't believe such a case exists?

3. Why is there not an FMV for administrators?

4. Hiring legal counsel was very beneficial and I was able to reduce the pay cut and negotiate a few other factors in my favor, but ultimately you are at their mercy. Unless you are in a difficult to recruit area they may just say take it or leave it. They absolutely owe you your current "true up", and I'd either look for a new job (if they refuse to negotiate) or adjust your lifestyle to take advantage of the limits they are imposing.

Best of luck.

I and colleagues I have known went through something similar. It seems to happen at any rural hospital where they are forced to pay doctors higher than MGMA median to recruit. These rural hospitals are caught between a rock and a hard place because they need to recruit and high pay needed to do that, but they want to limit it as much as possible, and the FMV scheme is their solution.

You situation is especially ridiculous given that you were producing >90%-tile wRVU but were getting paid at the 75th-tile level. They literally admitted they were paying you less than production level. The claim that you are "in violation of Stark Law" is equally ridiculous. It is a process to prove Stark Law violation in court and that starts with filing suit. As you note, the cases where judgements have been brought against physicians and hospital systems with regards to physician salaries being above fair market value always have other factors involved (usually kickbacks or other arrangements justifying extremely exorbitant pay well into the 7 figures) and NEVER to my knowledge were simply "this guy worked a lot and made us a lot of money so we had to pay him a lot in kind"

A colleague of mine went through the trouble of getting his own FMV consultant. He wasted his money. The hospital ignored him. The whole thing is totally arbitrary and made up. Don't grant them the premise. From my standpoint, I don't care what the reason they won't pay me X is. All I care is that they won't. If you engage them in debate about FMV and absurdities about breaking the law, they've won. Of course, if they actually want you to do something that's illegal to generate your salary beyond your fee for service, that's a different story. If you're a specialist, you can always tell them that you will contract independently and do your own billing. They will say no, of course, but it's funny to watch them squirm when you use the phrase "I can just do my own billing and collections" when they bring up concerns over FMV.

Private practice, although you work more for less, is much better in this regard as the sky is the limit.

[Nash22]

Similar to the above. I found FMV as a tool manipulated by admin in negotiations with really unclear support behind it .

I was in the 90th percentile pay AND production and they were giving me a hard time saying they couldn’t support FMV (even though this was 90% production in a rural area) during contract renewal. They didn’t threaten to take money away but wouldn’t resign the same terns once they realized my production was high.

nothing I found online seemed to support it.

bottom line they didn’t want outlier salaries. I was told I could either have high production and lower per rvu or the opposite. I chose the opposite and now about 30% production and 60-70th pay (capped with no ability to make more)

Hospitals get weird about highly compensated physicians, even if they are earning the high compensation through very high production. I don't fully understand it, but I think at least some of it has to do with pettiness/jealousy from the part of upper level admin. The CEO is not going to be happy if he is making 800k but is having to pay you 1M because you busted your butt and produced at the 95%-tile. I have definitely seen this before. Some hospital contracts will put a firm income cap on you that says no matter how much work you do, you cannot be paid more than $792,438 (or whatever the 90th percentile MGMA level is for your specialty), and they whittle away at how much you get paid per RVU as you approach this limit. So effectively, you are working more for less, and beyond a point you are working for free. This is opposite of the way that it should be, and we should all reject these offers outright.

Bizarrely, I have seen these hospitals be totally fine about paying a low volume physician very high for what they produce. For instance, if a department produces 10,000 wRVU per year, they would have no problem paying 2 physicians $400,000 each ($80/wRVU) or maybe even slightly more and spend most of their time hanging out in the lounge but would absolutely refuse to let one physician be busy and operate solo for $800,000/year ($80/wRVU) because that number just looks too bad.

Working for hospitals sucks. Physician services generate a lot of revenue in our country and it's no secret. The eventual goal of the hospital is to obfuscate this by employing us with set hours and fixed pay. The RVU system is a stepping stone to get us off of the fee for service expectation. In private practice you collect the whole fee. Now we get paid a portion of the fee for the service (which is usually kept in secret from the physician) at the administration's discretion. Eventually we will just get a fixed paycheck no matter how much work we do.

Hiring a consulting firm does apparently help if the hospital system is audited and accused of stark law violation. I don’t really understand it a lot, but it is a complicated topic apparently and it is all based on your pay, rvu production, and what it is compared to regional and national norms for your specialty

This may be true, but it is not the primary reason why they do it. It is a tool to reduce physician salary expense, what admin views as their biggest "cost center" on their budget even though they just ignore the fact that the physician services they bill for is what generates the revenue, and that admin salaries are not being supported by services they bill for.

[Tim]

The contract clearly states FMV.
The contract clearly indicates Comp is earned on wRVU's.
In context, FMV refers to comp as a unit of measure and many qualifiers in determining the total earned.
Pay the earned compensation at the FMV rates, total is not a limiting factor.

[Sundance]

Similar to the above. I found FMV as a tool manipulated by admin in negotiations with really unclear support behind it .

I was in the 90th percentile pay AND production and they were giving me a hard time saying they couldn’t support FMV (even though this was 90% production in a rural area) during contract renewal. They didn’t threaten to take money away but wouldn’t resign the same terns once they realized my production was high.

nothing I found online seemed to support it.

bottom line they didn’t want outlier salaries. I was told I could either have high production and lower per rvu or the opposite. I chose the opposite and now about 30% production and 60-70th pay (capped with no ability to make more)

[shady]

I had recent issues with this exact problem and had to hire an attorney.

I was under a 5 year contract and my RVU reimbursement was the 75th percentile per RVU. Due to working in an underserved area, in regards to my specialty, I produce >90th percentile RVUs. Trust me, this isn't by choice as I'd much rather have more time off than work excessive hours, but the only way to do that is to refuse care to my patients. In any event, I was told I exceeded my FMV and needed to take a ~20% pay cut or I'd be fired (30 day notice was given to me that day). I was told I was in violation of Stark Law and over my FMV. Things I learned from the ensuing legal discussions:

1. FMV is calculated by either the hospital or a consultant hired by the hospital. Thus, it is incredibly bias toward paying you less. You can hire your own consultant for an independent calculation of FMV but I highly doubt the hospital would give it any consideration. In my case, when I was initially hired the 75th percentile was used to justify FMV compliance (ie it wasn't 90+ percentile). A few years later it was used against me as a Stark Law violation claim.

2. I was provided several examples of Stark Law violations that were egregious and claimed to confirm my violation of Stark Law. These included doctors getting cheap office space rent for referrals, paying for referrals, and surgeons producing low volumes but being paid exorbitant salaries. I was never provided a Stark Law violation case that showed a high producing physician being paid at a reasonable (75th percentile/RVU in my case) RVU rate. I don't believe such a case exists?

3. Why is there not an FMV for administrators?

4. Hiring legal counsel was very beneficial and I was able to reduce the pay cut and negotiate a few other factors in my favor, but ultimately you are at their mercy. Unless you are in a difficult to recruit area they may just say take it or leave it. They absolutely owe you your current "true up", and I'd either look for a new job (if they refuse to negotiate) or adjust your lifestyle to take advantage of the limits they are imposing.

Best of luck.

[AR]

More stupidity in medicine. Administrators can make as much as they want, there’s no cap, but we’re limited to “fair market value”, no matter how much more we work.

Are admins really not capped. Assuming that it's a non-profit org, I thought there was some rule that they had to be paid something like fair market also. However, for an admin, that range is a lot more amorphous.

I definitely could be wrong. Can anyone confirm?

[pulmdoc]

To OP: time to hire an attorney and send your resume. Refusing to pay you for work already done is a breach of contract.

The bigger picture (why this exists) is that Stark demands it, to a point. Hospitals can directly employ physicians, but have to pay fair market value for services, ie can't pay a surgeon $5k/day for call to induce them to do all their surgeries at the hospital. However, this does NOT mean that highly productive employed physicians cannot be highly compensated, just that there has to be a clear paper trail about why the compensation paid is fair for the amount of work done. Any sort of $/WRVU payment system is inherently either FMV or not, regardless of how many WRVU are produced. Withholding money earned "because you made too much" is wage theft, pure and simple.

The "90% rule" comes from CMS audits of the highest paid physicians. The compliance position is that if you are not at the very top of the compensation heap, then they won't get audited and have to produce a bunch of paperwork justifying your income. Again, this doesn't mean that you can't be 90%+ percentile for income, just that if an audit comes, a 95th percentile income with a 30th percentile productivity would be under a lot more scrutiny than 95th percentile income with 95th percentile productivity.

[Golfing Doc]

Hiring a consulting firm does apparently help if the hospital system is audited and accused of stark law violation. I don’t really understand it a lot, but it is a complicated topic apparently and it is all based on your pay, rvu production, and what it is compared to regional and national norms for your specialty

[childay]

So if you work too much, you get flagged and sent to the consultant?

That is insane. They expect you to stop working at some point or just work for free?

If the average income for a radiologist is $500k and the average hours worked is 40 hours, and you bust your butt and work 80 hours and generate enough RVUs to get paid $1M, there is no law that says you are over "fair market value" and the hospital has to cap your pay at $700k or something.

There is no law that says the hospital has to use a consultant. It's a racket to shift blame off admin. They hire these consultants not so much to legally protect themselves from Stark law violations, but moreso to lower physician salary expense.

Agree. Not a Stark law expert but seems admin uses this some places as an excuse even when there is no reasonable concern for violations. Especially ridiculous for hospitalists or other hospital based docs.

[Nash22]

I am an employed physician and our rvu’s routinely get flagged for being over fmv and get audited by a consultant. If the consultant says we haven’t violated fmv, then we get paid for our rvu’s. If we don’t get ok’d by the consulting firm, then we don’t get paid.

So if you work too much, you get flagged and sent to the consultant?

That is insane. They expect you to stop working at some point or just work for free?

If the average income for a radiologist is $500k and the average hours worked is 40 hours, and you bust your butt and work 80 hours and generate enough RVUs to get paid $1M, there is no law that says you are over "fair market value" and the hospital has to cap your pay at $700k or something.

There is no law that says the hospital has to use a consultant. It's a racket to shift blame off admin. They hire these consultants not so much to legally protect themselves from Stark law violations, but moreso to lower physician salary expense.

[Nash22]

"fair market value" is a scheme cooked up by administrators to dupe young and/or financially ignorant physicians.

If they are paying you less than what they are actually collecting for your services, then you are not being paid in excess of fair market value. There is no legal/Stark law problem. None. Zero.

This is how these complicated employed compensation arrangements almost always play out. They lure you in with promises of bonus payments but use all these tricks to avoid paying you beyond the bare minimum of what they contractually have to. Physicians should do everything possible to reject such sort of arrangements, especially ones that give the hospital leeway in determining when and how to credit you for RVUs and to adjust compensation.

If you must accept an employed arrangement, keep it as simple as possible and with a penalty for the employer breaking the agreement (a 5 year contract with a 90-day out option by the employer is not a 5 year contract, it's a 90 day contract). Either a high flat salary and/or a very clear $/RVU arrangement with total transparency as to when and how the RVUs are credited and paid out.

[HikingDO]

More stupidity in medicine. Administrators can make as much as they want, there’s no cap, but we’re limited to “fair market value”, no matter how much more we work.

[Golfing Doc]

I am an employed physician and our rvu’s routinely get flagged for being over fmv and get audited by a consultant. If the consultant says we haven’t violated fmv, then we get paid for our rvu’s. If we don’t get ok’d by the consulting firm, then we don’t get paid.