On September 27, 2007, the Office of the Inspector General of the Department of Health and Human Services posted OIG Advisory Opinion No. 07-10 which approves a tax exempt hospital proposal for compensating physicians for on call coverage. While acknowledging that on call compensation potentially creates considerable risk that physicians may demand compensation as a condition of practicing and referring patients to a hospital, the OIG nevertheless concluded that, even though the personal service safe harbor may not apply because the compensation is not set in advance in accordance with those requirements, the arrangement nevertheless "presented a low risk of fraud and abuse". 

The hospital designed a call coverage program requiring basic physician obligations as part of a two (2) year service contract available to all physicians on the medical staff. The basic obligations and the arrangement include the following:

  1. Participation in a monthly call rotation established on a monthly basis by the appropriate department or division chief or chair.
  1. Continuing in-patient care and consultation obligations for patients seen in the emergency department and then later admitted to the hospital. 
  1. Timely response requirements for emergency calls. 
  1. Cooperation with risk management and quality assurance initiatives within the hospital.
  1. Appropriate medical record completion. 

The hospital established per diem compensation rates for each day dedicated to on call coverage excluding the 1 ½ days that each physician was required to contribute monthly as a medical staff obligation, which per diem rates differed among specialties based on the following factors: 

  1. Severity of illness typically encountered by that specialty in treating a patient presenting the Emergency Department;
  1. Likelihood of having to respond when on call at the Emergency Department;
  1. Likelihood of having to respond to a request for inpatient consultative services for an uninsured patient when on call;
  1. Degree of inpatient care typically required of the specialty for patients that initially present to the Emergency Department.

The OIG noted in its opinion that the hospital had certified its belief that the compensation was legitimate or fair market value compensation and that a third party consultant had concluded that the compensation was within the fair market value range for services to be provided, although the OIG specifically caveated that it offered no opinion as to the legitimacy of the fair market valuation. You can access the text of the opinion at the link below to the OIG resource reading room.