A growing number of hospitals around the country are paying physicians to be “on-call.” This practice has become necessary in many areas where physicians are dropping medical staff privileges or otherwise refusing to be on-call to hospital emergency rooms for high risk patients, trauma patients, and often indigent patients with no health insurance or other means of paying for services. Hospitals are concerned, however, because paying physicians to take call potentially violates federal and state laws. Under the federal anti-kickback statute it is a felony for any person who knowingly and willfully solicits or receives [or offers or pays] any remuneration in return for, or to induce referrals of individuals, items or services for which payment may be made in whole or in part under a federal health care program. Many states, for example, Florida, have very similar laws. In Florida, the patient brokering statute prohibits the same conduct and applies regardless of payor. Violation of the state law is also a felony and carries criminal penalties.

On September 20, 2007 the U.S. Department of Health & Human Services, Office of Inspector General (“OIG”) issued Advisory Opinion No. 07- 10, responding to a request for an Advisory Opinion from a tax-exempt, not-for-profit medical center that proposed a pay-for-call arrangement. The OIG found that the arrangement could potentially generate prohibited remuneration under the anti-kickback statute, but stated that it would not impose sanctions in this case.

In reviewing the proposed arrangement, the OIG acknowledged that, depending upon market conditions, it may be difficult for hospitals to maintain necessary on-call services without compensation for on-call coverage. However, the OIG is also concerned with the “considerable risk” that physicians may demand compensation as a condition of doing business at a hospital or that hospitals could misuse compensation for call to entice physicians to join or remain on staff to generate additional business for the hospital. The OIG found that problematic compensation structures might be used to disguise kickback payments (such as payment for “lost opportunities”) that do not reflect bona fide lost income, payment structures that compensate physicians when there are no identifiable services provided, payments for call that are disproportionately high compared to a physician’s regular medical practice income, or payments that compensate a physician for services for which he or she receives separate reimbursement from another source.

Nonetheless, in reviewing the arrangement before it, the OIG determined that there was indeed a legitimate need to compensate physicians for providing on-call coverage. Moreover, the medical center had in place adequate safeguards such that the OIG determined it would not impose sanctions. The medical center established that nearly one quarter of the patients visiting its emergency room had no form of health insurance; financial burdens of uncompensated care and increasing malpractice costs added to the problem by depleting the local supply of certain specialists to provide emergency call and uncompensated inpatient follow-up care; the hospital was having to transfer patients to other facilities for emergency and necessary inpatient care.

A per diem payment for on-call compensation varied depending upon the specialty and based upon the severity of illness typically encountered, the likelihood of having to respond to an ER call or to requests for inpatient consultation services when on-call, and the degree of uncompensated inpatient care typically required of the specialty for patients that initially present at the emergency room. The hospital certified, with the help of an independent third-party evaluation, that compensation is fair market value. The physician has additional obligations to provide inpatient care to any patient seen while on-call. The per diem arrangements are offered uniformly to all doctors in a specialty without regard to the physician’s referrals or other business generated by the physician. Monthly call obligations in each specialty are divided as equally as possible; paid call is not given selectively to the highest referrers. Because physicians are obligated to provide follow-up care regardless of the patients’ ability to pay, physicians are less able to “cherry pick” only the paying patients.

Considering all of the above, the OIG concluded that, while the arrangement could potentially generate prohibited remuneration under the anti-kickback statute, if the requisite intent to induce or reward referrals were present, the OIG will not impose sanctions in this case.