The following is a column from Vachette CEO Mick Raich:
Many of the nation’s pathology groups receive a payment for being the Medical Director of their hospital laboratory. This payment covers the time, effort and liability for running the hospital lab, among other items.
However, the recent COVID situation has caused a few issues to arise.
First, many hospitals are struggling as some will miss loan payments and are looking to restructure loans. This creates a huge problem with hospitals staying viable during this crisis. Contrary to many reports, most hospitals in the US are running below capacity. They are not, nor were ever, overwhelmed with patients. Yes, there were some isolated incidents, but most were running at less than 50 percent capacity. This loss of inpatient and outpatient revenue will lead to an interesting fall.
From the perspective of the laboratory Medical Directorship role, the COVID crisis has led to a large increase in man hours required to run a lab. Building a COVID testing line and working on the logistics and process of ramping up increases the overall number of hours necessary to manage the laboratory.
If you look at Medical Director compensation, many pathology groups who cover these laboratories are paid a fixed rate per hour for a certain number of hours per month. For example, a group may get paid $185 per hour and have 100 hours per month, equaling a monthly cost to the health system of $18,500 monthly. The question which must be addressed in these fixed hour contracts is this: what happens when the group’s time exceeds the allotted 100 hours per month?
Consider this: if a group works 200 hours in a month due to COVID testing, how is the group compensated for these extra hours? Does this valuable work go unpaid? What are the legal ramifications of having a Medical Director provide twice the amount of work and not receive any extra compensation? One could argue this is inurement. You are actually providing services to Medicare patients without compensation. This would likely lead to issues in the future.
Some pathology groups may face this dilemma when they review their hours and contract. In fact, we know of some pathology groups whose hospital has lowered their hourly compensation. Remember, the hospitals are struggling.
I wonder how long it will take the Office of Inspector General (OIG) to review these cases and make a ruling? These are interesting times and pathology groups are often walking a fine line with hospital administration whereas they wish to get paid fairly, but must be aware of market pressures. The administration is walking a fine line also, trying to maintain cash flow while not overpaying for services.
In summary, we cannot ignore this problem as it is only a matter of time before the OIG brings this issue up and starts fining hospitals for this unfair labor practice.
Vachette specializes in negotiating Medical Director and Part A agreements for both pathology groups, hospitals and health systems. We have negotiated over 300 contracts in the past 15 years. Contact us at 517-486-4262 if you would like to discuss your contract.