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Administrative Duties

Taking on the business side of a practice can net you
invaluable experience, but preparation for the role is key.

By bruce armon

Unique Opportunities, July/August 2008

Time is money. And lost time means less money. First and foremost, physicians and physician practices need to be excellent clinicians. However, top-notch clinical skills do not necessarily translate to increased revenue or better financial performance.

Unless your practice is a cash-and-carry or concierge type practice that can effectively market the reputation of its physicians and charge patients accordingly, your revenue stream will be dictated largely by your negotiations (or lack thereof) with your third party payors. Increasingly, physicians’ revenues are not keeping pace with practice expenses or with the rate of inflation.

There are only so many realistic patient hours in a day. There are constraints on staffing that preclude most practices from having daily weeknight hours or regular weekend hours. An entrepreneurial physician who has tireless energy or would like to expand his or her revenue base may seek additional administrative responsibilities or commitments to supplement a salary.

Before accepting any administrative position (regardless of whether it is a paying job), there are several important considerations a physician must think about:

Am I taking on an administrative role for my practice?

Many employment contracts include seemingly innocuous language that provides something to the effect of, “Employer may assign administrative tasks and duties to Employee.”

As the employee, a physician should understand exactly what these tasks might entail. It is very important for employees—particularly those on the shareholder or tenure track—to be viewed as team players. Being a valued member of the team often means taking on additional responsibilities and challenges that are not directly related to clinical duties.

Find out how much time these duties will require, when they are expected to be performed, and whether the physician’s performance will impact his or her promotional and/or bonus compensation. To the extent these items can be qualified or quantified, incorporate provisions into the employment contract.

As a practical matter, taking on administrative duties for an employer can be an invaluable means to understand how the practice or department is run and managed. Having a fundamental knowledge and appreciation for the business of medicine is almost as important as mastering clinical skills.

If the employment contract includes a productivity requirement (e.g., annual work RVUs) or the possibility of earning a bonus (e.g., based upon collections from services you personally perform), it is important and appropriate that the employer not “punish” the physician-employee from a compensation standpoint based upon nonrevenue producing administrative chores. For instance, if a bonus potential is based upon an average 40-hour clinical week, and the physician-employee spends five of those hours on clinical duties, it will be very difficult for the physician to achieve the preferred productivity goals when 13 percent of the work time (5 of 40 hours) is spent on administrative tasks.

Ideally, a physician should ask to receive some additional salary or bonus based upon the important nature of the administrative endeavors he or she has been asked and agreed to fulfill.

Is a third party asking a physician to take on a nonclinical role?

While a more junior physician is likely going to be asked to take on administrative tasks for his or her employer, as a physician becomes more senior and seasoned, he or she is likely to get opportunities to provide services for a third party. The physician may be asked to serve as a practice consultant, to act in an advisory capacity, serve as a program or department chair, or act as a medical director for a third party.

Any of these opportunities will broaden a physician’s community exposure, sharpen his business skills, and potentially provide an additional revenue stream.

The first thing a physician needs to do before accepting this responsibility is to review his or her employment contract (of course, it is important to make sure that the physician actually has a written and executed employment contract). This is true whether the physician is an employee or the actual employer (e.g., a shareholder in a medical practice should still have an employment contract with the entity that is the actual employer).

Does the employment contract permit the physician to do an “outside” activity? Is an outside activity defined clearly? Is the administrative activity deemed in some way to be competing with the physician’s primary employer? Does the physician need to get prior permission (written or otherwise) from the employer? Can the permission be revoked at any time for any reason by the employer? Does the physician need to secure separate directors and officers or errors and omissions insurance coverage before undertaking any of these administrative duties?

Is the physician going to get paid for this outside activity? If so, what does the employment contract say (or not say)? Imagine if there is language in the physician’s employment contract that states, “Any remuneration earned by Employee during the term of this Agreement shall be the property of Employer.” This language, as written, does not draw any distinction between clinical or nonclinical activities or activities performed for the Employer or on the Employee’s time when he or she is not previously scheduled to provide services—clinical or administrative—for the Employer.

The Federal anti-kickback statute safe harbor

Health care is heavily regulated at the federal and state level. As a physician entrepreneur who is looking to take on different roles for parties other than his or her primary employer, the physician must be aware of the ramifications of the Federal anti-kickback statute (AKS). The basic prohibition under the AKS is the knowing and willful solicitation or receipt of any remuneration in return for referring persons or arranging for acquisition of goods or services.

The AKS statute and case law define remuneration broadly. Because the AKS prohibition can impact so many different business arrangements, the Federal Government has created so-called “safe harbors” that specify payment practices that would not be treated as a criminal offense under the AKS statute.

A physician who is in a position to receive remuneration from a third party for providing services should be sure to structure the contractual arrangement in accordance with the personal services and management contracts safe harbor.

The key elements of the personal services and management contracts safe harbor include:

• a written agreement signed by the physician and the third party;

• the written agreement specifies the services the physician will provide;

• if the arrangement is not full-time, the agreement specifies the schedule of anticipated administrative tasks and the charge for such intervals;

• the agreement’s length is for not less than one year;

• the aggregate compensation paid to the physician over the term of the agreement is set in advance, consistent with fair market value in an arms-length transaction, and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare, Medicaid or other federal health care programs;

• the agreement does not otherwise violate any state or federal law; and,

• the aggregate services contracted for do not exceed those which are reasonably necessary to accomplish the commercially reasonable business purpose of the services.

One of the key questions and subject of negotiation between the physician and the prospective contracting party is how much should the physician be paid for services rendered. There are, not surprisingly, different opinions and no clear direction.

It is very important to be as specific as possible regarding the services the physician is providing and a realistic expectation of how long those services will take to perform. For instance, if a physician is going to make more money from his or her administrative duties than from clinical services provided during the same period of time, the physician must be aware of the referral relationship (if any) between the physician and the contracting party. The administrative relationship cannot be a subterfuge for compensating a physician for a stream of referrals in his or her clinical capacity.

Consultants can often play an important role in structuring fair market value for administrative contributions. Various physician salary survey organizations may also provide benchmark data that is helpful in calculating a fair and appropriate value for administrative efforts.

A physician should gather as much information to ascertain the economic value of the administrative services the physician is being asked to provide. The physician must ensure that there is a contract in place that protects the physician’s interests and does not jeopardize in any manner the physician’s primary employment situation. To do any less would be a waste of the physician’s time and not worth the money the physician might receive. END

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Bruce D. Armon (barmon@saul.com) is a partner in the health care group at Saul Ewing LLP. He is a frequent speaker to physician audiences on many corporate, regulatory and compliance topics.