Doctors, hospitals increasingly enter co-management arrangements

More hospital administrations are entering into co-management agreements that pay physicians to run a specific department to improve its performance, according to Report on Medicare Compliance.

Under the arrangement, physicians and the hospital establish and jointly own a limited liability company, which the hospital may contract with to manage a specific service line. The hospital pays the LLC a management fee, which is split between the parties. The physicians in the co-management arrangement typically receive pay for general compensation and performance incentives.

"Co-management agreements are a hot venture," Bill Maruca, an attorney with Fox Rothschild in Pittsburgh, tells the Report on Medicare Compliance. "Physicians are happy with co-management agreements because they don't have to sell their souls and become employees. They can remain independent but get their expertise reimbursed."

Fairfield Medical Center in Lancaster, Ohio, has used a co-management arrangement to reduce its congestive heart failure readmission rates. It is currently at 21 percent, and the co-managing physicians will receive full incentive payments once it drops to 15 percent.

However, hospitals must fit such arrangements into exceptions to the Stark law, typically under the personal services or fair-market value exceptions.

For more:
- read the Report on Medicare Compliance article (.pdf)
- read the Becker's ASC Review article