Healthcare Matters

   A Complimentary Newsletter From:

Barmak and Associates, LLC  

Managing Liability for Long Term Care and Health Care Providers

Volume 16, Issue 9                  ADVERTISEMENT                     September 2015

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In This Issue
October 1st Begins Voluntary Participation in the CMS Payroll-Based Journal System (PBJ): Medical Directors Beware!
Calculating Fair Market Value in a Skilled Nursing Facility's Medical Director Contract
David Barmak, Esq.
Gerald V. Burke, M.D., Esq. 
Jo Ann Halberstadter, Esq.
Jo Ann Halberstadter, Esq.

Click on Attorney's Picture for more Information 




October 1st  Begins Voluntary Participation in the CMS Payroll-Based Journal System (PBJ): Medical Directors Beware!

By: Jo Ann Halberstadter, Esq. 

Under the Affordable Care Act, all nursing homes are required to electronically submit payroll data.  In 2014, spurred on by the August 2014 New York Times article exposing the flaws in the 5-Star Rating System for nursing homes, President Obama signed an Executive Action requiring long term care facilities to submit electronic staffing data on a quarterly basis in addition to signing into law the IMPACT ACT which allocates significant funding to realize this goal.
According to CMS, the resulting system, Payroll-Based Journal System (PBJ), will allow staffing and census information to be: a) collected on a regular and more frequent basis; b) auditable to ensure accuracy; c) used to report staffing levels and staff turnover and tenure, all of which can impact on quality of care; and d) provide all long term care facilities with free access to the PBJ system.
In preparation for the July 2016 deadline for mandatory staffing reporting using the PBJ, CMS is encouraging all long term care facilities to begin voluntary reporting beginning October 1, 2015.  According to the CMS publication addressing PBJ Frequently Asked Questions (FAQs), data submitted during the voluntary submission period will not be used in the survey process or result in any enforcement actions, and will not be used in the CMS Nursing Home Five Star Quality Rating System.  See Electronic Staffing Data Submission Payroll-Based Journal (PBJ) System Data Submission FAQs.  Registration and training for PBJ began in August 2015.  Instructions on how to access can be found at: Important PBJ Action Items.
On August 25, 2015, CMS issued an updated draft of its Long Term Care Facility Policy Manual on Electronic Staffing Data Submission through Payroll-Based Journal.  See: Long-Term Care Facility Policy Manual .  The changes, which are highlighted in red in the policy, deal with the definition of "direct care staff" and updated informational reporting and submission requirements for direct care staff.
It is extremely important to take note that the updated PBJ policy requires long term care facilities to identify the number of hours that a Medical Director or Specialist Consultant/Contractor spends on site conducting the primary responsibilities of that position versus primary care activities.  The hours reported must be "auditable and able to be verified through either payroll, invoices, and/or tied back to a contract."  The updated PBJ policy specifically states that if a medical director is contracted for a certain monthly or annual fee to participate in Quality Improvement meetings and review a certain number of medical records each month, the facility should have a reasonable methodology for converting those activities into the number of hours paid to work. 

If you have any questions regarding this article, please contact Jo Ann Halberstadter, Esq. at or call (609)-454-5351.

Calculating Fair Market Value in a Skilled Nursing Facility's Medical Director Contract

By: Gerald V. Burke, M.D., Esq. 

Recent OIG fraud alerts have focused on physician compensation arrangements, with a particular emphasis on medical director contracts.  A physician and skilled nursing facility (SNF)  must carefully consider the financial terms and conditions of these contracts in order to avoid violations of the Anti-Kickback Statute.  Violations are punishable by  fine per violation of up to $25,000 and possible  imprisonment for up to five years.  Safe harbors do exist to protect involved parties  but must be carefully adhered to.  Safe  harbor status revolves around the payment of "fair market value" for physician services.

"Fair market value" is defined as "the value in arm's length transactions, consistent with the general market value." (42 C.F.R. SS 411.351) "General market value" means "the compensation that would be included in a service contract as a result of bona fide bargaining between well-informed parties to a contract  who are not otherwise in a position to generate business for the other party" at the time of the contract. (42 C.F.R. SS 411.351).

Fair market value is calculated based on the salaries of physicians in a given geographic locale.  For this reason, each SNF must calculate its own, geographic, fair market value compensation for medical director salaries.

An hourly payment for personal services is considered to be "fair market value" if the payment is established using either of the following two methodologies: (1) the hourly rate is less than or equal to the average hourly rate for emergency room physician services in the relevant physician market, provided there are at least three (3) hospitals providing emergency room services in the market; or (2) the hourly rate is determined by averaging the "50th percentile national compensation level" (annual salaries) for physicians with the same physician specialty (or, if the specialty is not identified in the survey, for general practice) in at least four (4) of the listed market surveys and dividing that average 50th percentile national salary by two thousand (2000) hours.

Any 4 of the following 6 surveys may be used for determining the hourly rate for non-emergency room practices are:
  1. Sullivan, Cotter & Associates, Inc. - Physician Compensation and Productivity Survey;
  2. Hay Group - Physicians Compensation Survey;
  3. Hospital and Healthcare Compensation Services - Physician Salary Survey Report;
  4. Medical Group Management Association - Physician Compensation and Productivity Survey;
  5. ECS Watson Wyatt-Hospital and Healthcare Management Compensation Report; and
  6. William M. Mercer - Integrated Health Network Compensation Survey. (42 C.F.R. SS 411.351).
If the medical director is an employee, the Stark Law, (involving physician self-referral limitations), has an exception. The employer and employee must have a bona fide employment relationship and (1) the employment must be for identifiable services; (2) the amount of remuneration under the employment must be consistent with fair market value and not determined in a manner that takes into account the volume or value of referrals (this requirement does not apply to productivity bonuses based on services personally performed by the physician); and (3) the remuneration is provided under a contract  that would be commercially reasonable even if no referrals were made to the employer.

For these reasons, there is no uniform fair market value hourly rate for a medical director.  Each transaction must be guided by one of the above methods of calculation of the fair market value. Each physician and SNF must consider its individual marketplace in making its fair market value calculations.

If a medical director and a SNF choose to calculate fair market value, including non-cash benefits, in a manner different from the techniques described above, then a calculation and the logic behind them should be reviewed by a healthcare attorney to assess confirmation with the OIG guidelines and to assure that the salary of the medical director will fall into a "safe harbor" provision. 

If you have questions regarding this article, please contact Gerald V. Burke, MD.,Esq. at or by telephone at (609) 454-5351.

Barmak and Associates, LLC      


Our law firm provides integrated regulatory, transactional, employment and litigation/advocacy services to skilled nursing facilities and other healthcare providers.


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Entities:  Skilled nursing facilities; Home health agencies; Hospice agencies; Hospitals.


Providers: Physicians; Therapists; Orthotists and Prosthetists


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Litigation/Advocacy: Contracts; Employment; Fiduciary issues; Commercial leases; Payment (Managed Care Organizations; Medicare; Medicaid); Guardianship; Professional and facility licensing; Healthcare regulatory; Fraud and privacy issues.
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This newsletter has been prepared by Barmak and Associates, LLC for informational purposes only and is not intended to provide legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.


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