Free CPRP Physician Compensation and Contracts Questions and Answers — Questions and Answers
Question 1: Which of the following physician compensation models is most directly scrutinized under the Stark Law for potential non-compliance due to its inherent structure?
- A model that rewards physicians for achieving specific quality metrics and patient satisfaction scores.
- A model where compensation is based directly on the volume or value of referrals for designated health services (DHS). (Correct answer)
- A model based purely on a fixed annual salary that is consistent with fair market value.
- A model that compensates physicians based on their personal productivity (e.g., wRVUs) for services they personally perform.
Correct answer: A model where compensation is based directly on the volume or value of referrals for designated health services (DHS).
The Stark Law is a strict liability statute prohibiting physicians from referring Medicare or Medicaid patients for designated health services (DHS) to an entity with which they have a financial relationship, unless an exception applies. A compensation model tied directly to the volume or value of referrals for DHS is the classic example of a prohibited financial relationship under Stark. While other models must be structured carefully, this one most directly implicates the core prohibition of the law.
Question 2: A rural hospital is recruiting a highly experienced orthopedic surgeon to a competitive market. The proposed compensation package is at the 90th percentile of national survey data. To defend this compensation level as Fair Market Value (FMV) and commercially reasonable, what is the most critical documentation the hospital must secure?
- A copy of the compensation packages offered to all other surgeons in the same department.
- A signed attestation from the physician candidate stating they believe the compensation is fair.
- A verbal agreement from the hospital CEO confirming the offer is necessary for recruitment.
- An independent, third-party FMV opinion that analyzes the candidate's specific experience, subspecialty, and the unique needs and realities of the local market. (Correct answer)
Correct answer: An independent, third-party FMV opinion that analyzes the candidate's specific experience, subspecialty, and the unique needs and realities of the local market.
Regulatory bodies require that physician compensation be at Fair Market Value (FMV) and commercially reasonable. For a compensation package at a high percentile, it is crucial to have an independent, third-party valuation. This provides an objective, defensible analysis that considers factors beyond just national survey data, such as the specific candidate's qualifications, the strategic need of the hospital, and local market conditions, which is essential for regulatory compliance.
Question 3: In a physician employment agreement, what is the primary purpose of a restrictive covenant, also known as a non-compete clause?
- To protect the employer's legitimate business interests, such as its patient base and referral sources, for a reasonable time and within a specific geographic area after the physician leaves. (Correct answer)
- To penalize the physician with a large financial penalty if they resign before the initial contract term ends.
- To prevent the physician from ever practicing medicine again in the same state after leaving the employer.
- To guarantee the physician a lifetime of employment with the healthcare organization.
Correct answer: To protect the employer's legitimate business interests, such as its patient base and referral sources, for a reasonable time and within a specific geographic area after the physician leaves.
A restrictive covenant is designed to protect the employer's investment in building a practice by preventing a departing physician from immediately setting up a competing practice nearby and soliciting former patients and staff. To be legally enforceable, these clauses must be reasonable in their time duration, geographic scope, and the activities they restrict. They are not meant to be punitive or to prevent a physician from practicing altogether.
Question 4: A primary care physician's contract includes a compensation model with a base salary for meeting a 4,500 wRVU threshold and a conversion factor of $55.00 for all subsequent wRVUs. If the physician generates 5,200 wRVUs in a year, how is their productivity incentive bonus calculated?
- The total 5,200 wRVUs are multiplied by the $55.00 conversion factor.
- The base salary is subtracted from the total value of wRVUs generated.
- The 700 wRVUs generated above the threshold are multiplied by the $55.00 conversion factor. (Correct answer)
- A fixed, predetermined bonus amount is paid for exceeding the 4,500 wRVU threshold.
Correct answer: The 700 wRVUs generated above the threshold are multiplied by the $55.00 conversion factor.
In a typical wRVU-based productivity model, the incentive is based on work performed *beyond* a set threshold. The calculation takes the number of wRVUs generated in excess of the threshold (5,200 - 4,500 = 700) and multiplies that number by the agreed-upon conversion factor to determine the bonus amount (700 x $55.00 = $38,500).
Question 5: Which of the following best describes the function of 'tail coverage' in a claims-made medical malpractice insurance policy?
- It provides additional coverage for claims that exceed the primary policy's liability limits during employment.
- It is an extended reporting endorsement that covers claims made *after* the policy is terminated for incidents that occurred *during* the policy period. (Correct answer)
- It is a type of insurance that covers the physician for administrative or legal costs related to medical license defense.
- It covers the employer for any claims filed against them due to the actions of a physician employee.
Correct answer: It is an extended reporting endorsement that covers claims made *after* the policy is terminated for incidents that occurred *during* the policy period.
A standard claims-made malpractice policy only covers claims that are made and reported while the policy is active. If a physician leaves an employer, their coverage ends. 'Tail coverage' is a separate endorsement that must be purchased to cover any claims that are filed *after* the physician's departure for incidents that took place while they were employed and covered by the original policy. Negotiation of who pays for tail coverage is a critical part of the contract process.
Question 6: A health system is offering a contract to a new physician completing her residency. The offer includes a two-year guaranteed income. What is the most likely reason for structuring the initial compensation this way?
- To permanently lock in the physician's salary for their entire tenure, regardless of future productivity.
- To comply with federal regulations that mandate all new physicians receive a guaranteed salary for at least one year.
- To eliminate the need for the physician to carry malpractice insurance during the initial guarantee period.
- To provide the new physician with a stable and predictable income while they build their patient panel, after which they will typically transition to a productivity-based model. (Correct answer)
Correct answer: To provide the new physician with a stable and predictable income while they build their patient panel, after which they will typically transition to a productivity-based model.
An income guarantee is a common and essential recruitment incentive for physicians starting a new practice who do not have an established patient base. It provides financial security for a defined period (e.g., 1-3 years), allowing the physician to focus on patient care and practice-building. At the end of the guarantee period, the compensation structure almost always converts to a model based on productivity, such as wRVUs, to align long-term compensation with performance.
Free CPRP Physician Compensation and Contracts Questions and Answers
Which of the following physician compensation models is most directly scrutinized under the Stark Law for potential non-compliance due to its inherent structure?