The Hospital PSA: Eight Points to Get Right
Congratulations, you made it through 2020! And as we move into 2021, we imagine that many of you may find yourselves in a similar position — searching through your archived emails for the last draft of that (yet to be completed) hospital-based Professional Services Agreement (PSA).
You may have put it on the back burner in 2020 while you and your practice applied for a Paycheck Protection Program loan, navigated the ever-evolving Provider Relief Fund guidance from the U.S. Department of Health and Human Services, and/or dealt with increased expenses and lost revenue attributable to COVID-19.
What a year.
As you re-engage with your hospital-based PSA, keep in mind that these agreements tend to be one-sided vehicles, meant to vest control of the arrangement in the hospital while providing it maximum flexibility to (among other things) adjust your compensation, terminate your partnership, and utilize other providers if the hospital believes it is necessary. Concepts and provisions advantageous to providers and provider groups are often overlooked, undocumented, or intentionally omitted in the initial draft. And when you, as a provider, are floated that first iteration of this pivotal agreement, you may receive instructions from a hospital administrator that “this is our standard form that everyone signs,” or, “we have limited room to negotiate, as we need consistency across all our departments.” In our experience, these arguments are pretenses, as most hospitals and health systems are willing to engage in negotiations to some extent.
Whether you are now in the midst of your first major PSA negotiation, considering an amendment to your existing relationship to address a new service line, or being pressured by your health system partner to enter into a new arrangement altogether, we encourage you to consider the following eight issues as you move through the process.
1. Provider Status
It is obviously important to confirm your status as your hospital-partner’s exclusive provider of radiology services (however that term might be defined in your PSA) and to protect this exclusivity at all of the hospital’s existing service sites, campuses, imaging centers, and other locations and health care facilities. However, depending on your negotiating leverage and the growth mentality of the hospital, consider also whether it is appropriate to solidify your exclusivity at any such locations that may be owned, operated by, or brought under common control with the hospital at some point in the future.
Providers who perceive themselves as having longstanding relationships with their hospital-partners may find themselves missing out on sharing in the potential growth opportunities if they have not made sure that newly developed modalities, expanded coverage areas, or additional hospital locations will be subject to their existing PSA with the hospital.
Related to the provider status, while preserving your status as the exclusive provider of services to your hospital partner, it is important to provide yourself maximum flexibility in the delivery of these services. A provider group that has not explicitly clarified its right to utilize a teleradiology service, locum tenens providers, or other subcontractor arrangements to provide night and weekend coverage may find itself in disputes with its hospital-partner over the appropriateness of such subcontracting or whether such a subcontractor may be used as either a short-term solution to address coverage gaps or as a long-term vendor to address 24-hour coverage requirements.
3. Managed Care
In all likelihood, your PSA will include provisions acknowledging that your hospital partner participates in certain programs, networks, and health plans with third-party payors. Depending on the aggressiveness of your hospital-partner, you may either be encouraged to negotiate the terms of your potential participation in such plans in good faith, or you may actually be contractually obligated by the hospital to participate in these plans.
In either case, the hospital will often insist that it negotiate your reimbursement rates in such plans on your behalf. These sorts of managed care PSA provisions present unique challenges, as you may find yourself having agreed to not only accept reimbursement from payors at rates that you do not prefer, but you may also have unintentionally granted your hospital-partner the ability to reveal your fee schedules to these payors without your consent.
The fallout may be that you are contractually obligated through your PSA to accept reimbursements below competitive market rates, which have been set by your hospital-partner and its payors through negotiations which disclosed your confidential information without your involvement or consent. It is therefore imperative that your PSA provide you flexibility to decline to participate in programs, networks, or plans that do not provide you commercially reasonable reimbursement rates, which are competitive in your market. This is often a heavily negotiated PSA provision — one that we encourage you to review carefully with counsel.
Hospitals and health systems frequently provide themselves numerous “for cause” termination rights that are both broad in scope and yet vague in terms of specific triggers. These termination rights are often written in such a way that allows them to be tripped by a breach caused by any individual provider within your group. Practically, this can leave you in a position of potentially having breached your PSA — jeopardizing the viability of your entire arrangement with the hospital — based upon a single provider’s conduct, including failure to comply with unspecified (and unwritten) hospital policies, tripping over “foot-fault” type compliance, qualification, licensure, or other behavioral requirements, all of which provide no notice and cure rights or due process procedures to challenge the hospital’s determination of whether cause in fact existed. Therefore, before finalizing your PSA, ensure that the termination provisions are fair and balanced — for both parties. The objective is to prevent the hospital from being able to terminate its alignment with you “for cause” as a pretense for convenience.
Regardless of the compensation in your PSA — whether a pure direct billing arrangement or some combination of direct billing, stipends, incentive performance metrics, or other administrative functions — it is crucial that the hospital provide you reasonable access to its systems and respond to your requests for clinical, billing, and other information or data. It is also important that this information and data be provided in a format or industry equivalent that is acceptable to your system (or the system of your billing agent). We have seen issues arise when hospitals change systems and thereafter provide information and data in formats that are no longer readable to the providers. Without PSA provisions to address costs in such instances, providers can find themselves incurring significant (and unforeseen) outlays to crosswalk the data from one system to the other.
6. Restrictive Covenants
Restrictive covenants within PSAs can often reflect the respective bargaining power of the parties, as well as their position with a given community or market. In our experience, we have seen PSAs with restrictive covenants that broadly restrict the provider group’s ability to render services to anyone other than its hospital-partner within a defined geographic area. We recommend that you verify with counsel that any restrictions that you agree to are tailored specifically to comply with the laws of your particular jurisdiction.
And while the appropriateness of restrictive covenants within the context of hospital-based PSAs merits its own separate discussion, there is one mechanical issue that can rear its head in PSAs, which we want to highlight here. That is, consider whether individual providers within your group will be required to execute any physician acknowledgment or some other similar exhibit or schedule to the PSA, which might individually subject them to any restrictive covenants.
While such individual acknowledgments are common enough, particular care should be taken to ensure that your individual providers are not unwittingly committing themselves to restrictive covenants that are inconsistent with or more expansive than the restrictive covenants contained within the PSA itself. An individual provider who was comfortable agreeing not to compete against your hospital-provider while engaged by your group, might have a rude awakening when a cease and desist letter is received from the hospital, detailing additional restrictions on the provider’s ability to practice, which the provider was previously unaware of.
7. Turnaround Times
This one gets “into the weeds” a bit, but turnaround times (TATs) can be heavily (and contentiously) negotiated, or they may be a non-issue. We suggest reviewing the TAT definitions in your PSA to ensure that you properly understand how quickly you are expected to return various imaging reports. In this sense, give particular consideration to when the hospital considers your “clock to start ticking” for purposes of calculating any specific TAT. At times, a provider may have received an image from the hospital but not the patient’s clinical history, medical file, other studies, or supporting information needed to turnaround a completed imaging report. Without clear language as to exactly when a TAT clock will begin to run, a provider group may find itself consistently failing to hit unrealistic TAT targets.
Last, although certainly not least important in any PSA arrangement, we strongly encourage you to work with your legal counsel to ensure the arrangement complies with all local, state, and federal laws. Without diving too far down the compliance rabbit hole, it is worth noting that your PSA will be required to comply, at a minimum, with the federal Anti-Kickback Statute and, depending on the nature of relationship with the hospital, Stark Law.
We understand that negotiating a hospital-based PSA can cause headaches and heartburn for providers. The process is lengthy, nuanced, and tedious. We encourage you to involve your legal counsel early and to give the agreement the time and attention necessary to ensure that your group is positioned for success for years to come.
View the article in the Chambliss Connection: Radiology Spring 2021 digital edition on pages 20 -25.
The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings, and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. In some cases, the underlying legal information is changing quickly in light of the COVID-19 pandemic. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship. Please contact your legal counsel for advice regarding specific situations.