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Part A and Medical Directorship Contracts

April 2014

By: Mick Raich, President, Vachette Pathology

Part A and Medical Directorship contract review requires knowledge of pertinent information to be used for determining compensation for services rendered by a pathology practice and for the oversight of the laboratory and its staff. The term 'Part A' refers to the global payment received by the hospital for clinical pathology for governmental carriers. These carriers include, but are not limited to, CMS, Champus, ChampVa, TriCare, and state Medicaid programs that do not recognize the professional component of clinical pathology. The Medical Directorship is the fee the pathology group is reimbursed for providing the oversight of the laboratory and its staff and the liability incurred as Medical Director.

The contract between the hospital and the pathology group, therefore, is a very important document that is used to define expectations from each entity. It is important to review the proposed document thoroughly and define items that are potential hazards to a group's revenue stream.

The steps listed below are potential roadblocks and should be examined closely. This is not a legal review of the document but an experienced review of items that are seen most often in hospital contracts and that can be potentially damaging.

1. Read through the document in its entirety and note any items that do not meet your approval. 2. Go back over the document and begin going through section by section to define the issues.

3. Contracts are set up in sections with definitions of each party's rules according to the agreement. Both sets of rules must be examined for required elements by part. General Obligations
1. Review the obligations of the group. Medical Director Requirements/Staff Requirements
1. This is sometimes included in the body of a contract and sometimes attached as an addendum.

2. The requirements usually list the types of degrees, board certifications, fellowships, etc. that a physician must possess to be either medical staff or Medical Director.

3. The duties to be performed are listed. These are many and will vary from contract to contract. Here are some typical duties: 4. Medical Judgment is solely the control and responsibility of the group. 5. Marketing is not required of the pathology group but the hospital may use the group's name/likenesses in their promotions of the hospital and physicians on staff.

Insurance and Indemnification
1. The group must carry their own professional liability insurance. 2. Indemnification simply says that each party will protect, indemnify, and hold the other party harmless for any claims, demands, lawsuits, settlements, etc., arising from damages to persons or property in connection with the services provided by the indemnifying party.

Terms and Termination
1. The terms of the contract list the effect date and renewals. Compensation
1. The most important wording to look for in the paragraph is the right to bill for the professional component of anatomic pathology and clinical pathology services. 2. The amount that is negotiated as compensation for the oversight of the laboratory (Medical Director) and payment from the hospital for Part A services (professional component of clinical pathology for governmental carriers). There are several ways that compensation can be determined: 1) by hourly rate, 2) by number of hospital beds, or 3) by RCE - relative compensation equivalent. 3. Along with the compensation listed above, several other factors should be considered and included in the negotiated compensation for Part A services: 4. Managed Care clauses are very important when negotiating a Part A contract for a pathology group. These clauses can bind a group's power to negotiate with commercial carriers on their own behalf because the wording is unfavorable. 5. Billing for the professional component of pathology services should be the responsibility of the group and should be stated as such in the contract with the hospital. 6. Exclusivity is important wording to include in the contract. This states that the pathology group is the exclusive provider of services for the hospital(s) and/or hospital system. Non Compete
1. There is typically a paragraph that addresses what guidelines the group (or individual pathologist in the group) must follow once the contracted is terminated or dissolved. While there may be many other sections and paragraphs included in the hospital contract, these are some of the most important that need to be addressed. Always, the most important thing the group must do when negotiating the Part A/Medical Directorship is to have an attorney review the contract - preferably one well-versed in healthcare and healthcare contracting.

Mick Raich owns Vachette Pathology and works with pathologists, laboratories and hospitals nationwide in the area of strategic management, and revenue cycle management. Mick can be reached for comment at 866-407-0763 or 517-403-0763 or via e-mail at mraich@vachettepathology.com or visit www.vachettepathology.com.

End of Management of Pathology Practices > Part A and Medical Directorship Contracts