Medical directors revisited.

A contributing writer to Contemporary Long Term Care, Marie Infante is an attorney with the Washington, D.C., law firm of Powers, Pyles, Sutter & Verville.

New responsibilities under PPS require a new contract

AS NURSING FACILITY ADMINISTRATORS BEGIN TO ADDRESS THE operational impact of the prospective payment system on all departments, they must evaluate and renegotiate relationships and contracts with outside resources and agencies. One of the most important contract relationships is with the medical director. PPS has expanded performance expectations for medical directors, so administrators must recalculate time and payment requirements for this position, using some measure of fair market value.

Under PPS, the nursing home is the provider for all covered items and services during a Medicare Part A-covered stay. Whether the facility supplies the items and services directly or through an outside supplier, it is legally responsible for their quality and timeliness. This requires enhanced oversight by the medical director. If the medical director is lax in these areas of oversight and supervision, including determinations of medical necessity, appropriate level of service, and whether services are actually delivered as needed, the door is left open for program fraud or abuse by suppliers, for which the nursing home can be held responsible.

In addition, the medical director must help administrators train and provide support to attending physicians regarding PPS. Most physicians do not yet appreciate the technical complexity of PPS or its impact on the facility's decisions and their own patient-management decisions. The multiple full MDS assessments required to classify a resident under PPS will likely require more physician input.

At times, the medical director may be called upon to provide that input or to contact an attending physician if the resident's status changes. The medical director must assume an instrumental role in educating physicians and developing medically sound facility policies that satisfy the new economic imperatives. For example, the medical director might help an administrator develop a formulary that limits the use of prescription drugs to those deemed most effective and economical, and then counsel attending physicians in its use.

Other new medical director functions may include activities that support the facility's financial viability under PPS while keeping it in compliance with all terms of the Medicare provider agreement. The medical director may need to oversee preadmission screening and review of hospital transfer documentation to ensure appropriate admissions. Practices by the attending physician staff that were never subject to management scrutiny before, such as reliance on the local emergency room at night and on weekends, standing orders for therapeutic diets, or care routines that are more rote than reasoned, may need to be reevaluated.

On the other hand, efforts to minimize cost under PPS may lead to inadequate allocation of facility resources and quality of care problems. The medical director will likely be called upon to be both the economic and moral/ethical compass of the facility.

Under PPS, the medical director may need to be more involved in evaluating products and developing clinical protocols and pathways. If the facility adopts such protocols, medical direction will be needed to ensure adoption and consistent implementation. And as attending physicians become acclimated to the new requirements, the medical director is likely to be called upon to mediate any differences that may arise between physicians and the nursing home.

Other traditional functions of the medical director may be affected by the implementation of PPS. All medical director responsibilities should be evaluated realistically to allow for the necessary time commitment and compensation. When reducing the agreement to a written contract, you need to obtain the advice of local counsel to determine whether any particular requirements of state law must be included in the proposed agreement for professional services between the facility and the medical director.

The contract should name the parties to the agreement, taking care to specify the correct legal entity (individual physician, corporation, professional corporation, professional association, or other entity, as appropriate). The contract should also: (1) be in writing and signed by the parties, (2) specify the services to be provided, (3) be for a term of not less than one year, (4) not base compensation on volume or value of referrals or other business, (5) determine compensation in advance based on fair market value and in an arm's length transaction, and (6) not involve promotion or counseling of activities or business arrangements that violate state or federal law.

If the relationship is not full-time, the agreement must also specify the number of intervals, their length, and the charge per interval (e.g., 12 monthly payments of $__per month based on __hours at $__per hour). Any determination as to fair market value of the services of the medical director should take the new time requirements and accountabilities under PPS into consideration.