Advertisement

April 25, 2014

January 30, 2013 Wisconsin Court Holds that Non-Profit Medical Group Must Pay Physician Even When Compensation May Not be Fair Market Value

In Prpa v. Wheaton Franciscan Medical Group, Inc. (No. 11-3013), the Wisconsin Court of Appeals (District II) recently held that a non-profit medical group must pay a physician his contracted salary even though that salary may not have been consistent with fair market value. The medical group developed a new physician compensation plan (the “Plan”) which it implemented on January 1, 2008. The Plan used one of two compensation models: Net Collections or wRVU. The medical group hired a consultant to determine fair market value of the models. The medical group and physician eventually agreed to the Net Collections model. However, the medical group eventually found that the charity-care data it mistakenly supplied to the consultant skewed the fair market value calculation. The consultant withdrew its opinion, and the medical group had to change its compensation model.

On July 28, 2008, the medical group informed physician that it would be compensating him based on the wRVU model, as opposed to the Net Collections model, retroactively to January 1, 2008.  Also on July 28, 2008, the medical group presented the physician with a novation, which required him to assent to the wRVU model.

The Court of Appeals held that the novation was valid and, therefore, the physician was bound by the wRVU model starting on July 28, 2008. However, the Court also held that “the Plan language does not support retroactively adjusting [the physician’s] salary. He was working pursuant to an agreed-upon compensation model when [the medical group’s] error occasioned the review and modification. There must be a mutual mistake of fact to avoid one’s contractual obligations.” Based on the Court’s decision, the medical group was obligated to pay pursuant to the Net Collections model, even though it does not appear that any fair market value opinion supported the model.

Importantly, the Plan permitted periodic review of and, from time to time, revision to the Plan. However, the Court still held that the medical group was obligated to pay the physician under the Net Collections model even with this review and revision language.

As a result of this decision, non-profit medical groups and other non-profit entities employing physicians should be sure to review their compensation plans to determine if they have the necessary contractual flexibility to retroactively adjust physician salaries due to issues with compliance and fair market value determinations.

A link to the opinion can be found here.

©2014 von Briesen & Roper, s.c

About the Author

William O. Jackson, health care, employment, attorney, von Briesen, law firm
Attorney

Bill Jackson is a member of the Health Care Practice Group where he focuses on both health law and employment law.

Prior to joining von Briesen & Roper, Bill worked as an Administrative Fellow at a hospital system in western Wisconsin. In this capacity, he worked on legal and administrative matters, including strategic planning, hospital program development, physician contracting, and compliance. Bill has also worked in the corporate office of a large, multistate hospital system and in administration at a community hospital.

During law school, Bill was a member of the...

414-287-1589

Boost: AJAX core statistics

Legal Disclaimer

You are responsible for reading, understanding and agreeing to the National Law Review's (NLR’s) and the National Law Forum LLC's  Terms of Use and Privacy Policy before using the National Law Review website. The National Law Review is a free to use, no-log in database of legal and business articles. The content and links on www.NatLawReview.com are intended for general information purposes only. Any legal analysis, legislative updates or other content and links should not be construed as legal or professional advice or a substitute for such advice. No attorney-client or confidential relationship is formed by the transmission of information between you and the National Law Review website or any of the law firms, attorneys or other professionals or organizations who include content on the National Law Review website. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor.  

Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. The National Law Review is not a law firm nor is www.NatLawReview.com  intended to be  a referral service for attorneys and/or other professionals. The NLR does not wish, nor does it intend, to solicit the business of anyone or to refer anyone to an attorney or other professional.  NLR does not answer legal questions nor will we refer you to an attorney or other professional if you request such information from us. 

Under certain state laws the following statements may be required on this website and we have included them in order to be in full compliance with these rules. The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. Attorney Advertising Notice: Prior results do not guarantee a similar outcome. Statement in compliance with Texas Rules of Professional Conduct. Unless otherwise noted, attorneys are not certified by the Texas Board of Legal Specialization, nor can NLR attest to the accuracy of any notation of Legal Specialization or other Professional Credentials.

The National Law Review - National Law Forum LLC 4700 Gilbert Ave. Suite 47 #230 Western Springs, IL 60558  Telephone  (708) 357-3317 If you would ike to contact us via email please click here.