Medical practices commonly hire nurse practitioners (NPs) and physician assistants (PAs) to boost productivity, improve healthcare access, and enhance profitability. Although the U.S. seems to be moving toward more autonomy and even full practice authority for PAs and NPs, every state in the US currently requires that PAs maintain a collaboration arrangement with a supervising physician. Many states require formal arrangements between NPs and supervising physicians, as well.
In many supervisory arrangements, a written document outlines the drugs, devices, medical treatments, tests, and procedures that may be prescribed, ordered, and performed by the NP/PA, along with an emergency protocol. The supervisory physician meets regularly with the PA or NP, provides telephone and in-person consultations, and is available for emergencies. The supervisory physician also reviews and co-signs (as necessary) the NP/PA's chart notes and orders, monitors performance to ensure protocols and procedures are met, and evaluates PA/NP competencies.
Physicians often supervise PAs and/or NPs without hesitation. However, physicians do expose themselves to risk under these arrangements. A recent Mayo Clinic study showed that around 80% of nurse practitioner malpractice lawsuits also named the supervising physician, even when the physician had no obligation or interaction with the subject patient or their chart.
In addition to taking on risk, physicians must perform real work under a supervisory arrangement. Many employers pay physicians for supervisory services. These stipends compensate physicians for the time and effort they spend personally providing supervision services. Market data show that these stipends often range between $5,000 and $15,000 annually. However, the market information is somewhat limited and provides no insight into the various state-by-state requirements for supervising arrangements or the different requirements for NPs versus PAs. Moreover, it doesn't touch on the specific obligations placed on physicians by insurers and organizational bylaws.
Given these limitations, a market approach is a one-size-fits-all valuation technique that may not best suit the heterogeneity of supervisory arrangements across the country. For example, it's hard to say that a national range applies equally to supervisory stipends in states that have no chart review requirements versus states that require physicians to perform chart reviews of 20% of a PA's or NP's charts.
NP 2023 Scope of Practice
PA 2023 Scope of Practice
Employing a cost approach seems to hold more water than the market approach when it comes to NP/PA supervisory stipends. The cost approach involves breaking down the supervising physician's responsibilities and duties into component activities/parts and estimating the hours required for each piece (at this point, the appraiser can consider the various state, payer, and organizational requirements that apply). A fair market value hourly rate, considering the physician's specialty and the necessary intensity/effort, is then applied to the physician hours required/spent. The aggregated dollar amount indicates the value of the supervisory services. Considerations to tailor the cost approach may include:
Location of the NP/PAs services (on-site with supervising physician, off-site, etc.)
Applicable employer bylaws and/or payer requirements regarding supervision
Type of provider being supervised and level of experience, training, and need for supervision
Clinical specialty, types of patients (inpatient, outpatient, etc.), and productivity level
In our view, the cost approach provides a more tailored and precise method for valuing NP/PA supervisory services than the market approach. Although more legwork is involved, the findings may be enlightening – you may find a specific supervisory arrangement requires significantly more or less work than another. You may even find additional support for a stipend that is already being paid. Regardless, the cost approach is a worthwhile exercise and something for physician employers and healthcare valuation experts to consider when valuing NP/PA supervisory services.
BFMV is experienced in valuing professional healthcare service arrangements, including compensation for nurse practitioners, physician assistants, and other advanced practice providers. Contact us for more information or assistance.