For example, celebrities and professional athletes negotiate contracts without any specific compensation regulations. With the increased rate of mergers and acquisitions, healthcare organizations are vulnerable to federal scrutiny. According to CMS in the Final Rule, commercially reasonable means that the particular arrangement furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. In the Final Rule, CMS also reiterated that the determination of commercial reasonableness is not one of valuation. An arrangement can be fair market value, but that does not mean that it is commercially reasonable. A comprehensive, but not all inclusive, list of the items covered in the final rule follows. However, since the law was enacted in 1989, the regulations implementing it have become woefully outdated. 98810.3;2988 \div 10.3 ; 298810.3;2 significant digits. For example, the guaranteed compensation for a physician under an employment arrangement would have to be at levels consistent with what other physicians make within those specialties. Therefore, the analysis is recommended to be conducted by an independent valuation expert to establish a value that is consistent with independently published surveys that are comparable for similar services. CMS-sponsored model arrangements and CMS-sponsored model patient incentives. First Name (required) Home Fair Market Value and Commercial Reasonableness Applied to Healthcare Transactions, An Informational Article 411.354). For the past 30 years, a key consideration for health care organizations entering into transactions and arrangements for the employment and compensation of physicians has been the profitability of the practices in which the physicians, their staff, and other practicerelated resources are housedor more precisely the losses of the practices in which physicians and APPs are housed. Proceduralists such as dermatologists, orthopedic surgeons, ophthalmologists, otolaryngologists, plastic surgeons, urologists, etc. 1892, the Bipartisan Budget Act of 2018 (the "Budget Act"), which included changes to the federal physician self-referral law (commonly known as the "Stark law").Among these revisions are allowing indefinite holdovers in two notable exceptions to the Stark law: (1) personal services arrangements and (2 . Refines when a physician practice is required to sign a recruitment agreement between a hospital and a physician as well as timing issues for arrangements between a physician and non-physician practitioner (NPP) when a hospital is involved in compensating the NPP. TheregressionequationisY=20.0+7.21XPredictorCoefSECoefTConstant20.0003.22136.21X7.2101.36265.29AnalysisofVarianceSOURCEDFSSRegression141587.3ResidualError7Total851984.1\begin{matrix} document.write(year) The previous definition of fair market value stated that physician compensation "must be set in advance, consistent with fair market value, and not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.". nbaker@hsgadvisors.com or call (502) 814-1189. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. Fixed asset valuations include fair market value, orderly and forced liquidation valuations of medical equipment, office and computer equipment, software, leasehold improvements and supplies inventory. Previous Definition of Fair Market Value (42 U.S.C. On the other hand, an arrangement must be considered fair market value in order to be commercially reasonable. Fair market value, and specifically as it relates to compensation arrangements, is defined as The value in arms-length transaction, consistent with the general market value of the transaction. General market value means with respect to compensation for services, the compensation that would be paid at the time the parties enter into the service arrangement as the result of bona fide bargaining between well-informed parties that are not otherwise in a position to generate business for each other., Commercially reasonable means that the particular arrangement furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. Sec. Using the example of celebrities above, many contracts with celebrities include a portion of ticket sales to that movie. The Final Rule provided key guidance on the "Big 3" Stark Law requirements of (1) fair market value; (2) commercial reasonableness; and (3) the volume or value of referrals. As it relates to the updated definition of fair market value, CMS continues to emphasize that its determination should be based on any appropriate method depending on the kind of transaction, its location, and other factors. The primary regulations governing physician compensation arrangements are the Stark Law and AKS. 7. That is a topic for another day. (i) Consistent with the fair market value of . Industry stakeholders have informed us that, because the consequences of noncompliance with the Stark Law are so dire, physicians and other healthcare providers may be discouraged from entering into innovative arrangements that would improve . bdo.com. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. 57 The amended provisions are for the Stark Law exceptions for academic medical centers, bona fide employment relationships, personal service arrangements, certain physician incentive plans, group practice arrangements with a hospital, fair market value compensation, indirect compensation arrangements, and the new exception for limited . ; and (3) Does it mean the compensation is not commercially reasonable? A Stark violation is punishable by civil money penalties; an anti-kickback violation is punishable by exclusion from federal health care programs, criminal penalties of up to $25,000 in fines or . var today = new Date() et al. The argument is that but for the celebrity being in the movie the consumer would not purchase the ticket. Downstream revenue may include referrals for laboratory services, referrals for imaging services, referrals for hospital services, or even referrals to other specialists. B and C only - False Claims Act liability & Exclusion from the Medicare and Medicaid programs. General market value is the compensation that would be included in a service agreement as the result of bona fide bargaining between well-informed parties who are not otherwise in a position to generate business for the other party. Fair Market Value (FMV) Which of the following is TRUE about the Stark Law? The Court concluded that the payment above fair market value for the services that were actually required to be performed would serve some other purpose, such as compensation for referrals. These statutes currently reside under the purview of Centers for Medicare & Medicaid Services (CMS) fraud and abuse laws. In addition, CMS removed the "volume or value" and the "other business generated" standards . 1320a-7b) prohibit payments and receipt of payments given with an intent to influence the purchase of a product or services for which Medicare or Medicaid reimbursement is sought. Therefore, the analysis is recommended to be conducted by an independent valuation expert to establish a value that is consistent with independently published surveys that are comparable for similar services. Contact our expert, Neal D. Barkeratnbaker@hsgadvisors.com or call (502) 814-1189. There are a myriad of reasons that hospital-owned practices lose moneyhigher practice costs, poor revenue cycle operations, mismatched compensation incentives, poor management, etc. https://www.healthlawyers.org/Events/Programs/Materials/Documents/PHS15/kk_homchick_hutzler_shay.pdf, https://www.bdo.com/blogs/healthcare/april-2015/commercial-reasonableness-analysis?feed=8799bc52-2237-4688-aeac-83e40e623b56, http://www.americanbar.org/content/dam/aba/events/health_law/2015_Meetings/DocLaw/Papers/10_valuation_03.authcheckdam.pdf, http://www.worldservicesgroup.com/publications.asp?action=article&artid=2086, http://www.healthcapital.com/hcc/newsletter/10_12/HCVAL.pdf, New Timeshare Arrangement Exception under Stark Law. 1320a-7b. b. These Stark Law updates may not alter the approach to production of a compensation fair market value and commercial reasonableness opinion (i.e., we are still going to consult industry salary surveys), but it certainly has us doubling down on the lengths to which we go to describe and document the uniqueness of a provider, the market, or the situation. Usually, the fair market price is the price at which bona fide sales have been consummated for assets of like type, quality, and quantity in a particular market at the time of acquisition, or the compensation that has been included in bona fide service agreements with comparable terms at the time of the agreement, where the price or compensation has not been determined in any manner that takes into account the volume or value of anticipated or actual referrals. A factor that is certain to affect fair market value determination during the coming year is not new or revised legislation. HSG has written articles about practice losses and how to address them. 4 See 42 CFR 411.354. An assessment of transactions should be done to analyze if it is reasonable to pay for the services in the first place, in order to prevent violation of the Anti-Kickback Statute. Makes clear that signatures may be electronic under the same applicable federal/ state laws while allowing parties to an agreement to obtain the writing requirement documentation within 90 days. Thanks for reaching out. Bob concentrates his . CMS indicated that many of the changes to the Stark Law rules are intended to provide new flexibility and reduce administrative burden on health care organizations and providers in the structuring of arrangements, making it easier and less expensive to comply with the Stark Law. In reading CMS comments in the Federal Register, there is no doubt that CMS views each case as unique and there is not a set formula or methodology for determining fair market value. In what situation is a written agreement NOT required under Stark? \text{X} & \text{7.210} & \text{1.3626} & \text{5.29}\\\\ On March 30, 2020, the Centers for Medicare & Medicaid Services (CMS) issued blanket waivers to the Stark Law that permit certain arrangements between physicians and health care providers implemented in response to COVID-19 that would otherwise violate the Stark Law. Included in the changes are definitions and special rules related to: (1) commercial reasonableness, (2) the volume or value standard and other business generated standard, and (3) fair market value and . Download a PDF Version of the Article as Published in AHLA's 2021 . Close the income statement accounts with debit balances. 411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. Documentation of all aspects of relationship. Whether it's an outright acquisition or a lease or service agreement, and whether it is the business or the underlying tangible assets (real estate and equipment), the transaction must be consistent with Fair Market Value. The regulations are part of the HHS Regulatory Sprint to Coordinated Care and . OIGs proposed new safe harbors are: Additionally, OIG is finalizing changes to the following existing safe harbors: CMS modifications and additions to the Stark Law rules were equally significant. Financial arrangements should be based on comparable data and should be set in advance by members who have no conflict of interests. Directions T. Z, R. C. Healthcare Valuation Series: A look at fair market value and commercial reasonableness. Documenting the organizations goals with the arrangement or transaction must be a priority. B. Stark Law Exception - Value-Based Arrangements . Posted on October 27, 2016August 15, 2022. Further, the concept of fair market value has become much more than a financial analysis. At the advent of the Stark regulations, the federal law placed the referral of prosthetics (as defined by state Medicaid laws . Grabbing a 2021 survey and finding a percentile might be enough, then again, it might not. ; (2) How can it be fixed? and Don Barbo, Managing Director with VMG Health, on the topic of "New Stark Law and AKS Final Rules -Valuation Considerations." On January 19, 2021, a new era was ushered in as the CMS Stark Law Final Rule and the HHS-OIG Anti-Kickback Statute Final Rule became effective. Reflecting on Recent Regulatory Changes to the Stark Law: A Real Estate and Equipment Valuation Perspective, Part 2. CMS' stated purpose is to establish bright-line, objective regulations that would be more easily applied. a non-profitable arrangement) may present a problem, it is not expressing a definitive opinion on the matter as each arrangement is facts and circumstances specific, and it could see certain arrangements with facts and circumstances whereby a non-profitable arrangement is commercially reasonable. Clarifies the period of disallowance for referrals and billing following a self-referral law violation, the satisfaction requirements for set-in-advance compensation, when an entity may direct a physicians referrals to a provider, the requirement for exclusive use of office space/ equipment, and the exception for payment by a physician to an entity. The reader should contact his or her Carnahan Group or other tax professional prior to taking any action based upon this information. Strategy, market growth, and larger referral bases were not among the examples. An assessment of transactions should be done to analyze if it is reasonable to pay for the services in the first place, in order to prevent violation of the Anti-Kickback Statute. Government scrutiny around healthcare transactions has heightened in recent years due to an increase in the volume of violations of healthcare fraud and abuse laws. Carry out the indicated operation and give your answer with the specified number of significant digits. This is the art and the work involved in determining fair market value. Get ready and roll up your sleeves for the work ahead. 22-14.HHS OIG was responding to a written request for an advisory opinion regarding a proposed continuing medical education program for local optometrists conducted by an ophthalmology group practice and four potential funding options for the programs. Jan 2017 - Oct 20225 years 10 months. This would be incorrect. With the increased rate of mergers and acquisitions, healthcare organizations are vulnerable to federal scrutiny. Yes, consulting multiple, objective, independently published salary surveys remains a prudent practice for evaluating fair market value, as stated in Stark II, Phase III, but salary surveys are not automaticregardless of the percentile at which the compensation in question falls. The AKS Final Rule further codifies statutory revisions by adding the statutory exception to remuneration related to Accountable Care Organization Beneficiary Incentive Programs for the Medicare Shared Savings Program. The U.S. Department of Health and Human Services (HHS) adopted certain regulatory leasing safe harbors for both the Anti-Kickback Statute, commonly referred to as the "space rental safe harbor," and Stark Law, commonly referred to as the "office space rental exception.". Rely on Our Experts for Stark Law and Fair Market Value Matters. On February 9, 2018, Congress passed and President Trump signed into law H.R. The fair market value of equipment and office space leases is determined without taking into account intended use or, in the case of office space, proximity to the lessor if the . This Stark Law exception applies to physician compensation arrangements that qualify as value-based arrangements, regardless of the level of risk undertaken by the VBE or any of its VBE participants. The exception cannot be utilized for the rental of office space though. Second, downstream financial incentives in healthcare, as in most industries, is extremely hard to quantify. Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. May 10, 2022 at 11:37 AM 6 minute read A general journal is given in the Working Papers. The case underscores that the OIG cares about technical as well as substantive compliance with the Stark law. 1877nn(h)(3) Value in arms-length transactions, consistent with general market value Rentals or Leases - value of rental property for general commercial purposes, not taking into account its intended use Space Lease - not taking into account the value the lessee or var year = today.getFullYear() Isolated financial transactions, such as a one-time sale of property or a practice, or a single instance of forgiveness of an amount owed in settlement of a bona fide dispute, if all of the following conditions are met: (1) The amount of remuneration under the isolated financial transaction is. 411.362 Additional requirements concerning physician ownership and investment in hospitals. The Stark law does maintain a definition of fair market value but it does not dictate actual numbers. Others have been slightly more conservative and mandated in their physician contracts that they will not provide total compensation (base compensation plus all bonuses) above the 75th percentile (a true ceiling). CMS further clarifies that commercial reasonableness is whether an arrangement makes sense as a means to accomplishing the parties goals. Third, fair market value as a concept is also dictated by relevant government enforcement actions as well as lawsuits. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); PYA Repeats Forbes Listing as a Top Tax and Accounting Firm in the Nation, PYA: Healthcare Consulting, Audit & Accounting, Financial Institutions Audit & Accounting, Alternative Payment Model Design & Strategy. An analysis to document commercial reasonableness may include, but not be limited to, whether the arrangement helps meet an organizations mission/ vision/ and values, the importance of the arrangement to the service line(-s) affected, how the arrangement affects the cost, quality, and access to care, what other options exist to accomplish the organizations goals, and why the arrangement entered was the best option. Specifically, the aim of healthcare delivery is to provide high-quality care, high levels of access, and at the most cost-effective price. A and B - not be conditioned on referrals & allow the physician to establish medical staff membership at other hospitals. As to its civil penalties, the Anti-Kickback Statute includes monetary penalties up to $50,000 per violation, civil . Suite 201 Many of the new and revised regulations apply beyond financial arrangements related to care coordination initiatives, and thus are crucial for all Our fixed asset valuation services serve a variety of purposes for our clients, including: Anti-Kickback Statute and Stark Law Compliance Special Rules for Profit Shares and Productivity Bonuses ( 411.352(i)) a. On the revenue side, many practices had the benefit of the Paycheck Protection Program, but unfortunately, for many that was not enough to outweigh the additional personal protective equipment cost and lost revenue due to decreased patient volume. B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation. According to CMS, we continue to believe that the fair market value of a transactionand particularly, compensation for physician servicesmay not always align with published valuation data compilations, such as salary surveys. healthlawyers.org. Website managed by SiteCare.com. If ever there was a time in which that is true on so many levels, this is it. Healthcare employment contracts must: 1) Have a duration of at least a year. First, it delineated that salary surveys or salary survey percentiles may not be appropriate to use in all circumstances. You can contact me at 800-270-9629. J. William Bookwalter, III, M.D. 411.354 Financial relationship, compensation, and ownership or investment interest. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. Stark defines fair market value (FMV) as ______________________________ . Please join us on September 13 th! What are your goals? As CMS stated, In our view, each compensation arrangement is different and must be evaluated based on its unique factors. Virtually every provider compensation exception under the Stark Law requires that the compensation paid reflects fair market value. Referring to survey data regarding practice losses per physician and per provider can be enlightening. \end{matrix} An arrangement may be renewed any number of times if the terms of the arrangement and the compensation for the same items or services do not change. Not that CMS made it easy by providing a bright line or even a floor that would allow us to say, if we go above this level, then we must get a formal thirty-party fair market value opinion. According to CMS, We wish to be perfectly clear that nothing in our commentary was intended to imply that an independent valuation is required for allcompensation arrangements.. However, we agree with the commenter that asserted that a hospital may find it necessary to pay a physician above what is in the salary schedule, especially where there is a compelling need for the physicians services. Despite the request and urging of commenters, CMS declined to establish rebuttable presumptions that compensation is fair market value or safe harbors that would deem compensation to be fair market value if certain conditions are met. Bottom line, CMS affirmed that there is no guarantee to fair market value determinationthere is no universal formula or proverbial rubberstamp as it pertains to provider compensation. The payments that exceed FMV are viewed as potential referrals, which is a violation of Stark Law that can lead to penalties and a healthcare systems exclusion from participation in federal health programs. This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. Because of increased enforcement, it is very common for organizations to work with legal professionals who specialize in fair market value and the Stark Law for the purpose of creating compliant and defensible financial arrangements. Unlike the civil nature of Stark Law, the Anti-Kickback Statute is under both civil (administrative) and criminal laws. stark law fair market value industry best practice. Fair Market Value and Commercial Reasonableness Applied to Healthcare Transactions. For additional questions or comments regarding this article or other valuation issues, please contact John Meindl, Manager, VMG Health, at 972-616-7813, or john . With regard to fair market value (FMV), industry best practice suggests that you _____ in order to better withstand government scrutiny. The reason the simplicity of this is not correct is that many lawsuits and government enforcement actions have established what are the risks associated with fair market value. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. If the AKS is addressing criminal penalties, the consequences include fines up to $25,000 per violation and up to a five-year . The Department of Health and Human Services (HHS) defines commercial reasonableness as a sensible, prudent business arrangement, from the perspective of the particular parties involved, even in the absence of any potential referrals. We also believe there has to be a limit to what is reasonable in terms of losses. All Rights Reserved. Electronic health records (EHR) safe harbor updates and removes provisions regarding interoperability; removes the December 31, 2021 sunset provision and prohibition on donation of equivalent technology; and clarifies protections for cybersecurity technology and services included in an EHR arrangement. A qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. Introduction. On December 2, 2020, the Department of Health and Human Services ("HHS") Office of Inspector General ("OIG") issued final rules including a host of reforms to the AKS, including three changes to the personal services and management contracts safe harbor ("Safe Harbor"). First, financial incentives from a policy standpoint should not impact the plan of care developed for patients. Formally establishes a definition of commercial reasonableness, while deleting outdated Stark Law references and updating key definitions such as fair market value, designated health services, physician, referral, remuneration, and transaction. New Arrangement Best Practices Consult with a valuation expert on whether financial arrangements satisfy the new Stark Law fair market value and commercial reasonableness standards. Also, a quantitative analysis of revenue cycle should be conducted to determine if the anticipated transaction acquires any referrals during the process and to ensure that healthcare organization complies with the regulatory statutes. Often traditional salary survey sources do not provide datasets based on level of physician involvement or oversight for CRNAs, making it difficult to find an apples-to-apples comparison. Last Name (required) Ultimately, valuators likely will have to be creative and look back into past years surveys to evaluate trends and validate current survey data. See our dedicated page. \text{Residual} & \text{Error} & \text{7}\\ In some cases, the alignment between compensation and production may be distorted. 201 East Fifth Street Suite 1110 Cincinnati, OH 45202-4152 t: 513.870.6700 f: 513.870.6699. info@bricker.com. Factors affecting the specific company risk of a practice can include the physician's age, specialty, location, market position, payer mix, payer contracts, size, and other factors. Structuring legally compliant hospital-physician leases and establishing fair market value (FMV) rental rates can be challenging. Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. To determine what is commercially reasonable, we first must start with a basic definition. A significant part of compliance with Stark and Anti-Kickback is the concept of Fair Market Value. Sec. which allows healthcare organizations to analyze physician compensation arrangements for fair market value and commercial reasonableness instantly. ; ; This exception takes effect when there is an arrangement into writing that specifies the time frame and remuneration, and meets Anti-Kickback Statutes . It is important to maintain documents of services provided by healthcare professionals and have agreements in writing, along with documents supporting the financial transaction at FMV, for actual duties performed to standardize financial transactions and to prevent violation of fraud and abuse laws. On November 20, the Centers for Medicare & Medicaid (CMS) and the Department of Health and Human Services Office of Inspector General (OIG) issued a 627-page final rule which will serve to modernize and clarify Stark Law regulations. Current, Three-Part Definition of Fair Market Value (42 C.F.R. The CMS Final Rule implements changes to the Stark Law and offers several clarifying provisions related to key Stark Law terms and concepts. ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide. Answer Choices A. obtain the valuation from legal counsel B. obtain a certified valuation from an expert, third party C. conduct an in-house valuation D. B and C This safe harbor permits patient engagement tools and/or other support furnished directly by a VBE to a patient in a target patient population that are directly connected to the coordination and management of care.
