It is inaccurate for a hospital or health system to believe that just because base compensation is below the 75th percentile there is no risk and that the compensation they are providing is automatically fair market value. \text{Predictor} & \text{Coef} & \text{SE Coef} & \text{T}\\ They are: (a) the lease agreement must be in writing; (b) the . Fair Market Value and Commercial Reasonableness Applied to Healthcare Transactions. Carnahan Group provides a unique platform. Again, job posting sites have been invaluable to determining fair market value for high-demand services. Key PYA Takeaway: CMS is clarifying that the Big 3 (fair market value, commercial reasonableness, and the volume or value standard) are separate and distinct concepts. 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. First, financial incentives from a policy standpoint should not impact the plan of care developed for patients. healthlawyers.org. 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. 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). Modifying the definition of set in advance used in many Stark exceptions to allow modification of compensation during the term of an arrangement (including in the first year). 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. For most Stark Law exceptions to apply, a(n) ___________________ is required. With respect to the rental of office space, fair market value means the value in an arms-length transaction of rental property for general commercial purposes (not taking into account its intended use), without adjustment to reflect the additional value the prospective lessee or lessor would attribute to the proximity or convenience to the lessor where the lessor is a potential source of patient referrals to the lessee, and consistent with the general market value of the subject transaction. The Anti-Kickback Statute is a criminal law that prohibits healthcare organizations from knowingly and willfully paying any remuneration to induce patient referrals or to generate business involving any service payable by the federal healthcare programs. have been significantly impacted by decreased patient volume. thousands of dollars) for apartment buildings. As to its civil penalties, the Anti-Kickback Statute includes monetary penalties up to $50,000 per violation, civil . 6 Financial arrangements are commercially reasonable if they are at FMV, services provided are documented and deemed necessary, and when the services cannot be provided at a lesser value.10 Financial arrangements should be based on comparable data and should be set in advance by members who have no conflict of interests. 2 A discussion of Stark's application to Medicaid claims is beyond the scope of this broad overview. How can we lose so much money and still consider our arrangement commercially reasonable? CMS has stated that compensation between certain percentiles does not provide a safe harbor. 411.353 Prohibition on certain referrals by physicians and limitations on billing. Which of the following disclosure protocols should be used by providers when disclosing a Stark violation? Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation. For example, celebrities and professional athletes negotiate contracts without any specific compensation regulations. <p> Fair Market Value (FMV) has become an industry standard in accordance with regulations and statutes such as the US Sunshine Act, False Claims Act, and Anti-Kickback Statute, as well as international transparency reporting and anti-corruption legislations. OIG also amended the definition of remuneration in the Beneficiary Inducements CMP statute to integrate a new statutory exception to the prohibition on beneficiary inducements for certain telehealth technologies.. For example, in the past some arrangements where physician compensation exceeded professional collections have received considerable scrutiny for commercial reasonableness. Second, from a fair market value standpoint it is often the case that there are true limits on reasonable income and compensation under a financial arrangement with a physician. Which of the following is a government sanction provided under the Stark regulation? Its criminal penalties include fines up to $25,000 per violation, and up to 5 years in federal prison. HSG is not a law firm; we are a health care consulting and compensation valuation firm, so this article is not an exhaustive legal interpretation, summary, or review of all of CMS and OIGs updates, but rather a review of selected areasparticularly those elements and areas we view as having the most impact in the world of physician and advance practice provider (APP) compensation and transactions valuation. ; ; They go as follows: Cost or selling price: If the item has been recently bought or sold, that can be a good indicator of its fair market value. In addition, CMS removed the "volume or value" and the "other business generated" standards . The exception permits both monetary and nonmonetary remuneration between the parties. In our prior article, we provided a basic overview of Fair Market Value (FMV) assessments and how these have become a key aspect in compensation contracts for cardiologists.We also reviewed how practices should focus on demonstrating their value to hospitals and health systems by showcasing leadership efforts within the practice and hospital, attention to strategy, financial performance . Assessing Fair Market Value. 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. This site rocks the Pearsonified Skin for Thesis. 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. "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 . Thanks for reaching out. 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. Sales of comparable assets: When a real estate agent presents a prospective home seller with a list of recent sales prices for similar nearby homes, known as . The exception cannot be utilized for the rental of office space though. Finally, the incentives in a healthcare environment are inherently different than they are in a business venture in other industries. However, there are a few core concepts that are applicable when establishing fair market value. The definitions of fair market value and commercial reasonableness have been updated and established as follows: Regarding commercial reasonableness, CMS clarified that , As it relates to fair market value compensation, CMS clarifies several important items. According to CMS in the Final Rule, We continue to believe that this determination should be made from the perspective of the particular parties involved in the arrangement. Another key factor to commercial reasonableness is answering the question: Does the arrangement make sense to accomplish the parties goals? The concept of fair market value under the Stark Law is different than the concept of fair market value in an otherwise normal business arrangement (where parties do realize they can generate business for one another). Many of the changes in the Stark Law are aimed at eliminating regulatory restrictions that could deter or even potentially eliminate some novel arrangements as the industry continues its move towards a value-based health care system. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. Many hospitals and health systems around the country have employed physicians and then struggled, or at least had to come to grips with the fact that, the practices are losing money. Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. health services directly attributable to a physicians participation in a value-based arrangement are deemed not to take into account the volume or value of the physicians referrals. Fair Market Value ( 411.351) C. Group Practices ( 411.352) 1. The following requirements must be [] Documentation of all aspects of relationship. 1 For purposes of this article, "Stark" refers to 42 U.S.C. \text{Constant} & \text{20.000} & \text{3.2213} & \text{6.21}\\ 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. \text{X} & \text{7.210} & \text{1.3626} & \text{5.29}\\\\ Chapter 25. If ever there was a time in which that is true on so many levels, this is it. The general market value definitions are: What does it mean for a compensation arrangement to be commercially reasonable? As an offshoot to periodic reviews of PSAs, Ms. Walsh says every component of the PSA must be recorded and documented to ensure both parties are . To determine what is commercially reasonable, we first must start with a basic definition. In a simple example, we can determine that fair market value for compensation of a medical director for a cardiac catheterization laboratory is $150 per hour. Introduction. In doing so, CMS offered helpful commentary for health care entities structuring real estate arrangements. Data were collected on several properties The Stark law does maintain a definition of fair market value but it does not dictate actual numbers. For example, if a physician is paid at the 75th percentile under a specific survey then fair market value must be met. Downstream revenue may include referrals for laboratory services, referrals for imaging services, referrals for hospital services, or even referrals to other specialists. Expands the 411.357(1) exception to fair market value payments for rental office space, notably when the arrangement is for less than one year. While this expansive list of Stark Law changes will take some time for the industry to digest, we wanted to promptly share three changes and corresponding takeaways as it relates to fair market value and commercial reasonableness in physician/ hospital relationships. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); document.getElementById( "ak_js_2" ).setAttribute( "value", ( new Date() ).getTime() ); 9850 Von Allmen Court As stated above in our discussion of fair market value, CMS continues to make it clear that the commercial reasonableness determination is also accomplished through consideration of an arrangements context and from the perspective of those involved. CRNAs are only one examplethe same challenges could easily apply to any physician specialty or market. Due to a complex regulatory environment, an in-depth analysis should be performed to ensure that the healthcare transactions are legally permissible at FMV and are commercially reasonable. The Stark Law prohibits physician referrals of Medicare patients for certain "designated health services" to entities with which the physician has a financial relationship, unless an exception under the law applies. The Stark "in-office ancillary" exception permits a physician or group practice to order and provide DHS in the office, provided that the DHS is ancillary to the professional medical services provided by the practice. \text{The regression equation is}\\ Carry out the indicated operation and give your answer with the specified number of significant digits. In order to qualify for the recruitment exception, the arrangement must _________________________ . Since the Stark Law was enacted in 1989 this been a compliance concern in the back of the minds of hospital executives. 4, 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. 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. Non-profit hospitals face additional requirements under the Internal Revenue Code that they must satisfy to maintain their tax-exempt status. The Stark Law (42 U.S.C. Directions A and B - not be conditioned on referrals & allow the physician to establish medical staff membership at other hospitals. The arrangement is in writing, signed by the parties, and covers only identifiable items or services, all of which are specified in writing. 3) Specify an aggregate payment, which is set in advance. The same is not true for physicians and other entities when the Stark Law applies. Helps identify compensation formulas that take into account the volume or value of a physicians referrals as well as those that are allowed to distribute profits from designated health services within a group practice. The definitions are as follows: Central to the definition of fair market value is the definition of general market value. General market value is also restated in the Final Rule. An extension has been granted until January 1, 2022 for compliance related to certain changes required in group practice compensation methodologies. Among the many changes in the Stark Law final rule, the following are some of the most significant: 1. between x, annual gross rents (in thousands of dollars), and y, selling price (in With the increased rate of mergers and acquisitions, healthcare organizations are vulnerable to federal scrutiny. Distribution of Profits Related to Participation in a Value-Based Enterprise; b. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. Unlike fair market value determination, commercial reasonableness is not as readily determined by standardized methodologies, practices, or sources. We also believe there has to be a limit to what is reasonable in terms of losses. ), commonly referred to as the Stark law, is a set of regulations that pertain to physician self-referral under current United States (US) federal law. Health Management Associates $260 Million, Kalispell Regional Healthcare $24 Million. 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. A significant part of compliance with Stark and Anti-Kickback is the concept of Fair Market Value. b. Many of these reasons are out of the hospital or health systems control. Finalized new, permanent exceptions for value-based arrangements that will permit physicians and other health care providers to enter into value-based arrangements without fear that their legitimate activities to better coordinate care, improve quality, and lower costs would violate the Stark Law. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. That is a topic for another day. Reflecting on Recent Regulatory Changes to the Stark Law: A Real Estate and Equipment Valuation Perspective, Part 2. 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. Civil penalties of the AKS include False Claims Act liability, civil monetary penalties (CMP) and program exclusion, up to $50,000 CMP per violation, and civil assessment of up to three times the amount of kickback. 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. Referring to survey data regarding practice losses per physician and per provider can be enlightening. The waivers, which are numerous and fairly broad, offer health care entities significant flexibility to combat COVID-19 in ways . 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 . Through the Final Rule, CMS has addressed the topic of losses and profitability, stating the determination that an arrangement is commercially reasonable does not turn on whether the arrangement is profitable; compensation arrangements that do not result in profit for one or more of the parties may nonetheless be commercially reasonable. CMS offers several examples of reasons parties may enter into an arrangement or transaction despite financial losses to one or more parties. According to CMS, those reasons include, community need, timely access to health care services, fulfillment of licensure or regulatory obligations, including those under the Emergency Medical Treatment and Labor Act, the provision of charity care, and the improvement of quality and health outcomes. In our opinion, this means health care organizations must go the extra mile to document their reason(s) for compensating physicians and APPs, if those arrangements and transactions are exhibiting or are expected to yield financial loses. 411.354). 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 .