Clinical Fair Market Value: Why it's essential and what - IQVIA J. William Bookwalter, III, M.D. To determine what is commercially reasonable, we first must start with a basic definition. 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. The Stark Truth About the Stark Law: Part I | AAFP First, financial incentives from a policy standpoint should not impact the plan of care developed for patients. Final Rules also provide guidance related to fundamental concepts under the Stark Law, including commercial reasonableness, the volume or value standard, and fair market value. This field is for validation purposes and should be left unchanged. A factor that is certain to affect fair market value determination during the coming year is not new or revised legislation. CMS' stated purpose is to establish bright-line, objective regulations that would be more easily applied. 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. 201 East Fifth Street Suite 1110 Cincinnati, OH 45202-4152 t: 513.870.6700 f: 513.870.6699. info@bricker.com. 1320a-7b. PDF The New Stark and AKS Final Rules: Implications and Considerations for 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. 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.". In the Court's opinion, the excess payments would violate the Stark Law and would make claims made to Medicare for those services false claims. 7 Things Hospitals Should Know About Professional Services Agreements For example, if a physician is paid at the 75th percentile under a specific survey then fair market value must be met. The bottom line is that in the context of fair market value and the Stark Law, normal business negotiations allowing for leverage between parties is not necessarily the same in the healthcare context (because the parties cannot take into account that they generate business for one another). The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. Cimasi, R. Z T. Traversing the threshold of commercial reasonableness in the healthcare industry. While this exception may be utilized in some instances, it is likely organizations will utilize the employment exception or personal services exception. For a vast number of health care entities, employment of physicians and APPs is the only option for attracting and maintaining providers in their community. The following definition is from the regulations: means the value in arms-length transactions, consistent with the general 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. While CMS has indicated that the presence of losses does not automatically call into question an arrangements commercial reasonableness, the agency noted that each arrangement or transactions circumstances will ultimately determine its commercial reasonableness. Fair market value is a pinnacle issue for compliance under the Stark Law and Anti-Kickback Statute. 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 following definition is from the regulations: means the value in arm's-length transactions, consistent with the general market value. Downstream revenue may include referrals for laboratory services, referrals for imaging services, referrals for hospital services, or even referrals to other specialists. Last Name (required) Too often, they have hindered, rather than . Carry out the indicated operation and give your answer with the specified number of significant digits. Some providers in these four specialties may have seen an increase in compensation to reflect their increased workload, while others, those paid salary and shift rates, may not have seen an increase in compensation. The Federal Anti-Kickback Statute, codified at 42 U.S.C. What is Fair Market Value? - Stark Law There are numerous regulatory statutes, such as Stark Law and Anti-Kickback Statute that need to be considered while structuring financial transactions for physicians and other staff to ensure that compensation is within fair market value (FMV) and is commercially reasonable. The reader is also cautioned that this material may not be applicable to, or suitable for, the readers specific circumstances or needs, and may require consideration of nontax and other tax factors if any action is to be contemplated. A "Stark" Difference in Fair Market Value and Commercial Reasonableness Providing additional flexibility related to signature and writing requirements. Note this requires a valuator being able to find enough comparable postings with posted salary offersless than ten is typically not enough. (i) Consistent with the fair market value of . Within the Healthcare industry, there are rules and regulations to ensure that . 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. 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 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. On Wednesday, October 9, HHS proposed highly anticipated reforms to regulations implementing the Physician Self-Referral Law and the Federal Anti-Kickback Statute, as well as related civil . Special Rules for Profit Shares and Productivity Bonuses ( 411.352(i)) a. Website managed by SiteCare.com. 1395 nn) and antikickback statutes (42 U.S.C. 411.354). 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. It says, . An arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.. A comprehensive, but not all inclusive, list of the items covered in the final rule follows. So, while it may require effort, and in some cases could be difficult to achieve, finding fair market value is a must. Fair market value is defined to mean the "value in an arm's length transaction, consistent with general market value of the subject transaction" (42 CFR 411.351). First, it delineated that salary surveys or salary survey percentiles may not be appropriate to use in all circumstances. Which of the following is a government sanction provided under the Stark regulation? Stark 101 for Physicians - KJK | Kohrman Jackson Krantz 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. Non-profit hospitals face additional requirements under the Internal Revenue Code that they must satisfy to maintain their tax-exempt status. Noteworthy 2021 stark law revisions and modifications: specifically areas impacting provider compensation and transactions valuation. The US Court of Appeals for the Third Circuit endorsed two controversial interpretations of the Stark Law's "volume or value" standard, known as the correlation theory and the practice "loss" theory in U.S. ex rel. 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. 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. Under the statute; With the increased rate of mergers and acquisitions, healthcare organizations are vulnerable to federal scrutiny. which allows healthcare organizations to analyze physician compensation arrangements for fair market value and commercial reasonableness instantly. Health Management Associates $260 Million, Kalispell Regional Healthcare $24 Million. PDF Fraud Alert: Physician Compensation Arrangements May Result in Introduction. 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. In June 2022, the United States Department of Health and Human Services Office of Inspector General (HHS OIG) released OIG Advisory Opinion No. The Stark Law (42 U.S.C. The Stark and AKS Final Rules became effective January 19, 2021, with the exception of certain changes to the definition of a group practice that have an effective date of January 1, 2022 to give physician practices time to adjust their compensation methodologies. 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. 411.351. Many of the new and revised regulations apply beyond financial arrangements related to care coordination initiatives, and thus are crucial for all Please join us on September 13 th! These historic reforms became effective January 19, 2021 and are part of HHS's "Regulatory Sprint to . 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. 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. Their concern has been financial, yes, but also an increasing concern of compliance risk. Personal services and management contracts and outcomes-based payments safe harbor creates protection under safe harbor for part-time or intermittent arrangements and arrangements for which total compensation is not known in advanceit eliminates a requirement that part-time arrangements have a schedule of services specifically set out in advance in the agreement. Since the Stark Law was enacted in 1989 this been a compliance concern in the back of the minds of hospital executives. stark law fair market value industry best practice 98810.3;2988 \div 10.3 ; 298810.3;2 significant digits. thousands of dollars) for apartment buildings. 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. For example, in the past some arrangements where physician compensation exceeded professional collections have received considerable scrutiny for commercial reasonableness. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. I. L. Fair market value of health care transactions. 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. 411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. These statutes currently reside under the purview of Centers for Medicare & Medicaid Services (CMS) fraud and abuse laws. Using the example of celebrities above, many contracts with celebrities include a portion of ticket sales to that movie. Anti-Kickback Statute and Stark Law - Constantine Cannon Thanks for reaching out. Limits what qualifies as an ownership or investment interest that is subject to the physician self-referral law. Carnahan Group provides a unique platform. What Is the Stark Law, and How Can You Avoid Violating It? 7. Sign Up for HSG's Physician Strategy News and Notifications on New Thought Leadership, Advanced Practice Provider (APP) Utilization, Fair Market Value and Commercial Reasonableness Opinions, Advanced Practice Provider (APP) Compensation, Download a PDF Version of the Article as Published in AHLAs 2021 Transactions Resource Guide to Share With Your Team, HSG Advisors Expands Consulting Services and Data Analytics Capabilities in Response to National Outpatient Utilization Trend, Creating a Win/Win System of Advanced Practice Provider Oversight, FPM Practice Pearls: HSG Advisors Shares How to Make APP Reviews Mutually Beneficial, Healthcare Provider Compensation in a Post-COVID, New MPFS Reality, Best Practices in Patient Attraction and Retention Strategies. Avoiding Illegal Service Referrals: The Stark Statute Explained In turn, CMS is willing to accept any commercially reasonable methodology that demonstrates compensation is comparable to what is ordinarily paid for services in an arms-length transaction. 6 Mark O. Dietrich, CPA/ABV Stark II -Statutory Guidance Stark Statute - 42 U.S.C. General market value means the price that an asset would bring as the result of bona fide bargaining between well-informed buyers and sellers who are not otherwise in a position to generate business for the other party, or the compensation that would be included in a service agreement as the result of bona fide bargaining between well-informed parties to the agreement who are not otherwise in a position to generate business for the other party, on the date of acquisition of the asset or at the time of the service agreement. 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. 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 primary regulations governing physician compensation arrangements are the Stark Law and AKS. On February 9, 2018, Congress passed and President Trump signed into law H.R. We are uncertain why the commenters believe that it is CMS policy that compensation set at or below the 75th percentile in a salary schedule is always appropriate, and that compensation set above the 75th percentile is suspect, if not presumed inappropriate. 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. CMS Completes Sprint to Modernize the Stark Law-Part III According to CMS, some of the commenters on the Final Rule asserted that, a safe harbor based on a range of values in salary surveys would be consistent with what they stated was established CMS policy that compensation set at or below the 75th percentile in a salary schedule is appropriate and compensation set above the 75th percentile is suspect, if not presumed inappropriate. To these comments CMS responded, For the reasons explained in Phase I, Phase II, and Phase III, we decline to establish the rebuttable presumptions and safe harbors requested by the commenters. Organizations who may have carte blanche physician compensation review policies set at certain thresholds should be careful that the totality of the facts and circumstances support each transaction (versus the entirety of all transactions). Close the income statement accounts with debit balances. \end{matrix} If ever there was a time in which that is true on so many levels, this is it. The Complete Guide to Fair Market Value Under the Stark Regulations A Primer on Fair Market Value - ByrdAdatto Federal physician self-referral prohibition (42 USC 1395nn. Valuation Triage: Stark/Anti-Kickback Valuation Issues within the Allows the electronic health records (EHR) exception to be unending and allows limited donations of cybersecurity that are necessary for EHR, flexible physician payment schedules, and donations of replacement EHR items. Below is a listing of some of the key changes: For those in the physician and APP compensation valuation arena, and for any hospital or health system that compensates a health care provider for administrative and/or professional services (which would be all hospitals and health systems in the country), there are other aspects of the Stark Law revisions that are of particular interest. The same is not true for physicians and other entities when the Stark Law applies. ; (2) How can it be fixed? 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 . Use Superior Corporation's trial balance and financial statements from the previous Work Together exercise. TheregressionequationisY=20.0+7.21XPredictorCoefSECoefTConstant20.0003.22136.21X7.2101.36265.29AnalysisofVarianceSOURCEDFSSRegression141587.3ResidualError7Total851984.1\begin{matrix} Additionally, until now, there has been no codified definition for commercial reasonableness, only limited CMS discussion such as that in the proposed 1998 rule. The following requirements must be [] Finalized a new exception to protect compensation not exceeding an aggregate of $5,000 per calendar year to a physician for the provision of items and services, without the need for a signed written agreement and compensation that is set in advance if certain other conditions are met (i.e., fair market value and does not take into account volume and value of referrals).