Proceduralists such as dermatologists, orthopedic surgeons, ophthalmologists, otolaryngologists, plastic surgeons, urologists, etc. CMS removed "general market value" from the definition of "fair market value" at 42 C.F.R. Stark Law provides this definition: The term "fair market value" means the value in arm's length transactions, consistent with the general market value(42 USC 1395nn) 42 CFR 411.351 -"general market value" means the price that an asset would bring or that would be included in a There is no fair market value calculator that takes in a couple datapoints and spits out a positive or negative fair market value answer. \text{Analysis} & \text{of} & \text{Variance}\\\\ The best practice that a health system can adopt for establishing financial arrangements without getting penalized is consulting with a third-party valuation expert to not only rationalize the compensation rate, but to justify the community need. New "Fair Market Value" and "General Market Value" Definitions. However, since the law was enacted in 1989, the regulations implementing it have become woefully outdated. Specifically, the Final Rule includes new or modified regulatory definitions for the terms "commercially reasonable," "fair market value," and "general market value" as well as terms particular to the definition of a "Group Practice." 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. ), 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. B and C only - False Claims Act liability & Exclusion from the Medicare and Medicaid programs. First Name (required) 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. Arrangements for patient engagement and support to improve quality, health outcomes, and efficiency. Using the example of celebrities above, many contracts with celebrities include a portion of ticket sales to that movie. 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. Interpretation of the "Volume or Value Standard" for Purposes of the Group Practice Regulations ( 411.352(g)) 2. Noteworthy 2021 stark law revisions and modifications: specifically areas impacting provider compensation and transactions valuation. Thursday, October 20, 2022. In healthcare, the patient would have received the care regardless of the physician and the complexity of healthcare with patients moving to different sites of service and within different specialties creates impossible scenarios for tracking who is responsible for what. Many organizations are frequently asking: Do we have greater compliance risk because our practices are losing money according to our internal financial statements and accounting? 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. 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. 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. 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). What are your goals? which allows healthcare organizations to analyze physician compensation arrangements for fair market value and commercial reasonableness instantly. Carnahan Group assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. 411.354 Financial relationship, compensation, and ownership or investment interest. Bob concentrates his . Use Superior Corporation's trial balance and financial statements from the previous Work Together exercise. Again, job posting sites have been invaluable to determining fair market value for high-demand services. See our dedicated page. 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. 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. 2 A discussion of Stark's application to Medicaid claims is beyond the scope of this broad overview. Among the many changes in the Stark Law final rule, the following are some of the most significant: 1. As an industry, the Life Sciences has nearly uniformly adopted . 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"). 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. Utilizing our extensive experience in fair market value compensation, commercial reasonableness, and physician compensation planning/ strategy, PYA will continue to analyze the final Stark regulations and bring you additional updates and important information. 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. Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. 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. The Stark Law safe harbor provision has seven components. These statutes currently reside under the purview of Centers for Medicare & Medicaid Services (CMS) fraud and abuse laws. How can we lose so much money and still consider our arrangement commercially reasonable? 411.354 Financial relationship, compensation, and ownership or investment interest. 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. The Final Rule of the Stark Law revises the definitions of Fair Market Value and includes a definition of General Market Value to better align with actual practices without unduly restricting innovative relationships between physicians and entities providing designated health services. The arrangement is in writing, signed by the parties, and covers only identifiable items or services, all of which are specified in writing. Last Name (required) HAND Children are the Future. 5, A regular assessment should be conducted to determine if the healthcare transactions are 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. So, while it may require effort, and in some cases could be difficult to achieve, finding fair market value is a must. 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. 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). Fair market value is a pinnacle issue for compliance under the Stark Law and Anti-Kickback Statute. Further, even if the physician under the arrangement is paid, in part, based upon his or her productivity, any rates under those models must be consistent with benchmark data. ; . Care coordination arrangements to improve quality, health outcomes, and efficiency without requiring the parties to assume any financial risk. Close the income statement accounts with debit balances. 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 . As to its civil penalties, the Anti-Kickback Statute includes monetary penalties up to $50,000 per violation, civil . These historic reforms became effective January 19, 2021 and are part of HHS's "Regulatory Sprint to . 1320a-7b (b) and the regulations and guidance promulgated thereunder. \text{SOURCE} & \text{DF} & \text{SS}\\ The following definition is from the regulations: means the value in arms-length transactions, consistent with the general market value. 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. 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. On November 20, 2020, the U.S. Department of Health and Human Services (HHS) published Final Rules for the Physician Self-Referral Law (Stark Law), the federal AKS, and the Civil Monetary Penalties (CMP) Law. 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. Health Management Associates $260 Million, Kalispell Regional Healthcare $24 Million. Looking for help navigating the Stark Law Final Rule? With regard to fair market value (FMV), industry best practice suggests that you _____ in order to . 7. What is downstream revenue? The final rule creates new exceptions to the Stark Law for value-based arrangements that satisfy specified requirements based on the characteristics of the arrangement and the level of financial risk assumed by the . 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. 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. B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation. An extension has been granted until January 1, 2022 for compliance related to certain changes required in group practice compensation methodologies. 3. 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. 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. Their concern has been financial, yes, but also an increasing concern of compliance risk. 411.351. between x, annual gross rents (in thousands of dollars), and y, selling price (in The answer to that question has often been more elusive and not as immediately apparent as fair market valueand we know how nebulous and elusive fair market value can be at times. ; ; 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. Barnes & Thornburg LLP. In the interim, for more information regarding these matters, contact a PYA executive below at (800) 270-9629. 3 See 42 U.S.C. Office-based primary care has been significantly affected as offices were closed for a period of time and then had to adjust to telehealth and virtual visits. Compliant compensation methodologies: Advanced Stark. The following definition is from the regulations: means the value in arm's-length transactions, consistent with the general market value. With respect to the rental of equipment, 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), consistent with the general market value of the subject transaction. Compensation arrangements that are required to be representative of . Downstream revenue may include referrals for laboratory services, referrals for imaging services, referrals for hospital services, or even referrals to other specialists. We also believe there has to be a limit to what is reasonable in terms of losses. This piece concludes with thoughts regarding the COVID-19 pandemics effect on the immediate future of physician and APP compensation valuation. Note this requires a valuator being able to find enough comparable postings with posted salary offersless than ten is typically not enough. The commenters are incorrect that this is CMS policy. Clearly, from CMS perspective, both referenced policies are misguided. 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. The regulations are part of the HHS Regulatory Sprint to Coordinated Care and . 411.357 Exceptions to the referral prohibition related to compensation arrangements. Limits what qualifies as an ownership or investment interest that is subject to the physician self-referral law. 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. <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. \text{X} & \text{7.210} & \text{1.3626} & \text{5.29}\\\\ For example, if a physician is paid at the 75th percentile under a specific survey then fair market value must be met. For example, it is very common for recruitment agencies to publicize the perceived revenue generation of certain specialties. "General market value" means the price that an asset would bring as the result of bona fide . Please join us on September 13 th! Louisville, Kentucky 40241, 2023 HSG Advisors. This is especially true given that scrutiny has increased greatly over the past decade, with the government taking aim at fraud and questionable arrangements and more fervently enforcing the Stark Law and Anti-Kickback Statute (AKS). 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. 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). The new Stark rule revises this, stating the fair . Although many compensation arrangements are legitimate, a compensation arrangement may violate the anti-kickback statute if even one purpose of the arrangement is to Fair Market Value and Commercial Reasonableness Applied to Healthcare Transactions. Sec. Posted on October 27, 2016August 15, 2022. 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. For example, celebrities and professional athletes negotiate contracts without any specific compensation regulations. On February 9, 2018, Congress passed and President Trump signed into law H.R. This field is for validation purposes and should be left unchanged. The exception cannot be utilized for the rental of office space though. Fraud and Abuse Laws. While this exception may be utilized in some instances, it is likely organizations will utilize the employment exception or personal services exception. 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. Many individual physicians believe that fair market value is met so long as relevant benchmarks exist. The same is not true for physicians and other entities when the Stark Law applies. 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. 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. 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. Typical compensation per Work Relative Value Unit rates could be significantly off from traditional levels for given specialties. To accommodate patient surge, a hospital rents office space or equipment from a physician practice at below fair market value or at no charge. 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. Bottom line, 2021 surveys, based on 2020 data, are likely going to be challenging. 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.
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