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. 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. 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"). 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 . Which of the following is a government sanction provided under the Stark regulation? Not only was the definition of general market value amended, but it was also given three unique definitions related to the context of a specific type of transaction. Instead, it is the impact of the COVID-19 pandemic on the industrys salary and production survey data. 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. Current Definition of General Market Value (42 C.F.R. Federal physician self-referral prohibition (42 USC 1395nn. 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. Fair Market Value and Commercial Reasonableness Applied to Healthcare Transactions. ; (2) How can it be fixed? There is no fair market value calculator that takes in a couple datapoints and spits out a positive or negative fair market value answer. 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. Bottom line, 2021 surveys, based on 2020 data, are likely going to be challenging. Provided additional guidance on key requirements of the exceptions to the Stark Law to make it easier for healthcare providers to take steps to ensure compliance, such as: Guidance on identifying compensation formulas that take into account the volume or value of a physicians referrals. Fair Market Value ( 411.351) C. Group Practices ( 411.352) 1. The Stark law does maintain a definition of fair market value but it does not dictate actual numbers. An arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.. For example, celebrities and professional athletes negotiate contracts without any specific compensation regulations. The Federal Anti-Kickback Statute, codified at 42 U.S.C. 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. This is not to say that organizations and individuals cant achieve high levels of income but it is to say that the aims in healthcare are much different than you might see in investment banking, entertainment industries, or in sporting industries. Jan 2017 - Oct 20225 years 10 months. 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). b. worldservicesgroup.com. The Anti-Kickback Statute, 42 U.S.C. 411.354 Financial relationship, compensation, and ownership or investment interest. Allows agreement participants to reconcile payment variances in compensation arrangements without violation of physician self-referral law. This safe harbor is designed to facilitate improved cybersecurity in health care through donations of cybersecurity technology and services. TheregressionequationisY=20.0+7.21XPredictorCoefSECoefTConstant20.0003.22136.21X7.2101.36265.29AnalysisofVarianceSOURCEDFSSRegression141587.3ResidualError7Total851984.1\begin{matrix} 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. 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. In June 2022, the United States Department of Health and Human Services Office of Inspector General (HHS OIG) released OIG Advisory Opinion No. Interpretation of the "Volume or Value Standard" for Purposes of the Group Practice Regulations ( 411.352(g)) 2. 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). It says, . 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. Providing additional flexibility related to signature and writing requirements. Stark requires that a lease with a referring physician be in writing, signed by both parties, for a term of at least one year, at a fair market value rental rate. 2) Be in writing and signed by both parties. 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. 411.357 Exceptions to the referral prohibition related to compensation arrangements. On the other hand, an arrangement must be considered fair market value in order to be commercially reasonable. 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 . The writing specifies the timeframe for the arrangement, which can be for any period of time and contain a termination clause, provided that the parties enter into only one arrangement for the same items or services during the course of a year. 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. If an appraiser is hired, the appraiser's qualifications and experience must be considered if that appraisal will be relied upon. The following requirements must be bet under this exception: While this exception may be utilized in various situations, it is likely another exception, depending on the arrangement, would be more appropriate. 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. 3 See 42 U.S.C. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); document.getElementById( "ak_js_2" ).setAttribute( "value", ( new Date() ).getTime() ); 9850 Von Allmen Court A factor that is certain to affect fair market value determination during the coming year is not new or revised legislation. B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation . Get ready and roll up your sleeves for the work ahead. The writing specifies the compensation that will be provided under the arrangement. ; . 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. So, while it may require effort, and in some cases could be difficult to achieve, finding fair market value is a must. Grabbing a 2021 survey and finding a percentile might be enough, then again, it might not. Introduction. You can contact me at 865-673-0844. If base or guaranteed compensation does not exceed the 75th percentile for the physicians specialty, as published by a survey source like the Medical Group Management Associations Provider Compensation Survey, then they do not seek a fair market value opinion because they consider the compensation to be fair market value. The same is not true for physicians and other entities when the Stark Law applies. 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. The fact is hospital-owned practices typically lose moneyit is more the rule than the exception. On December 2, 2020, the Centers for Medicare & Medicaid Services ("CMS") finalized long-awaited changes to the rules under the Physician Self-Referral Law, known as the "Stark Law." As discussed in our publication in 2019, CMS proposed the regulatory revisions in part to resolve uncertainty surrounding the terms "commercially reasonable . For example, it is very common for recruitment agencies to publicize the perceived revenue generation of certain specialties. 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. In order to qualify for the recruitment exception, the arrangement must _________________________ . 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. In December 2020, it was stated in the Stark Law Final Rule that the Centers for Medicare & Medicaid Services (CMS) expressly disavowed having any policy that compensation set at or below the 75th percentile of the physician compensation survey data is always appropriate, and that compensation above the 75th percentile is "suspect, if not . Thanks for reaching out. The Stark statute defines "fair market value" as the value in arm's-length transactions, consistent with the general market value and, with respect to rentals or leases, the value of rental property for general commercial purposes (not taking into account intended use . 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 . Removes the timeframe limitations for modifications to the financial terms of a compensation arrangement. 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. The same survey data that many compensation valuators rely on as a central component to their fair market value analysis and opinion. 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 . For example, in the past some arrangements where physician compensation exceeded professional collections have received considerable scrutiny for commercial reasonableness. Thursday, October 20, 2022. Do our losses mean the compensation we are paying, while fair market value, is not commercially reasonable? 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. 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. Value-based arrangements with substantial downside financial risk (at least 5%). 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). 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. These new rules, which significantly amend the existing laws, are a direct result of HHS Regulatory Sprint to Coordinated Care. The waivers, which are numerous and fairly broad, offer health care entities significant flexibility to combat COVID-19 in ways . 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. 411.354 Financial relationship, compensation, and ownership or investment interest. 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. If ever there was a time in which that is true on so many levels, this is it. Likewise, a belief that paying a provider above the 75th percentile is not fair market value is also misplaced. 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? Some of those include organizations that have been charged even with compensation levels that are not above the 90th percentile. 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. If Internal Revenue Services (IRS) determines that the net earnings of a tax-exempt organization are used for private interests of employees, or if their payments exceed FMV, it might result in loss of tax-exempt status. 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. This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. The original content piece along with other guide publications can be accessed here. The case underscores that the OIG cares about technical as well as substantive compliance with the Stark law. New Value-Based Exceptions. Documenting the organizations goals with the arrangement or transaction must be a priority. 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. In addition to fair market value, most applications of the anti-kickback statute and Stark law also require commercial reasonableness. Louisville, Kentucky 40241, 2023 HSG Advisors. An extension has been granted until January 1, 2022 for compliance related to certain changes required in group practice compensation methodologies. Unlike fair market value determination, commercial reasonableness is not as readily determined by standardized methodologies, practices, or sources. 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). Carnahan Group provides a unique platform. With regard to fair market value (FMV), industry best practice suggests that you _____ in order to . 4) Have a payment or salary provision that is reasonable and is at fair market value. the value in an arm's-length transaction that is consistent with general market value. 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. Bob concentrates his . If a hospital is losing three times the national average in its employed primary care practice ask:(1) Why? 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. To accommodate patient surge, a hospital rents office space or equipment from a physician practice at below fair market value or at no charge. 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. A qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. 3. 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. B. Stark Law Exception - Value-Based Arrangements . Too often, they have hindered, rather than . Modified the rule related to profit sharing and productivity bonuses such that distribution of profits from designated. 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. With regard to fair market value (FMV), industry best practice suggests that you ____________________________ in order to better withstand government scrutiny. 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 . The proposed rule would create new, permanent exceptions to the Stark Law for value-based arrangements. Key PYA Takeaway: Since the Stark II, Phase II regulations, CMS has introduced the use of salary surveys to help in determining fair market value compensation, even going so far in the Stark II, Phase III regulations to comment reference to multiple, objective, independently published salary surveys remains a prudent practice for evaluating fair market value. However, salary surveys by themselves may be limited in establishing fair market value. 3) Specify an aggregate payment, which is set in advance. The law provides that "fair market value" is the value in arms' length transactions concerning rentals or leases and the value of a rental property for general commercial purposes. Historically, the concept of a bargained for exchange was primarily handled and managed by financial professionals within the organization. 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. ), 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. 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. HAND Children are the Future. 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). This is the art and the work involved in determining fair market value. \text{Regression} & \text{1} & \text{41587.3}\\ The exception cannot be utilized for the rental of office space though. However, there are a few core concepts that are applicable when establishing fair market value. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. The commenters are incorrect that this is CMS policy. Clearly, from CMS perspective, both referenced policies are misguided. Assessing Fair Market Value. 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. To determine what is commercially reasonable, we first must start with a basic definition. Carnahan Group. 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. Second, downstream financial incentives in healthcare, as in most industries, is extremely hard to quantify. The Stark Law prohibits physicians from referring patients for services to entities in which the physician or _____ has a financial interest. 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. The general market value definitions are: What does it mean for a compensation arrangement to be commercially reasonable? Under the statute; Last Name (required) Health Management Associates $260 Million, Kalispell Regional Healthcare $24 Million. Fraud and Abuse Laws. The arrangement is commercially reasonable (taking into account the nature and scope of the transaction) and furthers the legitimate business purposes of the parties. CMS removed "general market value" from the definition of "fair market value" at 42 C.F.R. A "Stark" Difference in Fair Market Value and Commercial Reasonableness Is Coming in 2021. The Stark Law (42 U.S.C. Local transportation safe harbor was revised to expand mileage limits for rural areas (to 75 miles) and eliminate mileage limits for transporting patients discharged from the hospital to their home. Thus, "compensation substantially above $450,000 per year may be fair market value," according to . 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. What are your goals? 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. bdo.com. The Stark law does maintain a definition of fair market value but it does not dictate actual numbers. Rely on Our Experts for Stark Law and Fair Market Value Matters. Many of the new and revised regulations apply beyond financial arrangements related to care coordination initiatives, and thus are crucial for all As a result, fair market value, commercial reasonableness, and the volume or value standard are separate and distinct requirements, each of which must be satisfied when included in an exception to the physician self-referral law. CMS refers to these three cornerstones of the exceptions to the Stark Law as the Big Three. CMS redefined the Big Three as follows: In addition to the general definition of fair market value above, CMS revisions to the Stark Law also provide definitions of fair market value that are specific to the rental of equipment and the rental of office space. 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. 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. 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. Reflecting on Recent Regulatory Changes to the Stark Law: A Real Estate and Equipment Valuation Perspective, Part 2. This safe harbor is intended to provide greater predictability for model participants and uniformity across models. 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. americanbar.org. Downstream revenue may include referrals for laboratory services, referrals for imaging services, referrals for hospital services, or even referrals to other specialists.