The fair market value exception is a compensation exception that is flexible depending on the arrangement. Thanks for reaching out. Bob concentrates his . We also think this is an appropriate reflection and representation of what CMS recognized and articulated when it said: It is not CMS policy that salary surveys necessarily provide an accurate determination of fair market value in all cases.. 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. 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. A qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. 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. 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. All Rights Reserved. To accommodate patient surge, a hospital rents office space or equipment from a physician practice at below fair market value or at no charge. 6 Mark O. Dietrich, CPA/ABV Stark II -Statutory Guidance Stark Statute - 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 Sec. Attendees may ask questions in advance. Y=20.0 + 7.21X\\\\ Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. While this exception may be utilized in some instances, it is likely organizations will utilize the employment exception or personal services exception. First, it delineated that salary surveys or salary survey percentiles may not be appropriate to use in all circumstances. Downstream revenue may include referrals for laboratory services, referrals for imaging services, referrals for hospital services, or even referrals to other specialists. 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. Rather, each case must be evaluated and considered in the context of the situation. bdo.com. Grabbing a 2021 survey and finding a percentile might be enough, then again, it might not. Carnahan Group provides a unique platform. This would be incorrect. On the other hand, an arrangement must be considered fair market value in order to be commercially reasonable. That determination may be fairly conservative and well within a reasonable range, but if said physician is the second of two medical directors for this service and the duties are already handled by the first medical director so the second is not needed, then the $150 per hour medical directorship, while fair market value is not commercially reasonable. For example, celebrities and professional athletes negotiate contracts without any specific compensation regulations. Bottom line, 2021 surveys, based on 2020 data, are likely going to be challenging. The regulations are part of the HHS Regulatory Sprint to Coordinated Care and . CMS Completes Sprint to Modernize the Stark Law-Part III Rely on Our Experts for Stark Law and Fair Market Value Matters. Stark Law - an overview | ScienceDirect Topics Cybersecurity technology and services safe harbor for remuneration in the form of cybersecurity technology and services. CMS' stated purpose is to establish bright-line, objective regulations that would be more easily applied. 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. Fair Market Value (FMV) The Anti-Kickback Statute (AKS), 42 U.S.C. 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. CMS Sprints to Overhaul Stark | Insights | Davis Wright Tremaine The AKS Final Rule creates new safe harbors for entities participating in a value-based enterprise (VBE) and amends existing safe harbors. Again, job posting sites have been invaluable to determining fair market value for high-demand services. For bona fide employment as long as all other requirements are met. 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. J. William Bookwalter, III, M.D. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. HHS OIG Issues Advisory Opinion on Continuing Medical Education, Stark 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. 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. Non-profit hospitals face additional requirements under the Internal Revenue Code that they must satisfy to maintain their tax-exempt status. What are your reasons? The arrangement is commercially reasonable (taking into account the nature and scope of the transaction) and furthers the legitimate business purposes of the parties. B. Stark Law Exception - Value-Based Arrangements . Unfortunately though, although certain information is useful for business planning purposes, it is irrelevant for the purpose of establishing fair market value and compensation paid to a physician. To determine what is commercially reasonable, we first must start with a basic definition. What is Fair Market Value? - Stark Law Specifically, the aim of healthcare delivery is to provide high-quality care, high levels of access, and at the most cost-effective price. Fair Market Value ( 411.351) C. Group Practices ( 411.352) 1. Consult with healthcare counsel to review compensation arrangements to identify any structures that take into account the volume or value of referrals or business White Paper: Value-Based Safe Harbors and Exceptions to the Anti Record the following closing entries on page 19 of the general journal. 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. 7. This site rocks the Pearsonified Skin for Thesis. You can contact me at 865-673-0844. The Stark Law prohibits physicians from referring patients for services to entities in which the physician or _____________________________ has a financial interest. What are your goals? Another key Stark Law change that will certainly influence fair market value and commercial reasonableness opinion approach and deliverable is the uncoupling or disentanglement of the volume or value standard (and the other business generated standard) from the definitions of fair market value and commercial reasonableness. The Stark Truth About the Stark Law: Part I | AAFP which allows healthcare organizations to analyze physician compensation arrangements for fair market value and commercial reasonableness instantly. 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. Building High-Performing Physician Networks. Stark Law: Isolated Transactions -- 411.357(f) - Bricker 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. Establishing fair market value physician compensation in a - MGMA Avoiding Illegal Service Referrals: The Stark Statute Explained nbaker@hsgadvisors.com or call (502) 814-1189. 3. There are a myriad of reasons that hospital-owned practices lose moneyhigher practice costs, poor revenue cycle operations, mismatched compensation incentives, poor management, etc. 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. 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). Referring to survey data regarding practice losses per physician and per provider can be enlightening. Via the Final Rule, CMS has also indicated that salary surveys, regardless of percentile, are not automatic determinates of fair market value, stating, Consulting salary schedules or other hypothetical data is an appropriate starting point in the determination of fair market value, and in many cases, it may be all that is required. The commercial division of a real estate firm is conducting a regression analysis of the relationship Robert Wade - Partner - Nelson Mullins Riley & Scarborough | LinkedIn 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. Noteworthy 2021 stark law revisions and modifications: specifically areas impacting provider compensation and transactions valuation. Suite 201 Chapter 25. The Anti-Kickback Statute, 42 U.S.C. Arrangements for patient engagement and support to improve quality, health outcomes, and efficiency. 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. the value in an arm's-length transaction that is consistent with general market value. 411.362 Additional requirements concerning physician ownership and investment in hospitals. However, since the law was enacted in 1989, the regulations implementing it have become woefully outdated. This revenue generation includes downstream revenue. New Exceptions for Value-Based Arrangements - Epstein Becker & Green, P.C. This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. Clinical Fair Market Value: Why it's essential and what - IQVIA B and C only - False Claims Act liability & Exclusion from the Medicare and Medicaid programs. The Stark Law prohibits physicians from referring a patient to an entity with which the physician has a financial relationship when the referral is for the furnishing of certain designated health services (e.g., lab, PT, OT, radiology, DME . The following definition is from the regulations: means the value in arm's-length transactions, consistent with the general market value. 411.353 Prohibition on certain referrals by physicians and limitations on billing. The law makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive anything of value (not just money) in order to induce or reward referrals or the generation of business paid for by federal healthcare programs. This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. \text{Constant} & \text{20.000} & \text{3.2213} & \text{6.21}\\ 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. What is downstream revenue? Proceduralists such as dermatologists, orthopedic surgeons, ophthalmologists, otolaryngologists, plastic surgeons, urologists, etc. 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. 98810.3;2988 \div 10.3 ; 298810.3;2 significant digits. Although many compensation arrangements are legitimate, a compensation arrangement may violate the anti-kickback statute if even one purpose of the arrangement is to Stark Law Changes: Hospitals Need to Revisit Physician Compensation 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. et al. \text{Predictor} & \text{Coef} & \text{SE Coef} & \text{T}\\ The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. 411.357 Exceptions to the referral prohibition related to compensation arrangements. 411.357 Exceptions to the referral prohibition related to compensation arrangements. Jana will be discussing the Stark Law changes, and Angie will be providing related valuation examples during the September 13, 2022 Let's Talk Compliance webinar entitled Stark Law Changes and Impact on Physician Compensation Part 2. Sec. Regulatory Sprint: Understanding the Impact on the Stark Law, Anti 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. A and B - not be conditioned on referrals & allow the physician to establish medical staff membership at other hospitals. CMS removed "general market value" from the definition of "fair market value" at 42 C.F.R. ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide. 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. Second, downstream financial incentives in healthcare, as in most industries, is extremely hard to quantify. Structuring legally compliant hospital-physician leases and establishing fair market value (FMV) rental rates can be challenging. This has also been true in markets in which the demand and competition for CRNAs has exploded. With the increased rate of mergers and acquisitions, healthcare organizations are vulnerable to federal scrutiny. The original content piece along with other guide publications can be accessed here. Under the statute; Healthcare Fair Market Valuation Methods that are Proven | ValueScope Financial arrangements should be based on comparable data and should be set in advance by members who have no conflict of interests. A qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. 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. Developing your contracts and fair market value Spidey sense for 201 East Fifth Street Suite 1110 Cincinnati, OH 45202-4152 t: 513.870.6700 f: 513.870.6699. info@bricker.com. 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. Many hospitals and health systems across the country have drawn a line in the sand and set a base compensation threshold at the 75th percentile for physician compensation. Medical Director Compensation and Compliance - HG.org Under the Stark Law, one of the critical elements of compliance for many exceptions includes the requirement that the financial arrangement is representative of fair market value.

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