For the past 30 years, a key consideration for health care organizations entering into transactions and arrangements for the employment and compensation of physicians has been the profitability of the practices in which the physicians, their staff, and other practicerelated resources are housedor more precisely the losses of the practices in which physicians and APPs are housed. Documenting the organizations goals with the arrangement or transaction must be a priority. The Stark law prohibits a physician with a financial relationship in an entity from making a referral for designated health services covered by Medicare and Medicaid to that entity even if the services are billed to an individual or other third party payer. You can contact me at 800-270-9629. For example, in the past some arrangements where physician compensation exceeded professional collections have received considerable scrutiny for commercial reasonableness. What are your goals? ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide. Website managed by SiteCare.com. Unlike the civil nature of Stark Law, the Anti-Kickback Statute is under both civil (administrative) and criminal laws. Louisville, Kentucky 40241, 2023 HSG Advisors. 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{SOURCE} & \text{DF} & \text{SS}\\ 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. Looking for help navigating the Stark Law Final Rule? Always engage a competent appraiser who understands the Stark definition of fair market value and be sure the appraisal report addresses that. A qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. 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 . et al. However, since the law was enacted in 1989, the regulations implementing it have become woefully outdated. Proceduralists such as dermatologists, orthopedic surgeons, ophthalmologists, otolaryngologists, plastic surgeons, urologists, etc. Since the Stark Law was enacted in 1989 this been a compliance concern in the back of the minds of hospital executives. 411.357 Exceptions to the referral prohibition related to compensation arrangements. Healthcare Regulatory and Stark Law/Fair Market Value and Commercial Reasonableness attorney. 4 See 42 CFR 411.354. Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. 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. For bona fide employment as long as all other requirements are met. In fact, studies done by the government in the 1980s and early 1990s discovered that this was a real issue and it not only represented a significant increase in costs but also created significant patient risk. between x, annual gross rents (in thousands of dollars), and y, selling price (in Finalized protection for arrangements that will apply regardless of whether the parties operate in a fee-for-service or value-based payment system, such as donations of cybersecurity technology. 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. Three new safe harbors for remuneration exchanged between or among participants in value-based arrangements: Value-based arrangements with full financial risk. This revenue generation includes downstream revenue. In reading CMS comments in the Federal Register, there is no doubt that CMS views each case as unique and there is not a set formula or methodology for determining fair market value. For additional questions or comments regarding this article or other valuation issues, please contact John Meindl, Manager, VMG Health, at 972-616-7813, or john . This article was originally published by the American Health Law Association in April 2021 as part of their 2021 Health Care Transactions Resource Guide. Bottom line, 2021 surveys, based on 2020 data, are likely going to be challenging. healthlawyers.org. 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. New "Fair Market Value" and "General Market Value" Definitions. Although many compensation arrangements are legitimate, a compensation arrangement may violate the anti-kickback statute if even one purpose of the arrangement is to 6 Carnahan Group provides a unique platform FMVMD,which allows healthcare organizations to analyze physician compensation arrangements for fair market value and commercial reasonableness instantly. Structuring legally compliant hospital-physician leases and establishing fair market value (FMV) rental rates can be challenging. Care coordination arrangements to improve quality, health outcomes, and efficiency without requiring the parties to assume any financial risk. What is downstream revenue? This site rocks the Pearsonified Skin for Thesis. Sec. 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. 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. 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. 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 . B. Stark Law Exception - Value-Based Arrangements . 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. A regular assessment should be conducted to determine if the healthcare transactions are commercially reasonable. Using the example of celebrities above, many contracts with celebrities include a portion of ticket sales to that movie. In addition, CMS removed the "volume or value" and the "other business generated" standards . This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. 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. Barnes & Thornburg LLP. 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. 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 new Stark rule revises this, stating the fair . These are two critical questions that must be answered. 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. 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. On the other hand, an arrangement must be considered fair market value in order to be commercially reasonable. As an industry, the Life Sciences has nearly uniformly adopted . 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. 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. This has also been true in markets in which the demand and competition for CRNAs has exploded. stark law fair market value industry best practice. 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. 411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. Previous Definition of Fair Market Value (42 U.S.C. Value-based arrangements with substantial downside financial risk (at least 5%). Our fixed asset valuation services serve a variety of purposes for our clients, including: Anti-Kickback Statute and Stark Law Compliance 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 Stark Law addressed a legitimate problem. The three types of transactions are asset acquisition, compensation, and rental of equipment or office space. In doing so, CMS offered helpful commentary for health care entities structuring real estate arrangements. 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) Be in writing and signed by both parties. The Anti-Kickback Statute. CMS has stated that compensation between certain percentiles does not provide a safe harbor. 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. With regard to fair market value (FMV), industry best practice suggests that you _____ in order to better withstand government scrutiny. 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. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. \text{Predictor} & \text{Coef} & \text{SE Coef} & \text{T}\\ In what situation is a written agreement NOT required under Stark? In order to qualify for the recruitment exception, the arrangement must _________________________ . 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 . 1395nn, and the regulations and guidance promulgated thereunder.
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