Last Name (required) Fair Market Value (FMV) 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). Typical compensation per Work Relative Value Unit rates could be significantly off from traditional levels for given specialties. This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. Ultimately, valuators likely will have to be creative and look back into past years surveys to evaluate trends and validate current survey data. 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. 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. TheregressionequationisY=20.0+7.21XPredictorConstantXAnalysisSOURCERegressionResidualTotalCoef20.0007.210ofDF1Error8SECoef3.22131.3626VarianceSS41587.3751984.1T6.215.29. 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. 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. Fraud and Abuse Laws. The primary reasons that the Stark Law prevents organizations and individuals from including downstream revenue are numerous. HSG has written articles about practice losses and how to address them. Instead, it is the impact of the COVID-19 pandemic on the industrys salary and production survey data. The regulations are part of the HHS Regulatory Sprint to Coordinated Care and . 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. Unlike the civil nature of Stark Law, the Anti-Kickback Statute is under both civil (administrative) and criminal laws. 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). Fair market value is a pinnacle issue for compliance under the Stark Law and Anti-Kickback Statute. As CMS stated, In our view, each compensation arrangement is different and must be evaluated based on its unique factors. Virtually every provider compensation exception under the Stark Law requires that the compensation paid reflects fair market value. An arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.. So, while it may require effort, and in some cases could be difficult to achieve, finding fair market value is a must. The Anti-Kickback Statute (AKS), 42 U.S.C. Therefore, the analysis is recommended to be conducted by an independent valuation expert to establish a value that is consistent with independently published surveys that are comparable for similar services. 3) Specify an aggregate payment, which is set in advance. 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. The proposed rule would create new, permanent exceptions to the Stark Law for value-based arrangements. 5. Record the following closing entries on page 19 of the general journal. This revenue generation includes downstream revenue. In the final Stark rule, despite being asked by commenters, CMS specifically refused to establish a rebuttable presumption or safe harbor that guaranteed an arrangement was within fair market value if the arrangements compensation was set at a certain salary survey percentile. First, fair market value is based purely on the personally performed services of a physician and not based upon any downstream revenue for the entity or business generated between the parties. Which of the following is a government sanction provided under the Stark regulation? 411.354 Financial relationship, compensation, and ownership or investment interest. Attendees may ask questions in advance. 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. Guidance on reconciliation of payment variances. As to its civil penalties, the Anti-Kickback Statute includes monetary penalties up to $50,000 per violation, civil . Assessing Fair Market Value. The regulations will become effective January 19, 2021, with one exception. thousands of dollars) for apartment buildings. nbaker@hsgadvisors.com or call (502) 814-1189. 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). "General market value" means the price that an asset would bring as the result of bona fide . 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. There are four basic methods of determining fair market value. Which of the following are exceptions under Stark? \text{X} & \text{7.210} & \text{1.3626} & \text{5.29}\\\\ The case underscores that the OIG cares about technical as well as substantive compliance with the Stark law. Because of increased enforcement, it is very common for organizations to work with legal professionals who specialize in fair market value and the Stark Law for the purpose of creating compliant and defensible financial arrangements. 2) Be in writing and signed by both parties. 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. The argument is that but for the celebrity being in the movie the consumer would not purchase the ticket. 98810.3;2988 \div 10.3 ; 298810.3;2 significant digits. 4) Have a payment or salary provision that is reasonable and is at fair market value. 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. The original content piece along with other guide publications can be accessed here. To determine what is commercially reasonable, we first must start with a basic definition. 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 writing specifies the compensation that will be provided under the arrangement. Providing additional flexibility related to signature and writing requirements. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. For example, it is very common for recruitment agencies to publicize the perceived revenue generation of certain specialties. Provides new exceptions for value-based compensation arrangements that meet certain financial risk requirements and provides new definitions for value-based activity; value-based arrangement; value-based enterprise (VBE); value-based purpose; VBE participant; and target patient population. Reflecting on Recent Regulatory Changes to the Stark Law: A Real Estate and Equipment Valuation Perspective, Part 2. The Federal Anti-Kickback Statute, codified at 42 U.S.C. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. healthlawyers.org. which allows healthcare organizations to analyze physician compensation arrangements for fair market value and commercial reasonableness instantly. Three new safe harbors for remuneration exchanged between or among participants in value-based arrangements: Value-based arrangements with full financial risk. 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. All Rights Reserved. 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. 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. They are: (a) the lease agreement must be in writing; (b) the . 7. 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. 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. 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. B and C only - False Claims Act liability & Exclusion from the Medicare and Medicaid programs. Get ready and roll up your sleeves for the work ahead. Email (required), Healthcare eNewsletterTax & Assurance eNewsletterWebinars. If an appraiser is hired, the appraiser's qualifications and experience must be considered if that appraisal will be relied upon. Not that CMS made it easy by providing a bright line or even a floor that would allow us to say, if we go above this level, then we must get a formal thirty-party fair market value opinion. According to CMS, We wish to be perfectly clear that nothing in our commentary was intended to imply that an independent valuation is required for allcompensation 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. Special Rules for Profit Shares and Productivity Bonuses ( 411.352(i)) a. 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. 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. Fair Market Value ( 411.351) C. Group Practices ( 411.352) 1. var year = today.getFullYear() 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. 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. 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. Thanks for reaching out. A "Stark" Difference in Fair Market Value and Commercial Reasonableness Is Coming in 2021. The Anti-Kickback Statute, 42 U.S.C. If the AKS is addressing criminal penalties, the consequences include fines up to $25,000 per violation and up to a five-year . \text{Analysis} & \text{of} & \text{Variance}\\\\ 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. 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. between x, annual gross rents (in thousands of dollars), and y, selling price (in HIPAA Compliance 03: Privacy Rule Introduction, Administrative, Physical and Technical Safegu, Compliance - Documentation, Billing and Reimb, HIPAA Compliance 04: Protected Health Informa, Calculus for Business, Economics, Life Sciences and Social Sciences, Karl E. Byleen, Michael R. Ziegler, Michae Ziegler, Raymond A. Barnett, Fundamentals of Engineering Economic Analysis, David Besanko, Mark Shanley, Scott Schaefer. 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. What is downstream revenue? 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. 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. Historically, the concept of a bargained for exchange was primarily handled and managed by financial professionals within the organization. Please join us on September 13 th! Usually, the fair market price is the price at which bona fide sales have been consummated for assets of like type, quality, and quantity in a particular market at the time of acquisition, or the compensation that has been included in bona fide service agreements with comparable terms at the time of the agreement, where the price or compensation has not been determined in any manner that takes into account the volume or value of anticipated or actual referrals. Louisville, Kentucky 40241, 2023 HSG Advisors. Noteworthy 2021 stark law revisions and modifications: specifically areas impacting provider compensation and transactions valuation. The general market value definitions are: What does it mean for a compensation arrangement to be commercially reasonable? 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. This field is for validation purposes and should be left unchanged. What are your reasons? The Stark Law addressed a legitimate problem. 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. CRNAs are only one examplethe same challenges could easily apply to any physician specialty or market.