A regular assessment should be conducted to determine if the healthcare transactions are commercially reasonable. As you can see, the definition of fair market value does not provide details with respect to what is fair market value. 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. 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. Grabbing a 2021 survey and finding a percentile might be enough, then again, it might not. 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. The Stark law was initially enacted in 1992 but expanded in . A hospital lends money to a physician practice to offset lost income resulting from the cancellation of elective surgeries to ensure capacity for COVID-19 needs. For example, it is very common for recruitment agencies to publicize the perceived revenue generation of certain specialties. Get ready and roll up your sleeves for the work ahead. The 2021 Stark Law and Anti-Kickback Statute: Fair Market Value and Commercial Reasonableness (American Health Law Association Publication) Noteworthy 2021 stark law revisions and modifications: specifically areas impacting provider compensation and transactions valuation. What are your reasons? 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. Modified the rule related to profit sharing and productivity bonuses such that distribution of profits from designated. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. 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. 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 . Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. 1320a-7b. Suite 201 Last Name (required) 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. 1320a-7b (b) and the regulations and guidance promulgated thereunder. Strategy, market growth, and larger referral bases were not among the examples. CRNAs are only one examplethe same challenges could easily apply to any physician specialty or market. 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). Our fixed asset valuation services serve a variety of purposes for our clients, including: Anti-Kickback Statute and Stark Law Compliance Healthcare Regulatory and Stark Law/Fair Market Value and Commercial Reasonableness attorney. \text{X} & \text{7.210} & \text{1.3626} & \text{5.29}\\\\ B. Stark Law Exception - Value-Based Arrangements . ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide. 411.357 Exceptions to the referral prohibition related to compensation arrangements. What is downstream revenue? Which of the following disclosure protocols should be used by providers when disclosing a Stark violation? Sales of comparable assets: When a real estate agent presents a prospective home seller with a list of recent sales prices for similar nearby homes, known as . An arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.. The following definition is from the regulations: means the value in arm's-length transactions, consistent with the general market value. 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. 411.354 Financial relationship, compensation, and ownership or investment interest. Distribution of Profits Related to Participation in a Value-Based Enterprise; b. Building High-Performing Physician Networks. 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. 7. Answer Choices A. obtain the valuation from legal counsel B. obtain a certified valuation from an expert, third party C. conduct an in-house valuation D. B and C Further, the concept of fair market value has become much more than a financial analysis. document.write(year) 98810.3;2988 \div 10.3 ; 298810.3;2 significant digits. 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. 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. The regulations are part of the HHS Regulatory Sprint to Coordinated Care and . If the AKS is addressing criminal penalties, the consequences include fines up to $25,000 per violation and up to a five-year . 3 See 42 U.S.C. Email (required), Healthcare eNewsletterTax & Assurance eNewsletterWebinars. The primary reasons that the Stark Law prevents organizations and individuals from including downstream revenue are numerous. 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. 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. Contact our expert, Neal D. Barkeratnbaker@hsgadvisors.com or call (502) 814-1189. Attendees may ask questions in advance. 1320a-7b(b), applies to all individuals and companies. Compensation arrangements that are required to be representative of . 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 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. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. recently sold and the following computer output was obtained. Website managed by SiteCare.com. B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation. 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. 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. The services to be performed under the arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates a Federal or State law. Ultimately, valuators likely will have to be creative and look back into past years surveys to evaluate trends and validate current survey data. Assessing Fair Market Value. As an industry, the Life Sciences has nearly uniformly adopted . The Stark Law addressed a legitimate problem. \text{Predictor} & \text{Coef} & \text{SE Coef} & \text{T}\\ 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. 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. Consult with healthcare counsel to review compensation arrangements to identify any structures that take into account the volume or value of referrals or business 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. Due to a complex regulatory environment, an in-depth analysis should be performed to ensure that the healthcare transactions are legally permissible at FMV and are commercially reasonable. 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. (i) Consistent with the fair market value of . If a hospital is losing three times the national average in its employed primary care practice ask:(1) Why? A qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. The Stark law does maintain a definition of fair market value but it does not dictate actual numbers. Civil penalties of the AKS include False Claims Act liability, civil monetary penalties (CMP) and program exclusion, up to $50,000 CMP per violation, and civil assessment of up to three times the amount of kickback. There is no fair market value calculator that takes in a couple datapoints and spits out a positive or negative fair market value answer. 1877nn(h)(3) Value in arms-length transactions, consistent with general market value Rentals or Leases - value of rental property for general commercial purposes, not taking into account its intended use Space Lease - not taking into account the value the lessee or 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. Many individual physicians believe that fair market value is met so long as relevant benchmarks exist. To determine what is commercially reasonable, we first must start with a basic definition. Directions Please join us on September 13 th! 2 Healthcare transactions must be commercially reasonable and should be comparable to what is paid ordinarily for similar services in the area. June 14, 2022; salem witch trials podcast lore Makes clear that signatures may be electronic under the same applicable federal/ state laws while allowing parties to an agreement to obtain the writing requirement documentation within 90 days. CMS is clarifying here that while such a situation (e.g. The writing specifies the compensation that will be provided under the arrangement. bdo.com. 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. As to its civil penalties, the Anti-Kickback Statute includes monetary penalties up to $50,000 per violation, civil . The same is not true for physicians and other entities when the Stark Law applies. \text{The regression equation is}\\ 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. Allows agreement participants to reconcile payment variances in compensation arrangements without violation of physician self-referral law. 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. 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. The Anti-Kickback Statute. Fair Market Value ( 411.351) C. Group Practices ( 411.352) 1. 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. 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. ; (2) How can it be fixed? This has also been true in markets in which the demand and competition for CRNAs has exploded. The key elements of a robust FMV practice continue, however, to evolve. 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. 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. 1 For purposes of this article, "Stark" refers to 42 U.S.C. \text{SOURCE} & \text{DF} & \text{SS}\\ Rather, each case must be evaluated and considered in the context of the situation. 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. Due to a complex regulatory environment, an in-depth analysis should be performed to ensure that the healthcare transactions are legally permissible at FMV and are commercially reasonable. 3. This article is intended to highlight some of the most noteworthy revisions, clarifications, and modifications provided by the Centers for Medicare & Medicaid Services (CMS) through the Stark Law Final Rule and by the Office of Inspector General (OIG) through the Anti-Kickback Statute (AKS) Final Rule. Providing additional flexibility related to signature and writing requirements. 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. The "value-based arrangements exception" to the Stark Law protects value-based arrangements that are set forth in a writing (signed by the parties) that details the following: the value-based activities to be undertaken under the arrangement; how the value-based activities are expected to further the value-based purpose(s) of the VBE; How can we lose so much money and still consider our arrangement commercially reasonable? With regard to fair market value (FMV), industry best practice suggests that you _____ in order to better withstand government scrutiny. 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. A factor that is certain to affect fair market value determination during the coming year is not new or revised legislation. A qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. 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. Which of the following is TRUE about the Stark Law? 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. CMS has stated that compensation between certain percentiles does not provide a safe harbor. 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"). Additionally, until now, there has been no codified definition for commercial reasonableness, only limited CMS discussion such as that in the proposed 1998 rule. 411.362 Additional requirements concerning physician ownership and investment in hospitals. ), 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. The fair market value exception is a compensation exception that is flexible depending on the arrangement. These are two critical questions that must be answered. Within the Healthcare industry, there are rules and regulations to ensure that . Finally, the incentives in a healthcare environment are inherently different than they are in a business venture in other industries. 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. 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. 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. 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 . First, it delineated that salary surveys or salary survey percentiles may not be appropriate to use in all circumstances. 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. 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. A and B - not be conditioned on referrals & allow the physician to establish medical staff membership at other hospitals. J. William Bookwalter, III, M.D. This is the art and the work involved in determining fair market value. Since the Stark Law was enacted in 1989 this been a compliance concern in the back of the minds of hospital executives. The Stark Law prohibits physicians from referring patients for services to entities in which the physician or _____ has a financial interest. 1395nn, and the regulations and guidance promulgated thereunder. In doing so, CMS offered helpful commentary for health care entities structuring real estate arrangements. These historic reforms became effective January 19, 2021 and are part of HHS's "Regulatory Sprint to . On January 19, long-awaited adjustments to the Centers for Medicare and Medicaid Services' ("CMS") Physician Self-Referral Law (commonly referred to as the "Stark Law") and the Department of Health and Human Services Office of Inspector General's ("OIG") Anti-Kickback Statute ("AKS") took effect that make it easier for hospitals and health systems to transition from volume . In what situation is a written agreement NOT required under Stark? Specifically, the aim of healthcare delivery is to provide high-quality care, high levels of access, and at the most cost-effective price. Non-profit hospitals face additional requirements under the Internal Revenue Code that they must satisfy to maintain their tax-exempt status. With the increased rate of mergers and acquisitions, healthcare organizations are vulnerable to federal scrutiny. Government scrutiny around healthcare transactions has heightened in recent years due to an increase in the volume of violations of healthcare fraud and abuse laws. Likewise, a belief that paying a provider above the 75th percentile is not fair market value is also misplaced. They are: (a) the lease agreement must be in writing; (b) the . For example, in the past some arrangements where physician compensation exceeded professional collections have received considerable scrutiny for commercial reasonableness. 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. Home Fair Market Value and Commercial Reasonableness Applied to Healthcare Transactions, An Informational Article 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 .