The new Stark rule revises this, stating the fair . Building High-Performing Physician Networks. \text{Analysis} & \text{of} & \text{Variance}\\\\ With the increased rate of mergers and acquisitions, healthcare organizations are vulnerable to federal scrutiny. ), 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. which allows healthcare organizations to analyze physician compensation arrangements for fair market value and commercial reasonableness instantly. 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 Stark Law defines FMV as "the value in arm's length transactions, consistent with general market value". CRNAs are only one examplethe same challenges could easily apply to any physician specialty or market. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. 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. For example, it is very common for recruitment agencies to publicize the perceived revenue generation of certain specialties. americanbar.org. If ever there was a time in which that is true on so many levels, this is it. First Name (required) \text{Total} & \text{8} & \text{51984.1}\\ Many of these reasons are out of the hospital or health systems control. 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. Among the many changes in the Stark Law final rule, the following are some of the most significant: 1. In the Court's opinion, the excess payments would violate the Stark Law and would make claims made to Medicare for those services false claims. "General market value" is the compensation that would be included in a service agreement as the result of bona fide bargaining between well-informed parties who are not otherwise in a position to generate business for the other . 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. 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. Sec. The three types of transactions are asset acquisition, compensation, and rental of equipment or office space. 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. An arrangement may be renewed any number of times if the terms of the arrangement and the compensation for the same items or services do not change. Non-profit hospitals face additional requirements under the Internal Revenue Code that they must satisfy to maintain their tax-exempt status. However, we agree with the commenter that asserted that a hospital may find it necessary to pay a physician above what is in the salary schedule, especially where there is a compelling need for the physicians services. Despite the request and urging of commenters, CMS declined to establish rebuttable presumptions that compensation is fair market value or safe harbors that would deem compensation to be fair market value if certain conditions are met. Bottom line, CMS affirmed that there is no guarantee to fair market value determinationthere is no universal formula or proverbial rubberstamp as it pertains to provider compensation. Referring to survey data regarding practice losses per physician and per provider can be enlightening. 411.354). Thanks for reaching out. ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide. Healthcare Regulatory and Stark Law/Fair Market Value and Commercial Reasonableness attorney. Looking for help navigating the Stark Law Final Rule? 1 For purposes of this article, "Stark" refers to 42 U.S.C. 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. 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. Q. 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. The Stark law was initially enacted in 1992 but expanded in . The Stark law does maintain a definition of fair market value but it does not dictate actual numbers. For more information on Stark Law Exceptions, see our dedicated page. 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. With respect to the rental of office space, fair market value means the value in an arms-length transaction of rental property for general commercial purposes (not taking into account its intended use), without adjustment to reflect the additional value the prospective lessee or lessor would attribute to the proximity or convenience to the lessor where the lessor is a potential source of patient referrals to the lessee, and consistent with the general market value of the subject transaction. 4) Have a payment or salary provision that is reasonable and is at 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. It is, however, often the best information that one can find. Healthcare transactions must be commercially reasonable and should be comparable to what is paid ordinarily for similar services in the area. A qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. The original content piece along with other guide publications can be accessed here. Cybersecurity technology and services safe harbor for remuneration in the form of cybersecurity technology and services. This has required abandoning, or at least augmenting, traditional surveys with anesthesia-related job posting sites to find comparable salary offerings and ranges. between x, annual gross rents (in thousands of dollars), and y, selling price (in Thus, "compensation substantially above $450,000 per year may be fair market value," according to . According to CMS, we continue to believe that the fair market value of a transactionand particularly, compensation for physician servicesmay not always align with published valuation data compilations, such as salary surveys. Introduction. The waivers, which are numerous and fairly broad, offer health care entities significant flexibility to combat COVID-19 in ways . CMS removed "general market value" from the definition of "fair market value" at 42 C.F.R. With respect to the rental of equipment, fair market value means the value in an arms-length transaction of rental property for general commercial purposes (not taking into account its intended use), consistent with the general market value of the subject transaction. 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. Distribution of Profits Related to Participation in a Value-Based Enterprise; b. The following definition is from the regulations: means the value in arms-length transactions, consistent with the general market value. 1320a-7b (b) and the regulations and guidance promulgated thereunder. Using the example of celebrities above, many contracts with celebrities include a portion of ticket sales to that movie. Warranties safe harbor was modified to revise the definition of warranty and provide protection for bundled warranties for one or more items and related services provided they are paid for under the same payment. Additionally, until now, there has been no codified definition for commercial reasonableness, only limited CMS discussion such as that in the proposed 1998 rule. 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. This is the art and the work involved in determining fair market value. On February 9, 2018, Congress passed and President Trump signed into law H.R. 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. (i) Consistent with the fair market value of . There is no fair market value calculator that takes in a couple datapoints and spits out a positive or negative fair market value answer. 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. 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. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. bdo.com. Again, job posting sites have been invaluable to determining fair market value for high-demand services. "General market value" means the price that an asset would bring as the result of bona fide . Special Rules for Profit Shares and Productivity Bonuses ( 411.352(i)) a. Modified the rule related to profit sharing and productivity bonuses such that distribution of profits from designated. Carnahan Group. 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 . 6 Mark O. Dietrich, CPA/ABV Stark II -Statutory Guidance Stark Statute - 42 U.S.C. Within the Healthcare industry, there are rules and regulations to ensure that . For example, the guaranteed compensation for a physician under an employment arrangement would have to be at levels consistent with what other physicians make within those specialties. The CMS Final Rule implements changes to the Stark Law and offers several clarifying provisions related to key Stark Law terms and concepts. Compensation arrangements that are required to be representative of . The Federal Anti-Kickback Statute, codified at 42 U.S.C. 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. Fair market value is a pinnacle issue for compliance under the Stark Law and Anti-Kickback Statute. 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"). Record the following closing entries on page 19 of the general journal. Documentation of all aspects of relationship. 2 A discussion of Stark's application to Medicaid claims is beyond the scope of this broad overview. 1395 nn) and antikickback statutes (42 U.S.C. The same survey data that many compensation valuators rely on as a central component to their fair market value analysis and opinion. 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 . 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 . The fact is hospital-owned practices typically lose moneyit is more the rule than the exception. 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. They must demonstrate that the net earnings of a tax-exempt organization are not used for private interests of employees and are used for the benefit of the community as a whole. 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. Current, Three-Part Definition of Fair Market Value (42 C.F.R. 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. 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. Too often, they have hindered, rather than . That is a topic for another day. 1395nn). Jan 2017 - Oct 20225 years 10 months. Documenting the organizations goals with the arrangement or transaction must be a priority. Previous Definition of Fair Market Value (42 U.S.C. 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. document.write(year) For example, in the past some arrangements where physician compensation exceeded professional collections have received considerable scrutiny for commercial reasonableness. 411.354 Financial relationship, compensation, and ownership or investment interest. Directions This has also been true in markets in which the demand and competition for CRNAs has exploded. 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. stark law fair market value industry best practice. 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. 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. recently sold and the following computer output was obtained. \text{X} & \text{7.210} & \text{1.3626} & \text{5.29}\\\\ Removes the timeframe limitations for modifications to the financial terms of a compensation arrangement. 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. Financial arrangements should be based on comparable data and should be set in advance by members who have no conflict of interests. First, it delineated that salary surveys or salary survey percentiles may not be appropriate to use in all circumstances. Rely on Our Experts for Stark Law and Fair Market Value Matters. 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. B and C only - False Claims Act liability & Exclusion from the Medicare and Medicaid programs. A regular assessment should be conducted to determine if the healthcare transactions 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. At the advent of the Stark regulations, the federal law placed the referral of prosthetics (as defined by state Medicaid laws . The fair market value exception is a compensation exception that is flexible depending on the arrangement. 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). 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. 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). 5. In order to qualify for the recruitment exception, the arrangement must _________________________ . The Final Rule provided key guidance on the "Big 3" Stark Law requirements of (1) fair market value; (2) commercial reasonableness; and (3) the volume or value of referrals. Compliant compensation methodologies: Advanced Stark. 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? If a payment is made that cannot be shown to have been fair . A general journal is given in the Working Papers. 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 arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission. As an offshoot to periodic reviews of PSAs, Ms. Walsh says every component of the PSA must be recorded and documented to ensure both parties are . What are your goals? <p> Fair Market Value (FMV) has become an industry standard in accordance with regulations and statutes such as the US Sunshine Act, False Claims Act, and Anti-Kickback Statute, as well as international transparency reporting and anti-corruption legislations. 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 . There are numerous regulatory statutes, such as Stark Law and Anti-Kickback Statute that need to be considered while structuring financial transactions for physicians and other staff to ensure that compensation is within fair market value (FMV) and is commercially reasonable. 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 . General market value is the compensation that would be included in a service agreement as the result of bona fide bargaining between well-informed parties who are not otherwise in a position to generate business for the other party. 1892, the Bipartisan Budget Act of 2018 (the "Budget Act"), which included changes to the federal physician self-referral law (commonly known as the "Stark law").Among these revisions are allowing indefinite holdovers in two notable exceptions to the Stark law: (1) personal services arrangements and (2 . Unlike fair market value determination, commercial reasonableness is not as readily determined by standardized methodologies, practices, or sources. All Rights Reserved. Barnes & Thornburg LLP. What is downstream revenue? Some providers in these four specialties may have seen an increase in compensation to reflect their increased workload, while others, those paid salary and shift rates, may not have seen an increase in compensation. Its criminal penalties include fines up to $25,000 per violation, and up to 5 years in federal prison. 4, 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.