Email (required), Healthcare eNewsletterTax & Assurance eNewsletterWebinars. The writing specifies the compensation that will be provided under the arrangement. 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. 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. Non-profit hospitals face additional requirements under the Internal Revenue Code that they must satisfy to maintain their tax-exempt status. 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. 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. 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. The Stark law was initially enacted in 1992 but expanded in . United States. There is no fair market value calculator that takes in a couple datapoints and spits out a positive or negative fair market value answer. Many of the changes in the Stark Law are aimed at eliminating regulatory restrictions that could deter or even potentially eliminate some novel arrangements as the industry continues its move towards a value-based health care system. 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. The primary regulations governing physician compensation arrangements are the Stark Law and AKS. et al. 1320a-7b. Which of the following disclosure protocols should be used by providers when disclosing a Stark violation? The commenters are incorrect that this is CMS policy. Clearly, from CMS perspective, both referenced policies are misguided. 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. 7. All Rights Reserved. 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. 5, A regular assessment should be conducted to determine if the healthcare transactions are commercially reasonable. The commercial division of a real estate firm is conducting a regression analysis of the relationship The compensation must be set in advance, consistent with fair market value, and not determined in a manner that takes into account the volume or value of referrals or other business generated by the referring physician. New Value-Based Exceptions. Fair market value is a pinnacle issue for compliance under the Stark Law and Anti-Kickback Statute. Fair Market Value and Commercial Reasonableness Applied to Healthcare Transactions. 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 . 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. Our fixed asset valuation services serve a variety of purposes for our clients, including: Anti-Kickback Statute and Stark Law Compliance The key elements of a robust FMV practice continue, however, to evolve. The Stark Law safe harbor provision has seven components. Reflecting on Recent Regulatory Changes to the Stark Law: A Real Estate and Equipment Valuation Perspective, Part 2. 4) Have a payment or salary provision that is reasonable and is at fair market value. Specialties like critical care, hospital medicine, emergency medicine, and pulmonary medicine may have experienced increases in patient volume due to the pandemic. b. Unlike the civil nature of Stark Law, the Anti-Kickback Statute is under both civil (administrative) and criminal laws. This safe harbor is intended to provide greater predictability for model participants and uniformity across models. 1395 nn) and antikickback statutes (42 U.S.C. 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. In some cases, the alignment between compensation and production may be distorted. They go as follows: Cost or selling price: If the item has been recently bought or sold, that can be a good indicator of its fair market value. 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 . Referring to survey data regarding practice losses per physician and per provider can be enlightening. Posted on October 27, 2016August 15, 2022. Federal physician self-referral prohibition (42 USC 1395nn. \text{The regression equation is}\\ Too often, they have hindered, rather than . Looking for help navigating the Stark Law Final Rule? Stark Law provides this definition: The term "fair market value" means the value in arm's length transactions, consistent with the general market value(42 USC 1395nn) 42 CFR 411.351 -"general market value" means the price that an asset would bring or that would be included in a So, while it may require effort, and in some cases could be difficult to achieve, finding fair market value is a must. 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. which allows healthcare organizations to analyze physician compensation arrangements for fair market value and commercial reasonableness instantly. It is, however, often the best information that one can find. 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. Among the many changes in the Stark Law final rule, the following are some of the most significant: 1. This piece concludes with thoughts regarding the COVID-19 pandemics effect on the immediate future of physician and APP compensation valuation. 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. A significant part of compliance with Stark and Anti-Kickback is the concept of Fair Market Value. 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 is defined to mean the "value in an arm's length transaction, consistent with general market value of the subject transaction" (42 CFR 411.351). 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. 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. 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. This site rocks the Pearsonified Skin for Thesis. Current Definition of General Market Value (42 C.F.R. An extension has been granted until January 1, 2022 for compliance related to certain changes required in group practice compensation methodologies. The AKS Final Rule creates new safe harbors for entities participating in a value-based enterprise (VBE) and amends existing safe harbors. 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. J. William Bookwalter, III, M.D. There are four basic methods of determining fair market value. In addition, CMS removed the "volume or value" and the "other business generated" standards . 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. 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. 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. 2) Be in writing and signed by both parties. 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 . 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. 411.354). stark law fair market value industry best practice. Current, Three-Part Definition of Fair Market Value (42 C.F.R. 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. The regulations will become effective January 19, 2021, with one exception. 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. Fair Market Value (FMV) This safe harbor is designed to facilitate improved cybersecurity in health care through donations of cybersecurity technology and services. Carnahan Group provides a unique platform. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); PYA Repeats Forbes Listing as a Top Tax and Accounting Firm in the Nation, PYA: Healthcare Consulting, Audit & Accounting, Financial Institutions Audit & Accounting, Alternative Payment Model Design & Strategy. 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. 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. The Anti-Kickback Statute (AKS), 42 U.S.C. 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. Thanks for reaching out. 411.354 Financial relationship, compensation, and ownership or investment interest. Distribution of Profits Related to Participation in a Value-Based Enterprise; b. Carnahan Group. We also believe there has to be a limit to what is reasonable in terms of losses. The following requirements must be [] Introduction. ; (2) How can it be fixed? 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. The fact is hospital-owned practices typically lose moneyit is more the rule than the exception. 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. The same survey data that many compensation valuators rely on as a central component to their fair market value analysis and opinion. 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). The Department of Health and Human Services has released extensive and significant revised final rules governing the Physician Self-Referral Law 1 (the Stark law) and the Medicare Anti-Kickback Statute 2 (AKS) in furtherance of its efforts to create a more hospitable regulatory climate for innovation in health care. CRNAs are only one examplethe same challenges could easily apply to any physician specialty or market. This article was originally published by the American Health Law Association in April 2021 as part of their 2021 Health Care Transactions Resource Guide. 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. This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. 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. 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 . With regard to fair market value (FMV), industry best practice suggests that you _____ in order to better withstand government scrutiny. Many of these reasons are out of the hospital or health systems control. Provided additional guidance on key requirements of the exceptions to the Stark Law to make it easier for healthcare providers to take steps to ensure compliance, such as: Guidance on identifying compensation formulas that take into account the volume or value of a physicians referrals. 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. 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. 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. 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. 411.362 Additional requirements concerning physician ownership and investment in hospitals. 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. Chapter 25. 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 . These new rules, which significantly amend the existing laws, are a direct result of HHS Regulatory Sprint to Coordinated Care. ; . 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). New Arrangement Best Practices Consult with a valuation expert on whether financial arrangements satisfy the new Stark Law fair market value and commercial reasonableness standards. To accommodate patient surge, a hospital rents office space or equipment from a physician practice at below fair market value or at no charge. A general journal is given in the Working Papers. A regular assessment should be conducted to determine if the healthcare transactions are commercially reasonable. 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. Value-based arrangements with substantial downside financial risk (at least 5%). 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. Industry stakeholders have informed us that, because the consequences of noncompliance with the Stark Law are so dire, physicians and other healthcare providers may be discouraged from entering into innovative arrangements that would improve . recently sold and the following computer output was obtained. What are your reasons? 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. The proposed rule would create new, permanent exceptions to the Stark Law for value-based arrangements. <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. At the advent of the Stark regulations, the federal law placed the referral of prosthetics (as defined by state Medicaid laws . Noteworthy 2021 stark law revisions and modifications: specifically areas impacting provider compensation and transactions valuation. You can contact me at 865-673-0844. 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 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. 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 Which of the following are exceptions under Stark? Limits what qualifies as an ownership or investment interest that is subject to the physician self-referral law. Some of those include organizations that have been charged even with compensation levels that are not above the 90th percentile. 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. For more information on Stark Law Exceptions, see our dedicated page. The Stark law does maintain a definition of fair market value but it does not dictate actual numbers. 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. This would be incorrect. I. L. Fair market value of health care transactions. Health Management Associates $260 Million, Kalispell Regional Healthcare $24 Million. The arrangement is commercially reasonable (taking into account the nature and scope of the transaction) and furthers the legitimate business purposes of the parties. 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. 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. Guidance on reconciliation of payment variances. 411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. A factor that is certain to affect fair market value determination during the coming year is not new or revised legislation. 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. Interested in learning about what is a referral? In the interim, for more information regarding these matters, contact a PYA executive below at (800) 270-9629. Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. Louisville, Kentucky 40241, 2023 HSG Advisors. \text{SOURCE} & \text{DF} & \text{SS}\\ worldservicesgroup.com. Healthcare Regulatory and Stark Law/Fair Market Value and Commercial Reasonableness attorney. 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. 1320a-7b(b), applies to all individuals and companies. 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. The CMS Self-Referral Disclosure Protocol (SRDP). For example, celebrities and professional athletes negotiate contracts without any specific compensation regulations. 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. Refines when a physician practice is required to sign a recruitment agreement between a hospital and a physician as well as timing issues for arrangements between a physician and non-physician practitioner (NPP) when a hospital is involved in compensating the NPP. 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. 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. The case underscores that the OIG cares about technical as well as substantive compliance with the Stark law. Rely on Our Experts for Stark Law and Fair Market Value Matters. 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. The U.S. Department of Health and Human Services (HHS) adopted certain regulatory leasing safe harbors for both the Anti-Kickback Statute, commonly referred to as the "space rental safe harbor," and Stark Law, commonly referred to as the "office space rental exception.". 411.356 Exceptions to the referral prohibition related to ownership or investment interests.