Below is a listing of some of the key changes: For those in the physician and APP compensation valuation arena, and for any hospital or health system that compensates a health care provider for administrative and/or professional services (which would be all hospitals and health systems in the country), there are other aspects of the Stark Law revisions that are of particular interest. I. L. Fair market value of health care transactions. First Name (required) 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. 411.354 Financial relationship, compensation, and ownership or investment interest. Too often, they have hindered, rather than . CMS is clarifying here that while such a situation (e.g. Bottom line, 2021 surveys, based on 2020 data, are likely going to be challenging. 411.351. 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. 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. 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. On March 30, 2020, the Centers for Medicare & Medicaid Services (CMS) issued blanket waivers to the Stark Law that permit certain arrangements between physicians and health care providers implemented in response to COVID-19 that would otherwise violate the Stark Law. Arrangements for patient engagement and support to improve quality, health outcomes, and efficiency. 411.362 Additional requirements concerning physician ownership and investment in hospitals. Website managed by SiteCare.com. 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. 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. 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. 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. Carry out the indicated operation and give your answer with the specified number of significant digits. Referring to survey data regarding practice losses per physician and per provider can be enlightening. Which of the following disclosure protocols should be used by providers when disclosing a Stark violation? 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. 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. 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. Fair market value is a pinnacle issue for compliance under the Stark Law and Anti-Kickback Statute. 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. Jan 2017 - Oct 20225 years 10 months. The commercial division of a real estate firm is conducting a regression analysis of the relationship Contact our expert, Neal D. [email protected] or call (502) 814-1189. 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. 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. 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. 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 arrangement is in writing, signed by the parties, and covers only identifiable items or services, all of which are specified in writing. A qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. Close the income statement accounts with debit balances. 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.. 1395nn, and the regulations and guidance promulgated thereunder. If a hospital is losing three times the national average in its employed primary care practice ask:(1) Why? Factors affecting the specific company risk of a practice can include the physician's age, specialty, location, market position, payer mix, payer contracts, size, and other factors. In addition to fair market value, most applications of the anti-kickback statute and Stark law also require commercial reasonableness. This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. If ever there was a time in which that is true on so many levels, this is it. The anti-kickback regulations apply only to services reimbursed by Medicare or Medicaid. J. William Bookwalter, III, M.D. Typical compensation per Work Relative Value Unit rates could be significantly off from traditional levels for given specialties. This safe harbor is designed to facilitate improved cybersecurity in health care through donations of cybersecurity technology and services. This is the art and the work involved in determining fair market value. 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. Data were collected on several properties Eliminating the period of disallowance rules and correcting discrepancies during the arrangement. For the past 30 years, a key consideration for health care organizations entering into transactions and arrangements for the employment and compensation of physicians has been the profitability of the practices in which the physicians, their staff, and other practicerelated resources are housedor more precisely the losses of the practices in which physicians and APPs are housed. Always engage a competent appraiser who understands the Stark definition of fair market value and be sure the appraisal report addresses that. To determine what is commercially reasonable, we first must start with a basic definition. CMS' stated purpose is to establish bright-line, objective regulations that would be more easily applied. Allows agreement participants to reconcile payment variances in compensation arrangements without violation of physician self-referral law. 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. Second, downstream financial incentives in healthcare, as in most industries, is extremely hard to quantify. 57 The amended provisions are for the Stark Law exceptions for academic medical centers, bona fide employment relationships, personal service arrangements, certain physician incentive plans, group practice arrangements with a hospital, fair market value compensation, indirect compensation arrangements, and the new exception for limited . The key elements of a robust FMV practice continue, however, to evolve. With the increased rate of mergers and acquisitions, healthcare organizations are vulnerable to federal scrutiny. The three types of transactions are asset acquisition, compensation, and rental of equipment or office space. 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. Further, the concept of fair market value has become much more than a financial analysis. The exception permits both monetary and nonmonetary remuneration between the parties. What is downstream revenue? Limits what qualifies as an ownership or investment interest that is subject to the physician self-referral law. T. Z, R. C. Healthcare Valuation Series: A look at fair market value and commercial reasonableness. 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 . 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. Unlike fair market value determination, commercial reasonableness is not as readily determined by standardized methodologies, practices, or sources. 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. The AKS Final Rule creates new safe harbors for entities participating in a value-based enterprise (VBE) and amends existing safe harbors. Within the Healthcare industry, there are rules and regulations to ensure that . We also believe there has to be a limit to what is reasonable in terms of losses. 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. This has also been true in markets in which the demand and competition for CRNAs has exploded. 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.". Finalized a new exception to protect compensation not exceeding an aggregate of $5,000 per calendar year to a physician for the provision of items and services, without the need for a signed written agreement and compensation that is set in advance if certain other conditions are met (i.e., fair market value and does not take into account volume and value of referrals). Under the statute; 7. Use Superior Corporation's trial balance and financial statements from the previous Work Together exercise. 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. On December 2, 2020, OIG published its Final Rule, Revisions to the Safe Harbors Under the Anti-Kickback Statute and Rules Regarding Beneficiary Inducements, and CMS published its Final Rule, Modernizing and Clarifying the Physician Self-Referral Regulations in the Federal Register. Directions To accommodate patient surge, a hospital rents office space or equipment from a physician practice at below fair market value or at no charge. 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 following definition is from the regulations: means the value in arm's-length transactions, consistent with the general market value. For most Stark Law exceptions to apply, a(n) ___________________ is required. Additionally, until now, there has been no codified definition for commercial reasonableness, only limited CMS discussion such as that in the proposed 1998 rule. 1 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. 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 . thousands of dollars) for apartment buildings. 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. 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 . 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. 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. 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). 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. 3 See 42 U.S.C. B. Stark Law Exception - Value-Based Arrangements . We are uncertain why the commenters believe that it is CMS policy that compensation set at or below the 75th percentile in a salary schedule is always appropriate, and that compensation set above the 75th percentile is suspect, if not presumed inappropriate. Introduction. 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. stark law fair market value industry best practice. Q. 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. HHS, through the Regulatory Sprint to Coordinated Care, has a stated goal of reducing regulatory barriers within our nations health care system and accelerating the transformation of the health care system into one that better pays for value and promotes care coordination. As HHS statement indicates, value-based arrangements and transactions are the focus of this episode of Stark Law and AKS revisions, but other areas and central ideas of the Stark Law and AKS are significantly impacted as well. Value-based arrangements with substantial downside financial risk (at least 5%). The argument is that but for the celebrity being in the movie the consumer would not purchase the ticket. 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 fact is hospital-owned practices typically lose moneyit is more the rule than the exception. For example, celebrities and professional athletes negotiate contracts without any specific compensation regulations. The Federal Anti-Kickback Statute, codified at 42 U.S.C. Removes the timeframe limitations for modifications to the financial terms of a compensation arrangement.
