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. Previous Definition of Fair Market Value (42 U.S.C. 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. While this exception may be utilized in some instances, it is likely organizations will utilize the employment exception or personal services exception. A qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. The exception cannot be utilized for the rental of office space though. This is especially true given that scrutiny has increased greatly over the past decade, with the government taking aim at fraud and questionable arrangements and more fervently enforcing the Stark Law and Anti-Kickback Statute (AKS). 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. 1395nn). In 2004, CMS noted that valuation methods under Stark Law "must exclude valuation where the parties to the transaction are at arms-length but in a position to refer each other." 6 Because FMV under Stark Law does not "necessarily comport with the usage of the term in standard valuation techniques and methodologies," 7 a purely market . 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. If an appraiser is hired, the appraiser's qualifications and experience must be considered if that appraisal will be relied upon. We also think this is an appropriate reflection and representation of what CMS recognized and articulated when it said: It is not CMS policy that salary surveys necessarily provide an accurate determination of fair market value in all cases.. 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. 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. CMS' stated purpose is to establish bright-line, objective regulations that would be more easily applied. 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. I. L. Fair market value of health care transactions. ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. TheregressionequationisY=20.0+7.21XPredictorCoefSECoefTConstant20.0003.22136.21X7.2101.36265.29AnalysisofVarianceSOURCEDFSSRegression141587.3ResidualError7Total851984.1\begin{matrix} 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. The Stark and AKS Final Rules became effective January 19, 2021, with the exception of certain changes to the definition of a group practice that have an effective date of January 1, 2022 to give physician practices time to adjust their compensation methodologies. The writing specifies the timeframe for the arrangement, which can be for any period of time and contain a termination clause, provided that the parties enter into only one arrangement for the same items or services during the course of a year. It says, . Which of the following are exceptions under Stark? 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. That determination may be fairly conservative and well within a reasonable range, but if said physician is the second of two medical directors for this service and the duties are already handled by the first medical director so the second is not needed, then the $150 per hour medical directorship, while fair market value is not commercially reasonable. 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 safe harbor is intended to provide greater predictability for model participants and uniformity across models. In other words, the rate of compensation set forth in a salary survey may not always be identical to the worth of a particular physicians services. This is something that we have experienced from time to time for uniquely trained or experienced physicians and/or challenging markets, but more recently and frequently for Certified Registered Nurse Anesthetists (CRNAs) who practice autonomouslyusually in rural markets. The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment or tax advice or opinion provided by Carnahan Group to the reader. Fair Market Value Exception - Stark Law Consult with healthcare counsel to review compensation arrangements to identify any structures that take into account the volume or value of referrals or business The concept of fair market value under the Stark Law is different than the concept of fair market value in an otherwise normal business arrangement (where parties do realize they can generate business for one another). 411.356 Exceptions to the referral prohibition related to ownership or investment interests. Introduction. Many of these reasons are out of the hospital or health systems control. Developing your contracts and fair market value Spidey sense for 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. 411.354 Financial relationship, compensation, and ownership or investment interest. Local transportation safe harbor was revised to expand mileage limits for rural areas (to 75 miles) and eliminate mileage limits for transporting patients discharged from the hospital to their home. 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. 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 regulations are part of the HHS Regulatory Sprint to Coordinated Care and . Stark 101 for Physicians - KJK | Kohrman Jackson Krantz 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 The general market value definitions are: What does it mean for a compensation arrangement to be commercially reasonable? Referring to survey data regarding practice losses per physician and per provider can be enlightening. Expands the 411.357(1) exception to fair market value payments for rental office space, notably when the arrangement is for less than one year. 2 A discussion of Stark's application to Medicaid claims is beyond the scope of this broad overview. Specifically, the Final Rule includes new or modified regulatory definitions for the terms "commercially reasonable," "fair market value," and "general market value" as well as terms particular to the definition of a "Group Practice." Many hospitals and health systems across the country have drawn a line in the sand and set a base compensation threshold at the 75th percentile for physician compensation. Chapter 25. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); document.getElementById( "ak_js_2" ).setAttribute( "value", ( new Date() ).getTime() ); 9850 Von Allmen Court Interested in learning about what is a referral? Special Rules for Profit Shares and Productivity Bonuses ( 411.352(i)) a. In what situation is a written agreement NOT required under Stark? Changes to Stark Law Definitions Impact Innovative Relationships and Instead, it is the impact of the COVID-19 pandemic on the industrys salary and production survey data. The fact is hospital-owned practices typically lose moneyit is more the rule than the exception. 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 . 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. \text{X} & \text{7.210} & \text{1.3626} & \text{5.29}\\\\ This has required abandoning, or at least augmenting, traditional surveys with anesthesia-related job posting sites to find comparable salary offerings and ranges. 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. 1320a-7b. \text{Residual} & \text{Error} & \text{7}\\ CMS Waives Stark Law Limits to Hospital-Physician Arrangements During Carnahan Group provides a unique platform. 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). Grabbing a 2021 survey and finding a percentile might be enough, then again, it might not. CMS Limits Isolated Transactions Exception | Jones Day 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 Anti-Kickback Statute (AKS), 42 U.S.C. CMS Makes Things Nonexclusive: Immediate Changes to the Stark Law Will Avoiding Illegal Service Referrals: The Stark Statute Explained 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. Stark Law Final Rule Summary - Strategic Management Services, LLC PDF HD0070020 CMS Stark Law Regulations - Dorsey Cybersecurity technology and services safe harbor for remuneration in the form of cybersecurity technology and services. 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? Sec. Many of the new and revised regulations apply beyond financial arrangements related to care coordination initiatives, and thus are crucial for all Close the income statement accounts with debit balances. Strategy, market growth, and larger referral bases were not among the examples. Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. The case underscores that the OIG cares about technical as well as substantive compliance with the Stark law. According to CMS, some of the commenters on the Final Rule asserted that, a safe harbor based on a range of values in salary surveys would be consistent with what they stated was established CMS policy that compensation set at or below the 75th percentile in a salary schedule is appropriate and compensation set above the 75th percentile is suspect, if not presumed inappropriate. To these comments CMS responded, For the reasons explained in Phase I, Phase II, and Phase III, we decline to establish the rebuttable presumptions and safe harbors requested by the commenters. See our dedicated page. 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. New "Fair Market Value" and "General Market Value" Definitions. The reader is also cautioned that this material may not be applicable to, or suitable for, the readers specific circumstances or needs, and may require consideration of nontax and other tax factors if any action is to be contemplated. As an industry, the Life Sciences has nearly uniformly adopted . 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. Looking for help navigating the Stark Law Final Rule? J. William Bookwalter, III, M.D. On the other hand, an arrangement must be considered fair market value in order to be commercially reasonable. If a payment is made that cannot be shown to have been fair . 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. Also, a quantitative analysis of revenue cycle should be conducted to determine if the anticipated transaction acquires any referrals during the process and to ensure that healthcare organization complies with the regulatory statutes. The 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. United States. 2021 Stark Law and Anti-Kickback Statute: Fair Market Value Impact | HSG Which of the following is a government sanction provided under the Stark regulation? First, it delineated that salary surveys or salary survey percentiles may not be appropriate to use in all circumstances. 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. The AKS Final Rule creates new safe harbors for entities participating in a value-based enterprise (VBE) and amends existing safe harbors. Non-profit hospitals face additional requirements under the Internal Revenue Code that they must satisfy to maintain their tax-exempt status. \end{matrix} Use Superior Corporation's trial balance and financial statements from the previous Work Together exercise. Structuring legally compliant hospital-physician leases and establishing fair market value (FMV) rental rates can be challenging. \text{SOURCE} & \text{DF} & \text{SS}\\ The writing specifies the compensation that will be provided under the arrangement. There are numerous laws across the country that have been created to remove this unethical practice. 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. Surviving Fair Market Value & Commercial Reasonableness Thresholds Included in the changes are definitions and special rules related to: (1) commercial reasonableness, (2) the volume or value standard and other business generated standard, and (3) fair market value and . The reader should contact his or her Carnahan Group or other tax professional prior to taking any action based upon this information. 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. 411.353 Prohibition on certain referrals by physicians and limitations on billing. 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. What are your reasons? Compensation arrangements that are required to be representative of . The fair market value exception is a compensation exception that is flexible depending on the arrangement. The Stark law was initially enacted in 1992 but expanded in . 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. May 10, 2022 at 11:37 AM 6 minute read 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. Their concern has been financial, yes, but also an increasing concern of compliance risk. ; (2) How can it be fixed? Financial arrangements should be based on comparable data and should be set in advance by members who have no conflict of interests. The Anti-Kickback Statute. Clinical Fair Market Value: Why it's essential and what - IQVIA var today = new Date() Noteworthy 2021 stark law revisions and modifications: specifically areas impacting provider compensation and transactions valuation. 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. Ultimately, valuators likely will have to be creative and look back into past years surveys to evaluate trends and validate current survey data. Compliance - Stark Law Flashcards | Quizlet 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. A significant part of compliance with Stark and Anti-Kickback is the concept of Fair Market Value. Proceduralists such as dermatologists, orthopedic surgeons, ophthalmologists, otolaryngologists, plastic surgeons, urologists, etc. On November 20, 2020, the U.S. Department of Health and Human Services (HHS) published Final Rules for the Physician Self-Referral Law (Stark Law), the federal AKS, and the Civil Monetary Penalties (CMP) Law. ; and (3) Does it mean the compensation is not commercially reasonable? With regard to fair market value (FMV), industry best practice suggests that you _____ in order to . These Stark Law updates may not alter the approach to production of a compensation fair market value and commercial reasonableness opinion (i.e., we are still going to consult industry salary surveys), but it certainly has us doubling down on the lengths to which we go to describe and document the uniqueness of a provider, the market, or the situation. Second, downstream financial incentives in healthcare, as in most industries, is extremely hard to quantify. Healthcare Fair Market Valuation Methods that are Proven | ValueScope New Exceptions for Value-Based Arrangements - Epstein Becker & Green, P.C. 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? A Stark violation is punishable by civil money penalties; an anti-kickback violation is punishable by exclusion from federal health care programs, criminal penalties of up to $25,000 in fines or . Federal physician self-referral prohibition (42 USC 1395nn. 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. 22-14.HHS OIG was responding to a written request for an advisory opinion regarding a proposed continuing medical education program for local optometrists conducted by an ophthalmology group practice and four potential funding options for the programs.