Healthcare employment contracts must: 1) Have a duration of at least a year. Compensation arrangements that are required to be representative of . 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. As to its civil penalties, the Anti-Kickback Statute includes monetary penalties up to $50,000 per violation, civil . 411.354). The exception cannot be utilized for the rental of office space though. The "value-based arrangements exception" to the Stark Law protects value-based arrangements that are set forth in a writing (signed by the parties) that details the following: the value-based activities to be undertaken under the arrangement; how the value-based activities are expected to further the value-based purpose(s) of the VBE; 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. HAND Children are the Future. As stated above in our discussion of fair market value, CMS continues to make it clear that the commercial reasonableness determination is also accomplished through consideration of an arrangements context and from the perspective of those involved. With the increased rate of mergers and acquisitions, healthcare organizations are vulnerable to federal scrutiny. Contact our expert, Neal D. Barkeratnbaker@hsgadvisors.com or call (502) 814-1189. Guidance on reconciliation of payment variances. The previous definition of fair market value stated that physician compensation "must be set in advance, consistent with fair market value, and not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.". A regular assessment should be conducted to determine if the healthcare transactions are commercially reasonable. CMS indicated that many of the changes to the Stark Law rules are intended to provide new flexibility and reduce administrative burden on health care organizations and providers in the structuring of arrangements, making it easier and less expensive to comply with the Stark Law. Finalized new, permanent exceptions for value-based arrangements that will permit physicians and other health care providers to enter into value-based arrangements without fear that their legitimate activities to better coordinate care, improve quality, and lower costs would violate the Stark Law. 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. The general market value definitions are: What does it mean for a compensation arrangement to be commercially reasonable? 411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. health services directly attributable to a physicians participation in a value-based arrangement are deemed not to take into account the volume or value of the physicians referrals. 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. 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. Proceduralists such as dermatologists, orthopedic surgeons, ophthalmologists, otolaryngologists, plastic surgeons, urologists, etc. The Stark Law prohibits physicians from referring patients for services to entities in which the physician or _____________________________ has a financial interest. The Anti-Kickback Statute (AKS), 42 U.S.C. Which of the following disclosure protocols should be used by providers when disclosing a Stark violation? They are: (a) the lease agreement must be in writing; (b) the . between x, annual gross rents (in thousands of dollars), and y, selling price (in 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. For a vast number of health care entities, employment of physicians and APPs is the only option for attracting and maintaining providers in their community. The three types of transactions are asset acquisition, compensation, and rental of equipment or office space. For example, it is very common for recruitment agencies to publicize the perceived revenue generation of certain specialties. Data were collected on several properties Louisville, Kentucky 40241, 2023 HSG Advisors. Assessing Fair Market Value. 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. 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. Among the many changes in the Stark Law final rule, the following are some of the most significant: 1. While this exception may be utilized in some instances, it is likely organizations will utilize the employment exception or personal services exception. 411.354). In the final Stark rule, despite being asked by commenters, CMS specifically refused to establish a rebuttable presumption or safe harbor that guaranteed an arrangement was within fair market value if the arrangements compensation was set at a certain salary survey percentile. 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. 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. Formally establishes a definition of commercial reasonableness, while deleting outdated Stark Law references and updating key definitions such as fair market value, designated health services, physician, referral, remuneration, and transaction. Website managed by SiteCare.com. Whether it's an outright acquisition or a lease or service agreement, and whether it is the business or the underlying tangible assets (real estate and equipment), the transaction must be consistent with Fair Market Value. v. UPMC et al.In particular, the court held that the relators had made out a plausible allegation of an indirect compensation . Do our losses mean the compensation we are paying, while fair market value, is not commercially reasonable? You can contact me at 800-270-9629. 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 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. 411.357 Exceptions to the referral prohibition related to compensation arrangements. 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. Bob concentrates his . 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. CMS' stated purpose is to establish bright-line, objective regulations that would be more easily applied. CMS is clarifying here that while such a situation (e.g. There are numerous laws across the country that have been created to remove this unethical practice. 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? This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation . Download a PDF Version of the Article as Published in AHLA's 2021 . 7. 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. ; and (3) Does it mean the compensation is not commercially reasonable? In some cases, the alignment between compensation and production may be distorted. 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. 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. Modifying the definition of set in advance used in many Stark exceptions to allow modification of compensation during the term of an arrangement (including in the first year). 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. In reading CMS comments in the Federal Register, there is no doubt that CMS views each case as unique and there is not a set formula or methodology for determining fair market value. 411.353 Prohibition on certain referrals by physicians and limitations on billing. 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. Healthcare Regulatory and Stark Law/Fair Market Value and Commercial Reasonableness attorney. 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). stark law fair market value industry best practice. The reason the simplicity of this is not correct is that many lawsuits and government enforcement actions have established what are the risks associated with fair market value. 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. 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. Eliminating the period of disallowance rules and correcting discrepancies during the arrangement. There are a myriad of reasons that hospital-owned practices lose moneyhigher practice costs, poor revenue cycle operations, mismatched compensation incentives, poor management, etc. For more information on Stark Law Exceptions, see our dedicated page. which allows healthcare organizations to analyze physician compensation arrangements for fair market value and commercial reasonableness instantly. 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. Thanks for reaching out. If a hospital is losing three times the national average in its employed primary care practice ask:(1) Why? See our dedicated page. How can we lose so much money and still consider our arrangement commercially reasonable? Email (required), Healthcare eNewsletterTax & Assurance eNewsletterWebinars. 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"). Federal physician self-referral prohibition (42 USC 1395nn. Since the Stark Law was enacted in 1989 this been a compliance concern in the back of the minds of hospital executives. The primary regulations governing physician compensation arrangements are the Stark Law and AKS.
Gilbert Artemus (Artie) Darrell