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. To accommodate patient surge, a hospital rents office space or equipment from a physician practice at below fair market value or at no charge. CMS removed "general market value" from the definition of "fair market value" at 42 C.F.R. B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation. 411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. v. UPMC et al.In particular, the court held that the relators had made out a plausible allegation of an indirect compensation . The exception cannot be utilized for the rental of office space though. Rather, each case must be evaluated and considered in the context of the situation. 201 East Fifth Street Suite 1110 Cincinnati, OH 45202-4152 t: 513.870.6700 f: 513.870.6699. info@bricker.com. 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. 5, A regular assessment should be conducted to determine if the healthcare transactions are commercially reasonable. Many individual physicians believe that fair market value is met so long as relevant benchmarks exist. Do our losses mean the compensation we are paying, while fair market value, is not commercially reasonable? 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. As a result, fair market value, commercial reasonableness, and the volume or value standard are separate and distinct requirements, each of which must be satisfied when included in an exception to the physician self-referral law. CMS refers to these three cornerstones of the exceptions to the Stark Law as the Big Three. CMS redefined the Big Three as follows: In addition to the general definition of fair market value above, CMS revisions to the Stark Law also provide definitions of fair market value that are specific to the rental of equipment and the rental of office space. The following definition is from the regulations: means the value in arm's-length transactions, consistent with the general market value. b. 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. Non-profit hospitals face additional requirements under the Internal Revenue Code that they must satisfy to maintain their tax-exempt status. Second, downstream financial incentives in healthcare, as in most industries, is extremely hard to quantify. 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. 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. The regulations will become effective January 19, 2021, with one exception. The fair market value exception is a compensation exception that is flexible depending on the arrangement. The exception permits both monetary and nonmonetary remuneration between the parties. Bob concentrates his . 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). 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. 3) Specify an aggregate payment, which is set in advance. 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). 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 . The same survey data that many compensation valuators rely on as a central component to their fair market value analysis and opinion. 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. 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. With the increased rate of mergers and acquisitions, healthcare organizations are vulnerable to federal scrutiny. A comprehensive, but not all inclusive, list of the items covered in the final rule follows. This field is for validation purposes and should be left unchanged. If an appraiser is hired, the appraiser's qualifications and experience must be considered if that appraisal will be relied upon. As to its civil penalties, the Anti-Kickback Statute includes monetary penalties up to $50,000 per violation, civil . Arrangements for patient engagement and support to improve quality, health outcomes, and efficiency. 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. For example, celebrities and professional athletes negotiate contracts without any specific compensation regulations. Federal physician self-referral prohibition (42 USC 1395nn. 411.354). healthlawyers.org. OIG also amended the definition of remuneration in the Beneficiary Inducements CMP statute to integrate a new statutory exception to the prohibition on beneficiary inducements for certain telehealth technologies.. Value-based arrangements with substantial downside financial risk (at least 5%). The fact is hospital-owned practices typically lose moneyit is more the rule than the exception. 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 . Removes the timeframe limitations for modifications to the financial terms of a compensation arrangement. This is the art and the work involved in determining fair market value. 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. Please join us on September 13 th! The Stark Law prohibits physicians from referring patients for services to entities in which the physician or _____ has a financial interest. \text{Regression} & \text{1} & \text{41587.3}\\ 1395nn). Q. Fraud and Abuse Laws. 4 See 42 CFR 411.354. 1320a-7b(b), covers a broader range of activity than the Stark Law, and extends to all medical providers in a position to arrange or recommend medical services."Referrals" under the Anti-Kickback Statute include "any item or service for which payment may be made in whole or in part under a Federal health care program." Documenting the organizations goals with the arrangement or transaction must be a priority. 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. Many of these reasons are out of the hospital or health systems control. TheregressionequationisY=20.0+7.21XPredictorConstantXAnalysisSOURCERegressionResidualTotalCoef20.0007.210ofDF1Error8SECoef3.22131.3626VarianceSS41587.3751984.1T6.215.29. B and C only - False Claims Act liability & Exclusion from the Medicare and Medicaid programs. 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). Previous Definition of Fair Market Value (42 U.S.C. \text{Constant} & \text{20.000} & \text{3.2213} & \text{6.21}\\ 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. While this exception may be utilized in some instances, it is likely organizations will utilize the employment exception or personal services exception. 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. thousands of dollars) for apartment buildings. 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 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. 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. 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. How can we lose so much money and still consider our arrangement commercially reasonable? This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. 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. 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 . 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. 1320a-7b. 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. 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. Typical compensation per Work Relative Value Unit rates could be significantly off from traditional levels for given specialties. Cybersecurity technology and services safe harbor for remuneration in the form of cybersecurity technology and services. Bottom line, 2021 surveys, based on 2020 data, are likely going to be challenging. 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. CMS is clarifying here that while such a situation (e.g. 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. Finally, the incentives in a healthcare environment are inherently different than they are in a business venture in other industries. Clarifies the period of disallowance for referrals and billing following a self-referral law violation, the satisfaction requirements for set-in-advance compensation, when an entity may direct a physicians referrals to a provider, the requirement for exclusive use of office space/ equipment, and the exception for payment by a physician to an entity. The Situation: The isolated transactions exception under the Stark Law has been used by some providers and entities to retroactively protect services arrangements that do not qualify for personal services or fair market value compensation exceptions because, for example, the arrangements were not reduced to writing before services were rendered. Allows agreement participants to reconcile payment variances in compensation arrangements without violation of physician self-referral law. 5. Likewise, a belief that paying a provider above the 75th percentile is not fair market value is also misplaced. Looking for help navigating the Stark Law Final Rule? Y=20.0 + 7.21X\\\\ 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 . worldservicesgroup.com. 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. 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. 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. Jan 2017 - Oct 20225 years 10 months. Introduction. Sec. Consult with healthcare counsel to review compensation arrangements to identify any structures that take into account the volume or value of referrals or business 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." 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. 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. 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? 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. 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. A hospital lends money to a physician practice to offset lost income resulting from the cancellation of elective surgeries to ensure capacity for COVID-19 needs. 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 . In December 2020, it was stated in the Stark Law Final Rule that the Centers for Medicare & Medicaid Services (CMS) expressly disavowed having any policy that compensation set at or below the 75th percentile of the physician compensation survey data is always appropriate, and that compensation above the 75th percentile is "suspect, if not . Data were collected on several properties 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. All Rights Reserved. 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. According to CMS in the Final Rule, 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. In the Final Rule, CMS also reiterated that the determination of commercial reasonableness is not one of valuation. An arrangement can be fair market value, but that does not mean that it is commercially reasonable. The final rule creates new exceptions to the Stark Law for value-based arrangements that satisfy specified requirements based on the characteristics of the arrangement and the level of financial risk assumed by the . This is not to say that organizations and individuals cant achieve high levels of income but it is to say that the aims in healthcare are much different than you might see in investment banking, entertainment industries, or in sporting industries. Compliant compensation methodologies: Advanced Stark. The Stark Law (42 U.S.C. Because of increased enforcement, it is very common for organizations to work with legal professionals who specialize in fair market value and the Stark Law for the purpose of creating compliant and defensible financial arrangements. 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. 2 Healthcare transactions must be commercially reasonable and should be comparable to what is paid ordinarily for similar services in the area. The Stark Law defines FMV as "the value in arm's length transactions, consistent with general market value". As an industry, the Life Sciences has nearly uniformly adopted . Using the example of celebrities above, many contracts with celebrities include a portion of ticket sales to that movie. This has required abandoning, or at least augmenting, traditional surveys with anesthesia-related job posting sites to find comparable salary offerings and ranges. healthcapital.com. 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. For example, in the past some arrangements where physician compensation exceeded professional collections have received considerable scrutiny for commercial reasonableness. Noteworthy 2021 stark law revisions and modifications: specifically areas impacting provider compensation and transactions valuation. 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). On February 9, 2018, Congress passed and President Trump signed into law H.R. Interested in learning about what is a referral? 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. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. The Anti-Kickback Statute, 42 U.S.C. <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. "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 . 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. 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). Ultimately, valuators likely will have to be creative and look back into past years surveys to evaluate trends and validate current survey data. 4) Have a payment or salary provision that is reasonable and is at fair market value. Introduction. Louisville, Kentucky 40241, 2023 HSG Advisors. Download a PDF Version of the Article as Published in AHLA's 2021 . 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. Care coordination arrangements to improve quality, health outcomes, and efficiency without requiring the parties to assume any financial risk. 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. 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. As you can see, the definition of fair market value does not provide details with respect to what is fair market value. What are your reasons? What is downstream revenue? ; and (3) Does it mean the compensation is not commercially reasonable? \text{Residual} & \text{Error} & \text{7}\\ This has also been true in markets in which the demand and competition for CRNAs has exploded. 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. 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. 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. Its criminal penalties include fines up to $25,000 per violation, and up to 5 years in federal prison. 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. 1320a-7b(b), applies to all individuals and companies. Carnahan Group. 411.353 Prohibition on certain referrals by physicians and limitations on billing. 2) Be in writing and signed by both parties. 1395 nn) and antikickback statutes (42 U.S.C. 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. 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 . Unlike the civil nature of Stark Law, the Anti-Kickback Statute is under both civil (administrative) and criminal laws. The primary regulations governing physician compensation arrangements are the Stark Law and AKS. 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. New "Fair Market Value" and "General Market Value" Definitions. Specialties like critical care, hospital medicine, emergency medicine, and pulmonary medicine may have experienced increases in patient volume due to the pandemic. 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. In addition, CMS removed the "volume or value" and the "other business generated" standards . The regulations are part of the HHS Regulatory Sprint to Coordinated Care and . 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. What are your goals? It is, however, often the best information that one can find. Fair Market Value ( 411.351) C. Group Practices ( 411.352) 1. Third, fair market value as a concept is also dictated by relevant government enforcement actions as well as lawsuits. Many of the new and revised regulations apply beyond financial arrangements related to care coordination initiatives, and thus are crucial for all