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). Traditional survey sources have proven to be dated and inadequate for the CRNA salaries being offered. The Stark law does maintain a definition of fair market value but it does not dictate actual numbers. 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 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. Allows agreement participants to reconcile payment variances in compensation arrangements without violation of physician self-referral law. The primary reasons that the Stark Law prevents organizations and individuals from including downstream revenue are numerous. 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. For example, in the past some arrangements where physician compensation exceeded professional collections have received considerable scrutiny for commercial reasonableness. Finally, the incentives in a healthcare environment are inherently different than they are in a business venture in other industries. 411.353 Prohibition on certain referrals by physicians and limitations on billing. The Stark law was initially enacted in 1992 but expanded in . Key PYA Takeaway: Guidance from prior court decisions, as well as certain previous governmental representatives, have questioned commercial reasonableness if arrangements are not profitable. 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. 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. Referring to survey data regarding practice losses per physician and per provider can be enlightening. The commenters are incorrect that this is CMS policy. Clearly, from CMS perspective, both referenced policies are misguided. There is no fair market value calculator that takes in a couple datapoints and spits out a positive or negative fair market value answer. These are two critical questions that must be answered. 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. Building High-Performing Physician Networks. This safe harbor is designed to facilitate improved cybersecurity in health care through donations of cybersecurity technology and services. 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 . Get ready and roll up your sleeves for the work ahead. Fair Market Value and Commercial Reasonableness Applied to Healthcare Transactions. 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). Providing additional flexibility related to signature and writing requirements. This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. 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. Contact our expert, Neal D. Barkeratnbaker@hsgadvisors.com or call (502) 814-1189. The Stark Law addressed a legitimate problem. 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. 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. 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. 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." The original content piece along with other guide publications can be accessed here. 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). 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.. Downstream revenue may include referrals for laboratory services, referrals for imaging services, referrals for hospital services, or even referrals to other specialists. The regulations are part of the HHS Regulatory Sprint to Coordinated Care and . 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.. 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. This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. The following definition is from the regulations: means the value in arm's-length transactions, consistent with the general market value. 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. This revenue generation includes downstream revenue. The CMS Self-Referral Disclosure Protocol (SRDP). 411.353 Prohibition on certain referrals by physicians and limitations on billing. 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. Jan 2017 - Oct 20225 years 10 months. 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. Therefore, the analysis is recommended to be conducted by an independent valuation expert to establish a value that is consistent with independently published surveys that are comparable for similar services. If the AKS is addressing criminal penalties, the consequences include fines up to $25,000 per violation and up to a five-year . HAND Children are the Future. 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 . A qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. That is a topic for another day. 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. B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation . Note this requires a valuator being able to find enough comparable postings with posted salary offersless than ten is typically not enough. 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 . Personal services and management contracts and outcomes-based payments safe harbor creates protection under safe harbor for part-time or intermittent arrangements and arrangements for which total compensation is not known in advanceit eliminates a requirement that part-time arrangements have a schedule of services specifically set out in advance in the agreement. Federal physician self-referral prohibition (42 USC 1395nn. Again, job posting sites have been invaluable to determining fair market value for high-demand services. Financial arrangements should be based on comparable data and should be set in advance by members who have no conflict of interests. 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"). 411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. 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. The same survey data that many compensation valuators rely on as a central component to their fair market value analysis and opinion. Our hypothesis is that COVID-19 will appreciably affect the salary, production, and other data reported by physicians and their practicesin some instances, to a significant degree. 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. 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. Fraud and Abuse Laws. \text{Total} & \text{8} & \text{51984.1}\\ Download a PDF Version of the Article as Published in AHLA's 2021 . Barnes & Thornburg LLP. \text{SOURCE} & \text{DF} & \text{SS}\\ Attendees may ask questions in advance. 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. 411.354). have been significantly impacted by decreased patient volume. 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. In some cases, the alignment between compensation and production may be distorted. This safe harbor permits patient engagement tools and/or other support furnished directly by a VBE to a patient in a target patient population that are directly connected to the coordination and management of care. Our fixed asset valuation services serve a variety of purposes for our clients, including: Anti-Kickback Statute and Stark Law Compliance 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 exception cannot be utilized for the rental of office space though. In doing so, CMS offered helpful commentary for health care entities structuring real estate arrangements. 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 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. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); document.getElementById( "ak_js_2" ).setAttribute( "value", ( new Date() ).getTime() ); 9850 Von Allmen Court 3) Specify an aggregate payment, which is set in advance. With regard to fair market value (FMV), industry best practice suggests that you ____________________________ in order to better withstand government scrutiny. The primary regulations governing physician compensation arrangements are the Stark Law and AKS. Distribution of Profits Related to Participation in a Value-Based Enterprise; b. 5, A regular assessment should be conducted to determine if the healthcare transactions are commercially reasonable. 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. 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. 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 . 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. This piece concludes with thoughts regarding the COVID-19 pandemics effect on the immediate future of physician and APP compensation valuation. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. Structuring legally compliant hospital-physician leases and establishing fair market value (FMV) rental rates can be challenging. 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. 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. Arrangements for patient engagement and support to improve quality, health outcomes, and efficiency. 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. Some of those include organizations that have been charged even with compensation levels that are not above the 90th percentile. 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. 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. \text{Predictor} & \text{Coef} & \text{SE Coef} & \text{T}\\ 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. Guidance on reconciliation of payment variances. 1 For purposes of this article, "Stark" refers to 42 U.S.C. An arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.. Rather, each case must be evaluated and considered in the context of the situation. 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. 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. Fair Market Value (FMV) 2) Be in writing and signed by both parties. 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. 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. For more information on Stark Law Exceptions, see our dedicated page. While the hypothetical fair market value is $450,000, the general market value may exceed that. Specialties like critical care, hospital medicine, emergency medicine, and pulmonary medicine may have experienced increases in patient volume due to the pandemic. For example, it is very common for recruitment agencies to publicize the perceived revenue generation of certain specialties. 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. We also believe there has to be a limit to what is reasonable in terms of losses. Looking for help navigating the Stark Law Final Rule? Suite 201 Too often, they have hindered, rather than . 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. 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. This exception takes effect when there is an arrangement into writing that specifies the time frame and remuneration, and meets Anti-Kickback Statutes . Carnahan Group. Which of the following are exceptions under Stark? Within the Healthcare industry, there are rules and regulations to ensure that . Y=20.0 + 7.21X\\\\ ; and (3) Does it mean the compensation is not commercially reasonable? 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. Since the Stark Law was enacted in 1989 this been a compliance concern in the back of the minds of hospital executives. This site rocks the Pearsonified Skin for Thesis. Thursday, October 20, 2022. This safe harbor is intended to provide greater predictability for model participants and uniformity across models. CMS has stated that compensation between certain percentiles does not provide a safe harbor. 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. New Value-Based Exceptions. A comprehensive, but not all inclusive, list of the items covered in the final rule follows. "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 . While this exception may be utilized in some instances, it is likely organizations will utilize the employment exception or personal services exception. stark law fair market value industry best practice. The waivers, which are numerous and fairly broad, offer health care entities significant flexibility to combat COVID-19 in ways . 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. A regular assessment should be conducted to determine if the healthcare transactions are commercially reasonable. 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. This has required abandoning, or at least augmenting, traditional surveys with anesthesia-related job posting sites to find comparable salary offerings and ranges. 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. 1395nn). 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). 411.351. 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. Strategy, market growth, and larger referral bases were not among the examples. 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 . 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.
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