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7. 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. An extension has been granted until January 1, 2022 for compliance related to certain changes required in group practice compensation methodologies. Close the income statement accounts with debit balances. 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. \text{Constant} & \text{20.000} & \text{3.2213} & \text{6.21}\\ stark law fair market value industry best practice. They are: (a) the lease agreement must be in writing; (b) the . The Federal Anti-Kickback Statute, codified at 42 U.S.C. 4 See 42 CFR 411.354. With regard to fair market value (FMV), industry best practice suggests that you _____ in order to . There are numerous laws across the country that have been created to remove this unethical practice. The following definition is from the regulations: means the value in arm's-length transactions, consistent with the general market value. Too often, they have hindered, rather than . A regular assessment should be conducted to determine if the healthcare transactions are commercially reasonable. For example, it is very common for recruitment agencies to publicize the perceived revenue generation of certain specialties. The key elements of a robust FMV practice continue, however, to evolve. 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. In some cases, the alignment between compensation and production may be distorted. Unlike fair market value determination, commercial reasonableness is not as readily determined by standardized methodologies, practices, or sources. 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. Civil penalties of the AKS include False Claims Act liability, civil monetary penalties (CMP) and program exclusion, up to $50,000 CMP per violation, and civil assessment of up to three times the amount of kickback. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); document.getElementById( "ak_js_2" ).setAttribute( "value", ( new Date() ).getTime() ); 9850 Von Allmen Court 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 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. Healthcare Regulatory and Stark Law/Fair Market Value and Commercial Reasonableness attorney. 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 the art and the work involved in determining fair market value. Do our losses mean the compensation we are paying, while fair market value, is not commercially reasonable? 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. Third, fair market value as a concept is also dictated by relevant government enforcement actions as well as lawsuits. Second, downstream financial incentives in healthcare, as in most industries, is extremely hard to quantify. Special Rules for Profit Shares and Productivity Bonuses ( 411.352(i)) a. B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation . The Stark law does maintain a definition of fair market value but it does not dictate actual numbers. First, it delineated that salary surveys or salary survey percentiles may not be appropriate to use in all circumstances. Financial arrangements are commercially reasonable if they are at FMV, services provided are documented and deemed necessary, and when the services cannot be provided at a lesser value. This piece concludes with thoughts regarding the COVID-19 pandemics effect on the immediate future of physician and APP compensation valuation. Eliminating the period of disallowance rules and correcting discrepancies during the arrangement. 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. Health Management Associates $260 Million, Kalispell Regional Healthcare $24 Million. Consult with healthcare counsel to review compensation arrangements to identify any structures that take into account the volume or value of referrals or business Introduction. 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. The case underscores that the OIG cares about technical as well as substantive compliance with the Stark law. 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 primary reasons that the Stark Law prevents organizations and individuals from including downstream revenue are numerous. In addition, CMS removed the "volume or value" and the "other business generated" standards . 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. 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. 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. Financial arrangements should be based on comparable data and should be set in advance by members who have no conflict of interests. 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. If an appraiser is hired, the appraiser's qualifications and experience must be considered if that appraisal will be relied upon. Barnes & Thornburg LLP. This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. Carnahan Group provides a unique platform. Although many compensation arrangements are legitimate, a compensation arrangement may violate the anti-kickback statute if even one purpose of the arrangement is to 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." Attendees may ask questions in advance. \text{Regression} & \text{1} & \text{41587.3}\\ 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. 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. Fair market value is a pinnacle issue for compliance under the Stark Law and Anti-Kickback Statute. 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. 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. 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. 411.354). Interested in learning about what is a referral? 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. \text{Total} & \text{8} & \text{51984.1}\\ 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. CMS further clarifies that commercial reasonableness is whether an arrangement makes sense as a means to accomplishing the parties goals. Current Definition of General Market Value (42 C.F.R. 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. The anti-kickback regulations apply only to services reimbursed by Medicare or Medicaid. 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 . In addition to fair market value, most applications of the anti-kickback statute and Stark law also require commercial reasonableness. In doing so, CMS offered helpful commentary for health care entities structuring real estate arrangements. Bottom line, 2021 surveys, based on 2020 data, are likely going to be challenging. 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.. 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. 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. Three new safe harbors for remuneration exchanged between or among participants in value-based arrangements: Value-based arrangements with full financial risk. CMS removed "general market value" from the definition of "fair market value" at 42 C.F.R. 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 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. Noteworthy 2021 stark law revisions and modifications: specifically areas impacting provider compensation and transactions valuation. For more information on Stark Law Exceptions, see our dedicated page. Fair Market Value ( 411.351) C. Group Practices ( 411.352) 1. Thanks for reaching out. 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. "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 .