B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation. CMS has stated that compensation between certain percentiles does not provide a safe harbor. 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. For more information on Stark Law Exceptions, see our dedicated page. The exception permits both monetary and nonmonetary remuneration between the parties. As an offshoot to periodic reviews of PSAs, Ms. Walsh says every component of the PSA must be recorded and documented to ensure both parties are . Again, job posting sites have been invaluable to determining fair market value for high-demand services. Noteworthy 2021 stark law revisions and modifications: specifically areas impacting provider compensation and transactions valuation. The arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission. 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. Which of the following are exceptions under Stark? Health Management Associates $260 Million, Kalispell Regional Healthcare $24 Million. This has also been true in markets in which the demand and competition for CRNAs has exploded. Bottom line, 2021 surveys, based on 2020 data, are likely going to be challenging. 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. 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. The case underscores that the OIG cares about technical as well as substantive compliance with the Stark law. \text{SOURCE} & \text{DF} & \text{SS}\\ 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. 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. 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. The Stark law does maintain a definition of fair market value but it does not dictate actual numbers. The waivers, which are numerous and fairly broad, offer health care entities significant flexibility to combat COVID-19 in ways . 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. It is, however, often the best information that one can find. The following requirements must be [] 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. Introduction. Federal physician self-referral prohibition (42 USC 1395nn. Isolated financial transactions, such as a one-time sale of property or a practice, or a single instance of forgiveness of an amount owed in settlement of a bona fide dispute, if all of the following conditions are met: (1) The amount of remuneration under the isolated financial transaction is. stark law fair market value industry best 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? A general journal is given in the Working Papers. If a hospital is losing three times the national average in its employed primary care practice ask:(1) Why? 1320a-7b. 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. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. See our dedicated page. The Federal Anti-Kickback Statute, codified at 42 U.S.C. Some of those include organizations that have been charged even with compensation levels that are not above the 90th percentile. Fair Market Value and Commercial Reasonableness Applied to Healthcare Transactions. Commercial Reasonableness Analysis for an Increasingly Regulated Healthcare Environment | BDO Healthcare Industry Blog . 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. Contact our expert, Neal D. Barkeratnbaker@hsgadvisors.com or call (502) 814-1189. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); document.getElementById( "ak_js_2" ).setAttribute( "value", ( new Date() ).getTime() ); 9850 Von Allmen Court 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. At WilliamsMarston, our team of valuation experts are readily available to assist you with your most important financial transactions, including navigating Stark Law and fair market value (FMV) matters. The Stark Law defines FMV as "the value in arm's length transactions, consistent with general market value". Thursday, October 20, 2022. Key PYA Takeaway: CMS is clarifying that the Big 3 (fair market value, commercial reasonableness, and the volume or value standard) are separate and distinct concepts. Thanks for reaching out. 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 . \text{Analysis} & \text{of} & \text{Variance}\\\\ B. Stark Law Exception - Value-Based Arrangements . 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 . 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. 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 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. 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. 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. ; and (3) Does it mean the compensation is not commercially reasonable? The general market value definitions are: What does it mean for a compensation arrangement to be commercially reasonable? 7. Attendees may ask questions in advance. 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. What are your reasons? 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. 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." Likewise, a belief that paying a provider above the 75th percentile is not fair market value is also misplaced. The Stark Law prohibits physicians from referring patients for services to entities in which the physician or _____________________________ has a financial interest. Looking for help navigating the Stark Law Final Rule? The original content piece along with other guide publications can be accessed here. Eliminating the period of disallowance rules and correcting discrepancies during the arrangement. 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. 2 A discussion of Stark's application to Medicaid claims is beyond the scope of this broad overview. 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). On January 19, long-awaited adjustments to the Centers for Medicare and Medicaid Services' ("CMS") Physician Self-Referral Law (commonly referred to as the "Stark Law") and the Department of Health and Human Services Office of Inspector General's ("OIG") Anti-Kickback Statute ("AKS") took effect that make it easier for hospitals and health systems to transition from volume . The proposed rule would create new, permanent exceptions to the Stark Law for value-based arrangements. Record the following closing entries on page 19 of the general journal. The CMS Final Rule implements changes to the Stark Law and offers several clarifying provisions related to key Stark Law terms and concepts. Current, Three-Part Definition of Fair Market Value (42 C.F.R. 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. Jan 2017 - Oct 20225 years 10 months. 411.354 Financial relationship, compensation, and ownership or investment interest. The commercial division of a real estate firm is conducting a regression analysis of the relationship CMS' stated purpose is to establish bright-line, objective regulations that would be more easily applied. This site rocks the Pearsonified Skin for Thesis. This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. These are two critical questions that must be answered. 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. Guidance on reconciliation of payment variances. Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. 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. The arrangement is in writing, signed by the parties, and covers only identifiable items or services, all of which are specified in writing. 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. Additionally, until now, there has been no codified definition for commercial reasonableness, only limited CMS discussion such as that in the proposed 1998 rule. 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). 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 . have been significantly impacted by decreased patient volume. Download a PDF Version of the Article as Published in AHLA's 2021 . Specialties like critical care, hospital medicine, emergency medicine, and pulmonary medicine may have experienced increases in patient volume due to the pandemic. For bona fide employment as long as all other requirements are met. 4) Have a payment or salary provision that is reasonable and is at fair market value. The arrangement is commercially reasonable (taking into account the nature and scope of the transaction) and furthers the legitimate business purposes of the parties. 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. 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." This safe harbor is designed to facilitate improved cybersecurity in health care through donations of cybersecurity technology and services. The commenters are incorrect that this is CMS policy. Clearly, from CMS perspective, both referenced policies are misguided. \text{Constant} & \text{20.000} & \text{3.2213} & \text{6.21}\\ 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. Get ready and roll up your sleeves for the work ahead. 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? This article was originally published by the American Health Law Association in April 2021 as part of their 2021 Health Care Transactions Resource Guide. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. The primary regulations governing physician compensation arrangements are the Stark Law and AKS. Thanks for reaching out. Directions 1892, the Bipartisan Budget Act of 2018 (the "Budget Act"), which included changes to the federal physician self-referral law (commonly known as the "Stark law").Among these revisions are allowing indefinite holdovers in two notable exceptions to the Stark law: (1) personal services arrangements and (2 . Stark Law provides this definition: The term "fair market value" means the value in arm's length transactions, consistent with the general market value(42 USC 1395nn) 42 CFR 411.351 -"general market value" means the price that an asset would bring or that would be included in a 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. This is the art and the work involved in determining fair market value. CMS removed "general market value" from the definition of "fair market value" at 42 C.F.R. Under the statute; 411.353 Prohibition on certain referrals by physicians and limitations on billing. For example, it is very common for recruitment agencies to publicize the perceived revenue generation of certain specialties. 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 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. The exception cannot be utilized for the rental of office space though. 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 . 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"). 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. <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. You can contact me at 800-270-9629. If an appraiser is hired, the appraiser's qualifications and experience must be considered if that appraisal will be relied upon. 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. What are your goals? 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. The following definition is from the regulations: means the value in arm's-length transactions, consistent with the general market value. healthlawyers.org. Healthcare Regulatory and Stark Law/Fair Market Value and Commercial Reasonableness attorney. 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 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. This revenue generation includes downstream revenue. Barnes & Thornburg LLP. For most Stark Law exceptions to apply, a(n) ___________________ is required. Second, downstream financial incentives in healthcare, as in most industries, is extremely hard to quantify. 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. Data were collected on several properties In our prior article, we provided a basic overview of Fair Market Value (FMV) assessments and how these have become a key aspect in compensation contracts for cardiologists.We also reviewed how practices should focus on demonstrating their value to hospitals and health systems by showcasing leadership efforts within the practice and hospital, attention to strategy, financial performance . ), commonly referred to as the Stark law, is a set of regulations that pertain to physician self-referral under current United States (US) federal law. Y=20.0 + 7.21X\\\\ 1320a-7b (b) and the regulations and guidance promulgated thereunder. 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. Close the income statement accounts with debit balances. The Stark "in-office ancillary" exception permits a physician or group practice to order and provide DHS in the office, provided that the DHS is ancillary to the professional medical services provided by the practice. 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. 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. In addition to fair market value, most applications of the anti-kickback statute and Stark law also require commercial reasonableness. There are a myriad of reasons that hospital-owned practices lose moneyhigher practice costs, poor revenue cycle operations, mismatched compensation incentives, poor management, etc. What is downstream revenue? which allows healthcare organizations to analyze physician compensation arrangements for fair market value and commercial reasonableness instantly. 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. 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. Limits what qualifies as an ownership or investment interest that is subject to the physician self-referral law. 411.362 Additional requirements concerning physician ownership and investment in hospitals. CMS recently issued the Stark Law Final Rule ("Final Rule"), which makes numerous significant changes and provides important clarifications to the Stark Law. Utilizing our extensive experience in fair market value compensation, commercial reasonableness, and physician compensation planning/ strategy, PYA will continue to analyze the final Stark regulations and bring you additional updates and important information. 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. 6 Mark O. Dietrich, CPA/ABV Stark II -Statutory Guidance Stark Statute - 42 U.S.C. 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. The Anti-Kickback Statute. 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. ; . 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.