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 physicians from referring patients for services to entities in which the physician or _____________________________ has a financial interest. For example, celebrities and professional athletes negotiate contracts without any specific compensation regulations. 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. While this exception may be utilized in some instances, it is likely organizations will utilize the employment exception or personal services exception. Catherine Short converses with Rachel V. Rose, JD, MBA, principal with Rachel V. Rose - Attorney at Law, P.L.L.C. 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. 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. 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. The fair market value exception is a compensation exception that is flexible depending on the arrangement. 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. 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 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. However, we agree with the commenter that asserted that a hospital may find it necessary to pay a physician above what is in the salary schedule, especially where there is a compelling need for the physicians services. Despite the request and urging of commenters, CMS declined to establish rebuttable presumptions that compensation is fair market value or safe harbors that would deem compensation to be fair market value if certain conditions are met. Bottom line, CMS affirmed that there is no guarantee to fair market value determinationthere is no universal formula or proverbial rubberstamp as it pertains to provider compensation. The Anti-Kickback Statute. 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. b. the value in an arm's-length transaction that is consistent with general market value. Attendees may ask questions in advance. Please join us on September 13 th! Email (required), Healthcare eNewsletterTax & Assurance eNewsletterWebinars. 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 . The law makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive anything of value (not just money) in order to induce or reward referrals or the generation of business paid for by federal healthcare programs. 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 safe harbor is designed to facilitate improved cybersecurity in health care through donations of cybersecurity technology and services. The CMS Final Rule implements changes to the Stark Law and offers several clarifying provisions related to key Stark Law terms and concepts. Second, downstream financial incentives in healthcare, as in most industries, is extremely hard to quantify. The U.S. Department of Health and Human Services (HHS) adopted certain regulatory leasing safe harbors for both the Anti-Kickback Statute, commonly referred to as the "space rental safe harbor," and Stark Law, commonly referred to as the "office space rental exception.". 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. 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. At the advent of the Stark regulations, the federal law placed the referral of prosthetics (as defined by state Medicaid laws . Always engage a competent appraiser who understands the Stark definition of fair market value and be sure the appraisal report addresses that. However, since the law was enacted in 1989, the regulations implementing it have become woefully outdated. How can we lose so much money and still consider our arrangement commercially reasonable? 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. 3 See 42 U.S.C. Ultimately, valuators likely will have to be creative and look back into past years surveys to evaluate trends and validate current survey data. The writing specifies the compensation that will be provided under the arrangement. The argument is that but for the celebrity being in the movie the consumer would not purchase the ticket. 411.354 Financial relationship, compensation, and ownership or investment interest. Stark defines fair market value (FMV) as ______________________________ . These new rules, which significantly amend the existing laws, are a direct result of HHS Regulatory Sprint to Coordinated Care. The Stark Law addressed a legitimate problem. Specifically, the aim of healthcare delivery is to provide high-quality care, high levels of access, and at the most cost-effective price. Which of the following is a government sanction provided under the Stark regulation? 411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. 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. Likewise, a belief that paying a provider above the 75th percentile is not fair market value is also misplaced. 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. 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). Cincinnati. 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. 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 . The Anti-Kickback Statute, 42 U.S.C. Interpretation of the "Volume or Value Standard" for Purposes of the Group Practice Regulations ( 411.352(g)) 2. 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. For example, in the past some arrangements where physician compensation exceeded professional collections have received considerable scrutiny for commercial reasonableness. 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. It is, however, often the best information that one can find. T. Z, R. C. Healthcare Valuation Series: A look at fair market value and commercial reasonableness. 5, A regular assessment should be conducted to determine if the healthcare transactions are commercially reasonable. 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 . 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? In June 2022, the United States Department of Health and Human Services Office of Inspector General (HHS OIG) released OIG Advisory Opinion No. New Value-Based Exceptions. The Stark statute defines "fair market value" as the value in arm's-length transactions, consistent with the general market value and, with respect to rentals or leases, the value of rental property for general commercial purposes (not taking into account intended use . So, while it may require effort, and in some cases could be difficult to achieve, finding fair market value is a must. between x, annual gross rents (in thousands of dollars), and y, selling price (in 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 In the interim, for more information regarding these matters, contact a PYA executive below at (800) 270-9629. <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. Since the Stark Law was enacted in 1989 this been a compliance concern in the back of the minds of hospital executives. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. 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. Building High-Performing Physician Networks. 2 Healthcare transactions must be commercially reasonable and should be comparable to what is paid ordinarily for similar services in the area. 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. If ever there was a time in which that is true on so many levels, this is it. 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? 7. Carnahan Group. In addition, CMS removed the "volume or value" and the "other business generated" standards . Sec. There is no fair market value calculator that takes in a couple datapoints and spits out a positive or negative fair market value answer. 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. 411.357 Exceptions to the referral prohibition related to compensation arrangements. For example, if a physician is paid at the 75th percentile under a specific survey then fair market value must be met. For example, it is very common for recruitment agencies to publicize the perceived revenue generation of certain specialties. There are numerous regulatory statutes, such as Stark Law and Anti-Kickback Statute that need to be considered while structuring financial transactions for physicians and other staff to ensure that compensation is within fair market value (FMV) and is commercially reasonable. The Anti-Kickback Statute (AKS), 42 U.S.C. For most Stark Law exceptions to apply, a(n) ___________________ is required. Compensation arrangements that are required to be representative of . Many individual physicians believe that fair market value is met so long as relevant benchmarks exist. Health Management Associates $260 Million, Kalispell Regional Healthcare $24 Million. Bob concentrates his . The Stark Law safe harbor provision has seven components. nbaker@hsgadvisors.com or call (502) 814-1189. We also think this is an appropriate reflection and representation of what CMS recognized and articulated when it said: It is not CMS policy that salary surveys necessarily provide an accurate determination of fair market value in all cases.. If a payment is made that cannot be shown to have been fair . Cimasi, R. Z T. Traversing the threshold of commercial reasonableness in the healthcare industry. 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. The exception cannot be utilized for the rental of office space though. 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. You can contact me at 865-673-0844. HHS, through the Regulatory Sprint to Coordinated Care, has a stated goal of reducing regulatory barriers within our nations health care system and accelerating the transformation of the health care system into one that better pays for value and promotes care coordination. As HHS statement indicates, value-based arrangements and transactions are the focus of this episode of Stark Law and AKS revisions, but other areas and central ideas of the Stark Law and AKS are significantly impacted as well. This field is for validation purposes and should be left unchanged. 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. 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 . TheregressionequationisY=20.0+7.21XPredictorCoefSECoefTConstant20.0003.22136.21X7.2101.36265.29AnalysisofVarianceSOURCEDFSSRegression141587.3ResidualError7Total851984.1\begin{matrix} Specialties like critical care, hospital medicine, emergency medicine, and pulmonary medicine may have experienced increases in patient volume due to the pandemic. 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. Carnahan Group provides a unique platform. 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. Grabbing a 2021 survey and finding a percentile might be enough, then again, it might not. If the AKS is addressing criminal penalties, the consequences include fines up to $25,000 per violation and up to a five-year . Removes the timeframe limitations for modifications to the financial terms of a compensation arrangement. This has required abandoning, or at least augmenting, traditional surveys with anesthesia-related job posting sites to find comparable salary offerings and ranges. Further, even if the physician under the arrangement is paid, in part, based upon his or her productivity, any rates under those models must be consistent with benchmark data. 1320a-7b (b) and the regulations and guidance promulgated thereunder. The Stark law was initially enacted in 1992 but expanded in . On the other hand, an arrangement must be considered fair market value in order to be commercially reasonable. "General market value" means the price that an asset would bring as the result of bona fide . ), 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. Due to a complex regulatory environment, an in-depth analysis should be performed to ensure that the healthcare transactions are legally permissible at FMV and are commercially reasonable. This site rocks the Pearsonified Skin for Thesis. A and B - not be conditioned on referrals & allow the physician to establish medical staff membership at other hospitals. have been significantly impacted by decreased patient volume. Reflecting on Recent Regulatory Changes to the Stark Law: A Real Estate and Equipment Valuation Perspective, Part 2. 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). 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. For the past 30 years, a key consideration for health care organizations entering into transactions and arrangements for the employment and compensation of physicians has been the profitability of the practices in which the physicians, their staff, and other practicerelated resources are housedor more precisely the losses of the practices in which physicians and APPs are housed. 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. 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. The key elements of a robust FMV practice continue, however, to evolve. The Anti-Kickback Statute. Referring to survey data regarding practice losses per physician and per provider can be enlightening. 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. 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. 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. 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. Although many compensation arrangements are legitimate, a compensation arrangement may violate the anti-kickback statute if even one purpose of the arrangement is to With respect to the rental of office space, 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), without adjustment to reflect the additional value the prospective lessee or lessor would attribute to the proximity or convenience to the lessor where the lessor is a potential source of patient referrals to the lessee, and consistent with the general market value of the subject transaction. Commercial Reasonableness Analysis for an Increasingly Regulated Healthcare Environment | BDO Healthcare Industry Blog . 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. (i) Consistent with the fair market value of . 1320a-7b(b), applies to all individuals and companies. Many of these reasons are out of the hospital or health systems control. Jan 2017 - Oct 20225 years 10 months. 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. First Name (required) The previous definition of fair market value stated that physician compensation "must be set in advance, consistent with fair market value, and not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.". 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. 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 . 5. The Stark Law prohibits physicians from referring patients for services to entities in which the physician or _____ has a financial interest. 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. stark law fair market value industry best practice. The 2021 Stark Law and Anti-Kickback Statute: Fair Market Value and Commercial Reasonableness (American Health Law Association Publication) Noteworthy 2021 stark law revisions and modifications: specifically areas impacting provider compensation and transactions valuation. While 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. HSG has written articles about practice losses and how to address them. The Stark Law prohibits physicians from referring a patient to an entity with which the physician has a financial relationship when the referral is for the furnishing of certain designated health services (e.g., lab, PT, OT, radiology, DME . Assessing Fair Market Value. Which of the following disclosure protocols should be used by providers when disclosing a Stark violation? A factor that is certain to affect fair market value determination during the coming year is not new or revised legislation. \text{Predictor} & \text{Coef} & \text{SE Coef} & \text{T}\\ Current Definition of General Market Value (42 C.F.R. Do our losses mean the compensation we are paying, while fair market value, is not commercially reasonable? 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. New "Fair Market Value" and "General Market Value" Definitions. Guidance on reconciliation of payment variances. Website managed by SiteCare.com. The primary reasons that the Stark Law prevents organizations and individuals from including downstream revenue are numerous. The three types of transactions are asset acquisition, compensation, and rental of equipment or office space. Bottom line, 2021 surveys, based on 2020 data, are likely going to be challenging. Which of the following is TRUE about the Stark Law? 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. \text{The regression equation is}\\ document.write(year) 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. We also believe there has to be a limit to what is reasonable in terms of losses. v. UPMC et al.In particular, the court held that the relators had made out a plausible allegation of an indirect compensation . In doing so, CMS offered helpful commentary for health care entities structuring real estate arrangements. 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. Eliminating the period of disallowance rules and correcting discrepancies during the arrangement. ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide. The primary regulations governing physician compensation arrangements are the Stark Law and AKS. The commenters are incorrect that this is CMS policy. Clearly, from CMS perspective, both referenced policies are misguided. You can contact me at 800-270-9629. 7. As an industry, the Life Sciences has nearly uniformly adopted . 3) Specify an aggregate payment, which is set in advance. Among the many changes in the Stark Law final rule, the following are some of the most significant: 1.
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