On November 20, the Centers for Medicare & Medicaid (CMS) and the Department of Health and Human Services Office of Inspector General (OIG) issued a 627-page final rule which will serve to modernize and clarify Stark Law regulations. The following requirements must be [] Factors affecting the specific company risk of a practice can include the physician's age, specialty, location, market position, payer mix, payer contracts, size, and other factors. 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. 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. A general journal is given in the Working Papers. As an industry, the Life Sciences has nearly uniformly adopted . The Stark Law defines FMV as "the value in arm's length transactions, consistent with general market value". Within the Healthcare industry, there are rules and regulations to ensure that . 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. Email (required), Healthcare eNewsletterTax & Assurance eNewsletterWebinars. The commenters are incorrect that this is CMS policy. Clearly, from CMS perspective, both referenced policies are misguided. 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 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 . 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). Many of the new and revised regulations apply beyond financial arrangements related to care coordination initiatives, and thus are crucial for all 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. Since the Stark Law was enacted in 1989 this been a compliance concern in the back of the minds of hospital executives. 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. 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. Attendees may ask questions in advance. 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. While this exception may be utilized in some instances, it is likely organizations will utilize the employment exception or personal services exception. As to its civil penalties, the Anti-Kickback Statute includes monetary penalties up to $50,000 per violation, civil . You can contact me at 865-673-0844. 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. 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. The Anti-Kickback Statute, 42 U.S.C. Because of increased enforcement, it is very common for organizations to work with legal professionals who specialize in fair market value and the Stark Law for the purpose of creating compliant and defensible financial arrangements. have been significantly impacted by decreased patient volume. Strategy, market growth, and larger referral bases were not among the examples. It is, however, often the best information that one can find. According to CMS, we continue to believe that the fair market value of a transactionand particularly, compensation for physician servicesmay not always align with published valuation data compilations, such as salary surveys. While the hypothetical fair market value is $450,000, the general market value may exceed that. Fair market value is a pinnacle issue for compliance under the Stark Law and Anti-Kickback Statute. v. UPMC et al.In particular, the court held that the relators had made out a plausible allegation of an indirect compensation . Consult with healthcare counsel to review compensation arrangements to identify any structures that take into account the volume or value of referrals or business The regulations will become effective January 19, 2021, with one exception. Through the Final Rule, CMS has addressed the topic of losses and profitability, stating the determination that an arrangement is commercially reasonable does not turn on whether the arrangement is profitable; compensation arrangements that do not result in profit for one or more of the parties may nonetheless be commercially reasonable. CMS offers several examples of reasons parties may enter into an arrangement or transaction despite financial losses to one or more parties. According to CMS, those reasons include, community need, timely access to health care services, fulfillment of licensure or regulatory obligations, including those under the Emergency Medical Treatment and Labor Act, the provision of charity care, and the improvement of quality and health outcomes. In our opinion, this means health care organizations must go the extra mile to document their reason(s) for compensating physicians and APPs, if those arrangements and transactions are exhibiting or are expected to yield financial loses. The fact is hospital-owned practices typically lose moneyit is more the rule than the exception. The proposed rule would create new, permanent exceptions to the Stark Law for value-based arrangements. The Department of Health and Human Services has released extensive and significant revised final rules governing the Physician Self-Referral Law 1 (the Stark law) and the Medicare Anti-Kickback Statute 2 (AKS) in furtherance of its efforts to create a more hospitable regulatory climate for innovation in health care. 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 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.. Finally, the incentives in a healthcare environment are inherently different than they are in a business venture in other industries. This would be incorrect. Cincinnati. 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 Final Rule provided key guidance on the "Big 3" Stark Law requirements of (1) fair market value; (2) commercial reasonableness; and (3) the volume or value of referrals. 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. These historic reforms became effective January 19, 2021 and are part of HHS's "Regulatory Sprint to . Which of the following is TRUE about the Stark Law? TheregressionequationisY=20.0+7.21XPredictorCoefSECoefTConstant20.0003.22136.21X7.2101.36265.29AnalysisofVarianceSOURCEDFSSRegression141587.3ResidualError7Total851984.1\begin{matrix} For more information on Stark Law Exceptions, see our dedicated page. 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. 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. ; . This article was originally published by the American Health Law Association in April 2021 as part of their 2021 Health Care Transactions Resource Guide. \text{X} & \text{7.210} & \text{1.3626} & \text{5.29}\\\\ 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? B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation . 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 . Rather, each case must be evaluated and considered in the context of the situation. The Federal Anti-Kickback Statute, codified at 42 U.S.C. Healthcare Regulatory and Stark Law/Fair Market Value and Commercial Reasonableness attorney. The reason the simplicity of this is not correct is that many lawsuits and government enforcement actions have established what are the risks associated with fair market value. The reader should contact his or her Carnahan Group or other tax professional prior to taking any action based upon this information. The Anti-Kickback Statute. A comprehensive, but not all inclusive, list of the items covered in the final rule follows. 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. Proceduralists such as dermatologists, orthopedic surgeons, ophthalmologists, otolaryngologists, plastic surgeons, urologists, etc. In what situation is a written agreement NOT required under Stark? This safe harbor is designed to facilitate improved cybersecurity in health care through donations of cybersecurity technology and services. Downstream revenue may include referrals for laboratory services, referrals for imaging services, referrals for hospital services, or even referrals to other specialists. The fair market value exception is a compensation exception that is flexible depending on the arrangement. 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. CMS' stated purpose is to establish bright-line, objective regulations that would be more easily applied. A "Stark" Difference in Fair Market Value and Commercial Reasonableness Is Coming in 2021. The CMS Self-Referral Disclosure Protocol (SRDP). If the AKS is addressing criminal penalties, the consequences include fines up to $25,000 per violation and up to a five-year . 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). A qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. recently sold and the following computer output was obtained. 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. For example, in the past some arrangements where physician compensation exceeded professional collections have received considerable scrutiny for commercial reasonableness. 411.362 Additional requirements concerning physician ownership and investment in hospitals. What are your reasons? Carnahan Group. Fraud and Abuse Laws. The writing specifies the timeframe for the arrangement, which can be for any period of time and contain a termination clause, provided that the parties enter into only one arrangement for the same items or services during the course of a year. On February 9, 2018, Congress passed and President Trump signed into law H.R. 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. and Don Barbo, Managing Director with VMG Health, on the topic of "New Stark Law and AKS Final Rules -Valuation Considerations." On January 19, 2021, a new era was ushered in as the CMS Stark Law Final Rule and the HHS-OIG Anti-Kickback Statute Final Rule became effective. In order to qualify for the recruitment exception, the arrangement must _________________________ . ), 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. 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). B and C only - False Claims Act liability & Exclusion from the Medicare and Medicaid programs. Home Fair Market Value and Commercial Reasonableness Applied to Healthcare Transactions, An Informational Article Whether it's an outright acquisition or a lease or service agreement, and whether it is the business or the underlying tangible assets (real estate and equipment), the transaction must be consistent with Fair Market Value. Stark defines fair market value (FMV) as ______________________________ . Compliant compensation methodologies: Advanced Stark. Website managed by SiteCare.com. 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. Government scrutiny around healthcare transactions has heightened in recent years due to an increase in the volume of violations of healthcare fraud and abuse laws. Get ready and roll up your sleeves for the work ahead. Our fixed asset valuation services serve a variety of purposes for our clients, including: Anti-Kickback Statute and Stark Law Compliance Federal physician self-referral prohibition (42 USC 1395nn. 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. CMS has stated that compensation between certain percentiles does not provide a safe harbor. This revenue generation includes downstream revenue. There is no fair market value calculator that takes in a couple datapoints and spits out a positive or negative fair market value answer. The services to be performed under the arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates a Federal or State law. Contact our expert, Neal D. Barkeratnbaker@hsgadvisors.com or call (502) 814-1189. Download a PDF Version of the Article as Published in AHLA's 2021 . 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? 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 . What is downstream revenue? Introduction. Traditional survey sources have proven to be dated and inadequate for the CRNA salaries being offered. 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. There are numerous laws across the country that have been created to remove this unethical practice. What are your goals? June 14, 2022; salem witch trials podcast lore CMS is clarifying here that while such a situation (e.g. (i) Consistent with the fair market value of . Previous Definition of Fair Market Value (42 U.S.C. 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. 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). 411.354). 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. Note this requires a valuator being able to find enough comparable postings with posted salary offersless than ten is typically not enough. The writing specifies the compensation that will be provided under the arrangement. In the Court's opinion, the excess payments would violate the Stark Law and would make claims made to Medicare for those services false claims. 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. 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. Fair market value is defined to mean the "value in an arm's length transaction, consistent with general market value of the subject transaction" (42 CFR 411.351). 98810.3;2988 \div 10.3 ; 298810.3;2 significant digits. The original content piece along with other guide publications can be accessed here. var year = today.getFullYear() As stated above in our discussion of fair market value, CMS continues to make it clear that the commercial reasonableness determination is also accomplished through consideration of an arrangements context and from the perspective of those involved. 6 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.10 Financial arrangements should be based on comparable data and should be set in advance by members who have no conflict of interests. On the revenue side, many practices had the benefit of the Paycheck Protection Program, but unfortunately, for many that was not enough to outweigh the additional personal protective equipment cost and lost revenue due to decreased patient volume. 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. Although many compensation arrangements are legitimate, a compensation arrangement may violate the anti-kickback statute if even one purpose of the arrangement is to The Anti-Kickback Statute. These new rules, which significantly amend the existing laws, are a direct result of HHS Regulatory Sprint to Coordinated Care. 2 Healthcare transactions must be commercially reasonable and should be comparable to what is paid ordinarily for similar services in the area. 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.. 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.

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