Makes clear that signatures may be electronic under the same applicable federal/ state laws while allowing parties to an agreement to obtain the writing requirement documentation within 90 days. PDF A Compliance Officer's Approach to Fair Market Value - HCCA Official Site 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. Website managed by SiteCare.com. Cimasi, R. Z T. Traversing the threshold of commercial reasonableness in the healthcare industry. 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. The proposed rule would create new, permanent exceptions to the Stark Law for value-based arrangements. White Paper: CMS Finalizes Updates to the Stark Law to Reduce Please join us on September 13 th! stark law fair market value industry best practice. 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 . As an industry, the Life Sciences has nearly uniformly adopted . Structuring legally compliant hospital-physician leases and establishing fair market value (FMV) rental rates can be challenging. The CMS Final Rule implements changes to the Stark Law and offers several clarifying provisions related to key Stark Law terms and concepts. If a payment is made that cannot be shown to have been fair . New Arrangement Best Practices Consult with a valuation expert on whether financial arrangements satisfy the new Stark Law fair market value and commercial reasonableness standards. 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. This would be incorrect. \end{matrix} Some providers in these four specialties may have seen an increase in compensation to reflect their increased workload, while others, those paid salary and shift rates, may not have seen an increase in compensation. Proposed Stark Law, Anti-Kickback Reforms Aim To Facilitate Value-Based This article was originally published by the American Health Law Association in April 2021 as part of their 2021 Health Care Transactions Resource Guide. 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). This is the art and the work involved in determining fair market value. Under the statute; It is, however, often the best information that one can find. 411.354 Financial relationship, compensation, and ownership or investment interest. The Anti-Kickback Statute (AKS), 42 U.S.C. Fair Market Value ( 411.351) C. Group Practices ( 411.352) 1. 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 . First, it delineated that salary surveys or salary survey percentiles may not be appropriate to use in all circumstances. 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. Distribution of Profits Related to Participation in a Value-Based Enterprise; b. At the advent of the Stark regulations, the federal law placed the referral of prosthetics (as defined by state Medicaid laws . The bottom line is that in the context of fair market value and the Stark Law, normal business negotiations allowing for leverage between parties is not necessarily the same in the healthcare context (because the parties cannot take into account that they generate business for one another). 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. 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. nbaker@hsgadvisors.com or call (502) 814-1189. Stark Law - an overview | ScienceDirect Topics 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. \text{X} & \text{7.210} & \text{1.3626} & \text{5.29}\\\\ B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation . 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 . 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. Anti-Kickback Statute | Everything You Need to Know - Khouri Law The Stark Truth About the Stark Law: Part I | AAFP Grabbing a 2021 survey and finding a percentile might be enough, then again, it might not. 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). 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 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. Interested in learning about what is a referral? General market value is the compensation that would be included in a service agreement as the result of bona fide bargaining between well-informed parties who are not otherwise in a position to generate business for the other party. 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. Thanks for reaching out. 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. 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. 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. Catherine Short converses with Rachel V. Rose, JD, MBA, principal with Rachel V. Rose - Attorney at Law, P.L.L.C. 4 See 42 CFR 411.354. 3) Specify an aggregate payment, which is set in advance. which allows healthcare organizations to analyze physician compensation arrangements for fair market value and commercial reasonableness instantly. PDF The New Stark and AKS Final Rules: Implications and Considerations for The US Court of Appeals for the Third Circuit endorsed two controversial interpretations of the Stark Law's "volume or value" standard, known as the correlation theory and the practice "loss" theory in U.S. ex rel. b. var today = new Date() B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation. Modernizing and Clarifying the Physician Self-Referral - CMS The Stark law was initially enacted in 1992 but expanded in . 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 . 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. Additionally, until now, there has been no codified definition for commercial reasonableness, only limited CMS discussion such as that in the proposed 1998 rule. 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. CMS Clarifies Key Valuation Terms in the Stark Law | Jones Day With respect to the rental of equipment, fair market value means the value in an arms-length transaction of rental property for general commercial purposes (not taking into account its intended use), consistent with the general market value of the subject transaction. Allows agreement participants to reconcile payment variances in compensation arrangements without violation of physician self-referral law. 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. Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. 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.. Historically, the concept of a bargained for exchange was primarily handled and managed by financial professionals within the organization. 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. 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. Again, job posting sites have been invaluable to determining fair market value for high-demand services. 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. 411.351. 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. Key PYA Takeaway: Guidance from prior court decisions, as well as certain previous governmental representatives, have questioned commercial reasonableness if arrangements are not profitable.