411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. Using the example of celebrities above, many contracts with celebrities include a portion of ticket sales to that movie. 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. Fair Market Value (FMV) Non-profit hospitals face additional requirements under the Internal Revenue Code that they must satisfy to maintain their tax-exempt status. Typical compensation per Work Relative Value Unit rates could be significantly off from traditional levels for given specialties. While this exception may be utilized in some instances, it is likely organizations will utilize the employment exception or personal services exception. What is downstream revenue? 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 . Special Rules for Profit Shares and Productivity Bonuses ( 411.352(i)) a. 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 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 . Rely on Our Experts for Stark Law and Fair Market Value Matters. Healthcare transactions must be commercially reasonable and should be comparable to what is paid ordinarily for similar services in the area. B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation. A "Stark" Difference in Fair Market Value and Commercial Reasonableness Is Coming in 2021. This article was originally published by the American Health Law Association in April 2021 as part of their 2021 Health Care Transactions Resource Guide. Catherine Short converses with Rachel V. Rose, JD, MBA, principal with Rachel V. Rose - Attorney at Law, P.L.L.C. 1 For purposes of this article, "Stark" refers to 42 U.S.C. ; ; If a hospital is losing three times the national average in its employed primary care practice ask:(1) Why? Louisville, Kentucky 40241, 2023 HSG Advisors. Civil penalties of the AKS include False Claims Act liability, civil monetary penalties (CMP) and program exclusion, up to $50,000 CMP per violation, and civil assessment of up to three times the amount of kickback. Documenting the organizations goals with the arrangement or transaction must be a priority. 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. They are: (a) the lease agreement must be in writing; (b) the . Website managed by SiteCare.com. 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. An arrangement may be renewed any number of times if the terms of the arrangement and the compensation for the same items or services do not change. Traditional survey sources have proven to be dated and inadequate for the CRNA salaries being offered. As an industry, the Life Sciences has nearly uniformly adopted . New Value-Based Exceptions. Consult with healthcare counsel to review compensation arrangements to identify any structures that take into account the volume or value of referrals or business 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. Usually, the fair market price is the price at which bona fide sales have been consummated for assets of like type, quality, and quantity in a particular market at the time of acquisition, or the compensation that has been included in bona fide service agreements with comparable terms at the time of the agreement, where the price or compensation has not been determined in any manner that takes into account the volume or value of anticipated or actual referrals. The Court concluded that the payment above fair market value for the services that were actually required to be performed would serve some other purpose, such as compensation for referrals. Federal physician self-referral prohibition (42 USC 1395nn. This field is for validation purposes and should be left unchanged. 1395 nn) and antikickback statutes (42 U.S.C. The same is not true for physicians and other entities when the Stark Law applies. Do our losses mean the compensation we are paying, while fair market value, is not commercially reasonable? See our dedicated page. Cybersecurity technology and services safe harbor for remuneration in the form of cybersecurity technology and services. Via the Final Rule, CMS has also indicated that salary surveys, regardless of percentile, are not automatic determinates of fair market value, stating, Consulting salary schedules or other hypothetical data is an appropriate starting point in the determination of fair market value, and in many cases, it may be all that is required. If ever there was a time in which that is true on so many levels, this is it. 411.362 Additional requirements concerning physician ownership and investment in hospitals. For bona fide employment as long as all other requirements are met. Reflecting on Recent Regulatory Changes to the Stark Law: A Real Estate and Equipment Valuation Perspective, Part 2. 1877nn(h)(3) Value in arms-length transactions, consistent with general market value Rentals or Leases - value of rental property for general commercial purposes, not taking into account its intended use Space Lease - not taking into account the value the lessee or ; . This safe harbor is designed to facilitate improved cybersecurity in health care through donations of cybersecurity technology and services. Rather, each case must be evaluated and considered in the context of the situation. On the other hand, an arrangement must be considered fair market value in order to be commercially reasonable. 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. 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. If an appraiser is hired, the appraiser's qualifications and experience must be considered if that appraisal will be relied upon. 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. Historically, the concept of a bargained for exchange was primarily handled and managed by financial professionals within the organization. The regulations will become effective January 19, 2021, with one exception. (i) Consistent with the fair market value of . The regulations are part of the HHS Regulatory Sprint to Coordinated Care and . 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. Too often, they have hindered, rather than . Instead, it is the impact of the COVID-19 pandemic on the industrys salary and production survey data. The reader should contact his or her Carnahan Group or other tax professional prior to taking any action based upon this information. Healthcare Regulatory and Stark Law/Fair Market Value and Commercial Reasonableness attorney. Strategy, market growth, and larger referral bases were not among the examples. 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 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. 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. For additional questions or comments regarding this article or other valuation issues, please contact John Meindl, Manager, VMG Health, at 972-616-7813, or john . The case underscores that the OIG cares about technical as well as substantive compliance with the Stark law. 2) Be in writing and signed by both parties. Since the Stark Law was enacted in 1989 this been a compliance concern in the back of the minds of hospital executives. 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. Key PYA Takeaway: Guidance from prior court decisions, as well as certain previous governmental representatives, have questioned commercial reasonableness if arrangements are not profitable. 1395nn). In fact, studies done by the government in the 1980s and early 1990s discovered that this was a real issue and it not only represented a significant increase in costs but also created significant patient risk. In a simple example, we can determine that fair market value for compensation of a medical director for a cardiac catheterization laboratory is $150 per hour. Fair market value is a pinnacle issue for compliance under the Stark Law and Anti-Kickback Statute. Carnahan Group assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. Financial arrangements should be based on comparable data and should be set in advance by members who have no conflict of interests. 5, A regular assessment should be conducted to determine if the healthcare transactions are commercially reasonable. 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. Limits what qualifies as an ownership or investment interest that is subject to the physician self-referral law. 411.354). To determine what is commercially reasonable, we first must start with a basic definition. 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. There are four basic methods of determining fair market value. Looking for help navigating the Stark Law Final Rule? ; (2) How can it be fixed? \text{Analysis} & \text{of} & \text{Variance}\\\\ The commenters are incorrect that this is CMS policy. Clearly, from CMS perspective, both referenced policies are misguided. 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. 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. The new Stark rule revises this, stating the fair . Allows the electronic health records (EHR) exception to be unending and allows limited donations of cybersecurity that are necessary for EHR, flexible physician payment schedules, and donations of replacement EHR items. Stark defines fair market value (FMV) as ______________________________ . Unfortunately though, although certain information is useful for business planning purposes, it is irrelevant for the purpose of establishing fair market value and compensation paid to a physician. 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. For example, it is very common for recruitment agencies to publicize the perceived revenue generation of certain specialties. 1320a-7b. 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." CMS recently issued the Stark Law Final Rule ("Final Rule"), which makes numerous significant changes and provides important clarifications to the Stark Law. At the advent of the Stark regulations, the federal law placed the referral of prosthetics (as defined by state Medicaid laws . Bottom line, 2021 surveys, based on 2020 data, are likely going to be challenging. As it relates to the updated definition of fair market value, CMS continues to emphasize that its determination should be based on any appropriate method depending on the kind of transaction, its location, and other factors. 411.351. The Stark Law safe harbor provision has seven components. A and B - not be conditioned on referrals & allow the physician to establish medical staff membership at other hospitals. 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). If a payment is made that cannot be shown to have been fair . 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. This site rocks the Pearsonified Skin for Thesis. The Federal Anti-Kickback Statute, codified at 42 U.S.C. Sec. This Stark Law exception applies to physician compensation arrangements that qualify as value-based arrangements, regardless of the level of risk undertaken by the VBE or any of its VBE participants. 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. The proposed rule would create new, permanent exceptions to the Stark Law for value-based arrangements. Among the many changes in the Stark Law final rule, the following are some of the most significant: 1. Additionally, until now, there has been no codified definition for commercial reasonableness, only limited CMS discussion such as that in the proposed 1998 rule. 1320a-7b) prohibit payments and receipt of payments given with an intent to influence the purchase of a product or services for which Medicare or Medicaid reimbursement is sought. 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. 3 See 42 U.S.C. 7. 4) Have a payment or salary provision that is reasonable and is at fair market value.