Additionally, until now, there has been no codified definition for commercial reasonableness, only limited CMS discussion such as that in the proposed 1998 rule. The Stark Law addressed a legitimate problem. 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. On February 9, 2018, Congress passed and President Trump signed into law H.R. 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. 1395nn). 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). Strategy, market growth, and larger referral bases were not among the examples. 411.357 Exceptions to the referral prohibition related to compensation arrangements. Thus, "compensation substantially above $450,000 per year may be fair market value," according to . Assessing Fair Market Value. 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." The Stark Law defines FMV as "the value in arm's length transactions, consistent with general market value". It says, . 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. Specialties like critical care, hospital medicine, emergency medicine, and pulmonary medicine may have experienced increases in patient volume due to the pandemic. 3 See 42 U.S.C. B. Stark Law Exception - Value-Based Arrangements . 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. In June 2022, the United States Department of Health and Human Services Office of Inspector General (HHS OIG) released OIG Advisory Opinion No. 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). General market value means the price that an asset would bring as the result of bona fide bargaining between well-informed buyers and sellers who are not otherwise in a position to generate business for the other party, or the compensation that would be included in a service agreement as the result of bona fide bargaining between well-informed parties to the agreement who are not otherwise in a position to generate business for the other party, on the date of acquisition of the asset or at the time of the service agreement. Many of the new and revised regulations apply beyond financial arrangements related to care coordination initiatives, and thus are crucial for all The Stark law does maintain a definition of fair market value but it does not dictate actual numbers. In addition to fair market value, most applications of the anti-kickback statute and Stark law also require commercial reasonableness. PDF HD0070020 CMS Stark Law Regulations - Dorsey a non-profitable arrangement) may present a problem, it is not expressing a definitive opinion on the matter as each arrangement is facts and circumstances specific, and it could see certain arrangements with facts and circumstances whereby a non-profitable arrangement is commercially reasonable. 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. May 10, 2022 at 11:37 AM 6 minute read Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. Directions 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. In turn, CMS is willing to accept any commercially reasonable methodology that demonstrates compensation is comparable to what is ordinarily paid for services in an arms-length transaction. ; . Stark Law - StatPearls - NCBI Bookshelf which allows healthcare organizations to analyze physician compensation arrangements for fair market value and commercial reasonableness instantly. americanbar.org. Chapter 25. \text{Predictor} & \text{Coef} & \text{SE Coef} & \text{T}\\ Contact our expert, Neal D. Barkeratnbaker@hsgadvisors.com or call (502) 814-1189. Which of the following disclosure protocols should be used by providers when disclosing a Stark violation? This site rocks the Pearsonified Skin for Thesis. Surviving Fair Market Value & Commercial Reasonableness Thresholds The final rule creates new exceptions to the Stark Law for value-based arrangements that satisfy specified requirements based on the characteristics of the arrangement and the level of financial risk assumed by the . The Stark law was initially enacted in 1992 but expanded in . New Exceptions for Value-Based Arrangements - Epstein Becker & Green, P.C. Medical Director Compensation and Compliance - HG.org The following definition is from the regulations: means the value in arms-length transactions, consistent with the general market value. In some cases, the alignment between compensation and production may be distorted. Jana will be discussing the Stark Law changes, and Angie will be providing related valuation examples during the September 13, 2022 Let's Talk Compliance webinar entitled Stark Law Changes and Impact on Physician Compensation Part 2. An arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.. Stark Law/Fair Market Value | WilliamsMarston | Accounting Advisory Provides new exceptions for value-based compensation arrangements that meet certain financial risk requirements and provides new definitions for value-based activity; value-based arrangement; value-based enterprise (VBE); value-based purpose; VBE participant; and target patient population. 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. Many of the changes in the Stark Law are aimed at eliminating regulatory restrictions that could deter or even potentially eliminate some novel arrangements as the industry continues its move towards a value-based health care system. The general market value definitions are: What does it mean for a compensation arrangement to be commercially reasonable? 411.354 Financial relationship, compensation, and ownership or investment interest. b. 4 See 42 CFR 411.354. 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 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 . HHS OIG Issues Advisory Opinion on Continuing Medical Education, Stark 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. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. United States. Catherine Short converses with Rachel V. Rose, JD, MBA, principal with Rachel V. Rose - Attorney at Law, P.L.L.C. 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. For example, if a physician is paid at the 75th percentile under a specific survey then fair market value must be met. Bottom line, 2021 surveys, based on 2020 data, are likely going to be challenging. The primary reasons that the Stark Law prevents organizations and individuals from including downstream revenue are numerous. Healthcare Regulatory and Stark Law/Fair Market Value and Commercial Reasonableness attorney. With the increased rate of mergers and acquisitions, healthcare organizations are vulnerable to federal scrutiny. Fraud and Abuse Laws. The fact is hospital-owned practices typically lose moneyit is more the rule than the exception. 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. 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. Anti-Kickback Statute and Stark Law - Constantine Cannon Key PYA Takeaway: Guidance from prior court decisions, as well as certain previous governmental representatives, have questioned commercial reasonableness if arrangements are not profitable. The following requirements must be [] Carnahan Group. 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). 1395 nn) and antikickback statutes (42 U.S.C. Historically, the concept of a bargained for exchange was primarily handled and managed by financial professionals within the organization. Fair Market Value ( 411.351) C. Group Practices ( 411.352) 1. 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. 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 . Attendees may ask questions in advance. This piece concludes with thoughts regarding the COVID-19 pandemics effect on the immediate future of physician and APP compensation valuation. That is a topic for another day. Regulatory Sprint: Understanding the Impact on the Stark Law, Anti For more information on Stark Law Exceptions, see our dedicated page. Financial arrangements should be based on comparable data and should be set in advance by members who have no conflict of interests. CMS Limits Isolated Transactions Exception | Jones Day Comparison Chart of Anti-Kickback Safe Harbors and Stark - Bricker Value-based arrangements with substantial downside financial risk (at least 5%). 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. The fair market value exception is a compensation exception that is flexible depending on the arrangement. 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. The writing specifies the compensation that will be provided under the arrangement. Always engage a competent appraiser who understands the Stark definition of fair market value and be sure the appraisal report addresses that. 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. 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 . Y=20.0 + 7.21X\\\\ This would be incorrect. CMS removed "general market value" from the definition of "fair market value" at 42 C.F.R. 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. A "Stark" Difference in Fair Market Value and Commercial Reasonableness 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. 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. The CMS Self-Referral Disclosure Protocol (SRDP). 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. 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). 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. The Stark Law prohibits physicians from referring patients for services to entities in which the physician or _____________________________ has a financial interest. The commenters are incorrect that this is CMS policy. Clearly, from CMS perspective, both referenced policies are misguided. et al. The new Stark rule revises this, stating the fair . A comprehensive, but not all inclusive, list of the items covered in the final rule follows. This has also been true in markets in which the demand and competition for CRNAs has exploded. Many of these reasons are out of the hospital or health systems control. 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. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. Office-based primary care has been significantly affected as offices were closed for a period of time and then had to adjust to telehealth and virtual visits. Interested in learning about what is a referral? Special Rules for Profit Shares and Productivity Bonuses ( 411.352(i)) a. With regard to fair market value (FMV), industry best practice suggests that you ____________________________ in order to better withstand government scrutiny. First Name (required) 411.354 Financial relationship, compensation, and ownership or investment interest. The same survey data that many compensation valuators rely on as a central component to their fair market value analysis and opinion. Its criminal penalties include fines up to $25,000 per violation, and up to 5 years in federal prison. Key Issues in Cardiology Valuation: Anti-Kickback and Stark Law 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. 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. Proposed Stark Law, Anti-Kickback Reforms Aim To Facilitate Value-Based 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. What is Fair Market Value? - Stark Law 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. Removes the timeframe limitations for modifications to the financial terms of a compensation arrangement. To accommodate patient surge, a hospital rents office space or equipment from a physician practice at below fair market value or at no charge. Finally, the incentives in a healthcare environment are inherently different than they are in a business venture in other industries. Eliminating the period of disallowance rules and correcting discrepancies during the arrangement. Changes to AKS Personal Services Safe Harbor | Jones Day Final Rules also provide guidance related to fundamental concepts under the Stark Law, including commercial reasonableness, the volume or value standard, and fair market value. 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 . document.write(year) PDF The New Stark and AKS Final Rules: Implications and Considerations for The following definition is from the regulations: means the value in arm's-length transactions, consistent with the general market value. In other words, the rate of compensation set forth in a salary survey may not always be identical to the worth of a particular physicians services. This is something that we have experienced from time to time for uniquely trained or experienced physicians and/or challenging markets, but more recently and frequently for Certified Registered Nurse Anesthetists (CRNAs) who practice autonomouslyusually in rural markets. 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. On Wednesday, October 9, HHS proposed highly anticipated reforms to regulations implementing the Physician Self-Referral Law and the Federal Anti-Kickback Statute, as well as related civil . Many individual physicians believe that fair market value is met so long as relevant benchmarks exist. Federal physician self-referral prohibition (42 USC 1395nn. The three types of transactions are asset acquisition, compensation, and rental of equipment or office space. 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. For example, in the past some arrangements where physician compensation exceeded professional collections have received considerable scrutiny for commercial reasonableness. Health Management Associates $260 Million, Kalispell Regional Healthcare $24 Million. 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. The Anti-Kickback Statute (AKS), 42 U.S.C. 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. Valuation Triage: Stark/Anti-Kickback Valuation Issues within the The arrangement is in writing, signed by the parties, and covers only identifiable items or services, all of which are specified in writing. Current Definition of General Market Value (42 C.F.R. Stark 101 for Physicians - KJK | Kohrman Jackson Krantz Using the example of celebrities above, many contracts with celebrities include a portion of ticket sales to that movie. If the AKS is addressing criminal penalties, the consequences include fines up to $25,000 per violation and up to a five-year . ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide. A general journal is given in the Working Papers. 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 . The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. Fair Market Value (FMV) Establishing fair market value physician compensation in a - MGMA