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 original content piece along with other guide publications can be accessed here. Historically, the concept of a bargained for exchange was primarily handled and managed by financial professionals within the organization. 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 . On December 2, 2020, OIG published its Final Rule, Revisions to the Safe Harbors Under the Anti-Kickback Statute and Rules Regarding Beneficiary Inducements, and CMS published its Final Rule, Modernizing and Clarifying the Physician Self-Referral Regulations in the Federal Register. 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 primary regulations governing physician compensation arrangements are the Stark Law and AKS. Carnahan Group provides a unique platform. Jan 2017 - Oct 20225 years 10 months. For more information on Stark Law Exceptions, see our dedicated page. Fair Market Value ( 411.351) C. Group Practices ( 411.352) 1. 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. They go as follows: Cost or selling price: If the item has been recently bought or sold, that can be a good indicator of its fair market value. According to CMS, some of the commenters on the Final Rule asserted that, a safe harbor based on a range of values in salary surveys would be consistent with what they stated was established CMS policy that compensation set at or below the 75th percentile in a salary schedule is appropriate and compensation set above the 75th percentile is suspect, if not presumed inappropriate. To these comments CMS responded, For the reasons explained in Phase I, Phase II, and Phase III, we decline to establish the rebuttable presumptions and safe harbors requested by the commenters. Under the Stark Law, one of the critical elements of compliance for many exceptions includes the requirement that the financial arrangement is representative of fair market value. health services directly attributable to a physicians participation in a value-based arrangement are deemed not to take into account the volume or value of the physicians referrals. The CMS Self-Referral Disclosure Protocol (SRDP). 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. Get ready and roll up your sleeves for the work ahead. 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. 2 A discussion of Stark's application to Medicaid claims is beyond the scope of this broad overview. 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 fair market value exception is a compensation exception that is flexible depending on the arrangement. worldservicesgroup.com. Compliant compensation methodologies: Advanced Stark. Special Rules for Profit Shares and Productivity Bonuses ( 411.352(i)) a. The argument is that but for the celebrity being in the movie the consumer would not purchase the ticket. 411.353 Prohibition on certain referrals by physicians and limitations on billing. 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. 411.354 Financial relationship, compensation, and ownership or investment interest. B and C only - False Claims Act liability & Exclusion from the Medicare and Medicaid programs. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. CMS is clarifying here that while such a situation (e.g. As you can see, the definition of fair market value does not provide details with respect to what is fair market value. You can contact me at 865-673-0844. The Stark Law safe harbor provision has seven components. The proposed rule would create new, permanent exceptions to the Stark Law for value-based arrangements. In the interim, for more information regarding these matters, contact a PYA executive below at (800) 270-9629. Looking for help navigating the Stark Law Final Rule? 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). Y=20.0 + 7.21X\\\\ recently sold and the following computer output was obtained. 98810.3;2988 \div 10.3 ; 298810.3;2 significant digits. There are four basic methods of determining fair market value. The Federal Anti-Kickback Statute, codified at 42 U.S.C. 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. 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. 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 Stark Law prohibits physicians from referring patients for services to entities in which the physician or _____ has a financial interest. Record the following closing entries on page 19 of the general journal. 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. Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. 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. 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. 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 Anti-Kickback Statute (AKS), 42 U.S.C. This revenue generation includes downstream revenue. bdo.com. 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. 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 . Many of these reasons are out of the hospital or health systems control. 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. Many individual physicians believe that fair market value is met so long as relevant benchmarks exist. With the increased rate of mergers and acquisitions, healthcare organizations are vulnerable to federal scrutiny. The Anti-Kickback Statute. First, financial incentives from a policy standpoint should not impact the plan of care developed for patients. 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. 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. A qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. May 10, 2022 at 11:37 AM 6 minute read Documenting the organizations goals with the arrangement or transaction must be a priority. This is not to say that organizations and individuals cant achieve high levels of income but it is to say that the aims in healthcare are much different than you might see in investment banking, entertainment industries, or in sporting industries. et al. 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. For most Stark Law exceptions to apply, a(n) ___________________ is required. Traditional survey sources have proven to be dated and inadequate for the CRNA salaries being offered. 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 . 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. What are your goals? The new Stark rule revises this, stating the fair . \text{Regression} & \text{1} & \text{41587.3}\\ Some of those include organizations that have been charged even with compensation levels that are not above the 90th percentile. The Anti-Kickback Statute, 42 U.S.C. 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. 4 See 42 CFR 411.354. <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. americanbar.org. healthcapital.com. Note this requires a valuator being able to find enough comparable postings with posted salary offersless than ten is typically not enough. OIG also amended the definition of remuneration in the Beneficiary Inducements CMP statute to integrate a new statutory exception to the prohibition on beneficiary inducements for certain telehealth technologies.. Suite 201 B. Stark Law Exception - Value-Based Arrangements . 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. 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. "General market value" means the price that an asset would bring as the result of bona fide . Health Management Associates $260 Million, Kalispell Regional Healthcare $24 Million. 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. 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. J. William Bookwalter, III, M.D. 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. Rather, each case must be evaluated and considered in the context of the situation. 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 . United States. They are: (a) the lease agreement must be in writing; (b) the . 1395nn, and the regulations and guidance promulgated thereunder. Financial arrangements should be based on comparable data and should be set in advance by members who have no conflict of interests. 411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. Cincinnati. While this exception may be utilized in some instances, it is likely organizations will utilize the employment exception or personal services exception. Third, fair market value as a concept is also dictated by relevant government enforcement actions as well as lawsuits. On February 9, 2018, Congress passed and President Trump signed into law H.R. The Anti-Kickback Statute. 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. Use Superior Corporation's trial balance and financial statements from the previous Work Together exercise. Email (required), Healthcare eNewsletterTax & Assurance eNewsletterWebinars. As to its civil penalties, the Anti-Kickback Statute includes monetary penalties up to $50,000 per violation, civil . 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 . These Stark Law updates may not alter the approach to production of a compensation fair market value and commercial reasonableness opinion (i.e., we are still going to consult industry salary surveys), but it certainly has us doubling down on the lengths to which we go to describe and document the uniqueness of a provider, the market, or the situation. 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. This safe harbor is intended to provide greater predictability for model participants and uniformity across models. 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. 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. ; and (3) Does it mean the compensation is not commercially reasonable? Noteworthy 2021 stark law revisions and modifications: specifically areas impacting provider compensation and transactions valuation. "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 . 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. 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. Current Definition of General Market Value (42 C.F.R. These historic reforms became effective January 19, 2021 and are part of HHS's "Regulatory Sprint to . Unlike the civil nature of Stark Law, the Anti-Kickback Statute is under both civil (administrative) and criminal laws. Further, the concept of fair market value has become much more than a financial analysis. 5, A regular assessment should be conducted to determine if the healthcare transactions are commercially reasonable. 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. 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. Referring to survey data regarding practice losses per physician and per provider can be enlightening. 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 . 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. v. UPMC et al.In particular, the court held that the relators had made out a plausible allegation of an indirect compensation . 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. 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. Reflecting on Recent Regulatory Changes to the Stark Law: A Real Estate and Equipment Valuation Perspective, Part 2. 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. nbaker@hsgadvisors.com or call (502) 814-1189. 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." have been significantly impacted by decreased patient volume. Typical compensation per Work Relative Value Unit rates could be significantly off from traditional levels for given specialties. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. 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. 411.357 Exceptions to the referral prohibition related to compensation arrangements. 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. 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. 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. To determine what is commercially reasonable, we first must start with a basic definition. Chapter 25. 1320a-7b(b), applies to all individuals and companies. Bottom line, 2021 surveys, based on 2020 data, are likely going to be challenging. CMS removed "general market value" from the definition of "fair market value" at 42 C.F.R. These are two critical questions that must be answered. A general journal is given in the Working Papers. 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. 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 The AKS Final Rule creates new safe harbors for entities participating in a value-based enterprise (VBE) and amends existing safe harbors. 1 For purposes of this article, "Stark" refers to 42 U.S.C. Catherine Short converses with Rachel V. Rose, JD, MBA, principal with Rachel V. Rose - Attorney at Law, P.L.L.C. It is, however, often the best information that one can find. Rely on Our Experts for Stark Law and Fair Market Value Matters. 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. 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. 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. Value-based arrangements with substantial downside financial risk (at least 5%). 411.357 Exceptions to the referral prohibition related to compensation arrangements. 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 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. Building High-Performing Physician Networks. 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.. Previous Definition of Fair Market Value (42 U.S.C. 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. Proceduralists such as dermatologists, orthopedic surgeons, ophthalmologists, otolaryngologists, plastic surgeons, urologists, etc. 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 .
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