The Stark Law defines FMV as "the value in arm's length transactions, consistent with general market value". 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. 1 For purposes of this article, "Stark" refers to 42 U.S.C. Three new safe harbors for remuneration exchanged between or among participants in value-based arrangements: Value-based arrangements with full financial risk. Stark Law provides this definition: The term "fair market value" means the value in arm's length transactions, consistent with the general market value(42 USC 1395nn) 42 CFR 411.351 -"general market value" means the price that an asset would bring or that would be included in a Again, job posting sites have been invaluable to determining fair market value for high-demand services. ; ; Home Fair Market Value and Commercial Reasonableness Applied to Healthcare Transactions, An Informational Article 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 . 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. 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 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 . B and C only - False Claims Act liability & Exclusion from the Medicare and Medicaid programs. Close the income statement accounts with debit balances. In order to qualify for the recruitment exception, the arrangement must _________________________ . Proceduralists such as dermatologists, orthopedic surgeons, ophthalmologists, otolaryngologists, plastic surgeons, urologists, etc. 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. 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. Ultimately, valuators likely will have to be creative and look back into past years surveys to evaluate trends and validate current survey data. In addition to fair market value, most applications of the anti-kickback statute and Stark law also require commercial reasonableness. var year = today.getFullYear() On December 2, 2020, the Department of Health and Human Services ("HHS") Office of Inspector General ("OIG") issued final rules including a host of reforms to the AKS, including three changes to the personal services and management contracts safe harbor ("Safe Harbor"). 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. A comprehensive, but not all inclusive, list of the items covered in the final rule follows. Rather, each case must be evaluated and considered in the context of the situation. Distribution of Profits Related to Participation in a Value-Based Enterprise; b. That determination may be fairly conservative and well within a reasonable range, but if said physician is the second of two medical directors for this service and the duties are already handled by the first medical director so the second is not needed, then the $150 per hour medical directorship, while fair market value is not commercially reasonable. The regulations are part of the HHS Regulatory Sprint to Coordinated Care and . The new Stark rule revises this, stating the fair . This exception takes effect when there is an arrangement into writing that specifies the time frame and remuneration, and meets Anti-Kickback Statutes . Unlike the civil nature of Stark Law, the Anti-Kickback Statute is under both civil (administrative) and criminal laws. 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. 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. I. L. Fair market value of health care transactions. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. 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). In doing so, CMS offered helpful commentary for health care entities structuring real estate arrangements. HAND Children are the Future. Typical compensation per Work Relative Value Unit rates could be significantly off from traditional levels for given specialties. thousands of dollars) for apartment buildings. Below is a listing of some of the key changes: For those in the physician and APP compensation valuation arena, and for any hospital or health system that compensates a health care provider for administrative and/or professional services (which would be all hospitals and health systems in the country), there are other aspects of the Stark Law revisions that are of particular interest. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. 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. While the hypothetical fair market value is $450,000, the general market value may exceed that. 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. Download a PDF Version of the Article as Published in AHLA's 2021 . 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. Barnes & Thornburg LLP. 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 . For example, it is very common for recruitment agencies to publicize the perceived revenue generation of certain specialties. Please join us on September 13 th! Under the statute; Reflecting on Recent Regulatory Changes to the Stark Law: A Real Estate and Equipment Valuation Perspective, Part 2. 411.357 Exceptions to the referral prohibition related to compensation arrangements. The law makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive anything of value (not just money) in order to induce or reward referrals or the generation of business paid for by federal healthcare programs. recently sold and the following computer output was obtained. var today = new Date() Health Management Associates $260 Million, Kalispell Regional Healthcare $24 Million. 2 Healthcare transactions must be commercially reasonable and should be comparable to what is paid ordinarily for similar services in the area. The Final Rule of the Stark Law revises the definitions of Fair Market Value and includes a definition of General Market Value to better align with actual practices without unduly restricting innovative relationships between physicians and entities providing designated health services. Contact our expert, Neal D. [email protected] or call (502) 814-1189. For example, celebrities and professional athletes negotiate contracts without any specific compensation regulations. \text{Constant} & \text{20.000} & \text{3.2213} & \text{6.21}\\ The fair market value exception is a compensation exception that is flexible depending on the arrangement. Personal services and management contracts and outcomes-based payments safe harbor creates protection under safe harbor for part-time or intermittent arrangements and arrangements for which total compensation is not known in advanceit eliminates a requirement that part-time arrangements have a schedule of services specifically set out in advance in the agreement. 411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. \text{Residual} & \text{Error} & \text{7}\\ The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. It says, . There are a myriad of reasons that hospital-owned practices lose moneyhigher practice costs, poor revenue cycle operations, mismatched compensation incentives, poor management, etc. Isolated financial transactions, such as a one-time sale of property or a practice, or a single instance of forgiveness of an amount owed in settlement of a bona fide dispute, if all of the following conditions are met: (1) The amount of remuneration under the isolated financial transaction is. 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. 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. They are: (a) the lease agreement must be in writing; (b) the . 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 . Specifically, the aim of healthcare delivery is to provide high-quality care, high levels of access, and at the most cost-effective price. Consult with healthcare counsel to review compensation arrangements to identify any structures that take into account the volume or value of referrals or business 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. Its criminal penalties include fines up to $25,000 per violation, and up to 5 years in federal prison. healthcapital.com. 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 . If Internal Revenue Services (IRS) determines that the net earnings of a tax-exempt organization are used for private interests of employees, or if their payments exceed FMV, it might result in loss of tax-exempt status. 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. Likewise, a belief that paying a provider above the 75th percentile is not fair market value is also misplaced. The regulations will become effective January 19, 2021, with one exception. The exception permits both monetary and nonmonetary remuneration between the parties. Documenting the organizations goals with the arrangement or transaction must be a priority. In June 2022, the United States Department of Health and Human Services Office of Inspector General (HHS OIG) released OIG Advisory Opinion No. First Name (required) It is inaccurate for a hospital or health system to believe that just because base compensation is below the 75th percentile there is no risk and that the compensation they are providing is automatically fair market value. Additionally, until now, there has been no codified definition for commercial reasonableness, only limited CMS discussion such as that in the proposed 1998 rule. There are numerous laws across the country that have been created to remove this unethical practice. 1395nn, and the regulations and guidance promulgated thereunder. 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. Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. 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. Compensation arrangements that are required to be representative of . healthlawyers.org. 411.351. The same survey data that many compensation valuators rely on as a central component to their fair market value analysis and opinion. Eliminating the period of disallowance rules and correcting discrepancies during the arrangement. CRNAs are only one examplethe same challenges could easily apply to any physician specialty or market. Thursday, October 20, 2022. 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. 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. Bob concentrates his . 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. 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. Stark defines fair market value (FMV) as ______________________________ . Downstream revenue may include referrals for laboratory services, referrals for imaging services, referrals for hospital services, or even referrals to other specialists. 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. 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. 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. The best practice that a health system can adopt for establishing financial arrangements without getting penalized is consulting with a third-party valuation expert to not only rationalize the compensation rate, but to justify the community need. You can contact me at 865-673-0844. Catherine Short converses with Rachel V. Rose, JD, MBA, principal with Rachel V. Rose - Attorney at Law, P.L.L.C. A and B - not be conditioned on referrals & allow the physician to establish medical staff membership at other hospitals. The Anti-Kickback Statute (AKS), 42 U.S.C. The 2021 Stark Law and Anti-Kickback Statute: Fair Market Value and Commercial Reasonableness (American Health Law Association Publication) Noteworthy 2021 stark law revisions and modifications: specifically areas impacting provider compensation and transactions valuation. 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. Instead, it is the impact of the COVID-19 pandemic on the industrys salary and production survey data. 1320a-7b(b), applies to all individuals and companies. OIGs proposed new safe harbors are: Additionally, OIG is finalizing changes to the following existing safe harbors: CMS modifications and additions to the Stark Law rules were equally significant. Specifically, the Final Rule includes new or modified regulatory definitions for the terms "commercially reasonable," "fair market value," and "general market value" as well as terms particular to the definition of a "Group Practice." 1395 nn) and antikickback statutes (42 U.S.C. 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. Fair Market Value (FMV) What are your reasons? The case underscores that the OIG cares about technical as well as substantive compliance with the Stark law. v. UPMC et al.In particular, the court held that the relators had made out a plausible allegation of an indirect compensation . document.write(year) The U.S. Department of Health and Human Services (HHS) adopted certain regulatory leasing safe harbors for both the Anti-Kickback Statute, commonly referred to as the "space rental safe harbor," and Stark Law, commonly referred to as the "office space rental exception.". 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. 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. In some cases, the alignment between compensation and production may be distorted. 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 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. So, while it may require effort, and in some cases could be difficult to achieve, finding fair market value is a must. The Stark Law prohibits physicians from referring patients for services to entities in which the physician or _____________________________ has a financial interest. These statutes currently reside under the purview of Centers for Medicare & Medicaid Services (CMS) fraud and abuse laws. Record the following closing entries on page 19 of the general journal. Thanks for reaching out. 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 . Fair Market Value and Commercial Reasonableness Applied to Healthcare Transactions. With regard to fair market value (FMV), industry best practice suggests that you _____ in order to . New Value-Based Exceptions. With the increased rate of mergers and acquisitions, healthcare organizations are vulnerable to federal scrutiny. 98810.3;2988 \div 10.3 ; 298810.3;2 significant digits. 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. Too often, they have hindered, rather than . Their concern has been financial, yes, but also an increasing concern of compliance risk. Interpretation of the "Volume or Value Standard" for Purposes of the Group Practice Regulations ( 411.352(g)) 2. Which of the following disclosure protocols should be used by providers when disclosing a Stark violation? 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. CMS' stated purpose is to establish bright-line, objective regulations that would be more easily applied. 1320a-7b (b) and the regulations and guidance promulgated thereunder. If a payment is made that cannot be shown to have been fair . In what situation is a written agreement NOT required under Stark? Allows agreement participants to reconcile payment variances in compensation arrangements without violation of physician self-referral law. Arrangements for patient engagement and support to improve quality, health outcomes, and efficiency. 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. 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. 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. "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 . 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. 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. Fraud and Abuse Laws. The previous definition of fair market value stated that physician compensation "must be set in advance, consistent with fair market value, and not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.". How can we lose so much money and still consider our arrangement commercially reasonable? 4 See 42 CFR 411.354. 7. 3 See 42 U.S.C. This has also been true in markets in which the demand and competition for CRNAs has exploded. A regular assessment should be conducted to determine if the healthcare transactions are commercially reasonable. 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. 6 Mark O. Dietrich, CPA/ABV Stark II -Statutory Guidance Stark Statute - 42 U.S.C. Non-profit hospitals face additional requirements under the Internal Revenue Code that they must satisfy to maintain their tax-exempt status. 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. CMS removed "general market value" from the definition of "fair market value" at 42 C.F.R. The Anti-Kickback Statute. Care coordination arrangements to improve quality, health outcomes, and efficiency without requiring the parties to assume any financial risk. Strategy, market growth, and larger referral bases were not among the examples. You can contact me at 800-270-9629. Fair Market Value ( 411.351) C. Group Practices ( 411.352) 1. The exception cannot be utilized for the rental of office space though. Get ready and roll up your sleeves for the work ahead. 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. An arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.. The waivers, which are numerous and fairly broad, offer health care entities significant flexibility to combat COVID-19 in ways .

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