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. 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"). ; ; This article was originally published by the American Health Law Association in April 2021 as part of their 2021 Health Care Transactions Resource Guide. A "Stark" Difference in Fair Market Value and Commercial Reasonableness Is Coming in 2021. For bona fide employment as long as all other requirements are met. HHS, through the Regulatory Sprint to Coordinated Care, has a stated goal of reducing regulatory barriers within our nations health care system and accelerating the transformation of the health care system into one that better pays for value and promotes care coordination. As HHS statement indicates, value-based arrangements and transactions are the focus of this episode of Stark Law and AKS revisions, but other areas and central ideas of the Stark Law and AKS are significantly impacted as well. A comprehensive, but not all inclusive, list of the items covered in the final rule follows. The Stark law prohibits a physician with a financial relationship in an entity from making a referral for designated health services covered by Medicare and Medicaid to that entity even if the services are billed to an individual or other third party payer. 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. The CMS Self-Referral Disclosure Protocol (SRDP). 411.357 Exceptions to the referral prohibition related to compensation arrangements. Another key Stark Law change that will certainly influence fair market value and commercial reasonableness opinion approach and deliverable is the uncoupling or disentanglement of the volume or value standard (and the other business generated standard) from the definitions of fair market value and commercial reasonableness. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. 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 hospitals and health systems around the country have employed physicians and then struggled, or at least had to come to grips with the fact that, the practices are losing money. Not that CMS made it easy by providing a bright line or even a floor that would allow us to say, if we go above this level, then we must get a formal thirty-party fair market value opinion. According to CMS, We wish to be perfectly clear that nothing in our commentary was intended to imply that an independent valuation is required for allcompensation arrangements.. 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. Three new safe harbors for remuneration exchanged between or among participants in value-based arrangements: Value-based arrangements with full financial risk. 1320a-7b (b) and the regulations and guidance promulgated thereunder. 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. For example, in the past some arrangements where physician compensation exceeded professional collections have received considerable scrutiny for commercial reasonableness. What are your reasons? An analysis to document commercial reasonableness may include, but not be limited to, whether the arrangement helps meet an organizations mission/ vision/ and values, the importance of the arrangement to the service line(-s) affected, how the arrangement affects the cost, quality, and access to care, what other options exist to accomplish the organizations goals, and why the arrangement entered was the best option. 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. Again, job posting sites have been invaluable to determining fair market value for high-demand services. Finalized a new exception to protect compensation not exceeding an aggregate of $5,000 per calendar year to a physician for the provision of items and services, without the need for a signed written agreement and compensation that is set in advance if certain other conditions are met (i.e., fair market value and does not take into account volume and value of referrals). Referring to survey data regarding practice losses per physician and per provider can be enlightening. The exception cannot be utilized for the rental of office space though. Strategy, market growth, and larger referral bases were not among the examples. 6 Mark O. Dietrich, CPA/ABV Stark II -Statutory Guidance Stark Statute - 42 U.S.C. Building High-Performing Physician Networks. "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 . The fair market value exception is a compensation exception that is flexible depending on the arrangement. Helps identify compensation formulas that take into account the volume or value of a physicians referrals as well as those that are allowed to distribute profits from designated health services within a group practice. However, since the law was enacted in 1989, the regulations implementing it have become woefully outdated. The exception permits both monetary and nonmonetary remuneration between the parties. (i) Consistent with the fair market value of . Which of the following disclosure protocols should be used by providers when disclosing a Stark violation? 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. This safe harbor is intended to provide greater predictability for model participants and uniformity across models. Provided additional guidance on key requirements of the exceptions to the Stark Law to make it easier for healthcare providers to take steps to ensure compliance, such as: Guidance on identifying compensation formulas that take into account the volume or value of a physicians referrals. 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. 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 example, celebrities and professional athletes negotiate contracts without any specific compensation regulations. 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. These historic reforms became effective January 19, 2021 and are part of HHS's "Regulatory Sprint to . 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. The commenters are incorrect that this is CMS policy. Clearly, from CMS perspective, both referenced policies are misguided. The Stark "in-office ancillary" exception permits a physician or group practice to order and provide DHS in the office, provided that the DHS is ancillary to the professional medical services provided by the practice. 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. Compliant compensation methodologies: Advanced Stark. 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. 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. This has also been true in markets in which the demand and competition for CRNAs has exploded. 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 . Finally, the incentives in a healthcare environment are inherently different than they are in a business venture in other industries. 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." In our prior article, we provided a basic overview of Fair Market Value (FMV) assessments and how these have become a key aspect in compensation contracts for cardiologists.We also reviewed how practices should focus on demonstrating their value to hospitals and health systems by showcasing leadership efforts within the practice and hospital, attention to strategy, financial performance . There is no fair market value calculator that takes in a couple datapoints and spits out a positive or negative fair market value answer. According to CMS in the Final Rule, We continue to believe that this determination should be made from the perspective of the particular parties involved in the arrangement. Another key factor to commercial reasonableness is answering the question: Does the arrangement make sense to accomplish the parties goals? 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. CMS' stated purpose is to establish bright-line, objective regulations that would be more easily applied. 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. This revenue generation includes downstream revenue. The Anti-Kickback Statute. Expands the 411.357(1) exception to fair market value payments for rental office space, notably when the arrangement is for less than one year. If a hospital is losing three times the national average in its employed primary care practice ask:(1) Why? Traditional survey sources have proven to be dated and inadequate for the CRNA salaries being offered. First, it delineated that salary surveys or salary survey percentiles may not be appropriate to use in all circumstances. 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. 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. First Name (required) 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. 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 waivers, which are numerous and fairly broad, offer health care entities significant flexibility to combat COVID-19 in ways . The case underscores that the OIG cares about technical as well as substantive compliance with the Stark law. Fair market value is defined to mean the "value in an arm's length transaction, consistent with general market value of the subject transaction" (42 CFR 411.351). In doing so, CMS offered helpful commentary for health care entities structuring real estate arrangements. CMS removed "general market value" from the definition of "fair market value" at 42 C.F.R. The Federal Anti-Kickback Statute, codified at 42 U.S.C. There are numerous laws across the country that have been created to remove this unethical practice. Thanks for reaching out. 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. Sec. Eliminating the period of disallowance rules and correcting discrepancies during the arrangement. 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. 411.362 Additional requirements concerning physician ownership and investment in hospitals. See our dedicated page. The AKS Final Rule further codifies statutory revisions by adding the statutory exception to remuneration related to Accountable Care Organization Beneficiary Incentive Programs for the Medicare Shared Savings Program. However, there are a few core concepts that are applicable when establishing fair market value. CMS further clarifies that commercial reasonableness is whether an arrangement makes sense as a means to accomplishing the parties goals. 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. The regulations are part of the HHS Regulatory Sprint to Coordinated Care and . Due to a complex regulatory environment, an in-depth analysis should be performed to ensure that the healthcare transactions are legally permissible at FMV and are commercially reasonable. between x, annual gross rents (in thousands of dollars), and y, selling price (in Many of the new and revised regulations apply beyond financial arrangements related to care coordination initiatives, and thus are crucial for all 2) Be in writing and signed by both parties. 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. Interpretation of the "Volume or Value Standard" for Purposes of the Group Practice Regulations ( 411.352(g)) 2. The definitions of fair market value and commercial reasonableness have been updated and established as follows: Regarding commercial reasonableness, CMS clarified that , As it relates to fair market value compensation, CMS clarifies several important items.
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