Stark Law Final Rule Summary - Strategic Management Services, LLC HAND Children are the Future. Modernizing and Clarifying the Physician Self-Referral - CMS 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. 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 411.353 Prohibition on certain referrals by physicians and limitations on billing. thousands of dollars) for apartment buildings. This would be incorrect. 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 . 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. A Stark violation is punishable by civil money penalties; an anti-kickback violation is punishable by exclusion from federal health care programs, criminal penalties of up to $25,000 in fines or . Health Management Associates $260 Million, Kalispell Regional Healthcare $24 Million. 3 See 42 U.S.C. 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.". Finalized new, permanent exceptions for value-based arrangements that will permit physicians and other health care providers to enter into value-based arrangements without fear that their legitimate activities to better coordinate care, improve quality, and lower costs would violate the Stark Law. 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. 2 A discussion of Stark's application to Medicaid claims is beyond the scope of this broad overview. 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). 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. \text{Regression} & \text{1} & \text{41587.3}\\ An arrangement may be renewed any number of times if the terms of the arrangement and the compensation for the same items or services do not change. The argument is that but for the celebrity being in the movie the consumer would not purchase the ticket. 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"). Changes to AKS Personal Services Safe Harbor | Jones Day Historically, the concept of a bargained for exchange was primarily handled and managed by financial professionals within the organization. The general market value definitions are: What does it mean for a compensation arrangement to be commercially reasonable? 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. 1395 nn) and antikickback statutes (42 U.S.C. B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation. 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. 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. Real Estate Leasing in the Healthcare Industry: Understanding the Stark The same is not true for physicians and other entities when the Stark Law applies. 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. If ever there was a time in which that is true on so many levels, this is it. Which of the following disclosure protocols should be used by providers when disclosing a Stark violation? 1320a-7b. Fair Market Value and Commercial Reasonableness - Carnahan Group With regard to fair market value (FMV), industry best practice suggests that you _____ in order to better withstand government scrutiny. 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. 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 qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. 3) Specify an aggregate payment, which is set in advance. Louisville, Kentucky 40241, 2023 HSG Advisors. Ultimately, valuators likely will have to be creative and look back into past years surveys to evaluate trends and validate current survey data. 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. 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. Assessing Fair Market Value. Regulatory Sprint: Understanding the Impact on the Stark Law, Anti Which of the following is a government sanction provided under the Stark regulation? Traditional survey sources have proven to be dated and inadequate for the CRNA salaries being offered. In the interim, for more information regarding these matters, contact a PYA executive below at (800) 270-9629. A regular assessment should be conducted to determine if the healthcare transactions are commercially reasonable. To accommodate patient surge, a hospital rents office space or equipment from a physician practice at below fair market value or at no charge. 2018 Changes to the Federal Physician Self-Referral Law (Stark Law) americanbar.org. Sec. Complying with Stark Law and Anti-Kickback Policies | SMS Specifically, the aim of healthcare delivery is to provide high-quality care, high levels of access, and at the most cost-effective price. 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. 22-14.HHS OIG was responding to a written request for an advisory opinion regarding a proposed continuing medical education program for local optometrists conducted by an ophthalmology group practice and four potential funding options for the programs. This has also been true in markets in which the demand and competition for CRNAs has exploded. An extension has been granted until January 1, 2022 for compliance related to certain changes required in group practice compensation methodologies. 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). The Stark Truth About the Stark Law: Part I | AAFP The regulations will become effective January 19, 2021, with one exception. stark law fair market value industry best practice CMS Releases Several Stark Law Waivers for Use during the COVID - Mintz 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. A significant part of compliance with Stark and Anti-Kickback is the concept of Fair Market Value. The following definition is from the regulations: means the value in arm's-length transactions, consistent with the general market value. On January 19, long-awaited adjustments to the Centers for Medicare and Medicaid Services' ("CMS") Physician Self-Referral Law (commonly referred to as the "Stark Law") and the Department of Health and Human Services Office of Inspector General's ("OIG") Anti-Kickback Statute ("AKS") took effect that make it easier for hospitals and health systems to transition from volume . Using the example of celebrities above, many contracts with celebrities include a portion of ticket sales to that movie. That is a topic for another day. var today = new Date() 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. Documentation of all aspects of relationship. In some cases, the alignment between compensation and production may be distorted. 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. Proceduralists such as dermatologists, orthopedic surgeons, ophthalmologists, otolaryngologists, plastic surgeons, urologists, etc. Fair Market Value Under the Stark Law and Anti-Kickback Statute 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 . 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? 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. New Arrangement Best Practices Consult with a valuation expert on whether financial arrangements satisfy the new Stark Law fair market value and commercial reasonableness standards. Jan 2017 - Oct 20225 years 10 months. \text{Residual} & \text{Error} & \text{7}\\ 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. Second, downstream financial incentives in healthcare, as in most industries, is extremely hard to quantify. worldservicesgroup.com. 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. This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. However, since the law was enacted in 1989, the regulations implementing it have become woefully outdated. There are a myriad of reasons that hospital-owned practices lose moneyhigher practice costs, poor revenue cycle operations, mismatched compensation incentives, poor management, etc. The Anti-Kickback Statute, 42 U.S.C. CMS Sprints to Overhaul Stark | Insights | Davis Wright Tremaine Sec. Key PYA Takeaway: Since the Stark II, Phase II regulations, CMS has introduced the use of salary surveys to help in determining fair market value compensation, even going so far in the Stark II, Phase III regulations to comment reference to multiple, objective, independently published salary surveys remains a prudent practice for evaluating fair market value. However, salary surveys by themselves may be limited in establishing fair market value. How to Define Fair Market Value Rate of Return in Health Care 411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. Under the statute; Stark law, anti-kickback updates may boost value-based payments the value in an arm's-length transaction that is consistent with general market value. Typical compensation per Work Relative Value Unit rates could be significantly off from traditional levels for given specialties. In addition, CMS removed the "volume or value" and the "other business generated" standards . Structuring legally compliant hospital-physician leases and establishing fair market value (FMV) rental rates can be challenging. The Stark Law addressed a legitimate problem. Grabbing a 2021 survey and finding a percentile might be enough, then again, it might not. The same survey data that many compensation valuators rely on as a central component to their fair market value analysis and opinion. Developing your contracts and fair market value Spidey sense for Organizations who may have carte blanche physician compensation review policies set at certain thresholds should be careful that the totality of the facts and circumstances support each transaction (versus the entirety of all transactions). The case underscores that the OIG cares about technical as well as substantive compliance with the Stark law. While this expansive list of Stark Law changes will take some time for the industry to digest, we wanted to promptly share three changes and corresponding takeaways as it relates to fair market value and commercial reasonableness in physician/ hospital relationships. The reason the simplicity of this is not correct is that many lawsuits and government enforcement actions have established what are the risks associated with fair market value. For example, it is very common for recruitment agencies to publicize the perceived revenue generation of certain specialties. Compensation arrangements that are required to be representative of . 5. 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 . First, fair market value is based purely on the personally performed services of a physician and not based upon any downstream revenue for the entity or business generated between the parties. 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. Thanks for reaching out. CMS' stated purpose is to establish bright-line, objective regulations that would be more easily applied. Carnahan Group assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. The following requirements must be [] Attendees may ask questions in advance. Providing additional flexibility related to signature and writing requirements. 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. 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. Allows agreement participants to reconcile payment variances in compensation arrangements without violation of physician self-referral law. Close the income statement accounts with debit balances. Cincinnati. 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. Our fixed asset valuation services serve a variety of purposes for our clients, including: Anti-Kickback Statute and Stark Law Compliance What are your goals? Please join us on September 13 th! On November 20, 2020, the U.S. Department of Health and Human Services (HHS) published Final Rules for the Physician Self-Referral Law (Stark Law), the federal AKS, and the Civil Monetary Penalties (CMP) Law. Fair Market Value Exception - Stark Law An assessment of transactions should be done to analyze if it is reasonable to pay for the services in the first place, in order to prevent violation of the Anti-Kickback Statute. Instead, it is the impact of the COVID-19 pandemic on the industrys salary and production survey data. Specialties like critical care, hospital medicine, emergency medicine, and pulmonary medicine may have experienced increases in patient volume due to the pandemic. There are four basic methods of determining fair market value. Bottom line, 2021 surveys, based on 2020 data, are likely going to be challenging. \text{SOURCE} & \text{DF} & \text{SS}\\ The Complete Guide to Fair Market Value Under the Stark Regulations 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. As to its civil penalties, the Anti-Kickback Statute includes monetary penalties up to $50,000 per violation, civil . document.write(year) 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. Clinical Fair Market Value: Why it's essential and what - IQVIA ; and (3) Does it mean the compensation is not commercially reasonable? Comparison Chart of Anti-Kickback Safe Harbors and Stark - Bricker 4) Have a payment or salary provision that is reasonable and is at fair market value. In 2004, CMS noted that valuation methods under Stark Law "must exclude valuation where the parties to the transaction are at arms-length but in a position to refer each other." 6 Because FMV under Stark Law does not "necessarily comport with the usage of the term in standard valuation techniques and methodologies," 7 a purely market . 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."