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 . 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. ; (2) How can it be fixed? 411.354 Financial relationship, compensation, and ownership or investment interest. 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). et al. 3. B. Stark Law Exception - Value-Based Arrangements . 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. have been significantly impacted by decreased patient volume. Its criminal penalties include fines up to $25,000 per violation, and up to 5 years in federal prison. ), commonly referred to as the Stark law, is a set of regulations that pertain to physician self-referral under current United States (US) federal law. Home Fair Market Value and Commercial Reasonableness Applied to Healthcare Transactions, An Informational Article The Stark law does maintain a definition of fair market value but it does not dictate actual numbers. TheregressionequationisY=20.0+7.21XPredictorCoefSECoefTConstant20.0003.22136.21X7.2101.36265.29AnalysisofVarianceSOURCEDFSSRegression141587.3ResidualError7Total851984.1\begin{matrix} 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 . Healthcare employment contracts must: 1) Have a duration of at least a year. HAND Children are the Future. 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. B and C only - False Claims Act liability & Exclusion from the Medicare and Medicaid programs. 2) Be in writing and signed by both parties. 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. The Stark Law safe harbor provision has seven components. 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. The regulations will become effective January 19, 2021, with one exception. Referring to survey data regarding practice losses per physician and per provider can be enlightening. 411.362 Additional requirements concerning physician ownership and investment in hospitals. In addition to fair market value, most applications of the anti-kickback statute and Stark law also require commercial reasonableness. Introduction. With regard to fair market value (FMV), industry best practice suggests that you ____________________________ in order to better withstand government scrutiny. For a vast number of health care entities, employment of physicians and APPs is the only option for attracting and maintaining providers in their community. 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. The Stark law does maintain a definition of fair market value but it does not dictate actual numbers. 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. 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. 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. 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. Cybersecurity technology and services safe harbor for remuneration in the form of cybersecurity technology and services. Special Rules for Profit Shares and Productivity Bonuses ( 411.352(i)) a. 411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. Documenting the organizations goals with the arrangement or transaction must be a priority. This safe harbor is intended to provide greater predictability for model participants and uniformity across models. 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. Three new safe harbors for remuneration exchanged between or among participants in value-based arrangements: Value-based arrangements with full financial risk. The Stark Law prohibits physicians from referring patients for services to entities in which the physician or _____________________________ has a financial interest. On the other hand, an arrangement must be considered fair market value in order to be commercially reasonable. 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. On March 30, 2020, the Centers for Medicare & Medicaid Services (CMS) issued blanket waivers to the Stark Law that permit certain arrangements between physicians and health care providers implemented in response to COVID-19 that would otherwise violate the Stark Law. The "value-based arrangements exception" to the Stark Law protects value-based arrangements that are set forth in a writing (signed by the parties) that details the following: the value-based activities to be undertaken under the arrangement; how the value-based activities are expected to further the value-based purpose(s) of the VBE; Chapter 25. Structuring legally compliant hospital-physician leases and establishing fair market value (FMV) rental rates can be challenging. 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.". As CMS stated, In our view, each compensation arrangement is different and must be evaluated based on its unique factors. Virtually every provider compensation exception under the Stark Law requires that the compensation paid reflects fair market value. Documentation of all aspects of relationship. 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 . ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide. 1395 nn) and antikickback statutes (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. 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. The commenters are incorrect that this is CMS policy. Clearly, from CMS perspective, both referenced policies are misguided. 3) Specify an aggregate payment, which is set in advance. 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.". 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 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. Which of the following disclosure protocols should be used by providers when disclosing a Stark violation? Stark defines fair market value (FMV) as ______________________________ . Carnahan Group provides a unique platform. 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. This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. Healthcare organizations should consider both qualitative and quantitative components for FMV and commercial reasonableness analyses of financial transactions. 1 For purposes of this article, "Stark" refers to 42 U.S.C. HIPAA Compliance 03: Privacy Rule Introduction, Administrative, Physical and Technical Safegu, Compliance - Documentation, Billing and Reimb, HIPAA Compliance 04: Protected Health Informa, Calculus for Business, Economics, Life Sciences and Social Sciences, Karl E. Byleen, Michael R. Ziegler, Michae Ziegler, Raymond A. Barnett, Fundamentals of Engineering Economic Analysis, David Besanko, Mark Shanley, Scott Schaefer. There is no fair market value calculator that takes in a couple datapoints and spits out a positive or negative fair market value answer. A factor that is certain to affect fair market value determination during the coming year is not new or revised legislation. 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). There are a myriad of reasons that hospital-owned practices lose moneyhigher practice costs, poor revenue cycle operations, mismatched compensation incentives, poor management, etc. Likewise, a belief that paying a provider above the 75th percentile is not fair market value is also misplaced. This field is for validation purposes and should be left unchanged. the value in an arm's-length transaction that is consistent with general market value. The Stark Law defines FMV as the value in arms length transactions, consistent with general market value. If base or guaranteed compensation does not exceed the 75th percentile for the physicians specialty, as published by a survey source like the Medical Group Management Associations Provider Compensation Survey, then they do not seek a fair market value opinion because they consider the compensation to be fair market value. 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. The waivers, which are numerous and fairly broad, offer health care entities significant flexibility to combat COVID-19 in ways . 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. Second, downstream financial incentives in healthcare, as in most industries, is extremely hard to quantify. 411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. Many individual physicians believe that fair market value is met so long as relevant benchmarks exist. 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. 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. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. Traditional survey sources have proven to be dated and inadequate for the CRNA salaries being offered. The Court concluded that the payment above fair market value for the services that were actually required to be performed would serve some other purpose, such as compensation for referrals. Care coordination arrangements to improve quality, health outcomes, and efficiency without requiring the parties to assume any financial risk. 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. As you can see, the definition of fair market value does not provide details with respect to what is fair market value. These historic reforms became effective January 19, 2021 and are part of HHS's "Regulatory Sprint to . They must demonstrate that the net earnings of a tax-exempt organization are not used for private interests of employees and are used for the benefit of the community as a whole. These new rules, which significantly amend the existing laws, are a direct result of HHS Regulatory Sprint to Coordinated Care. recently sold and the following computer output was obtained. 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. b. Local transportation safe harbor was revised to expand mileage limits for rural areas (to 75 miles) and eliminate mileage limits for transporting patients discharged from the hospital to their home. Please join us on September 13 th! 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. 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). For more information on Stark Law Exceptions, see our dedicated page. 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.