The bottom line is that in the context of fair market value and the Stark Law, normal business negotiations allowing for leverage between parties is not necessarily the same in the healthcare context (because the parties cannot take into account that they generate business for one another). 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. 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. The Stark Law addressed a legitimate problem. 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. For example, in the past some arrangements where physician compensation exceeded professional collections have received considerable scrutiny for commercial reasonableness. Warranties safe harbor was modified to revise the definition of warranty and provide protection for bundled warranties for one or more items and related services provided they are paid for under the same payment. 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. Finally, the incentives in a healthcare environment are inherently different than they are in a business venture in other industries. Record the following closing entries on page 19 of the general journal. between x, annual gross rents (in thousands of dollars), and y, selling price (in With regard to fair market value (FMV), industry best practice suggests that you _____ in order to better withstand government scrutiny. 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; The same is not true for physicians and other entities when the Stark Law applies. For the past 30 years, a key consideration for health care organizations entering into transactions and arrangements for the employment and compensation of physicians has been the profitability of the practices in which the physicians, their staff, and other practicerelated resources are housedor more precisely the losses of the practices in which physicians and APPs are housed. The exception cannot be utilized for the rental of office space though. 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. 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. Thanks for reaching out. 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. First, financial incentives from a policy standpoint should not impact the plan of care developed for patients. Civil penalties of the AKS include False Claims Act liability, civil monetary penalties (CMP) and program exclusion, up to $50,000 CMP per violation, and civil assessment of up to three times the amount of kickback. Please join us on September 13 th! 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. 411.353 Prohibition on certain referrals by physicians and limitations on billing. They are: (a) the lease agreement must be in writing; (b) the . HSG has written articles about practice losses and how to address them. 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. 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. 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. The final rule creates new exceptions to the Stark Law for value-based arrangements that satisfy specified requirements based on the characteristics of the arrangement and the level of financial risk assumed by the . Barnes & Thornburg LLP. 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. 7. Which of the following disclosure protocols should be used by providers when disclosing a Stark violation? Because of increased enforcement, it is very common for organizations to work with legal professionals who specialize in fair market value and the Stark Law for the purpose of creating compliant and defensible financial arrangements. Specifically, the aim of healthcare delivery is to provide high-quality care, high levels of access, and at the most cost-effective price. ), 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. healthlawyers.org. Close the income statement accounts with debit balances. https://www.healthlawyers.org/Events/Programs/Materials/Documents/PHS15/kk_homchick_hutzler_shay.pdf, https://www.bdo.com/blogs/healthcare/april-2015/commercial-reasonableness-analysis?feed=8799bc52-2237-4688-aeac-83e40e623b56, http://www.americanbar.org/content/dam/aba/events/health_law/2015_Meetings/DocLaw/Papers/10_valuation_03.authcheckdam.pdf, http://www.worldservicesgroup.com/publications.asp?action=article&artid=2086, http://www.healthcapital.com/hcc/newsletter/10_12/HCVAL.pdf, New Timeshare Arrangement Exception under Stark Law. Q. Thursday, October 20, 2022. The AKS Final Rule creates new safe harbors for entities participating in a value-based enterprise (VBE) and amends existing safe harbors. 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. 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. Rather, each case must be evaluated and considered in the context of the situation. HAND Children are the Future. On February 9, 2018, Congress passed and President Trump signed into law H.R. 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. 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. 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. 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. Compensation arrangements that are required to be representative of . 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. Stark defines fair market value (FMV) as ______________________________ . 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. Many organizations are frequently asking: Do we have greater compliance risk because our practices are losing money according to our internal financial statements and accounting? The case underscores that the OIG cares about technical as well as substantive compliance with the Stark law. 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 . 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 arrangement is in writing, signed by the parties, and covers only identifiable items or services, all of which are specified in writing. 3) Specify an aggregate payment, which is set in advance. The CMS Final Rule implements changes to the Stark Law and offers several clarifying provisions related to key Stark Law terms and concepts. 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. The fair market value exception is a compensation exception that is flexible depending on the arrangement. Interested in learning about what is a referral? 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 . americanbar.org. B and C only - False Claims Act liability & Exclusion from the Medicare and Medicaid programs. Many of these reasons are out of the hospital or health systems control. 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 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. Get ready and roll up your sleeves for the work ahead. Additionally, until now, there has been no codified definition for commercial reasonableness, only limited CMS discussion such as that in the proposed 1998 rule. Fair market value, and specifically as it relates to compensation arrangements, is defined as The value in arms-length transaction, consistent with the general market value of the transaction. General market value means with respect to compensation for services, the compensation that would be paid at the time the parties enter into the service arrangement as the result of bona fide bargaining between well-informed parties that are not otherwise in a position to generate business for each other., Commercially reasonable means that the particular arrangement furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. 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. If a payment is made that cannot be shown to have been fair . In fact, studies done by the government in the 1980s and early 1990s discovered that this was a real issue and it not only represented a significant increase in costs but also created significant patient risk. 411.356 Exceptions to the referral prohibition related to ownership or investment interests.