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What is Fair Market Value?
Generally, FMV is
defined as the value derived by the parties as a result of
“arms 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 its intended use)” 42 U.S.C.
1395nn(h)(3). The final rule implementing this section
further defines general market value as follows:
“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.
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.” – Sec 42 CFR
Section 411.351.
Professional service
arrangements between hospitals and physicians can vary
greatly depending on the scope of services, competitive
market, supply and demand of physicians in the community,
licensure and service status of the hospital, etc.
Employment arrangements for physicians can vary greatly
depending on these factors.
Healthcare Compliance Guidance
Healthcare organizations need FMV determinations to support
FMV arrangements / compliance. Compliance with
Anti-Kickback and Stark Laws requires that three conditions
be met. Those conditions are:
 1)Payments
made must be commercially
reasonable.
2)Achieve
conditions that allow for "rebuttable presumption".
Conditions needed to achieve rebuttable
presumption include:
▪approved
in advance...no conflicts of interest,
▪obtained
and relied on appropriate data,
▪documented
the basis of determination.
3)Avoid
excess benefit.
Two
approaches are used to determine FMV
in healthcare; the Published Data and Market Comparables approaches.
The Published data approach relies upon data gathered from recognized
physician compensation data sources, formulaic analysis of survey data and
use of Stark II, Phase II guidelines. The Market Comparable approach
consists of research for peer examples and adaptation to context of
arrangements in review.
Pinnacle & FMV
The aim of the Pinnacle FMV Program is to simplify, to the
extent possible, compliance with FMV requirements and aid in the development
of productive physician-hospital relationships. To learn more about
the Physician FMV Program features or how Pinnacle can assist your
organization contact Dan Stech (303.390.1946 or
dstech@medbizz.com)
or David White (303.407.0526 or
dwhite@medbizz.com) for more information.
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Stark
Resources
▪Link
to the Stark II, Phase III Final Rule
The
Federal Register, September 5, 2007
▪Link
to the Stark II, Phase II Final Rule
The
Federal Register, March, 26, 2004
▪www.starkcompliance.com
Link
to MGMA's Stark Compliance website
Links
to the National Compensation Surveys
Referenced
in the Stark II, Phase II Regulations
▪MGMA
Physician Production and Compensation
Survey.
2007 Report Based on 2006 Data.
-(877)
275-6462, ext. 895
-www.mgma.com
▪Sullivan
Cotter & Associates, Inc. 2006
Physician
Production and Compensation Survey
-(313)
872-1760
-www.sullivancotter.com
▪Hay
Group. Physician Compensation Report
2007.
-(215)
861-2000
-www.haygroup.com
▪Hospital
& Healthcare Compensation Service.
Physician
Salary Survey Report 2007.
-(201)
405-0075
-www.hhcsinc.com
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