FMV (Fair Market Valuation) Heads Up

By: Jeff Cohen

FMVs are at the heart of healthcare regulatory compliance when money or anything of value changes hands in a healthcare business setting.  Why?  Two reasons:

  1. Healthcare laws (Stark, the Anti Kickback Statute and the Patient Brokering Act) all target money changing hands in the healthcare business space; and
  2. There are clear exemptions and exceptions that have as an essential ingredient that the compensation (or pricing) is consistent with “fair market value.”

How it Goes—A Six Part Process

Locking down an externally performed FMV (part of the “gold standard” in regulatory compliance) is a process.  Here’s what it should look like:

Step 1.  The healthcare business person or his/her advisors (often accountants) find someone who specializes in performing FMVs for the specific matter (e.g. compensation, price of a business to be acquired);

Step 2.  The LAWYER for the healthcare business is immediately involved in the process BEFORE the FMV firm is engaged;

Step 3.  The LAWYER engages the FMV firm on behalf of the healthcare business client;

Step 4.  The parties (including the lawyer) get on the phone or in a meeting with the “FMV guy” and has a very extensive conversation re the project;

Step 5.  Once the FMV process done, a DRAFT FMV study is prepared and discussed interactively with the healthcare business and the lawyer;

Step 6.  Once finalized, an execution copy is prepared and provided to the lawyer.Continue reading

Breaking Down Legal Buzzwords: Fair Market Value & Commercial Reasonableness

book-stacks-colorful.jpgBy: Jackie Bain

Federal fraud and abuse laws often require that arrangements between health care providers are “fair market value” and “commercially reasonable.” And while these terms look like legalese and are easy to overlook, in fact, they are important. For example, the Federal Stark law requires strict compliance with its terms. A physician may enter into a prohibited arrangement with the intention that it falls within an exception to the law. If, however, the arrangement is not fair market value, the physician’s arrangement would violate the law, subject the physician to fines and risk the physician’s ability to participate in Medicare. Continue reading

Calculating Charges for Out-of-Network Health Services

bonus calculationBy: Karina Gonzalez

A healthcare provider’s “billed charge” is usually the total charges billed before applying any contractual discounts.  Where there are no contractual relations, a provider’s charge may be considered the equivalent of fair market value for the service provided. But what is fair market value? If the provider is contracted the rate is confidential and not subject to disclosure.  If the provider is non-contracted, there is no standard billing rate for providers, making it difficult to get reliable rate data on what is fair market value for similar services or similar providers. One Florida court has found that “fair market value” is the price that a willing buyer will pay and a willing seller will accept in an arm’s length transaction. Continue reading