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Healthcare Industry E-Flash CMS PHYSICIANS REGULATIONS AND STARK III – Now What???In July 2007, the Center for Medicare and Medicaid Services (CMS) issued the 2008 Proposed Physician Fee Schedule (PPFS). This pronouncement was soon followed by the final installment in the Stark regulations on September 5, 2007, commonly known as Stark III. These two pronouncements are anticipated to have a measurable impact on how hospital/physician collaborations are structured and what constitutes "fair market value". This bulletin focuses on only two of the implications of these pronouncements: 1) the compensation safe harbor and 2) the anticipated impact on services provided "under arrangements". The pre-Stark III regulations included a safe harbor methodology for calculating compensation associated with services provided personally by physicians. This safe harbor was typically utilized to determine compensation associated with management agreements, medical directorships and call coverage arrangements. Stark III eliminated the safe harbor methodology and replaced it with language stating simply that the compensation must be at "fair market value" (FMV) and that FMV can be determined using any commercially reasonable methodology appropriate to the given circumstances. On the negative side, the safe harbor is no longer available. However, on the positive side, this may open the door for more creative approaches to determining FMV compensation. It will be critical that appraisers employed for such determinations understand not only valuation principals, but also the regulatory implications associated with such determinations. The PPFS deals with what some have determined to be a death blow to management agreements commonly termed "under arrangements". If the PPFS is approved as proposed, the definition of "entity" changes to include not only the organization that bills CMS (as it is currently defined), but also the organization that delivers the designated health service (DHS). Under this definition of entity, the common structure of establishing a management company to provide the services under arrangement will be prohibited. The under arrangement services would be deemed to be a referral to a DHS entity in which the physician has a financial interest. For assistance in determining FMV compensation or other appraisal needs
in the healthcare industry, the professionals at ValuePoint possess both
the technical expertise and healthcare industry experience that you need
for navigating these treacherous waters. For more information about ValuePoint’s
services, please contact Carol Carden or Jim Lloyd at 865-558-8118 or
visit our website at www.valuepointconsulting.com. ValuePoint Consulting Group, LLC
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