A growing interest in hospital-provider alignment, coupled with the desire to establish meaningful mechanisms for provider accountability related to hospital quality, efficiency, and patient outcomes, were the original – and remain – the impetus behind service line co-management arrangements. Service line co-management arrangements are generally considered higher risk in comparison to certain other alignment structures such as medical directorships, foundation models, or direct physician employment because they may implicate (among other regulatory schemes) each of the “big three” legal considerations in healthcare; the federal Stark Law, the Anti-Kickback Statute (AKS), and the Civil Monetary Penalties (CMP) Law. Structured properly, service line co-management arrangements can serve not only as effective drivers of hospital-physician alignment, but also lay the foundations for participation and success in cost savings endeavors, alternative payment models (APMs), broader clinical integration, and the delivery of value-based care.

Originally published in the American Association of Provider Compensation Professionals Bulletin on August 1, 2023.

OVERVIEW

The use of healthcare provider compensation data (generically referred to herein as the “Surveys”) is common practice amongst both operators and valuators, and, although widely utilized, is susceptible to misinterpretation and/or misapplication. As a prime example, the Surveys, which include those published by Medical Group Management Association (“MGMA”) and American Medical Group Association (“AMGA”), make it clear that reported data (e.g., total cash compensation, professional collections, work relative value units (“wRVUs”), etc.) correspond to “full-time” providers. But what does it mean to be a “full-time” provider, and why is that important? This article explores the various ways in which a full-time equivalent (“FTE”) is defined, and the role that such definition has in evaluating, analyzing, and utilizing data from the Surveys.

DEFINITION OF AN FTE

An FTE is meant to standardize the concept of a full-time provider; however, even amongst the Surveys, there are various definitions of FTE, with certain Surveys failing to clearly define FTE altogether.

Broadly speaking, the existing definitions of FTE are vague, and tend to defer to each particular organization’s “normal” workweek or minimum weekly work requirements. By way of example, MGMA cites two examples within its definition of “Clinical FTE,” including two physicians both working 32 clinical hours per week as either a (i) 1.0 FTE, or (ii) 0.64 FTE, dependent upon what constitutes a “normal” workweek for the provider within a particular organization. The applicable text from MGMA is restated below.[1]

Clinical Full Time Equivalent (FTE) Also referred to as: cFTE

A measure based upon the number of hours worked on clinical activities for each provider. A provider cannot be more than 1.0 FTE but may be less. For example, a physician administrator who is 80 percent clinical and 20 percent administrative would be 0.8 clinical FTE; a physician with a normal workweek of 32 hours (4 days) working in a clinic or hospital for 32 hours would be a 1.0 clinical FTE; a physician with a normal workweek of 50 hours (5 days) working 32 clinical or hospital hours would be a 0.64 clinical FTE (32 divided by 50 hours).

Certain Surveys include supplemental data that may provide additional insight into what constitutes a typical full-time workload, as represented in such Survey. For example, AMGA reports required clinical hours per week for full-time providers. Additionally, MGMA includes annual hours of: (i) vacation, (ii) sick time, and (iii) total paid time off (inclusive of vacation, sick, and personal days) separated by physician specialty, each of which could be used as a means of estimating actual workdays per year. It is important to note, however, that reporting such data is not required for survey participants, and therefore, the number of respondents tends to be lower than other primary reporting metrics, such as cash compensation and measures of productivity.

Having shown that the definition of FTE is not uniform and generally open to some aspect of interpretation by both Survey respondents and end users, it is imperative to develop a “best” practice when interpreting and referencing Survey data as demonstrated by the following case studies.

CASE STUDY ONE: CONSISTENCY IN FTE DETERMINATION

As mentioned above, the Surveys include various metrics that may be utilized in order to derive the hours associated with an FTE. As the following Tables 1 and 2 demonstrate, such data is open to interpretation, which can yield drastically different compensation outcomes for our hypothetical physicians, Dr. A and Dr. B, who perform similar services:

While consistency in application of a methodology to define FTE should be best practice by organizations, to the extent different methodologies are utilized for deriving FTE across specialties and/or providers, it is important to document your support and reasoning for such application.

CASE STUDY TWO: DETERMINING FTE – WEEKLY CLINICAL SERVICES HOURS

According to the American Medical Association, most physicians work between 40 and 60 hours each week.[4] If a physician is compensated based purely on productivity or actual worked hours, the required hours of clinical services per week is not necessarily relevant, since the physician’s compensation is ultimately tied back to the actual work effort.[5] However, if a physician is compensated based on an annual salary, it is reasonable to expect compensation differences between a physician who provides 40 hours per week versus a physician who provides 52 hours per week in the same type of role. By way of example, Dr. A and Dr. B are employed by the same organization to perform similar roles. These physicians only provide clinical services under their hypothetical agreements, as detailed in Table 3, below:

Relying on MGMA’s definition of FTE, each of these physicians would be considered a 1.0 clinical FTE; however, when utilizing Survey data to derive a guaranteed salary, is it inappropriate for both Drs. A and B to receive the same annual salary? Maybe. If both physicians historically have produced at comparable levels as measured by work relative value units or some other metric, a similar annual salary may be appropriate. Alternatively, if both physicians are inexperienced new hires and have comparable backgrounds, training, and certification, an argument could be made that Dr. B should receive a higher annual salary than Dr. A. specifically considering that Dr. B would be required to perform 30% more hours each week than Dr. A.

Bringing this discussion point full circle is the fact that both physicians responding to a particular Survey would report the same total compensation with significantly different required work hours. However, as the data is aggregated amongst all Survey participants, end users would not be able to identify such differences, thus reiterating the importance of careful and prudent analyzation and application of Survey data.

CASE STUDY THREE: PAID TIME OFF AND FTE

In our final example in Table 4, Dr. A and Dr. B are entitled to drastically different annual weeks of paid time off.

Referring to Table 4, although Dr. B is entitled to 10 more weeks of PTO than Dr. A, total annual hours worked by Dr. B are the same as those for Dr. A, as Dr. B is required to provide 50 weekly work hours versus 40 weekly work hours for Dr. A. This observation highlights the importance of looking at multiple reference points in determining a particular provider’s FTE status. It is also important to note that certain shift-based specialties and/or production-based compensation structures do not typically include any paid time off. Therefore, in situations in which such providers are offered paid time off, even if consistent with what is offered to similarly situated providers within the organization, it is necessary to determine if the benchmark survey data reflects a somewhat comparable work requirement.

CONCLUSION

This article explored the definition of FTE as one of many ways that Survey data is susceptible to misinterpretation and/or misapplication. As always, when using Survey data, it is important to understand what is included in such data and to make adjustments, as necessary. As such, when utilizing Survey data for provider compensation purposes, it is essential to: (i) develop and follow best practices, (ii) establish consistent approaches to application, and (iii) document any deviations to such approaches.

Originally published by the American Association of Provider Compensation Professionals, Journal of Provider Compensation, June 20, 2023 Issue.

Please note the PDF included herein includes HealthCare Appraisers’ article only. For access to the full journal, please visit the American Association of Provider Compensation Professionals’ website at https://providercompensation.org/.

 Introduction to the Physician Shortage

Healthcare, like any other industry, is subject to simple supply and demand pressures. Unlike many other industries, however, healthcare is subject to a highly regulated environment that introduces a variety of complexities that disrupt standard supply and demand principles. This disruption has matriculated into perhaps one of the most pressing issues the healthcare industry has seen in recent years: a staggering number of physician shortages.

There are numerous factors causing the physician shortage, including (i) the increasing number of physicians retiring and nearing retirement age – the number of people aged 65 or over is expected to grow by about 47% by 2032 – and (ii) the increasing likelihood of physician burnout, which was largely exacerbated by the COVID-19 Pandemic.[1] Regardless of ultimate reason, however, statistics make painstakingly clear that the present demand for healthcare services far outweighs the supply of physicians. Further, this supply-demand relationship does not appear to be set to improve any time soon. A recent study conducted by the Association of American Medical Colleges (“AAMC”) predicts that the United States could see a shortage of 37,800 to 124,000 physicians by the year 2034.[2]

Academic Medical Centers (“AMCs”) are perhaps feeling the effect of this current and impending physician shortage more than any other healthcare entity. Not only are AMCs competing against other hospitals and healthcare systems for the same pool of new physicians to join their medical staff, but one study has shown that up to 38% of physicians practicing in an academic setting will leave within 10 years, requiring AMCs to competitively recruit an even higher number of qualified physicians to their facilities.[3] A recent article on the topic indicates that academic physicians, often junior faculty or associate professors, tend to join other types of physician practices, in addition to leaving the practice of medicine altogether.[4] While competing for new physicians to alleviate physician shortages may seem hard enough to navigate, it is imperative that AMCs remain fully staffed with physicians who are able to satisfy the additional requirements for operating graduate medical education (“GME”) programs (e.g., the Common Program Requirements set forth by the Accreditation Council for Graduate Medical Education).[5] In this sense, AMCs are also under pressure to simply retain their current medical staff.

This article discusses how the current governmental regulations largely affect the physician shortage in the United States, takes a deeper look at the ongoing difficulty for AMCs in the context of these governmental regulations and other fraud and abuse laws, and seeks to provide helpful guidance for individual AMCs in an effort to diminish the effects of the physician shortage on their programs and in their facilities.[6]

 What are AMCs and How Does the Physician Shortage Impact these Organizations?

As current physicians phase out of practice, the natural response is to look towards those coming into practice as replacements. In order to become licensed and able to practice as a physician in the United States, most states require that medical school graduates complete a residency program to further develop their medical skills in a specific specialty. This additional education completed after graduation from medical school is referred to as graduate medical education (i.e., GME), and includes internship, residency, and fellowship programs offered at AMCs across the country. As the Joint Commission International outlines, an AMC is “a tertiary care hospital that is organizationally and administratively integrated with a medical school.”[7] As such, AMCs are the primary educational facilities for physicians-in-training to complete their GME in residency programs.

In order to fulfill these GME requirements and enter a residency program, students must enter into the National Residency Matching Program and compete for residency slots at AMCs around the country.[8] Residency program slots are funded by the Centers for Medicare & Medicaid Services (“CMS”), and the amount of funding provided by CMS directly dictates the number of residency spots available for AMC programs.[9] Such funding was largely unchanged from 1997 until recently, when it was expanded with the Fiscal Year 2022 Inpatient Prospective Payment System (“IPPS”) final rule, which will allowed for 200 new Medicare-funded residency slots, in total, for qualifying hospitals per year, for five years. This equates to 1,000 new residency slots available beginning July 1, 2023.[10]

The number of students graduating from U.S. medical programs has increased year-over-year at a rate that continuously outpaces the number of residency slots available.[11] In 2022, 47,675 students entered the National Residency Matching Program.[12] The number of residency slots available for those students to begin their required GME to obtain a license and practice as a physician was only 39,205.[13] This left 8,470 medical student graduates without a residency slot in 2022. Further complicating that shortfall, the year 2021 alone saw approximately 117,000 physicians leaving the workforce. As such, the 1,000 additional slots are not enough.[14]

Is there hope for the residency slot shortage? Perhaps. In March 2021, the U.S. Senate introduced the Resident Physician Shortage Reduction Act of 2021, which proposed an increase to “the number of residency positions eligible for graduate medical education payments under Medicare for qualifying hospitals” (the “Reduction Act”) to the tune of 75 additional residency slots per hospital during the period beginning in fiscal year 2023 through 2029.[15] Another U.S. Senate introduction, the Training Psychiatrists for the Future Act (the “Future Act”), proposes to expand the psychiatry GME program by 400 slots.[16] Neither the Reduction Act nor the Future Act has yet to gain traction.

While the introductions of these bills are promising to alleviate a portion of the shortage, it does not appear that the physician shortage is going to abate any time soon. Additionally, competition to employ existing and incoming physicians is becoming more aggressive, albeit subject to various fraud and abuse laws that require fair market value (“FMV”) compensation, such as the Stark Law and federal Anti-Kickback Statute. With this understanding and context, the questions become relatively straightforward: “How do AMCs retain both (i) their residents – residents the AMCs have just trained for three-plus years – as physician staff and (ii) their current physician teaching staff overseeing resident training?”

 What AMCs can do to be Competitive

Resident Physicians

AMCs are in the unique position to offer residents their first glimpse at life beyond residency, and first impressions created through a positive work environment may entice residents to seek employment with their employing AMC post-residency. In the context of the medical setting, a positive work environment may be narrowed down to two things: the provision of high-quality patient care and an outstanding residency experience. The provision of quality patient care could, and should, be a recruitment and retention strategy for AMCs, especially for residents who appreciate the value of both quality patient service and AMC reputation. Similar to quality of care, an AMC that provides its residents with the best resident experience will likely be better positioned to retain that physician post-residency. Prioritizing an appropriate work/life balance, recognizing the potential for physician burnout and taking steps to prevent it, and providing interaction with high-quality instructors (who would in turn become the residents’ colleagues post-residency) are all ways to provide an unbeatable experience and secure post-residency employment.

Although non-monetary considerations are persuasive, AMCs should, naturally, still seek to offer residents competitive pay packages with robust benefits…of course within the bounds of regulatory permissibility. Additionally, opportunities to earn compensation in excess of standard resident salaries, such as permitting, and even encouraging, “moonlighting,” or clinical shifts or services outside of the scope of their full-time resident responsibilities, may be attractive to residents seeking to maximize their income. Depending upon the particular facts and circumstances, the FMV compensation for any such moonlighting activities may well exceed the compensation earned by a resident for their underlying employment responsibilities.

Academic Physicians

Academic physicians are involved in a variety of activities that are not necessarily directly profitable for their employers; namely, didactic teaching, research, and direct supervision of residents. It is imperative for AMCs to recognize the value in remaining competitive employers in the marketplace, and to therefore design compensation plans that do not “penalize” physicians for any unprofitable aspects of their job responsibilities. Implementing compensation plans that most closely align with those of W-2 non-academic physicians, which would allow for certain upside potential, can help in this regard.

As an illustrative example, assume a physician is employed by an AMC and required to devote part of their full-time effort to non-clinical/didactic instruction of residents, in addition to their clinical duties. In this scenario, a compensation plan that provides for a fixed annual payment for the non-clinical/didactic time and variable compensation for the provision of clinical services could maximize an academic physician’s earning potential. This becomes especially true when the variable compensation for clinical services includes considerations for when clinical duties are performed with and without residents, thereby accounting for any potential decrease in productivity as a result of resident supervision. In such case, a “normalizing” adjustment might be made to productivity metrics, such as work relative value units (e.g., compare the physician’s productivity with and without resident supervision to determine if any noticeable shortfall, and applying some sort of “drag factor” to account for the lag caused by resident supervision). In addition, AMCs should take advantage of site of service allowances, such as CMS’s “primary care exception,” which allows a supervising physician to bill for (or otherwise be fully credited for providing) certain activities even when not in the presence of the residents.[17] It should be noted that credit to the physician should not be duplicative (i.e., not accounting for both a “drag factor” and credit under the primary care exception simultaneously).

There is no one-size-fits-all approach to compensating academic physicians and each program should take special care to ensure their compensation packages are structured to optimize physician compensation while also remaining commercially reasonable and consistent with FMV. Designing a competitive compensation platform for Physicians practicing in Academia to align with the unique AMC services has a two-fold effect: it can help retain and maintain satisfied physicians, which may likely trickle down to the resident physician experience.

Early Employment Offers with Early Signing Bonuses

Assuming that AMCs are successful at providing a positive work experience for both physician residents and teachers, AMCs can turn their attention to early recruiting. One advantage that AMCs have over other non-academic facilities is that resident physicians are already on staff at the AMC facility, allowing AMCs to recruit these residents before other facilities have direct access to such recruits. AMCs should take full advantage of this early access to candidates, especially when trying to secure in-demand specialties.

In securing a resident early in a residency program, the AMC may be able to offer resident physicians sign-on bonus packages that could be paid during the residency period, in exchange for a commitment to employment for a set number of years after the residency program is complete. Any such upfront bonus compensation would need to be (i) subject to claw-back provisions for resident physicians who ultimately do not enter into employment, and (ii) commercially reasonable and consistent with FMV on a prospective basis when taken into account with the prospective compensation terms of the employment agreement.[18]

 Conclusion

There is no simple solution to the ongoing physician shortage. Although legislation is underway to expand residency slots, that alone is not likely to be a total solution. However, as this article has demonstrated, AMCs may be able to grab a larger share of the diminishing physician pool by ensuring a pleasant residency experience, providing access to qualified and satisfied academic physician teachers, and offering creative and competitive compensation structures for both resident and medical staff physicians. Implementing these tactics, AMCs should be able to distinguish themselves in the competitive market.

In August 2023, the Centers for Medicare & Medicaid Services (CMS) released 2022 Performance Year Financial and Quality Results data related to the Medicare Shared Savings Program
(MSSP).[1] In total, there were 482 Accountable Care Organizations (ACOs) that participated in the 2022 performance year, including – in the aggregate – over 573,000 participating providers serving nearly 11 million total beneficiaries. The underlying data released reflects that overall, the program has been financially beneficial for both Medicare and MSSP participant ACOs.

Figure 1 reflects statistics related to the savings rates experienced by the 482 ACO participants in 2022. 405 of the 482 participants, or 84 percent, achieved a positive savings rate in 2022, and 63 percent of the ACOs were eligible to receive shared savings payments.[2]

Originally published by the American Health Law Association, Health Law Connections, August 2023 Issue.

Spend any amount of time in the health care industry and it won’t take long to recognize the importance and prevalence of the term “fair market value” or “FMV.” Particularly for attorneys who work on arrangements with physicians or other referral sources, FMV is a routine part of their practice. Structuring an arrangement that is consistent with FMV is not just a “nice-to-have,” but rather is a necessary requirement for many types of health care arrangements.

The goal of this article is to highlight the various roles that the attorney and appraiser play during the valuation process, outline the items to consider when engaging and working with an appraiser, and provide practical recommendations to help educate clients about the importance of the valuation process and gain their trust to ensure they are committed to the valuation process from start to finish.

 OVERVIEW

Concerns of compensation discrimination remain a persistent issue across industries, with the most prevalent claims of disparity centered around gender, race, and seniority. These concerns are no different within the healthcare industry, specifically among physicians and other healthcare providers. The Association of American Medical Colleges (AAMC) – whose membership includes representation from 170 accredited medical schools and over 400 teaching hospitals, health systems, and Veterans Affairs medical centers – has conducted surveys revealing that gender and race are the most significant characteristics associated with pay disparities amongst physicians.[1] In 2019, the first academic year in which women represented more than 50% of total enrolled students in U.S., MD-granting medical schools[2], a survey performed by AAMC reported that “women were paid between $0.72 and $0.96 for every $1 paid to men across different departments and specialties.”[3] In the context of the AAMC study, the greatest correlation to pay disparity was between genders, even after accounting for rank, tenure, specialty and training.

With an ever-growing focus on potential pay inequity amongst providers, hospitals must consider more than whether compensation is consistent with requirements of fair market value; assessments of compensation parity should be conducted regularly in order to ensure fairness and equity, as well as protect against potential legal action. In this article, we will explore a recent example of the consequences of physician compensation discrimination allegations and the importance of documentation in addressing and protecting against concerns of unfounded disparities in provider compensation.

 CASE STUDY

The recent judgment in the equal pay case of Boles v. Greenwood Leflore Hospital highlights that even where compensation is consistent with fair market value, compensation structures may raise prima facie questions of discriminatory compensation structures and hiring practices. Boles also places emphasis on the burden of demonstrating non-pretextual, non-discriminatory support for compensation variances.[4] Operators, counsel, and outside advisors should take caution to ensure that the methodologies and rationale applied to analyses and decisions regarding provider compensation are both defensible and well-documented, and that a plan is in place to facilitate continued compliance with evolving laws and regulations surrounding pay equity.

In Boles, Dr. Preston Boles, a podiatrist who is black, sued his employer, Greenwood Leflore Hospital, alleging discriminatory pay practices on the basis of race. Specifically, Dr. Boles claimed that he was paid significantly less than Dr. Joseph Assini, a physician who is white, notwithstanding that – other than Dr. Boles being a member of a protected class – their circumstances were nearly identical. Both physicians held similar positions within the hospital, performed comparable duties, and possessed equivalent levels of expertise and experience. Notwithstanding these similarities, Dr. Boles argued that he received a significantly lower salary and unfavorable productivity compensation structure compared to his white colleague. On two occasions, the hospital increased Dr. Boles’ base salary and modified his productivity incentive structure. Upon discovering that Dr. Assini’s base salary was greater, Dr. Boles requested an increase in the conversion rate applicable to incentive bonuses. Greenwood Leflore Hospital rejected this request on the basis that Dr. Boles’ productivity and wRVU production expectations were lower in each year that both physicians were on staff.

In its defense, the hospital set forth that Dr. Boles (i) had initially negotiated a far smaller starting salary than Dr. Assini, (ii) did not negotiate, as Dr. Assini had, additional medical directorships into his initial salary, (iii) had lower production levels and wRVU expectations than Dr. Assini, and (iv) did not have comparable physician leadership duties in the context of Medical Staff activities and the hospital’s Centers of Excellence. Dr. Boles provided evidence that terms of the two physicians’ employment agreements contradicted this defense – in particular, that in certain years, conversion factors either increased amid decreasing productivity levels or remained static despite increasing wRVUs. In the absence of a defensible rationale for the highlighted compensation differences, the court noted that a pretextual reason for such differences might exist.

 POTENTIAL SOLUTIONS

To avoid concerns of provider compensation discrimination, hospitals and health systems must take proactive steps to ensure fairness, transparency, and ongoing compliance. Although there are many different ways to combat inequity, below are a few recommended solutions:

External Compensation Evaluations: Healthcare institutions can engage external experts to conduct regular evaluations of provider compensation structures. These evaluations can yield an unbiased assessment of fair market value and commercial reasonableness, while identifying potential disparities and recommendations for necessary adjustments, as needed.

Regular Compensation Reviews: Hospitals should establish a systematic process and regular cadence for reviewing and updating compensation plans. This may involve assessing the compensation of individual providers, comparing compensation among staff providers and/or to industry standards and internal benchmarks, and promptly addressing any identified disparities.

Equal Pay Policies: Hospitals should adopt explicit, well-structured and adaptable policies that promote equal pay and transparency for equitable compensation models. These policies should be communicated clearly to all employees and include mechanisms for reporting and addressing pay discrepancies. Regular training programs can also mitigate the subtle differences and potential biases involved in compensation structures and serve as active prevention for future concerns of discrimination.[5]

 CONCLUSION

Hospitals and healthcare organizations should regularly evaluate provider compensation policies and practices to mitigate any potential gaps related to pay equity. To avoid discrimination concerns amongst physicians and other healthcare providers related to compensation, hospitals and healthcare systems are encouraged to consult with valuation experts when developing compensation models. Certain data could inadvertently serve as prima facie evidence of discrimination. However, with appropriate, thorough business documentation and/or third-party valuator recommendations, coupled with an actionable plan that includes routine compensation re-assessment, hospitals can help lay a strong foundation for compensation parity and eliminate indefensible biases.

As a leader in the healthcare valuation space for over 20 years, HealthCare Appraisers has extensive experience assisting health systems and physician practices to create defensible solutions and fair compensation plans that are not only consistent with FMV, but also support compensation parity amongst similarly situated physicians and other healthcare providers. By implementing transparent and unbiased compensation structures, hospitals can protect themselves against potential legal battles and foster an environment that upholds fairness and equity for all providers, regardless of their backgrounds. Contact HealthCare Appraisers today to learn how we can help your organization design defensible solutions and fair compensation models that are equitable and consistent with FMV for your organization.

Medicare Advantage Plans (otherwise known as Medicare Part C) represent alternatives to traditional Medicare plans. These Medicare Advantage Plans, which are approved by Medicare and are offered through private insurers, bundle coverage for hospital, medical, and, in many cases, prescription drug services (i.e., Medicare Parts A, B, and D, respectively) into a single plan. Because Medicare Advantage Plans are offered through private insurers, they are often sold by agents or brokers who can educate consumers on their varying and specific features and help ensure consumers select the plan that best suits their needs.

Once a patient has enrolled in a Medicare Advantage Plan, the private insurance company aligned with that particular plan will compensate the agent/broker by way of a commission. Under applicable laws,[1] this enrollment commission must be consistent with fair market value (“FMV”). However, unlike other areas of health law, whereby the government has provided a general definition of FMV without any specific guidance on the method(s) to be used in order to arrive at an FMV conclusion, the government has specified exact dollar values that constitute FMV for Medicare Advantage Plan agent/broker commissions.[2] The table below summarizes the 2023 Agent/Broker Commissions for Medicare Advantage Plans and Part D Prescription Drug Plans:

Overview

On May 11, 2023, the federal Public Health Emergency (“PHE”) waivers put in place three years ago will expire. These waivers, enacted pursuant to Section 1135 of the Social Security Act, 42 USC § 1320b-5, provided hospitals and healthcare facilities with much-needed flexibility as they worked to respond to the public health crisis brought about by the COVID-19 pandemic. However, as the waivers expire, it is important for healthcare providers to be aware of the regulations coming back into effect to ensure compliance under healthcare laws.

Stark Law

Included in the PHE waivers were blanket waivers of sanctions under the physician self-referral law (or Stark Law). These blanket waivers of sanctions under Section 1877(g) of the Social Security Act, 42 USC § 1395nn, allowed previously prohibited financial referrals and relationships that were related to COVID-19. Under these blanket waivers, hospitals and health systems had the flexibility to enter into arrangements with physicians under terms that may not have been consistent with fair market value (“FMV”) in order to combat the health emergency. The intent was to allow hospitals to recruit much needed healthcare providers at competitive rates and retain them without having to engage in excessive paperwork.

Upon expiration of the blanket waivers, all applicable provisions of the Stark Law will go back into full force and effect. As such, any arrangements that may have been entered into without meeting an enumerated exception will need to be reviewed. Furthermore, for those arrangements to be supported under the FMV exception, supporting documentation from an outside valuator is advisable.

FMV – PITFALL

Over the last three years, hospitals and health systems have operated with greater latitude in contracting, and may have entered into numerous arrangements that, upon expiration of the PHE waivers, may run afoul of the Stark Law or related healthcare regulations. As such, healthcare providers should proactively review all existing arrangements to ensure compliance with applicable healthcare fraud and abuse laws.

As the leading experts in healthcare valuation services, HAI is uniquely poised to provide comprehensive healthcare valuation services. Our automated tools can provide you with FMV guidance at the click of a button – an invaluable benefit for those who may be scrambling to document FMV support otherwise absent during the PHE waiver. Contact us today to learn more.