Presenting a live 90-minute webinar with interactive Q&A Fair Market Value in Hospital and Physician Transactions: Complying With Anti-Kickback and Self-Referral Laws WEDNESDAY, NOVEMBER 30, 2016 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Albert D. (Chip) Hutzler, Partner, HealthCare Appraisers , Delray Beach, Fla. Albert W. Shay, Partner, Morgan Lewis & Bockius , Washington, D.C. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Fair Market Value in Hospital & Physician Transactions: Meeting FMV Requirements in Federal Anti-Kickback and Self-Referral Presented by: Chip Hutzler, JD, MBA, CVA | Partner HealthCare Appraisers, Inc. Albert Shay, Esq.| Partner Morgan Lewis & Bockius, LLP November 30, 2016
Presentation Overview • Discussion of Legal Landscape • Common Hospital/Physician Arrangements and FMV Approaches • FMV Pitfalls/Commercial Reasonable Issues • Recent Developments Strafford Webinar FMV in Hospital & Physician Transactions 5
Legal Issues to Consider • Anti-Kickback Statute - 42 U.S.C. §1320a-7b(b) • The federal Physician Self-Referral Prohibition 42 U.S.C. §1395nn • Internal Revenue Code prohibition on Private Benefit/ Private Inurement • Civil Monetary Penalty Laws - 42 U.S.C. §1320a-7q(b) • False Claims Act - 31 U.S.C. §§ 3729-3731 Strafford Webinar FMV in Hospital & Physician Transactions 6
The 3 “How’s” • When analyzing physician compensation, at least three tests are involved: • How Much? • Is the compensation within the range of fair market value? • How Calculated? • Is the compensation based on the volume or value of the physician’s referrals? • How Come? • Is the compensation commercially reasonable? • Are these tests separate? Strafford Webinar FMV in Hospital & Physician Transactions 7
How Much? Fair Market Value • Statutory Definition of Fair Market Value: • “The term ‘fair market value’ means the value in arms length transactions, consistent with the general market value, . . .” 42 USC § 1395nn(h)(3) • Regulatory Definition of Fair Market Value • “Fair market value means the value in arm's -length transactions, consistent with the general market value. ‘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 . . . .” 42 CFR § 411.351 Strafford Webinar FMV in Hospital & Physician Transactions 8
How Calculated? Volume or Value of Referrals • How is Compensation Determined? • Is the Compensation calculated based on the volume or value of the physician’s referrals? • Are referrals taken into account in determining compensation? • Requirement of many compensation exceptions: • “The compensation to be paid … is set in advance, does not exceed [FMV], … and is not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties.” • Definition of an Indirect Compensation Arrangement (second prong): • “The referring physician … receives aggregate compensation … that varies with, or takes into account, the volume or value of referrals or other business generated by the referring physician ….” • To fit within the Indirect Compensation Arrangement Exception, compensation may not be based on the volume or value of referrals. Strafford Webinar FMV in Hospital & Physician Transactions 9
How Come? Commercial Reasonableness • Many Stark exceptions include a commercial reasonableness requirement • the arrangement must be “commercially reasonable even if no referrals were made between the parties” • Neither the statute nor the regulations define “commercial reasonableness” • Justice Stewart: I know it when I see it • Two questions: • Why did the parties enter into the arrangement? • Would the terms of the arrangement be different in the absence of any referrals between the parties? Strafford Webinar FMV in Hospital & Physician Transactions 10
How Come? Commercial Reasonableness • CMS Commentary • The “arrangement appears to be a sensible, prudent business agreement, from the perspective of the particular parties involved, even in the absence of any potential referrals.” 63 Fed. Reg. 1659, 1700 • The arrangement makes “commercial sense if entered into by a reasonable entity of similar type and size and a reasonable physician … of similar scope and specialty, even if there were no potential referrals.” 69 Fed. Reg. 16054, 16093 • Is it commercially reasonable for a hospital to pay a physician more than the gross revenues derived from the physician’s professional services? Strafford Webinar FMV in Hospital & Physician Transactions 11
The Antikickback Statute (AKS) • 42 U.S.C. §1320a-7b(b) • Prohibits the offer or payment of any remuneration to any person to induce that person to • refer an individual to a person for the provision of any item or service; or • purchase, order, or arrange for, or recommend purchasing, ordering, or arranging for, any service, facility or item for which payment may be made, in whole or in part, under any Federal health care program. • Statutory prohibitions apply to both sides of the arrangement • AKS applies to all health care providers and anyone else who can influence referrals Strafford Webinar FMV in Hospital & Physician Transactions 12
AKS (cont.) • Intent-based statute • Cannot violate the statute without acting “knowingly and willfully” with intent to induce or reward referrals. • Actual knowledge or specific intent — “With respect to violations of this section, a person need not have actual knowledge of this section or specific intent to commit a violation of this section .” ACA §6402(h) • Felony statute • Fines • Imprisonment • A claim resulting for items/services resulting from violation of the AKS constitutes a false or fraudulent claim under the FCA. ACA §6402(f) . Strafford Webinar FMV in Hospital & Physician Transactions 13
AKS Exceptions and Safe Harbors • AKS statute includes exceptions and OIG created regulatory “safe harbors” • Very narrowly defined • Must satisfy ALL criteria to have protection • If arrangement falls within safe harbor, OIG claims the arrangement is immune from prosecution, regardless of intent • Fitting a financial relationship into a safe harbor is not required; arrangements that do not meet the requirements of a safe harbor are not presumptively illegal. • Advisory Opinion Process available Strafford Webinar FMV in Hospital & Physician Transactions 14
Physician Self- Referral (“Stark”) Law • 42 U.S.C. §1395nn • Statute prohibits physicians from engaging in “financial relationships” ( i.e. , compensation arrangements and ownership interests) with entities to whom they refer patients for Designated Health Services. • If physician engages in a prohibited financial relationship with entity to which he refers patients for DHS, then the entity is prohibited from billing Medicare for DHS provided to those patients and Medicare is prohibited from paying for such services. (42 U.S.C. §1395nn(a)(1)(B)) • HHS will not pay Medicaid programs for services violating Stark. (42 U.S.C. §1396b(s)) Strafford Webinar FMV in Hospital & Physician Transactions 15
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