Whether for-profit or nonprofit, participation in government reimbursement programs requires organizations to comply with federal laws, statutes, and regulations. Understanding these and corresponding FMV, CR, and RC requirements is key to evaluating arrangements and compliance. Related state statutes should also be considered, as applicable.
Anti-Kickback Statute (AKS). The AKS,[1] applicable to referrals from anyone, protects patients and federal healthcare programs by making the knowing or willful exchange of renumeration in return for referrals (for services and items) illegal. Even though multiple purposes for the arrangement may be legitimate, if one purpose[2] of the renumeration is to improperly induce referrals, the arrangement violates AKS. Consequences, including exclusion from federal healthcare programs and criminal and civil penalties, can apply to organizations and individuals. Several voluntary safe harbors require FMV and CR be met and should be principal considerations of organizations seeking to meet these safe harbors.
Stark Law (Stark).[3] Stark prohibits patient referrals for designated health services payable by Medicare or Medicaid to an entity with which a physician, or their immediate family member, has a financial relationship. Likewise, claims for services from prohibited referrals may not be submitted for reimbursement. As a strict liability statute, proof of intent is not required, and violation may result in exclusion from Medicare and Medicaid plus civil (but not criminal) penalties. FMV and CR are requirements to meet several mandatory exceptions, highlighting the importance of these considerations for compliance purposes.
Commercial reasonableness. Many of the Stark exceptions and AKS safe harbors require CR, but neither define it. CMS and the Department of Justice have provided commentary that CR means the particular arrangement furthers a legitimate business purpose of the parties and is on similar terms and conditions as like arrangements.[4] Although an arrangement may be FMV, it may not be CR (e.g., multiple medical directors over a service line may be compensated at FMV, but the services may be duplicative and hence not CR).
Fair market value. FMV is a key element of federal laws, statutes, and regulations. Internal Revenue Ruling 59-60 defines FMV but does not reference referrals or business generated between the parties. Therefore, healthcare nonprofit organizations should refer to FMV under Stark, which defines FMV as the value in arm’s-length transactions, consistent with the general market value, and determined without consideration of referrals.[5] AKS does not define FMV, but several safe harbors require compensation be consistent with FMV.
Establishing FMV may require appraisers with expertise in compensation, management and professional services, business and intangible assets, real property, and equipment, among others.
False Claims Act (FCA). Under the FCA, whistleblowers can file qui tam lawsuits for false claims submitted as a result of arrangements in violation of either AKS or Stark. Whistleblowers may receive a share of any recovery. Penalties under the FCA are civil.
Regulatory Sprint to Coordinated Care. In October 2019, the U.S. Department of Health and Human Services issued proposed rules for Stark and AKS to advance the transition to value-based care, ease regulatory burdens, and remove barriers to coordinated care. In many instances, the proposed revisions to Stark and AKS mirror one another. Key proposed revisions include new, value-based exceptions and safe harbors, potential new definitions of FMV and CR, clarification of wRVU-based compensation as a reasonable method, and clarification an arrangement may be CR even if it is not profitable. Nonprofit entities should be familiar with the proposed rules and anticipate more to come later this year.
