The Intersection of Compliance and Fair Market Value: Are You Sure Your Arrangements Coincide?

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) established a national Health Care Fraud and Abuse Control Program (HCFAC or the Program) under the joint direction of the Attorney General and the Secretary of the Department of Health and Human Services (HHS). In 2021, under this initiative, the Federal Government recovered over $5.0 billion from health care settlements.Healthcare organizations must be diligent in their compliance efforts, particularly concerning physician compensation arrangements. Organizations must create a process and policy that delivers a framework to ensure compliance is a priority across the organization. Unfortunately, some of the regulations can be far from black and white, which makes the necessity of a formal compliance review process all the more significant.An organization's policy regarding provider arrangements should set the standard for structuring deals.

The procedure should address areas such as:

  1. Responsible persons for required approvals
  2. Compensation parameters (including recruitment incentive parameters)
  3. Signing/starting bonuses, educational loan repayment, relocation compensation, pre-employment stipends, etc.
  4. Incentive compensation programs, including productivity and non-productivity-based incentives
  5. Medical directorship compensation, payment for call arrangements, and other areas
  6. Medical directorship compensation, payment for call arrangements, and other areas
  7. Required documentation and support as well as maintenance of the required documentation
  8. Timesheet requirements, where applicable
  9. Total compensation limits
  10. Compliance auditing and monitoring

The policy is not intended to be able to address every possible situation or circumstance at the intersection of compliance and fair market value. However, it should provide boundaries within which you play and the potential plays the organization has in its playbook. It should be developed in such a way as to provide guidelines for organizational compliance.Our experience is that organizations also need a well-developed process with internal and external checks and balances. The course of action should involve a committee structure that includes all relevant stakeholders in the organization. This committee should have a policy and procedure for operating, as described above.

The regular review process should go something like this:

  1. Each member prepares proposed arrangements for committee review that are submitted in advance to each member. The details should include the key compensation terms of the proposed arrangement, the proposed term, and other relevant information related to the background of the situation, market data, recruitment priorities, and other considerations.
  2. The committee review should consider critical factors such as the basis for the arrangement, comparable arrangements in the organization, capabilities of the provider, and other relevant considerations.
  3. Legal counsel must also address any legal considerations for the proposed arrangement.
  4. Obtain documentation for fair market value (FMV) and commercial reasonableness. Many organizations prefer to have the proposed arrangement reviewed by a third-party valuation expert to evaluate FMV and commercial reasonableness. The valuation expert should recommend the actual need for a formal opinion based on the specific components of the arrangement, as well as the circumstances surrounding the situation. A critical point here is the need to consult the third-party valuation expert at this point rather than later in the process when the negotiations are farther along.

Once implemented in an organization, this process can be streamlined to prevent unnecessary delays in negotiating with a provider. It is critical that the executive leadership champion this process. Setting the tone at the top will be as vital as quality or patient safety in care delivery within the organization.Your organization can reduce the uncertainties of compliance issues and their potential subsequent federal penalties with the help of experienced reviewers. Coker Group is uniquely qualified to assist organizations in developing a compliant provider arrangement process, including reviewing and documenting compensation arrangements from an FMV and commercial reasonableness perspective.

Submit your contact information to request assistance in creating a solid compliance program procedure.

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