The Importance of Examining Fair Market Value in the Healthcare Industry

Posted on Health Care Law News by Rachel Broughton

Understanding Fair Market Value (FMV)

Health care is one of the most highly regulated industries in the United States. Whenever anything of value is exchanged among health care providers or between health care providers and third parties, the value of the exchange may need to be at fair market value (“FMV”), or the parties may open their practice (and potentially themselves) up to civil or even criminal penalties.

What is FMV in healthcare?

In healthcare, FMV becomes particularly crucial to eliminate the corrupting influence of money on healthcare decisions. One provider offering something of value to another provider for less or more than FMV with the intent to induce the referral of Medicare or Medicaid patients can lead to serious consequences, including federal law violations and program exclusion.

What are the Applicable Laws?

Several federal statutes govern the FMV analysis in the healthcare industry, including:

The Stark Law: Designed to prevent economic incentives from influencing referrals involving physicians and Designated Health Services (DHS).
The Anti-Kickback Statute (AKS): Prohibits remuneration as an inducement for referrals of goods or services paid for by the government.
Health Insurance Portability and Accountability Act (HIPAA): Ensures the protection and privacy of patient information.
False Claims Act: Imposes liability on those who knowingly submit false claims to the government.

The Stark law, Anti-Kickback Statute, HIPAA and False Claims Act are just a few of the federal statutes that implicate the FMV analysis; the most commonly enforced being the federal Anti-Kickback Statute (“AKS”), the main purpose of which is to protect patients and the federal health care programs from fraud and abuse by curtailing the corrupting influence of money on health care decisions.

Ensuring Compliance with FMV

More specifically, this influence usually consists of one provider giving something of value to another provider for less than or more than FMV to induce the referral of Medicare or Medicaid patients to the rendering provider. There are also a vast number of state-specific mandates and statutes in place relating to FMV and it is extremely important to be aware of the parameters set out those as well.

Government agencies are always on the lookout for healthcare organizations that do not offer fair payment practices. Oftentimes health care providers risk federal law violations, federal program exclusion and severe civil and criminal fines by passively failing to examine their business arrangements.

Consult Nicholson & Eastin, LLP for FMV Compliance

If you or your practice are involved in joint venture arrangements, business acquisitions or dispositions, space rental agreements/equipment leases, or simply wish to evaluate employment compensation arrangements, please contact the highly experienced attorneys at Nicholson & Eastin, LLP. We’d be happy to assist you and your business with assuring that your arrangements are consistent with FMV and are commercially reasonable according to state and federal law.