Analyzing Compensation at Fair Market Value

Translating Regulatory Standards for Medical Group-Physician Financial Arrangements

The Stark Law and other regulations mandate that physicians must be compensated at "fair market value," but provide little guidance. Learn five imperatives for assessing fair market value in physician compensation.

By reading this white paper, members will:

  • Understand fair market value standards and considerations for physician compensation
  • Learn how to structure physician compensation arrangements compliant with regulatory standards
  • Know which factors to consider in fair market value assessments

Executive Summary

Regulations without guidance

Advisory Board research suggests that by March 2014, physicians will account for over 75% of new hires by hospitals. The trend toward tighter alignment raises questions about how hospitals and medical groups can share financial responsibility without jeopardizing independence in clinical decision-making.

Federal and state regulators have introduced legislation requiring that physician compensation be commercially reasonable and at fair market value. However, regulatory guidance for meeting these valuation standards is limited.

No standard method to determine fair market value

Three main laws regulate fair market valuations in physician compensation arrangements: the Stark Law, Federal Anti-Kickback Statute, and IRS guidelines. All three dictate that physician compensation cannot exceed fair market value thresholds without providing significant guidance, such as legal standards or formulas, for assessing where that lies.

In fact, CMS has acknowledged that every valuation will depend on the nature of the transaction, its location, and other applicable factors. Not only does fair market value not have a single definition, regulators are on the lookout for those that abuse valuation standards.

Law violations can lead to strict liabilities for both the medical group and the employed physician, including payment denials or exclusion from Medicare and Medicaid under the Stark Law, or removal of an organization's tax exempt status under IRS guidelines.

Read the full white paper to learn more

This white paper offers five imperatives for structuring compliant physician compensation packages and profiles three organizations’ experiences.


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