Hospital-Physician Affiliations and Transactions: How Fair Market Value and Commercially Reasonable Standards Apply

Health Care

May 02, 2013
by Lisa Cribben, CPA/ABV, ASA, CMA

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Lisa Cribben Lisa Cribben, CPA/ABV, ASA, CMA
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Integration between physicians and hospitals continues to advance at an accelerated pace. An increasing number of physicians are either employed by a hospital/health system or operate under a Professional Services Agreement (PSA). With the increasing acquisitions and financial arrangements between physicians and hospitals comes increased scrutiny and compliance with regulations surrounding these types of arrangements. Financial arrangements between physicians and hospitals need to comply with the following regulations:
 
1.            Stark (I, II, and III)
 
2.            Office of Inspector General False Claims/Anti-kickback provisions
 
3.            Internal Revenue Service private inurement
 
Financial payments made to physicians from a hospital/health system typically have to be set at Fair Market Value (FMV) and be considered commercially reasonable to comply with all the regulations. What do Fair Market Value and Commercially Reasonable mean in the context of physician/hospital transactions? Why should a hospital be concerned? And how can the hospital ensure transactions are set at Fair Market Value and be Commercially Reasonable?

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Length: 2 pages (PDF 52 kB)



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