Fair Market Value And Commercial Reasonableness: How To .
Fair Market Value and CommercialReasonableness:How to DocumentRobert A. Wade, Esq.CompliancePartnerBaker & Daniels LLP202 South Michigan StreetSuite 1400South Bend, Indiana 46601(574) 239-1906 – Direct Dial(574) 472-4576 - Facsimilebob.wade@bakerd.comHealth Care Compliance Association6500 Barrie Road, Suite 250, Minneapolis, MN 55435www.hcca-info.org 888-580-8373Why Is Documenting Fair Market Value and CommercialReasonableness Important? Fines and Penalties, including 3 times the amount paid byMedicare/Medicaid for service, 10,000 fine per payment, etc. Exclusion from Medicare/Medicaid Programs Intermediate Sanctions Imprisonmentwww.hcca-info.org 888-580-837321
This really willnot happen tome, will it?The government hasbetter things to worryabout than one contractbetween a hospital andphysician, right?www.hcca-info.org 888-580-83733Tell that to the parties involved in the followingcases: Metropolitan Health, Grand Rapids, Michigan Rapid City Regional Hospital, Rapid City, South Dakota McLaren Regional Medical Center, Flint, Michigan Baptist Medical Center, Kansas City, Missouri Saint Joseph Regional Medical Center,South Bend, Indianawww.hcca-info.org 888-580-837342
Excerpt from the Petition to Enter a PleaInvolving Saint Joseph Regional MedicalCenter:From in or around 1991 through 1993, it knowingly and willfully offeredand provided financial benefits, including a 350,000 loan guarantee, alease of medical facility space for radiology services at an inflated rate,monthly “practice enhancement payments,” and medical chart coding toDrs. Peter D. Farr and Howard M. Addis and offered other things ofvalue to Drs. Peter D. Farr and Howard M. Addis for purposes includingSaint Joseph’s Medical Center, an affiliate of Horizon, receiving patientreferrals, including referrals of Medicaid and Medicare patients, fromthese two doctors. Horizon intentionally offered and provided this itemsto Drs. Farr and Addis while Horizon knew, on a collective basis, that itwas contrary to law and a violation of a legal duty to enter into and tomaintain the financial arrangements that it did with Drs. Farr and Addis;www.hcca-info.org 888-580-83735Fair Market Value and CommercialReasonableness Are Important Factors In: Anti-Kickback Statute Stark Act Intermediate Sanctionswww.hcca-info.org 888-580-837363
Anti-Kickback Statute(42 U.S.C. § 1320a-7b) It is illegal to knowingly or willfully:– Offer, pay, solicit, or receive remuneration;– Directly or indirectly;– In cash or in kind;– In exchange for: Referring an individual; or Furnishing or arranging for a good orservice; and– Payment may be made by Medicare orMedicaid.www.hcca-info.org 888-580-83737Anti-Kickback StatuteEmployment Safe Harbor Payments made by employer to employee under bona fideemployment relationship with employer for employment in furnishingof any item or service for which payment may be made underMedicare or Medicaid are excepted from the Anti-Kickback Statutes’prohibitions.– Fair Market Value– Arm’s Length Negotiation– Reasonablewww.hcca-info.org 888-580-837384
Anti-Kickback StatuteSafe Harbor for Personal Services and ManagementContracts Written Agreement signed by parties Term of at least one year Agreement must specify aggregate payment and such paymentmust be set in advance Compensation must be reasonable, fair market value anddetermined through arms’ length negotiations Must set exact services required to be performedwww.hcca-info.org 888-580-83739Anti-Kickback StatuteSafe Harbor For Personal Services and ManagementContracts Compensation must not be determined in a manner that takes intoaccount volume or value of referrals All arrangements must be in one contract The arrangement must serve a commercially reasonable businesspurposewww.hcca-info.org 888-580-8373105
Anti-Kickback StatuteSafe Harbor For Personal Services And ManagementContract If the Agreement does not contemplate full-time services, it mustalso specify: The exact schedule of intervals; Their precise length; and The exact charge for such intervals.www.hcca-info.org 888-580-837311Anti-Kickback Statute Written Agreement 1 Year Fair Market Valuewww.hcca-info.org 888-580-8373126
Anti-Kickback StatuteSafe Harbor For Equipment Rental Written Agreement Identify Specific Equipment Schedule of Usage 1 Year Term Fair Market Valuewww.hcca-info.org 888-580-837313Stark Act42 U.S.C. § 1395 nn Under the Stark Act, a physician is prohibited from making areferral:– to an entity;– for the furnishing of a designated health service;– for which payment may be made under Medicare or Medicaid;– if the physician (or an immediate family member);– has a financial relationship with the entity.www.hcca-info.org 888-580-8373147
Stark Act42 U.S.C. § 1395 nn Stark Exceptions Requiring Fair Market Value/CommercialReasonableness:– Personal Service Arrangements– Rental of Office Space– Rental of Equipment– Employment– Isolated Transactions– Fair Market Value– Indirect Compensation Arrangementwww.hcca-info.org 888-580-837315Stark ActPersonal Service Arrangement Exception(Applies to Compensation Relationships) Remuneration paid under personal service arrangement is notprohibited compensation arrangement if:– Arrangement is set out in writing, signed by parties and specifiesservices covered by arrangement;– Arrangement covers all services to be provided by physician to entity;– This condition is met if Contract references all other arrangements; or Master list of contracts is maintained with historical record of allarrangements.– Term for at least one yearwww.hcca-info.org 888-580-8373168
Stark ActPersonal Service Arrangement Exception(Applies to Compensation Relationships) Services are reasonable and necessary Compensation to be paid over term of arrangement is set inadvance, does not exceed FMV, is reasonable and determinedthrough arm’s length negations, and is not determined in mannerwhich takes into account volume or value of referrals betweenpartieswww.hcca-info.org 888-580-837317Rental Of Office Space And Equipment Exception(Applies to Compensation Relationships) Term of lease is for at least one year; Rental charges over term of lease are set in advance, consistentwith fair market value, and not determined in a manner that takesinto account volume or value of referrals or other businessgenerated between parties; and Lease would be commercially reasonableeven if no referrals were made between parties.www.hcca-info.org 888-580-8373189
Rental Of Equipment Exception(Applies To Compensation Relationships) Can charge per use fee (“per click”) as long as charge does notreflect payment for professional services. Per click fee must be FMV and commercially reasonable. Cannot use per click compensation for use related to lessor’sreferralswww.hcca-info.org 888-580-837319Bona Fide Employment Exception(Applies to Compensation Relationships) Employment is for identifiable services; Amount of remuneration under employment is:– Consistent with fair market value, reasonable and determined througharm’s length negotiations;– Not determined in manner which takes into account volume or value ofreferrals by referring physician; and– Remuneration is provided pursuant to agreement that would becommercially reasonable even if no referrals were made to employer.www.hcca-info.org 888-580-83732010
Bona Fide Employment Exception(Applies to Compensation Relationships) Productivity bonuses can be paid if based on services performedpersonally by the physician (i.e., worked RVUs)www.hcca-info.org 888-580-837321Bona Fide Employment Exception(Applies to Compensation Relationships) Requiring referrals An employer can require an employee to refer to a particularprovider, practitioner or supplier so long as:– Compensation is set in advance– Compensation is fair market value– Referral requirement Is in writing signed by the parties Is not required if the patient expresses a preference for a different provider Does not require physician to refer if the patient’s insurance does not coverservices at required providers Does not require physician to refer if physician believes that the requiredreferral is not in the patient’s best medical interestwww.hcca-info.org 888-580-83732211
Bona Fide Employment Exception(Applies to Compensation Relationships)Requiring referrals (Continued) The required referrals relate solely to the physician’s servicescovered by the scope of the employment and the referralrequirement is reasonably necessary for the legitimate businesspurposes of the compensation arrangement between the employerand the employee. Good– Employed Primary Care – Inpatient Bad– Medical Director - Inpatientwww.hcca-info.org 888-580-837323Isolated Transaction Exception(Applies to Compensation Relationships) Definition of compensation does not include isolated financialtransactions, such as one-time sale of property or practice, if: Amount of remuneration is: Consistent with FMV, is reasonable and determined through arm’s lengthnegotiations; is not determined in manner that takes into account volume or value ofreferrals by referring physician; and Remuneration is provided pursuant to agreement that would becommercially reasonable even if no referrals were made to purchaser.– No other transactions between parties for 6 months after isolatedtransactionwww.hcca-info.org 888-580-83732412
Fair Market Value Exception(Applies to Compensation Relationships) Payments that are fair market value are permitted compensationarrangements if:– In writing– Covers all arrangements between parties– Does not have to have 1 year term as long as terms and conditions donot change during 1 year– Compensation set in advance, FMV, and not related to volume or valueof referrals– Commercially reasonable and furthers legitimate business interests– Complies with fraud and abuse provisionswww.hcca-info.org 888-580-837325Indirect Compensation Arrangement Exception(Applies to Compensation Relationships) An indirect compensation arrangement is any series of ownership orcompensation arrangements. For ywww.hcca-info.org 888-580-83732613
Indirect Compensation Arrangement Exception(Applies to Compensation Relationships) The aggregate compensation that is closest to the referringphysician (in the example below, the compensation betweencompany B and C) must be fair market ww.hcca-info.org 888-580-837327Indirect Compensation Arrangement Exception(Applies to Compensation Relationships)Stand in ShoesPhysician must “stand in shoes” of their Physician Organization ifphysician has an ownership/investment interest (not compensation).Creates Direct Financial Arrangement .org 888-580-8373PhysicianOrganizationDHSEntityServices ServicesDHSEntity2814
Intermediate SanctionsIf a tax-exempt organization engages in anexcess benefits transaction with adisqualified person, the tax-exemptorganization’s directors and managers, andthe disinterested person, could be subject toa tax of 25% on the excess benefit. If theexcess benefit is not paid back or reversed,the organization's officers and managers,and the disqualified person could be subjectto a 200% tax on the excess benefit.www.hcca-info.org 888-580-837329Intermediate SanctionsDisqualified PersonA disqualified person is an officer,director, trustee, highly-compensated orhigh-level employee, department orproject manager, major donor or anyonewho has been in a position to exertsubstantial influence over theorganization within the prior five years.www.hcca-info.org 888-580-83733015
Intermediate SanctionsExcess BenefitAn excess benefit is one that exceedsfair market value for the benefitreceived by the tax exempt organization,or is not comparable (commerciallyreasonable) to similar benefits paid bysimilar tax-exempt organizations.www.hcca-info.org 888-580-837331Intermediate SanctionsUltimately, the Internal RevenueService has the authority to revokethe tax-exempt status.IRSwww.hcca-info.org 888-580-83733216
What Is Fair Market Value? I wantMORE!Fairmarketvalue isfine!www.hcca-info.org 888-580-8373 33What Is Fair Market Value?According to the Stark Act, fair marketvalue is “the value in arm’s-lengthtransactions, consistent with the generalmarket value.”www.hcca-info.org 888-580-83733417
What Is Fair Market Value?“General Market Value” means the price that an assetwould bring as a result of bona fide bargaining betweenwell-informed buyers and sellers who are not otherwisein a position to generate business for the other party, orthe compensation that would be included in a serviceagreement as a result of bona fide bargaining betweenwell-informed parties to the agreement who are nototherwise in a position to generate business for theother party, on the date of acquisition of the asset or atthe time of the service agreement.42 C.F.R. § 411.351www.hcca-info.org 888-580-837335What Is Fair Market Value?The Stark Act also defines Fair Market Valueas the market price at which bona fide saleshave been consummated for like type assets ina particular market.www.hcca-info.org 888-580-83733618
What Is Fair Market Value?For real estate, the Stark Act states that fairmarket value is “the value of rental property forgeneral commercial purposes (not taking intoaccount its intended use). In the case of alease of space, this value may not be adjustedto reflect the additional value the prospectivelessee or lessor would attribute to the proximityor convenience to the lessor when the lessor isa potential source of patient referrals to thelessee.”www.hcca-info.org 888-580-837337What Is Fair Market Value?Although the proximity to the lessor cannot addvalue to the lease payments, the rentalpayment can “take into account intended use ifit takes into account costs incurred by thelessor in developing or upgrading the propertyor maintaining the property or itsimprovements.”VS.www.hcca-info.org 888-580-83733819
What Is Fair Market Value? Key points under the Stark Act: Referrals between the parties cannot be considered. Fair market value is determined upon the sale or when the serviceagreement is executed. Local market conditions are factors (i.e., lack of a specialty in themarket, depressed real estate market). Proximity of real estate to the lessor(hospital) cannot be considered, but costs ofdeveloping or improving real estateshould be considered.www.hcca-info.org 888-580-837339What Is Fair Market Value?A Fair Market Value Safe Harbor for hourlyrates was developed under Phase II of Starkbut deleted in Phase III.*CMS noted that it is still a prudentdocumentation process.www.hcca-info.org 888-580-83734020
Fair Market Value Safe Harbor An hourly rate is deemed to be fair market value if it meets one ofthe following two tests:– 1) Hourly rate is less than or equal to the average hourly rate foremergency room physician services in the market provided there are atleast three hospitalsproviding emergency roomservices in the market.www.hcca-info.org 888-580-837341Fair Market Value Safe Harbor An hourly rate is fair market value if it meets one of the following twotests:– 2) Hourly rate is determined by averaging the 50 percentile nationalcompensation level with the same physician specialty in at least four ofthe following survey, and dividing by 2000. Sullivan, Cotter & Associates, Inc. - Physician Compensation andProductivity Survey Hay Group - Physician’s Compensation Survey Hospital and Health Care Compensation Services - Physician Salary SurveyReport Medical Group Management Association (MGMA) - Physician Compensationand Productivity Survey ECS Watson Wyatt - Hospital and Health Care Compensation Report William M. Mercer - Integrated Health Networks Compensation Surveywww.hcca-info.org 888-580-83734221
What Is Fair Market Value?Intermediate Sanctions According to the Internal Revenue Service, fair market value “is theprice at which property, or the right to use property, would changehands between a willing buyer and a willing seller, neither beingunder any compulsion to buy, sell, or transfer property or the right touse property, and both having reasonable knowledge of all relevantfacts.” “The fair market value of economic benefits received for theperformance of services is reasonable compensation, which is thevalue that would ordinarily be paid for like services by a likeenterprise under like circumstances.”See: Internal Revenue Service Web Site atwww.irs.gov/charities/charitable/article/0,,id 123303,00.htmlwww.hcca-info.org 888-580-837343What Is Commercially Reasonable? Many of the exceptions under the Stark Act require the payment to“be commercially reasonable even no referrals were made” betweenthe parties.www.hcca-info.org 888-580-83734422
What Is Commercially Reasonable? To be commercially reasonable, both the services and paymentmust be commercially reasonablewww.hcca-info.org 888-580-837345What Is Commercially Reasonable? The following services may not be commercially reasonable:– Two medical directors over a department when only one is needed.– Paying the physician for questionable consulting services.– Renting a piece of equipment full-time when only used once a month(assuming rental for one day is less than full-time rental).– Purchase of physician’s medical office building with no intention to usebuilding.www.hcca-info.org 888-580-83734623
What Is Commercially Reasonable? Commercially reasonable PAYMENTS are financial arrangementsthat are equivalent to arrangements between parties who are notdependent upon referrals. Examples:– Landlord of a medical office building who is not a medical provider andwho owns the medical office building to generate a reasonable rate ofreturn/profit.– Lessor of equipment who is in the business of renting equipment, and isnot a doctor or othermedical provider.www.hcca-info.org 888-580-837347Documentation Of Fair MarketValue/Commercial ReasonablenessLet the fun begin!www.hcca-info.org 888-580-83734824
Documentation Of Fair MarketValue/Commercial ReasonablenessIs it an art or is it a science?www.hcca-info.org 888-580-837349Documentation Of Fair MarketValue/Commercial ReasonablenessFor every physician contract, fair marketvalue/commercial reasonableness is thebiggest issuewww.hcca-info.org 888-580-83735025
Legal OpinionsMost law firms do not provide legal opinions onfair market value or commercial reasonablenesswww.hcca-info.org 888-580-837351Legal OpinionsLaw firms should work with providers to establisha process to develop FMV/commercialreasonableness information, and then opine thatproviders followed established process.www.hcca-info.org 888-580-83735226
Fair Market Value Guidelines for the following arrangements:– Employment Agreements– Medical Directorships– Real Estate Leasing– Time Share Arrangement– Equipment Leasing– Consulting Services– On Call Coveragewww.hcca-info.org 888-580-837353Employment For employed physicians, the following compensation structures canbe developed:1.Equal compensation2.Productivity-based compensation (Cap Compensation - i.e.,75th percentile by specialty)3.Combination of equal pay and productivity-basedcompensation4.Point System (a/k/a relative value unit [RVU] method)5.Fixed base periodic salary plus bonuswww.hcca-info.org 888-580-83735427
Employment Market Data:1.Determine what competitors are paying (anti-trust risks)2.Opinion letter from compensation analyst3.Third party surveyswww.hcca-info.org 888-580-837355Employment Typical third party surveys include:– Sullivan, Cotter & Associates, Inc. - Physician Compensation andProductivity Survey;– HayGroup - Physicians Compensation Survey;– Hospital and Healthcare Compensation Service - Physician SalarySurvey Report;– Medical Group Management Association - Physician Compensation andProductivity Survey;– ECS Watson Wyatt - Hospital and Health Care ManagementCompensation Report– William M. Mercer - Integrated Health Networks Compensation Surveywww.hcca-info.org 888-580-83735628
www.hcca-info.org 888-580-837357www.hcca-info.org 888-580-83735829
www.hcca-info.org 888-580-837359www.hcca-info.org 888-580-83736030
EmploymentKey Concepts with Exhibit A:1. Range established (25 %, 50%, and 75%)2. Specialty is matched3. Hourly rate is determined by percentile4. Surveys are averaged to negate disparity5. Premium added to base in leu of benefits(assuming physician is independentcontractor)www.hcca-info.org 888-580-837361Incentive Compensation Arrangements There are three (3) basic types of productivitycompensation arrangements:– Percentage of collections.– Compensation per RVU.– Percentage of gross charges.www.hcca-info.org 888-580-83736231
Incentive Compensation ArrangementsPros vs. ConsGross Charges Pro:– Compensation is not basedupon patient’s payor Con:– Charges may not bealigned with collections– Compensation can beinfluenced by employer’sincrease/decrease ofchargeswww.hcca-info.org 888-580-837363Incentive Compensation ArrangementsPros vs. ConsCollections Pro:– Compensation is alignedwith the amount employercollects for professionalservices.– Good documentation,better behaviorwww.hcca-info.org 888-580-8373 Con:– Great incentive forphysician to see patientswith higher paying payors(disincentive to seeMedicare, Medicaid orindigent patients).6432
Incentive Compensation ArrangementsPros vs. Cons Relative Value Unit Con: Pro:– Compensation is based uponphysician’s productivity.– Value of RVU is assigned byMedicare.– Physician is compensated forwork effort regardless ofpayor/collections.– Compensation based uponRVUs may not be alignedwith collections.– Confusion btw work andtotalwww.hcca-info.org 888-580-837365Example 1 Single Tier Model with a Guaranteed Cash Compensation of 175,000 with additional incentive compensation of 40 per RVUabove 4,500 RVUs work. Base Compensation, RVU production and compensation per RVUall benchmarked at 50th percentile.CompensationPercentileCash CompensationRVUs25125,0003,500 3550175,0004,500 4075225,0005,500 4190300,0006,500 46www.hcca-info.org 888-580-8373per RVUs6633
Example 2 Multiple Tiered Model 100% RVU ProductionRVUs workedCompensation per RVU4,500 and below 354,501 – 5,500 405,501 – 6,500 456,501 and above 50www.hcca-info.org 888-580-837367Medical Director Structure of compensation (and underlying fair market valuedocumentation) may depend upon legal status:– Employee vs. independent contractorwww.hcca-info.org 888-580-83736834
Medical DirectorIndependent Contractor:1. Hourly payment (with maximum number of hoursin contract)2. Annual payment (determined by projected numberof hours multiplied by Fair Market Value hourlyrate)3. Quality-based compensationwww.hcca-info.org 888-580-837369Medical DirectorIf Annual Paymentmethod is used, needto track hours to makesure consistent withcontract.www.hcca-info.org 888-580-83737035
Medical DirectorTime SheetDuties andResponsibilities:If physician will be amedical director,require physician tocomplete a time card,(written statement ofservices renderedand amount of timededicated to suchservices).Example Included as Exhibit B.www.hcca-info.org 888-580-837371Medical DirectorTracking ToolEXHIBIT Cwww.hcca-info.org 888-580-83737236
Real EstateFair market valuev. CommerciallyReasonable: Isthere a difference?www.hcca-info.org 888-580-837373Real EstateFair market value: A Box is a Box is aBox. So, I can charge what theHospital down the street charges.Right?www.hcca-info.org 888-580-83737437
Real EstateFair market value: Is the physicianpaying occupancy costs that areconsistent with arm’s lengthrelationships in comparableproperties in local market?www.hcca-info.org 888-580-837375Real EstateCommercially Reasonable: Is hospitalestablishing rental rates in amountssufficient to generate positive cash flowsand a rate of return consistent with i) riskand ii) other local real estate investors?www.hcca-info.org 888-580-83737638
Real EstateCommerciallyReasonable: Whata reasonable realestate investor willrequire as a rate ofreturn.10 %?15%?20%?www.hcca-info.org 888-580-837377Real EstateTo be commercially reasonable,unless extenuating circumstancesexist, real estate should generatea reasonable rate of returnwww.hcca-info.org 888-580-83737839
Real EstateCommercially Reasonable: (AmortizedCost of Building interest expenses) rent receipts 10% [Market reasonablerate of return]www.hcca-info.org 888-580-837379Real EstateThings to consider: Tenant Improvements (“TI”)– New Space (higher TIs)– Rehab (Presumption - lower TIs)– Standard TIs– Enhanced TIs Pay up front Prorate with lease payments with interestwww.hcca-info.org 888-580-83738040
Things to consider (Continued): Leasing Costs Amenities (Parking, Security, Internet, etc.) Total Cost (Design, Construction, Land, Financing,HVAC, Taxes, Janitorial, Legal, etc.)www.hcca-info.org 888-580-837381Real EstateQuality of Building must beevaluated. Class A, B orC Building?www.hcca-info.org 888-580-83738241
Real EstateShared SpaceMust allocate all costs Rental of space (Half or Full Day Slots) Vacancy Rate (Project 20% vacancy?) Supplies Utilities Staff (Registration, Nursing, etc.) Equipmentwww.hcca-info.org 888-580-837383Real EstateShared Space - ExampleAssume the following: 18 gross per square foot rental (exclusive use) 30% projected vacancy 1,000 square feet in suite Building has 6,000 square feet, with 1,000 square feet for commonarea (5,000 square feet usable space) Suite capable of being leased in half day increments (8:00 A.M. –Noon; 1:00 P.M. – 5:00 P.M.)www.hcca-info.org 888-580-83738442
Real EstateShared Space - Example Furniture and equipment in suite determined to be leaseable at 2,000 per year using independent third party leasing company. Miscellaneous medical/office supplies projected to be used in suiteis approximately 5,000 annually if suite leased 70% of the timewww.hcca-info.org 888-580-837385Real EstateShared Space - ExampleWhat is the fair marketvalue/commerciallyreasonable rate for onehalf day?www.hcca-info.org 888-580-83738643
Real EstateShared Space - Example 18 (exclusive use rate) 30% (vacancy) 25.71 persquare foot ( 18 .7 25.71)1,000 square feet (suite) 5,000 square feet (building notincluding common area) 20% (percentage of suite’s usablespace in building’s usable space)1,000 square feet (common area) x 20% (suite to building) 200 square feet (common area allocated to suite)www.hcca-info.org 888-580-837387Real EstateShared Space - Example1,200 square feet (suite plus allocated common area) x 25.71 30,852 30,852 2,000 (furniture and equipment) 5,000(medical/office supplies) 37,852 37,852 52 (weeks) 728 (weekly rate) 728 5 (business days in week) 146(daily rate) 146 2 73 (half day rate)www.hcca-info.org 888-580-83738844
Real EstateShared Space - ExampleWhat is 73Alex?www.hcca-info.org 888-580-837389Real EstateShared Space - ExampleExample becomes more complicated if: Part of suite is leased (as opposed to full suite) Staff is provided by landlord/hospital Specialized equipment is used Non-standardized supplies are used by a tenantwww.hcca-info.org 888-580-83739045
Equipment Leasing First, it must be determined whether the equipment will be usedexclusively by lessee or shared between multiple providerswww.hcca-info.org 888-580-837391Equipment Leasing If leased exclusively, comparables from third party leasingcompanies should be obtained.– Call and receive quote– If unable to obtain a quote from a third party leasing company, lessorcould determine the useful life of the equipment and reasonable rate ofreturn for lessors of equipmentwww.hcca-info.org 888-580-83739246
Equipment LeasingExample:Equipment valued at 100,000, with a useful life of 7years, and a commercially reasonable rate of return of30%, produces an annual lease rate of 18,571Reasonable Rate of Return:Determined by lessors who arenot dependant upon referrals fromlesseeswww.hcca-info.org 888-580-837393Equipment Leasing If the equipment is not going to be used exclusively by the lessee,either a daily, hourly or per click lease rate should be developed– Quote from third party leasing company– If unable to receive third party quote, using the same methodology asused in the exclusive use example may be appropriate 18,571 (annual rate including 30% rate of return) divided by 260days 71 daily rental rate Caution: This does not include any additional services lessor needsto provide to transport equipment or to make equipment available tolessee (i.e., films, technician, etc.)www.hcca-info.org 888-580-83739447
Equipment LeasingIt is very important to use comparablesfrom sources who are not referral sourceswww.hcca-info.org 888-580-837395Consulting Services Payment for consulting services can be:– Hourly– Fixed Payment for Projectwww.hcca-info.org 888-580-83739648
Consulting ServicesFixed payments should be developed by estimatednumber of hours to be dedicated by physicianmultiplied by fair market value hourly rate usingnational surveys or third party compensationconsultantwww.hcca-info.org 888-580-837397Consulting Services Actual consulting services should be performed– Good:Review and develop written reports/analysis.– Questionable:Paid “consulting fee” to sit in an audience to listen about a newproduct/servicewww.hcca-info.org 888-580-83739849
2008 Physician On-Call PaySurvey ReportSullivan Cotter and Associates, Inc.July, 2008www.hcca-info.org 888-580-837399Pay Practices - ExamplesRestricted On-CallAnesthesiologyUnrestricted On-CallNo. ofRespondents25th %Median75th %No. ofResponden
Fair Market Value and Commercial Reasonableness: How to Document Compliance www.hcca-info.org 888-580-8373 2 Why Is Documenting Fair Market Value and Commercial Reasonableness Important? † Fines and Penalties, including 3 times the amount paid by Medi
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