heathtran

http://www.entrepreneur.com/tradejournals/article/188511288.html

While there are many exceptions available as described in the Stark Law, the exception that applies most commonly to skilled nursing facilities is the "personal services exemption." To meet the requirements of the personal services exemption, and to qualify for protection under a safe harbor, the nursing home and the physician must satisfy several key conditions.

These include, at a minimum:

• the relationship between the skilled nursing facility and the physician must be covered by a written, signed agreement covering at least one year of service.
• the services provided by the physician must be specifically identified.
• the services must be reasonable and necessary for legitimate business purposes.
• the amount paid must be set in advance and have no direct or indirect relationship to volume or referrals by the physician.
• the agreement must be commercially reasonable.
• the agreement must not involve counseling or promotion of any business arrangement or other activity that violates any state or federal law; and
• the amount paid must be consistent with fair market value (FMV).

While it is common for skilled nursing facilities to use an experienced healthcare attorney to assist with drafting agreements to address most of these issues, it becomes challenging for a skilled nursing facility operator to determine FMV. FMV is innocuously defined in the regulations as "the value in arm's length transactions, consistent with the general market value." But reading through the regulations provides a more detailed definition for general market value as "the price that an asset would bring as the result of bona fide bargaining between well-informed buyers and sellers who are not otherwise in a position to generate business for the other party, or the compensation that would be included in a service agreement as the result of bona fide bargaining between well-informed parties to the agreement who are not otherwise in a position to generate business for the other party, on the date of acquisition of the asset or at the time of the services agreement." The definition continues for the interested reader, but the conclusion is that if the parties want to "fit" into a safe harbor, and have the presumption of compliance, the FMV may not be easily identifiable and most importantly, cannot be arbitrarily decided by the parties involved. There must be a reasonable basis for deciding the fair market value, and more weight will be given to the determination if the value is derived from established methodologies or practices.