CMS Releases Stark, Phase III Final Rule -
Impact to Safe Harbor Calculations?

(PYA Alert dated August 30, 2007)


Implications to Determination of Fair Market Value Compensation for Physician Services

CMS recently released a display copy of the Stark physician self-referral prohibition, Phase III regulations. Phase III final rule is a response to public comments on the Phase II interim final rule published March 26, 2004 in the Federal Register. The final rule is scheduled to be published in the September 5, 2007 Federal Register. Phase III includes significant changes to the guidelines related to fair market value, specifically the regulations pertaining to the calculation of fair market value compensation for a physician’s personal services (i.e. Safe Harbor calculation). Phase II regulations included a detailed explanation of the calculation of the hourly payment for physician’s personal services. The Safe Harbor hourly rate was calculated utilizing the average of the 50th percentile national compensation level for physicians within the same specialty as reported in at least four of the six surveys identified by Stark and dividing this average compensation by 2,000 hours. While the definition of fair market value remains unchanged, Phase III regulations exclude any explanation or guidelines for a Safe Harbor hourly rate calculation. The exclusion of guidelines for a Safe Harbor calculation of compensation for physician services has a significant impact on hospitals and physician practices attempting to determine fair market value compensation.

The regulations included in Phase III will become effective 90 days after being published in the Federal Register. PYA will continue to provide updates regarding the impact of these changes. The display copy of the Phase III final rule can be found on the CMS website.

If you would like more information, please contact Marty Brown at (800) 270-9629.

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