Given the intense focus on determining the fair market value associated with various physician arrangements, hospitals and health systems may be neglecting to assess whether such arrangements are commercially reasonable. However, healthcare providers should proceed with caution as this sometimes overlooked requirement may invoke liability under the Stark Law, the Anti-Kickback Statute, and the Federal False Claims Act. In fact, a determination as to whether an arrangement is commercially reasonable may be viewed more or less as a prerequisite to calculating fair market value.
Fundamentally, a determination as to commercial reasonableness is a separate and distinct inquiry from calculating fair market value. In particular, while the standard of fair market value assesses the appropriateness of the range of dollars exchanged between healthcare providers, the standard of commercial reasonableness requires that the arrangement be sensible from a general business perspective. As such, an arrangement between healthcare providers may be at fair market value yet be commercially unreasonable.
For example, a physician may be party to an arrangement by which he is compensated at an amount commensurate with fair market value given his position, specialty, geographic region, and other factors. However, if the hospital at which he provides such services already maintains personnel/positions capable of carrying out his contracted duties, the arrangement may not be commercially reasonable. Other such risk factors may include insufficient demand, hospital size and patient population, physician specialty, relationship to hospital strategic and financial goals, and inadequate oversight.
Given the aforementioned risk factors and regulations, healthcare providers should be engaging in assessments, whether internally or through external assistance, related to the commercial reasonableness of their physician arrangements. Accordingly, to facilitate such reviews, PYA has assembled a proprietary and comprehensive five part analysis (a subset of which is provided below) to help your organization determine the commercial reasonableness of physician-hospital arrangements.
- Business Purpose Analysis:
Example:Does the arrangement provide for the accomplishment of the Hospital’s business and clinical objectives? - Provider Analysis
Example:Does the arrangement require a physician (versus a non-physician clinical provider) to perform the services? - Facility Analysis
Example:Are there sufficient numbers of Hospital patients and/or adequate levels of community demand to justify the services? - Resource Analysis
Example:Does the arrangement require the provider to perform duties which are already required of active medical staff members under Hospital bylaws? - Independence & Oversight Analysis
Example:Does the Hospital engage in appropriate monitoring to determine the amount of funds spent on such arrangements and whether these services resulted in the arrangement s anticipated outcome?
For additional information regarding commercial reasonableness, please contact the experts listed below at PYA, (800) 270-9629.
