In the business valuation community, a discount is sometimes applied to the equity value of a minority ownership stake in a business. This discount often referred to as a discount for lack of control (“DLOC”), is to account for the various control privileges that a minority owner doesn’t possess. Control shares are normally more valuable than minority shares because they contain a bundle of rights that minority shares do not enjoy. … [Read more...]
Genetic Testing Lab Kickback Scheme: Another One Bites the Dust…
By now, it’s probably no surprise to healthcare compliance professionals that there’s been a lot of enforcement in the genetic testing lab space. Over the past two or three years, there have been countless settlements, investigations, and indictments related to how genetic labs obtain their referrals. In this particular case, Ark Laboratory Network submitted patient DNA samples to various labs but was compensated in an improper manner. Ark made a deal behind the scene to be paid a percentage of Medicare reimbursements and/or a flat fee per DNA sample. The kickback scheme was covered up by issuing sham invoices to laboratories that purportedly reflected services provided at an hourly … [Read more...]
Fair Market Value of Professional Services Agreements – The Proper Way
Many health systems and hospitals will contract with private physician groups to provide professional services to its facilities. Some of the more common specialties we see contracted for are neurosurgery, orthopedic surgery, and urology. When hospitals and physician groups enter into a professional services agreement (PSA) the contracted fee must be fair market value (FMV) to comply with the federal Anti-Kickback Statute and sometimes the Stark Law (depending on how it’s structured). Every thorough FMV opinion and appraisal should start with some basic assumptions and theories. This FMV QuickRead will go over the three common valuation approaches and the most appropriate assumptions … [Read more...]
DME Supplier – Market Multiples
The durable medical equipment (DME) supplier market is highly fragmented and competitive with over 6,000 companies. The sector is comprised of national competitors, scaled regional businesses, product specific distributors, and mom and pop operators. Competition among DME suppliers is based on pricing, breadth of product offering, performance, relationship with physicians in the locality, strategic location of facilities, and customer service and delivery. The market has been witnessing strong consolidation during the last five years. Publicly traded DME suppliers such as Pro Tech Home Medical (PTQ), AdaptHealth Corp.(AHCO), and VieMed Healthcare (VMD) have acquired several smaller, … [Read more...]
Physical Therapy Market and Valuation Multiples
The physical therapy (PT) market currently generates approximately $33.9 billion in annual revenues, and is expected to grow 2.1% in 2021. Although the PT industry has declined 0.8% per year, on average, since 2016, many industry expert expect the annual growth rate to approach 5%. The PT industry is experiencing heightened M&A activity from both strategic suitors and private equity investors. The PT market is highly fragmented with the 50 largest competitors comprising less than 25% of the market, which makes it ripe for consolidation. This consolidation is being led by private equity backed firms as they continue to expand their footprint through add-on … [Read more...]
Fair Market Value of Management Fees
Here at HVG, we’ve seen dozens and dozens of various entity formations of management services organizations (MSO) and management services agreements (MSA) that require an FMV opinion. As an appraiser, we encounter certain unique challenges when it comes to opining to an FMV management fee. In certain states with restrictions on fee splitting and/or corporate practice of medicine (CPOM) in-force the management fee cannot be contracted (or expressed) as percentage of reimbursements or patient volume. And second, there exists no relevant and/or sufficient market data for management fees to utilize as a suitable comparison, similar to physician compensation or private company … [Read more...]
DME Suppliers and Fair Market Value of Lead Generation
There have been many enforcement actions and settlements with durable medical equipment (DME) suppliers over the past 24 months. Many of the cases involve overbilling, claims for medically unnecessary equipment and the improper use of lead generation and referral sources. DME companies often purchase sales leads from third-party lead generation companies (LGC). However, DME suppliers need to be conscious and careful about how they pay for sales leads, especially if their customers/patients participate in the Medicare or Medicaid program for their supplies. Federal healthcare laws are particular when it comes to how healthcare providers, including DME suppliers, … [Read more...]
FMV of Marketing & Management Services for Laboratories
Another genetic testing lab settles with DOJ for violating the False Claims Act (FCA) and Anti-Kickback Statue (AKS) [https://www.justice.gov/usao-wdwi/pr/autogenomics-inc-agrees-pay-over-25-million-allegedly-paying-kickbacks].California-based PersonalizeDx, a genetic testing laboratory, entered into an agreement with a third-party “healthcare marketing company”. According to the agreement, the genetic testing lab paid the health care marketing company a specified monetary kickback for each test that was reimbursed by Medicare. The particular structure of the marketing agreement violates the AKS and further implicates the False Claims Act once such tests are filed for … [Read more...]
Modernization of the Stark Law – An Appraiser’s Perspective
Part II: Commercially Reasonable
As I continue to skim over the anticipated revisions to the Stark Law and AKS I’ve analyzed the new definition for commercially reasonable (“CR”) from an appraiser/consultant’s perspective. However, first I believe it’s important to identify the existing CR definitions/meanings that the healthcare compliance community has been following.In 63 F.R. 1700 (Jan. 9, 1998) CMS identifies CR as an arrangement which appears to be “a sensible, prudent business agreement, from the perspective of the particular parties involved, even in the absence of any potential referrals.”[1] In the Stark Law, an arrangement will be considered “commercially reasonable in the absence of … [Read more...]
Modernization of Stark Law – An Appraiser’s Perspective Part I: Fair Market Value Re-Defined
I’ve been skimming over the 600+ pages of this most pleasurable reading and trying to identify the changes/revisions to the fair market value (FMV) and commercial reasonableness (CR) definitions. The proposed ruling identifies CMS’ “dramatic changes” to what it calls “The Big Three” definitions in the Stark Law: Fair Market Value (FMV)Commercial Reasonableness (CR), andProhibition on taking into account “the volume or value of physician referrals.” This FMV QuickRead will focus just on FMV. Although CMS added some additional specific language, the new language doesn’t really “move the needle” from an appraiser’s standpoint. CMS added language and specifics that the … [Read more...]
