This court ruling will definitely raise some eyebrows. In the case S&G Labs Hawaii v. Graves, Civ. No. 19-00310, 2021 WL 4847430, the judge allowed a commission payment structure between a lab and the accounts manager because the account manager was selling directly to physician practices and other clinics/facilities and NOT selling directly to the “individual” (i.e. the Medicare patient).
HVG receives calls regularly to conduct FMV assessments for management and marketing arrangements for labs. The most risk-averse clients are structuring their arrangements as a fixed flat fee which is usually a cost-plus mark-up structure. However, the EKRA law is quite cumbersome, and this type of structure is not conducive to businesses that are performing poorly or those that wish to scale up in short period of time. Therefore, many labs and MSOs are willing to structure their payment terms as percentage of reimbursements knowing that it is outside of the safe harbor, just as long as the fee paid was, in fact, fair market value. This new court ruling will surely entice some businesses to take on additional compliance risks and structure their contracts based on a percent of reimbursements.
Estimating fair market value of such arrangements involves a careful analysis of two perspectives: one from the standpoint of the lab and one from the standpoint of the MSO. The answer is a delicate balance between the amount the MSO services are worth to the lab and the profit the MSO is entitled to earn.