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), and
- Prohibition 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 appraisal community is already considering and taking into account in their appraisal exercises. In other words, the “new definition” won’t dramatically change an appraiser’s opinion of FMV of compensation or equipment and space rental rates.
The proposed rule will modify the most commonly recognized definition of “fair market value” in CMS 42 C.F.R. § 411.351 to provide for a definition of general application (whatever that means), one applicable for equipment rentals and one for office space rentals. Some of the additional language I’m seeing related to FMV and “general market value” include very minor additions such as:
- …with like parties and under like circumstances, of like assets or services..
- …on the date of acquisition of the assets or at the time the parties enter into the service arrangement.
- …consistent with the general market value of the subject transaction.
- ….in the case of rental of equipment or office space…… in the subject transaction at the time the parties enter into the rental arrangement.”
CMS also makes several clarifications related to FMV compensation. Here are a few:
- Salary surveys or survey percentiles may not be appropriate to use in ALL circumstances.
- It is not CMS policy that salary surveys necessarily provide an accurate determination of fair market value in all cases…
- CMS dispels the claim that it’s their policy that compensation set at or below the 75th percentile in a salary schedule is always appropriate, and that compensation set above the 75th percentile is suspect, if not presumed inappropriate.
Take Aways:
The new definitions don’t dramatically change an appraiser’s opinion of value or their methodology and/or approaches. This new language, in my opinion, only clarifies the thought process and methodologies that competent appraisers are already employing.
CMS is implying that the 100% reliance on salary surveys is NOT always correct and suitable.
