Health Value Group

Telehealth FMV & the Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020

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I’m sure many of you are aware of the recently passed Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020.  This new law relaxes many of the current Medicare criteria in order to rapidly expand the use of telehealth as a resource against COVID-19. Pursuant to this law, the Secretary of HHS has the authority to waive the “site” requirements for telehealth services provided to Medicare beneficiaries who are located in an identified “Emergency Area” during an “Emergency Period.” Since the whole country is currently experiencing a public health emergency, the Emergency Period and Emergency Area requirements are met on a nation-wide basis.

 Prior to this waiver, Medicare could only pay for telehealth on a limited basis which is when the person receiving the service is in a designated rural area and when they leave their home and go to a clinic, hospital, or certain other types of medical facilities for the service.

However, what still remains is the FMV requirements.  Hospitals must pay telehealth providers a fee that is Fair Market Value.  As health systems around the country scramble to meet the current needs and develop telehealth arrangements, we at HealthValue Group stand ready to help you quickly make your arrangements compliant.  If you are currently working on a new telehealth arrangement and have FMV questions, please don’t hesitate calling me, Chris David, directly at 303-918-3607.

I’ll give you my guarantee that my staff and I will react quickly to help you develop a compliant and effective telehealth arrangement.

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Fair Market Value of Telemedicine Call Coverage

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With staffing shortages around the country, many healthcare facilities are calling on retired physicians and mid-levels to take telehealth shifts.  In addition, many ER physicians and other specialists are being asked to work additional hours and take telehealth call.  Needless to say, the demands of healthcare workers are increasing and the correct fair market value of their time and services is being called into question. 

The most common telemedicine arrangement is referred to as a “hub-and-spoke” arrangement. This involves an originating site (usually a rural hospital) with patients in need of care and a distant site (usually a larger health system) employing or contracting with specialists who deliver care.  However, the new Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020 has changed some of these requirements.  In addition, many state Medicaid programs are announcing new coverage policies to make it easier to provide telemedicine services.

This new law relaxes many of the current Medicare criteria in order to rapidly expand the use of telehealth as a resource against COVID-19. Pursuant to this law, the Secretary of HHS has the authority to waive the “site” requirements for telehealth services provided to Medicare beneficiaries who are located in an identified “Emergency Area” during an “Emergency Period.” Since the whole country is currently experiencing a public health emergency, the Emergency Period and Emergency Area requirements are met on a nation-wide basis. Prior to this waiver, Medicare/Medicaid could only pay for telehealth on a limited basis which is when the person receiving the service is in a designated rural area and when they leave their home and go to a clinic, hospital, or certain other types of medical facilities for the service.

Telehealth On-Call Fair Market Value

In some cases, a health system will have physicians on-call to respond to a telemedicine encounter.  At first, this telemedicine on-call arrangement appears to be very similar to a typical call arrangement for an emergency department.  However, utilizing per diems reported in benchmark surveys to determine a telemedicine FMV on-call rate is not exactly appropriate. It is important to remember that call coverage rates published in surveys like MGMA or Sullivan Cotter mostly represents emergency department call coverage.   If you are using these survey on-call rates for telemedicine on-call arrangements, the data will likely need to be adjusted.  Emergency department call coverage benchmarks are commensurate with the burden of responding in person to the emergency department to perform a consultation, surgery, or other procedure.  In a telemedicine arrangement, the on-call physician can likely deliver the consult or examination at his home, office or over the telephone, which is much less burdensome than having to come into the emergency department. In this case, the per diem on-call rates published in the compensation surveys should be discounted to account for the diminished burden. 

#telehealthcareappraisers, #telemedicineFMV, #telehealthFMV, #telehealthFMVcompensation, #telemedicineFMVcompensation #COVID19 #coronavirus

The information provided herein is of a general nature and cannot be substituted for an actual fair market valuation opinion in which specialized knowledge is applied to a particular circumstance and specific facts.  Therefore, nothing in this article should be construed to offer or render a valuation or legal opinion, and neither Chris David or HealthValue Group cannot take any responsibility for an attempt to use or adopt the information or disinformation presented herein.

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What Every Healthcare Attorney Should Know About Appraisals

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When attorneys contract with appraisers to issue valuation opinions, there are 5 very important elements that the attorney must know and understand to ensure its proper and effective use.  These may sound elementary, but I find that these elements are commonly misunderstood which can ultimately affect the transaction or the purpose of the appraisal.

Subject of Valuation –

The attorney, client, and appraiser need to have a clear understanding and agree on the actual subject of the appraisal.

  1. Are we valuing a specific service?  If so, is it clearly defined, detailed and documented?
  2. Are we valuing a specific entity?  If so, are we valuing the invested capital of a business or the net equity?  Are we valuing a minority, fractional interest or one hundred percent?
  3. Are we valuing medical equipment? What peripherals are included? Who delivers and installs?
  4. Are we valuing an equipment lease rate?  What is included? Do we have all the details?

Purpose of Valuation –

The attorney should inform the appraiser exactly how the appraisal report will be used. The appraisal report can be used for any of the following:

  1.  Compliance with the Stark Law and Anti-Kickback Statue
  2. Compliance with the Private Inurement laws for 501(c)(3) organizations
  3. For federal tax compliance
  4. Buy/Sell agreement
  5. Litigation or dispute resolution

Standard of Value –

The purpose of valuation will dictate the standard of value.  The attorney and appraiser should discuss the various standards of value and both agree on the proper standard to use. The commonly used standards of value include:

  1. Fair Market Value – Revenue Ruling 59-60
  2. Fair Market Value (healthcare)  –  Stark Law
  3. Investment Value
  4. Fair Value

Premise of Value –

This is the unique set circumstances and assumptions pertaining to the asset, transaction, or situation.  The premise of value should also be discussed between the appraiser and client/attorney because this will have an impact on the appraisal value.  The common premises of value include:

  1. Value as a going concern
  2. Value as an assemblage of assets
  3. Value as an orderly disposition
  4. Value as a forced liquidation

Value Date –

Finally, the valuation date needs to be clearly understood among the parties.  The purpose of the appraisal will have the most bearing on this element.

If the attorney, client, and appraiser all have a clear understanding of these five elements and assumptions, then this will reduce compliance risk and ensure the appraisal is being properly used. Facebooktwitterlinkedinmail

Mr. David to attend the Cline Williams Annual Healthcare Law Forum

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The forum is held in Kearny, NE and has the following presentations:

Healthcare Law – Year in Review, Jason Yungtum
The Impact of Employment Law Developments on Healthcare Employers, Tara Stingley
J-1 Waivers & the Role International Medical Graduates Play at CAHs, Dan Oldenburg
Medical Malpractice “Case of the Year”, Mark Christensen
Healthcare Marketing Do’s and Don’ts, Jill Jensen
Medicare Enrollment Gaffes: Not for the Faint of Heart, Dennis Grindle (Seim Johnson)
Top 10 Things CAHs Can Do to Avoid Data Breaches, Rick Jeffries

Fair Market Value of DME Patient Leads and Legal Restrictions

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Durable Medical Equipment (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.

dme, medical equipment

Federal healthcare laws are particular when it comes to how healthcare providers, including DME suppliers, obtain information on patients. These laws may come into play when DME suppliers attempt to generate new business by contracting with LGCs, which can cause suppliers to violate any number of healthcare law like the Anti-Kickback Statute (AKS).

As the AKS relates to the Durable Medical Equipment industry, it is acceptable for a DME supplier to “purchase a lead.” However, it is a violation of the AKS for the supplier to “pay for a referral.” So, when a DME supplier contracts with a lead generation company or another type of third-party marketing firm, it’s important to understand whether they are purchasing an “unqualified lead” or are they purchasing a “qualified lead” which can be considered a patient referral, making the purchase illegal.

DME suppliers can and should pay a set FMV price-per-unqualified lead. An unqualified lead is a prospect’s/patient’s name, phone number and address or email address.  A qualified lead/patient is a prospect with much more information, such as prescription, doctor’s name, Medicare information, etc.  Government regulators consider a qualified lead as a patient referral and paying a set price-per-qualified lead could be problematic. Therefore, it’s recommended to play it safe and pay a set FMV price-per-unqualified lead and then pay an FMV hourly rate to qualify the lead.

Feel free to contact me if you have any questions.

Chris David —  Cdavid@healthvaluegroup.com – 303-918-360Facebooktwitterlinkedinmail

Physical Therapy Clinics – Sector Overview & Fair Market Value

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The Physical Therapy sector is going through a period of growth and is expected to increase by 3.6% annually to become a $34.6 billion sector by 2020. The PT industry is experiencing heightened M&A activity from both strategic suitors and private equity investors. The PT business is highly fragmented with the 50 largest competitors comprising less than 25% of the market, which makes it ripe for consolidation.  This consolidation will be led by private equity backed firms as they continue to expand their footprint through add-on acquisitions to gain market share and improve margins by leveraging infrastructure and systems.   

physical therapy

Nine of the top twelve outpatient companies are private equity backed. The outpatient rehabilitation sector is highly fragmented with the three largest players controlling only 8.3% of the market share and 13.1% of the facility base.  While there are a few national companies, the industry consists predominantly of small to medium regional providers with annual revenue of slightly over $1 million per clinic. Physician-owned PT practices comprise an estimated 10% -15% of all PT clinics and represent a large compelling market opportunity for consolidation. 

Fair market valuation multiples are ranging from 5 to 6 time trailing EBITDA.  US Physical Therapy, the largest pure-play operator of outpatient physical therapy clinics has been an active acquirer in this space.  According to a number of their 8K filings since May 2005, US Physical Therapy has been acquiring private PT businesses at values averaging  1.6 times revenue. 

 

The information provided herein is of a general nature and cannot be substituted for an actual fair market valuation opinion, in which specialized knowledge is applied to a particular circumstance.  Therefore, nothing in this paper should be construed to offer or render a valuation of a physical therapy clinic, and neither Chris David or HealthValue Group can take any responsibility for an attempt to use or adopt the information or disinformation presented herein.

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