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Financial Relationships & Fair Market Value Compensation

Texas Health Care Law Attorneys with Over 100 Years of Combined Experience

The federal government relies on several statutory laws to combat fraud, waste, and abuse of federal health care programs. As such, physicians and health care providers face a considerable task of sifting through the maze of dense and complex regulations and ensuring their circumstances, arrangements, and transactions are compliant with the law. Because violating these laws can result in substantial penalties, and the potential for career-altering ramifications, ensuring regulatory compliance is of the utmost importance.

Our legal team at Hendershot Cowart P.C. leverages over 100 years of collective experience to provide comprehensive representation to health care providers throughout Texas and the U.S. From proactive counsel when drafting agreements and compliance plans to responsive representation when providers face audits, investigations, and alleged violations, we have the insight and depth of knowledge to help health care clients address they numerous and complex needs – all while tailoring strategies and practices to their unique situations.

Request an initial consultation with our Houston health care attorneys when you call (713) 909-7323.

Exceptions & Safe Harbors

When it comes to ensuring compliance in relation to federal health care fraud and abuse laws, due diligence and careful evaluations of any relationship and contract is critical, especially as laws may be broad or vague in their interpretation. Aside from assessing whether or not a particular arrangement would constitute a violation, providers should also explore whether their arrangements meet the requirements to qualify for an exception or “safe harbor.”

With regulations such as the Stark Law (physician self-referral law) and the Anti-Kickback Statute, there are a number of exceptions written into the law. These exceptions are intended to ensure that while physicians should be subject to regulatory oversight, patient health should not be compromised. However, ensuring an arrangement fits within an exception means meeting all of the provisions defined by statute.

Fair Market Value

Although there are numerous exceptions that each have varied and multiple provisions, many safe harbors have requirements that require financial relationships of physicians (i.e. employment agreements, rental agreements, etc.) to reflect “fair market value.”

Common examples of such arrangements include:

  • Leases for office space or equipment
  • Bona fide employment
  • Group practice arrangements with hospitals
  • Isolated transactions
  • Indirect compensation arrangements
  • Ambulance restocking
  • Academic medical centers

Both the Stark Law and the Ant-Kickback Statute have multiple exceptions that contain fair market value requirements, whether it’s for property, goods, or services. All Stark exceptions to compensation arrangements, including personal services and bona fide employment, also require compensation that is consistent with fair market value for the services performed.

While regulatory definitions of “fair market value” are broad, FMV is generally established on a case-by-case basis in reference to compensation / pricing for the same items or services in the community and agreed upon by both parties in an arm’s length transaction. Compensation must also be consistent with general market value, or a certain asset’s value in a competitive marketplace.

Ensuring compensation and pricing for goods or services are consistent fair market value is only one of many elements to address when exploring exceptions. Providers must also ensure all other elements of any particular requirement are met, including some that are directly tied with fair market value compensation. Examples include:

  • Arrangements are made in writing, signed by all parties involved, and cover specified services or items.
  • Written agreements specify timeframes for arrangements, including any time period that contains only one arrangement for the same services or items during the course of a year, and renewals if compensation for the same services or items remains the same.
  • Fair market compensation is set in advance and does not take volume or value of referrals into account.
  • Arrangements are commercially reasonable.

Determining fair market value should be done before a physician enters into any contractual relationship or transaction, and with the assistance of attorneys with experience in the field. At Hendershot Cowart P.C., we leverage our extensive experience counseling a range of providers throughout the country to evaluate circumstances, obtain comparable benchmark data, and work with specially qualified experts or appraisers when necessary, and determine FMV for the unique circumstance involved. Establishing a FMV range of compensation not only facilitates regulatory compliance, it can also help professionals and providers with establishing base salaries for employment.

Comprehensive Counsel for Health Care Professionals

Stark Law exceptions and other safe harbors are known for their complexity, subjectivity, and for being subject to intensive scrutiny. More than one exception can apply to compensation arrangements, and even relationships that appear reasonable and fair to the parties involved may not be consistent with fair market value under the law. This is why working with experienced legal counsel is immensely important whenever medical professionals a contemplating relationships and arrangements subject to regulatory oversight.

At Hendershot Cowart P.C., our award-winning lawyers have the depth of experience to help a range of health care professionals ensure regulatory compliance with various laws and reduce their exposure to violations. In addition to proactive counsel when drafting contracts, we also have the experience to represent clients on an immediate and responsive basis should they already face allegations of waste, fraud, or abuse.

Discuss your situation and our health care services personally with an attorney. Our firm serves clients throughout Texas and beyond. Call (713) 909-7323 or contact us online for an initial consultation.

Committed To Protecting Your Interests

Lawyer Consulting a Client
  • "Our firm defended a health care client against a fraud and abuse investigation by the Office of Inspector General. The client's response: Trey, On behalf of myself and M., I would like to extend our gratitude and appreciation for an outstanding job in our presentations regarding the OIG matter. Your honest and thorough work and your belief in our honesty and integrity as physicians, which was conveyed to the OIG and resulted in giving us the opportunity to meet with them, was a smart move and is greatly appreciated. We truly appreciate all your hard work and representation. Ben, I would also like to take this opportunity to thank you for finalizing the documents for the purchase of . . . in such a short time."

    - A.
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