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New Stark Regulations Further Clarify Definitions of Fair Market Value and General Market Value

December 14, 2020
Health Care

The Department of Health and Human Services (HHS), on November 20, 2020, released final rules for the federal physician self-referral law (Stark) and the anti-kickback statute (AKS). The Centers for Medicare & Medicaid Services (CMS) and the Office of the Inspector General (OIG) worked together to finalize proposed protections for value-based arrangements and clarify existing Stark and AKS requirements to facilitate coordinated, value-based care, and cure undue confusion and burdens. Most changes will be effective on January 19, 2021. Here, we outline changes to the definitions of "fair market value" and "general market value" under the new Stark regulations.

CMS altered the definitions of "fair market value" and "general market value" to better reflect how they are defined in the statute. They also sought to provide additional specificity based on the type of the financial arrangement being valued for "fair market value," and specificity for the transactions contemplated in the Stark law exceptions.

CMS removed "general market value" from the definition of "fair market value" at 42 C.F.R. §411.351. In addition, CMS removed the "volume or value" and the "other business generated" standards from the definition of "fair market value." Now, CMS considers the "volume or value" and the "other business generated" standards as separate and distinct requirements from the "fair market value" requirement. As a result, where these requirements appear for exceptions, compensation must be (1) fair market value for items or services provided; and (2) not take into account the volume or value of referrals—or the volume or value of other business generated by the physician, where such standard appears. CMS also removed the "volume or value" standard from the definition of "general market value" to maintain consistency with this new interpretation.

Modified definitions of "fair market value" now exist for specific applications as well. This structure enhances clarity, but does not significantly differ from the statutory language at section 1877(h)(3) of the Stark Law.

CMS restructured the "general market value" definition to emphasize their policy that the valuation of the remuneration terms of a transaction should not include any consideration of other business the actual parties to the transaction may have with one another. Additionally, modified definitions now exist for the transactions contemplated in the Stark law exceptions.

CMS will continue to accept any valuation method that is commercially reasonable and provides them with evidence that the compensation is comparable to what is ordinarily paid for an item or service in the location at issue, by parties in arm's-length transactions that are not in a position to refer to one another (66 FR 944). They will continue to consider a range of methods of determining fair market value and that the appropriate method will depend on the nature of the transaction, its location, and other factors (69 FR 16107 and 72 FR 51015 through 51016).