What you will learn:

  • Understand the level of scrutiny the panelists feel the government will apply to Stark regulations moving forward
  • Risk assessment and business judgment factors that need to be in place to establish commercial reasonableness
  • Documentation requirements under new regulation updates
  • Contract lifecycle management should serve as more than a repository
  • The importance of collaboration, solution integrations, and the level of sophistication needed for complex assessments


The live webinar is being broadcast. Please note that this call is being recorded. Welcome, everyone. Today’s webinar will last 60 minutes and at the conclusion the presenters will be answering your questions. Just submit your question, simply use the q&a icon on the lower left corner of the screen to type your question or comment. Please note that this webinar is not eligible for CLE credit. If you are experiencing technical difficulties with the web portion of today’s program, please email educate at American health law.org or call 202-833-1100. Today’s program is titled a panel discussion how to take advantage of new Stark Law compliance regulations. A special thank you to the sponsor of today’s program and tracks. I’d like to take the next few minutes to introduce our first speaker Sarah Lowe. As a certified health care compliance professional Sara Lowe brings 18 years of leadership, operational experience and technology solutions development and health care compliance space. Throughout her career, Sarah has served as an in house compliance expert for health systems, and has largely served as a compliance expert for software as a service companies. Currently, Sara is the vice president of strategy and operations at end tracks. The leading contract management solution for healthcare organizations across the country, and tracks is uniquely driven by the expertise of dedicated contract compliance professionals like Sara, and is proud to be strategic partners with Hall render, and with Sullivan Cotter. Now I will turn the presentation over to Sarah.

Sara Low  01:43

Thank you, Ashley. And thank you to AHLA. Ntracts is super excited for this really important panel discussion. So we’re going to go quickly into the panel discussion. I know everybody’s anxious for that. But prior to that, and then prior to allowing our participants to introduce themselves, we thought we should kick off today by asking the audience to complete two polling questions. They’re designed to help us get a sense who of who is in the audience and tailor the conversation accordingly? So we’re going to start quickly with question number one. And that question is, what is your role within your organization? Are you a health system in house counsel? Are you in compliance? Are you with a private law firm, a consultant, other or a vendor? And while you all are answering the first polling question, I’m gonna go ahead and just read the second question in the interest of time. So we’ll go give everybody a second for that one. Question number two will be I’m most interested in learning about tools to help my organization streamlining processes, cleaning up my organization data and transitioning my organization to a value based enterprise. Okay, again, we’ll continue to allow everyone to respond to those two polling questions. But we would like to go ahead and kick off with our introductions for our speakers today. And we’ll start with Ritu Cooper.

Ritu Cooper  03:21

Thanks, Sara. Sorry, I had to unmute myself. Thanks so much for allowing me to participate in this panel. I really appreciate it. It’s been great to work with Darrell, Ron and Sara on this. Again, my name is Ritu Cooper, I’m a shareholder with Hall render Killian Heath and Lyman in the DC office. Hall render is the largest healthcare focused law firm in the country. My area focuses primarily in fraud and abuse. So I represent providers such as hospitals, health systems, large physician practice groups, I also do some work with pharma and device companies. But all in the fraud and abuse space. I co chair our compliance service line. And I work with clients and providing guidance on how to comply with the fraud and abuse laws, conducting investigations, whether they’re initiated by the government, or internal investigations, and then sometimes those investigations turned into voluntary disclosures. And then last but not least, I also work with a number of clients who are under CIAs.  Ron, can I pass it to you?

Ron Vance  04:21

Thank you. Thanks for you, too. So my name is Ron Vance. I’m a managing principal at SullivanCotter, and we’re one of the largest executive physician, Advanced Practice provider and employee workforce firms. We focus significantly in the compensation, design and valuation space. My practice for the last 35 years has included a range of strategic physician affiliation, compensation planning, and the related fair market value commercial reasonableness and other valuation matters. I’ll be glad to speak to some of those issues today. Darrell,

Darrell Buck  04:56

thank you and good morning. My name is Darrell Buck. I’m the corporate counsel for Oklahoma. Heart Hospital, or physician owned cardiac hospital based in a city, Oklahoma, I deal with the general duties inherent to the corporate counsel role. But primarily, I work with all the organization’s transactional issues, and the Contract Lifecycle, which is why the contract management database falls under my purview. Right now, my day to day heavily involves real estate and vendor contracts. Within the next year, all Physician Contracting is projected to come under my responsibility. And I’m thrilled for the opportunity to join today. So thank you.

Sara Low  05:32

Great, thank you re to Ron. And, Darrell. Before we get started into the first question, let’s go ahead actually, if we can share the responses to question number one. Okay, that’s probably question number two, we can start there if we need to. So it looks like the majority of everyone that’s participating. Okay, we’ll get back to number one looks like we’ve got about a tie of other in the vast majority is with in house counsel followed closely with private law firm. So thank you for that those responses, and then the responses to number two. All right. And then by a landslide, it looks like everyone is super interested to help, or to learn about tools that may help your organization to mitigate risk, which is great, because we’re going to be talking a lot about that today. So thank you for again, for responding to or taking the minute to respond to our polling questions. And we’ll go ahead and jump into the conversation. All right. So by now, I think everybody is pretty well aware that there have been some revisions and some may even say relaxation, and some new or clarifying definitions as it relates to specifically fair market value and commercial reasonableness, and stark and Dan with AKs. So Ron and Ruti, before we get into a little bit more of the practical discussions that we’re going to be having today, would you mind giving everyone a high level reintroduction to what the updates are? Ritu, I think it’d be great if we could start with you.

Ritu Cooper  07:12

Thanks. Okay. So this slide that we have shows an overview of the material changes that came out from Star Conflict back. But you’ll notice that these are all the non value based changes. And I know that there, you know, the value based changes got so much attention. But as you can see from this slide, there were a number of changes to long standing fundamental parts of Stark and kickback. So you’ll see and here we’ve got some new and revised definitions, there were some common requirements that have now some special procedures. And then there also were some new and revised exceptions. Clearly, I cannot go through all of this, but it was Whelan and Darrell will not get to talk at all. So we’re going to just cover just a couple of things that we thought would be useful as we’re talking about tools. Okay, so let’s first talk about the writing and the signature requirement. As we all know, the vast majority of contracts are required to be in writing under under the stark exceptions. In 2016, CMS, through commentary introduced this concept of being able to use a collection of documents to show evidence of a writing. Well, what they did in 2021, was they actually turned that sub regulatory guidance into a regulation. And what does that mean that that means that it gives providers a stronger basis or stronger authority to be able to rely on a collection of documents to show to show evidence of a writing those documents, however, need to be contemporary to the arrangements. So that’s important. There also was relaxations with the signature requirement. So we’ve had that ability to be able to have the signature for within 90 days, but you could add, you could only use it once per three years per physician, which meant that the compliance departments had to track it. So now that limitation is no longer there. In addition, the signature can now be electronic. And that was a really big deal, because in the 2015 commentary, the government was really reluctant to allow for any state contract principles to ride because they were concerned that it would result in differences from state to state. But now, they’ve confirmed that if something is valid under state or federal contract law, then it’s also valid under the Stark law. So that’s a that’s a big win. The other thing to think about or to make sure that you’re aware of is that yes, you can have 90 days to have a signature or a writing but that doesn’t mean that you can continue to them. Go here the terms of the agreement.

So the government’s very clear that the negotiations that have ended in agreement has started arrangement has started. But the the technical pieces of the writing and the signature can be a little bit delayed. And then one more thing that I wanted to bring up related to the writing is that the government also provided for a new exception that you no longer have to have an arrangement in writing if the compensation position is less than $5,000. Alright, so now let’s move on to what the government has dubbed as the Big Three fair market value. So prior to 2021, the definition of fair market value was a mess. You know, there were inconsistencies. There are references to value and value in the definition and cause confusion on whether volume and value of referrals. That requirement was distinct from FMV. So in this new rule, the general definition of FMV has been revised. There also is a new definition for FMV enter rental of equipment and rental of office space. The fair market value definition also refers to general market value. And so for assets, compensation and rent, general market value is the amount that would be paid at the time the agreement is entered into between the parties. There isn’t a separate definition for other payments. So under this framework, general market value really means that FMV is an objective question is this price, or the price of the transaction, something that someone would pay if they were in a similar situation? Another concept that I think also is a big win, is this idea that fair market value does not have to be confined to the survey data within the 50th and the 75th percentiles. The government said there could be extended waiting circumstances that could dictate parties going outside of that range, but still be within fair market value. All right, commercial reasonableness.

Before 2021, there was no definition of commercial reasonableness. CMS only addressed it I think, once in 1998, where they just said, Well, does it make commercial sense for the parties to enter into this arrangement, absence on the referrals? Well, now and 2021, CMS has adopted a new definition. And I want to read that definition. Because I think it’s a really big deal. It shows that they really thought about it, they tried to be aligned also with with the concept under anti kickback of having a legitimate business purpose. So commercial reasonableness means that the particular arrangement furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. In addition to that, CMS also made it very clear that an arrangement does not have to make a profit for either party for it to be commercially reasonable. And that also is a huge win. For anyone who’s been nerding out on a case lawn and what the government has been saying in their arguments of if something is not profitable, then it’s not commercially reasonable. And now we know that we don’t have to rely on that, that that viewpoint. One thing that I want to caution about commercial reasonableness is the government also made it very clear that just because an arrangement looks like it’s commercially reasonable on its face, doesn’t mean that it’s commercially reasonable. So let me give an example. If on its face, you have a medical directorship, or a call coverage agreement, and it looks like it’s commercially reasonable, because you have a reason to enter into it. If it’s duplicative of another agreement, then the government says, Well, you know, just because those terms are all the same, doesn’t mean that it’s commercially reasonable. That agreement needs to stand on its own, and you need to be able to provide the legitimate business purpose of why you need a second agreement that’s duplicative of the first one. Alright, so now let’s move into volume and value of referrals.

The note five and by referrals, has been something that’s tough, right? In some cases, providers have been discouraged completely from even considering the value of services of a party when they’re negotiating agreement. So and we know that that’s just not reasonable. Right. So now the government has provided a concept that cut is reduced to a math problem. So they see that if the mathematical formula for when you’re deciding the physicians compensation includes some kind of physician referral as an element or as a variable, and if the result of that variable that use of that variable either increase or decrease the physicians compensation, then you have taken into account the volume and referrals. If it doesn’t, then you haven’t taken into account the volume and value of referrals. One thing I do want to note, though, is that this new concept for the volume and value of rule does not apply to all of the various exceptions under start.

So make sure that when you read them, you, you pay attention to that. So I think the big thing to think about with these big three is that, you know, I don’t think you necessarily all of a sudden have to do something different as an organization right immediately. But what it does do is these, these flexibilities allow the organization to think about how they’re gonna go about their business. There’s three more things that I want to cover, and then I’ll toss it over to Ron, what is a reconciling compensation. So the government now has said that you have up to 90 days after an arrangement is terminated to reconcile compensation. Now we know that’s a big deal, because so many things can happen during that lifecycle of the arrangement, one could even just be that you didn’t realize that it might not have been fair market value. But they said that they definitely want an opportunity to be able to cure any unintentional errors. And we know that this sometimes happens, right with accounts payable, so or even accounts receivable if you’re receiving money through for rent or something. So what this does, is I think this change really incentivizes compliance departments to monitor and audit their physician arrangements, and the terms of those arrangements, specifically the payment terms. But in order to do that, you have to have a mechanism that will allow you to readily recall the details of those arrangements, set in advance that there is a change and a shift for set in advance both for Stark and for kickback. Now, they’ve said that you just need to have the formula for determining the compensation and and that that compensation for like can be modified during the term of the agreement. But that 90 day grace period for the signature in the writing would not be there. And under the OIG for the anti Kickback Statute. Again, you can have the methodology, you don’t have to have the aggregate compensation plan in advance. And if you have a part time arrangement, that schedule for the part time arrangement does not have to be laid out in detail. And then last but not least, was directed referrals. Now, direct referrals is not a a new concept. direct referrals has been something that has been present within the rules. But what they did is they took that concept that was kind of hidden in the regulations, and they’ve now put it in each of the exceptions where it applies. The other thing that they did is that they very directly stated that there needs to be a safeguard and that safeguard is that you cannot consider the adherence with the directed referral requirement when you’re setting compensation, or you can’t have compensation fluctuate because of the director referral requirement, nor can it be the basis for future agreements. So with all of that, let me toss it over over to Ron.

Ron Vance  18:03

Thank you, Ritu. That’s great summary, I’ll just add a couple of other additional overview comments. As we To summarize, there’s been some relaxation in the stock regulations, but there’s also some new clarification. So we have relaxation on certain technical requirements, but we have new definitions that have to be adhered to. And there’s new three new value based arrangements, which we did not heretofore have. So I’ll talk a little bit about those in a minute. Either way, we’re going to have to still be able to document that we’ve met reasonableness that relaxation is probably the most exciting for me in the market is the new value based arrangements for risks and partial risks, which do not appear to require a demonstration of fair market value. And even for the inkind valuation arrangement, we’ll still have to prove commercial reasonableness. So as Rita was describing more clarity around commercial reasonableness, whether it’s fair market value or commercial reasonableness, we’re going to need to make sure that we’ve met those requirements, we actually anticipate greater scrutiny with a reliance more on a facts and circumstances basis. As Rita said, there, there’s some guidance that simply adhering to percentile matching or certain benchmarks. We’re not constrained to that, though, we do believe that you’re still going to have to have documentation to market comparables or proving business judgment factors. There’s some comments that have been out on the new stock regulations that they diminish the importance of benchmarks or comparators. And that’s just not our read. We think it’s clear that one of the guidelines, they’ve indicated that although you may not have a reliance on a simple benchmark approach, we’re going to have to be looking at the facts and circumstances to maybe tailor benchmarks, or evaluate the specific situations of where we can demonstrate reasonable for the particular situation involved. So more tailoring more demonstration of the benchmarks that meet those facts and circumstances will be required. That means we’re going to have to have a view and a database to continue to look at those competitors. There also appears to be a strong signaling whether in value based arrangements or others for commercial reasonableness, so it’ll be even more important we have a clear documentation for business judgment factors. And even the most sophisticated new arrangements we think are going to be requiring more collaboration between law firms, valuation firms and our clients.

So for the new value based arrangements, again, full risks, partial risks or the unchain service allowance, there does appear to be this exception that we will not have to prove fair market value, at least for the first two for risk partial risk. And in the past, we were really constrained with regard to some of the metrics, one of the things that’s encouraging about the new stock regulations is an ability to look at further metrics, which might have actually taken into account cost of case or other elements for how we’re performing on that value based arrangement, we have to establish a baseline, we have to demonstrate, we’ve had achievement of performance above that baseline, and there’s going to be continuing interpretation of the market, what exactly needs those tests. So being able to demonstrate what I had in the arrangement, being able to document that I’ve approved on that arrangement will become critical, that’s likely going to mean we have to have new recording and reporting relationships. And so being able to demonstrate those physician behaviors that actually contribute to the ultimate results of payout we think will also become part of that commercial reasonable consideration. So the concern is, if I haven’t met these new guidelines, in the value based side, I won’t have demonstrated fair market value. So if I don’t have the exception, and I certainly may not have met commercial reasonableness. So well, the state of repurpose for the change in the regs was to remove some of those real or perceived barriers in the sprint to go from volume to value. It doesn’t mean that it’s a complete relaxation, of proving that we’ve met reasonableness. And then as we move forward, we think that there’s going to continue to be this need for tools to be able to track where’s the arrangement? Where am I performing on the arrangement? What exactly are the contributing business judgment factors that I’ve documented over a period of time? So I think that’s going to be one of the key aspects that we’ll see some changes on from both the legal side and the valuation side.

Ritu Cooper  22:04

So Ron, if you don’t mind, I want to ask you a question. So you talked about this collaboration with my counsel and SullivanCotter? For your commercial reasonableness report, do you mind sharing kind of what you envision that collaboration to look like,

Ron Vance  22:19

even before the stark regulations change, we had collaboration on some of these most sophisticated questions of how I met the actual business purpose we have at SullivanCotter, we had a definition for commercial reasonless in a testing approach that was similar to what very similar to what ultimately has been published. So the collaboration would involve interpretation of what was commercial, reasonable. And we’re going to need more interpretation, particularly in the value based arrangements. Do I need the checklist, as well as documentation? Have I really established that legitimate business purpose? And I think from the valuation side, a continuing period of the market, what is legitimate business just adjustment factor? And what do we see in terms of the ultimate arrangement to document that I’ve met those, those business judgment factors, and then other collaboration between the law firms and evaluation firms with the client? And potentially other tools is, am I actually being able to have a tool that’s going to document that I’ve met those guidelines, so that could be one opinion, collaborated between the different advisors, it could be separate opinions. We think that the singling from Stark is going to be more not less of that type of collaboration?

Ritu Cooper  23:24

No, I think that’s a great point. That idea of a tool, right? Maybe you use your document management system or your your Contract Lifecycle system, and you you answer those questions, you know, why are you entering into the arrangement? What’s the purpose for it? Is it to meet a regulatory requirement? Is it to me to access or need requirement? What are you doing? And I think that it sounds like you guys were already doing that. But But now, if we could have clients proactively think about that in advance, you’re right, it would certainly help. And if they asked us from a legal perspective of risk, then we also would be able to respond and react to what they’ve already put together. And then of course, you know, use use someone like a solvent cutter to then actually put the report together to talk about the trends that you’re seeing across all the clients that you guys service.

Ron Vance  24:17

So one of the things that’s a little concerning, we just pulled a pretty significant segment of our clients. And at least in the commercial, reasonable space, whether working with law firms or valuation firms, 50% of them were really not documenting what their actual commercial reasonableness factors were, they did not they don’t have a consistent process. If anything, it was done on a one off basis. And that I think the signaling from Stark is we’re gonna have to do better than that.

Ritu Cooper  24:42

Well, yeah. Especially with the the comment that they made, right, that I mentioned earlier, that if you’ve two agreements that look exactly the same, it doesn’t necessarily mean that they’re commercially reasonable. You have to say why you need this other one that’s duplicative. So so no, I think that that definitely makes sense. So I Got a maybe a softball question or I kind of know what you might say. But, you know, I’m curious to know what you think in terms of valuators, who feel that they shouldn’t be opining on commercial reasonableness. And, and they feel that some of the language from the regulations gave them this indication that valuation valuators should not be putting together commercial results reports

Ron Vance  25:25

will take the softball, obviously, we don’t have that interpretation. We think that the signaling is it’s pretty clear, they’ve said it’s separate are tests. Fair market value is one test, commercial regionals is another test. And there’s a lot of this evolving interpretation of the new stock regs that’s going to take input from the legal side from valuation side from the general market. But we think there is absolutely a role for the evaluators to play, particularly when they just said you’re going to need to be able to demonstrate more on a facts and circumstance bases the legitimacy, that you have a not only legitimate business purpose, but achieving it. So I think being able to weigh in as valuators have insight to the market, we can look at common terms, we can look at what we believe is ultimately an opinion about the reasonableness of those terms, as we’re seeing them played out whether they’re value based or not value based. So I’ve I actually believe that in many cases, we may see an actual expansion of these interpretation these regs to where fair market value may become less and less critical in the value base space completely. And then you’re going to be relying on commercial reasonable, and I think there’s gonna be third party evaluators, including valuation firms, law firms playing a heavy role and giving guidance to our clients.

Ritu Cooper  26:37

And for anyone in our audience that doesn’t isn’t familiar with the sentence that we’re talking about. There was a sentence in the guidance under start that said that the determination of commercial reasonableness is not one evaluation. And as Ron stated, and I totally agree, I don’t think they were saying that that means it’s not something that evaluator should do. It’s really to say that your fair market value opinion is separate and distinct from your commercial reasonableness depict opinion and report, it could still be the same document, but they are two different concepts that you need to opine on. And I think that now that the government has given those tools, I think there’s going to be a lot more scrutiny. They’re gonna say, hey, look, we’ve given you the map, we’ve told you what we expect. And now we want you to deliver on that. So I think you’re right, Ron, I mean, the, the documentation is going to be key for each and every arrangement. So I think, just like we said before, you won’t be able to say that this group of arrangements, they all are the same. So therefore, they’re all commercially reasonable. There, there will need to be a determination for each one, whether that’s done in house or outside using using evaluating.

Ron Vance  27:50

I think you said it well earlier to the negative side by side arguments for fair market value. I have two medical directorship opinions that under a traditional fair market value testing appear reasonable in terms of the amount to be paid. But I may not be able to document commercial reasons that I needed both of those agreements, or that the facts and circumstances even justify that I have the nature of the scope for the second agreement. So this this signaling from Stark is giving us some allowance, but it’s also implying that when commercial reasonableness is required, we’re going to have to do a better job of documenting what that purpose is, and then in the value base space achievement of that purpose.

Sara Low  28:30

I think that’s really a great segue to get the provider perspective. So thank you guys. That was a great discussion. So Darrell, turning to you, as corporate counsel of Oklahoma heart can do you mind talking to us a little bit about how you been practically applying some of the things that Ron had read to you have been talking about the necessity for documentation and the increased scrutiny.

Darrell Buck  28:58

As a provider and working in that space, I see the relaxations and flexibilities as an opportunity to better track our compliance with the stock in a case expectations. For example, on the signature and writing requirements, we know that at the outset, we prefer to have all the terms of a given relationship in one agreement. And that’s what we strive to do. But there may be times when we realize all the terms of the arrangement are not captured in one writing or one written document. So we keep track of the various documents were using to show and evidence that the arrangement is actually you know, compiled and set up in writing. With regard to the signature requirement, again, our preference is to have all the signatures present prior to the commencement of the arrangement, but there are times when that may not be possible. So we are tracking the date of the signatures to ensure that they are within that 90 day grace period. In terms of commercial reasonableness, we are in the process of creating a survey or some type of document that our Physician Contracting department will need to complete during the Contract Lifecycle process to demonstrate the legitimate business purpose of the right increments. And then last but not least, we realized that some of the evaluations that we had been getting are really only opining on the fair market value and really didn’t say too much about commercial reasonableness. Since we understand that there’s a need for both fair market value, and commercial reasonableness. For an arrangement to be compliant, we are building out our internal processes currently, to kind of track fair market value and commercial reason, in addition to determining when we need to go to an external consultant. opinion for us, these are some of the considerations we’re working through. And of course, they’re in the forefront of our minds as we continue to build our contract repository and Contract Lifecycle system departing within tracks.

Sara Low  30:41

Given their all that you’re you just mentioned, and open the door for this question for me, but you’re talking a little bit how you’re in the process of implementing in tracks, I think it’s I want to speak a little bit about how in tracks as a health care, focused Contract Lifecycle Management Solutions is really representative of and current with best practices in the industry. So one of our goals consistently is to work with our clients. And I think you’re probably seeing some of that during our implementation process now is to continue to mitigate risks, and then provide control to clients such as, like you, surrounding your contract processes as you’re implementing new things into your own processes. As the regs are evolving, so it’s we have built in areas and in our system to help our clients with that, to track some known risk mitigation necessities. And you know, they may vary by type of contract today. Like, for example, we’re really cognizant of on provider arrangements, providing you or our clients an area to track compensation terms and fair market value and commercial reasonableness, which is very much the topic of what we’re talking about today. But also in other types of arrangements. Things like square footage or type of lease when we’re thinking about real estate or other specific data points, and other other types of contracts. All of that being said, the point is, we do in tracks, the series itself is really an expert in the health care compliance space. However, we also understand that we have to continue to evolve as the as client needs evolve as the regs as the regs evolve. So we understand that we can’t be stagnant. So that being said, we work really closely with not just clients like Oklahoma heart, but also with our partners. So with Hall render, and with Sullivan Cotter, so that we’re collaboratively staying ahead of the curve. So that leads me to the next question. This is really directed towards hri. Two and Ron. And, and wanting to get some scenarios or instances where you’ve been recommending to your clients, or if you’re recommending anything differently to your clients, how they use their contract management systems or any other available tools that they may have at their disposal, to what they how they need to how they should be using those tools to continue to mitigate risk as some of the regs are changing. So can you tell us a little bit about some of those instances? Ritu, you want to start with you?

Ritu Cooper  33:17

Oh, sure, Sarah. So I think the first thing is to look at the relaxations for what they are. Right? I don’t think all of a sudden, we now need to change our best practices and say, Oh, no, we don’t need to have a writing for any of the arrangements that are under $5,000. So I think the first step is to look at your policies and procedures and say, Look, our policies and procedures make sense. They make business sense, they’re good best practices, the relaxation is really come in on the part where you’re trying to save an arrangement, because you realize that it’s fallen out of what you consider to be best practices. And now, I think there’s an opportunity to save more arrangements be that then don’t need to be disclosed to the government. But in terms of the tools that you’re talking about, I mean, I think folks really need to be looking at their contract management solution, and to see, are they optimizing the use of it? So Ron, and I, and even Gerald’s touched on this a bit, you know, we talked about commercial reasonableness and the documentation of commercial reasonableness. And now that we have a definition from the government, and, you know, Ron, in his shop for a long time, have already put together a checklist. Well, now let’s make that checklist real. Right. Ron said that 50% of the clients that they polled have not been even evaluating commercial reasonableness in advance. Now, the government’s made it made it very clear, right, we have a definition they have made it clear that it is a concept that is separate from fair market value, perhaps in that contract management solution. You have that checklist put together and tailor to the organization and you require the operations folks who wants to push this agreement forward to answer that questionnaire first, and have it then be sent to let’s say it gets sent to Darrel shop right in the legal department. And to look at that and say, Okay, does this seem sufficient enough to to ensure some kind of legitimate need? Maybe there’s a question on there that says, is there an identical contract like this? If yes, say why yours is, is still something that is serving a legitimate purpose. I think the other thing is also the data repository portion. You know, and I can speak for as far as I know that there’s like this data sheet that you have, that you put together for clients. That kind of gives you like a quick snapshot of the agreement? Well, maybe that you might say, you might ask questions like, Is this only one agreement? That’s memorializing the arrangement? Or are there contemporaneous documents? What are those documents? And maybe you even show the date of those documents to show whether it’s contemporaneous or not? Maybe you put in there a field for the signature, whether the signature was wet or electronic? Maybe you put in the date of the signature, and maybe there’s alarms that you put in? Because the agreement has started of, do we have signatures? And if we don’t, let’s make sure we don’t let those signatures go past the 90 days. So some of those technical type requirements. I think another one that’s a little bit tricky, is that fair market value and commercial reasonableness? Right. So let’s say we talk about the the initial part where we have that checklist. Well, what if it comes to a point where we say, we need to have an opinion put into place? So maybe we put something in there that shows whether we did that internally? So maybe the Physician Contracting department just did a look at the surveys and review the checklist answers? And they said, Oh, yeah, this feels good. But there could be a trigger that says, No, you know what? It can’t be internal, we need to go external. And then if you go external, Ron talked about this collaboration, maybe it’s then going to be under privilege, well, then, do we want to have that document saved in the repository? And the answer might be maybe not because we don’t want to waive privilege. So I think we might need to make sure that we’re thinking about that. But we’re really using the contract management solution as support and elevating that, that that data repository for something that can be more useful from a compliance perspective.

Sara Low  37:22

That’s great, too. Thank you. Those are all really great points. Ron, do you have anything to add from your perspective,

Ron Vance  37:28

I’m gonna do a little bit cheating of some of the same things. I agree with everything we to said about documentation, but bvo response, partly from evaluation, and partly from what we’re seeing with our clients from the business side, having the documentation is great, it’s going to help us with compliance, it’s certainly going to help us be much more organized, if we’re going to have to show a trail of what the original purposes were, and at least what we laid out if we have a, say value based arrangements for performance, but it’s continuing with what we’ve been doing. But in many cases, under the pressures our clients are facing for affordability, just making sure that it just makes good business rationale, they’re looking at this database, also as a way to ensure that I continue to make sure those original purposes still still make sense. The performance still make sense. If I do have inconsistencies? Do I have a good reason for it? Do I even need? And that’s not just a compliance issue that becomes do I need to have the spend? Do I need to have this particular arrangement? So I think it’s both business intelligence for compliance as well as really thinking through, do I have a legitimate purpose and do I want to continue to make this investment, these data systems are going to have to evolve though, particularly in this new exception. And to start with a value based space, what I document for my original, legitimate purpose in my original business judgment factors, we have to demonstrate that there’s still legitimate during renewals, and we have to be careful that we don’t just assume, Oh, they’re in the system, I had the original tracking and documentation, we’re gonna have to have a check to make sure that they make sense. I think the hardest thing will be the evolution of our tracking of actual performance. Part of the biggest interpretation of the new Stark regs is going to be did I not only meet these new definitions, these new guidelines, particularly under for risk and partial risks, but did I have documented sufficient performance to meet those purposes? And that’s going to be an interpretation from all the advisors involved, to get that list of performance accomplished, but dude, I document it. And I think the risk is quite high if I don’t document it, that I’m not going to meet the new exceptions. So a similar set of comments from YouTube that I think we’re going to have that pressure to not only keep up with, but keep evolving.

Sara Low  39:39

Right? Right. They’re really reinforcing a lot of what she said and adding some more color. And, again, I want to turn it back to Darold perspective. This is really important timing, as the URL is your organization’s working through implementing interacts again. So I’d love to hear your point of view and really specifically, we’re Waiting to what Ritu and Ron, were just talking about the importance of documentation on the front end, about commercial reasonableness. In particular, I’d love to hear a little bit about how your organization is being really mindful to put those controls in place right now.

Darrell Buck  40:15

Absolutely. And it’s it’s such a relevant point, because we’re going through that process currently with the new requirements for commercial reasonableness and determining how to show that within our documentation. In the past, I’ve had to call retail on several occasions surrounding commercial reason this and kind of asked her, What do you think about this and, and thankfully, she’s always given us great advice. So thank you for the Henry two. As I mentioned, we are in the process of creating a survey or some type of document that our Physician Contracting department will need to complete during the Contract Lifecycle process to demonstrate the legitimate business purpose of that arrangement, the response to that survey will be stored in our contracts database, and we’ll force our contracting department to kind of think about the reasoning behind each arrangement in advance. Up until recently, our contracting department tracked all these requirements manually, and utilize kind of an archaic repository. Now, I’ve never had a problem for them to find documentation for us or anything to that nature. So clearly, their system has been working for them. But we felt the need to reevaluate this process. We’ve been evolving our process, we elected to move to an electronic contract management system, this is where we felt interacts was going to be very helpful. And that marries up well, with what appears to be an increasing need for documentation coming from the new star can kick back regulations and other compliance needs that organization has. As we build our system, we intend to track the existence of both our fair market value and commercial reasonableness determinations within our interests database. But as Ricci mentioned earlier, we’re still working through whether these opinions will be available in the database, as some of them may be subject to attorney client privilege. For example, if the opinion is subject to an attorney client privilege, the document may not be in the repository. But we’re planning to include fields that would give us that information, we would want to have readily available such as the date of the FMV, the name of the consultant, the expiration of the opinion, or the name, it’s going to be awesome, though, because we need like whenever I need to recall a lease or go to a certain transaction, I can pull it up. I’ve got all the pieces right there at my fingertips, it’s easy to track, it’s easy to see. It’ll make compliance easier and much more transparent for me, and the rest of the legal team and the organization as a whole. Not to mention it will allow me to keep up with the demand of the organization’s as as it comes in and increases throughout these years. To the point that Ron and Rita made though we’re at the point they made about government scrutiny and and how it should be it is increasing, we felt that we need to be ready for that with the right tools in place. And thankfully, so far interest is really making that transition very smoothly.

Sara Low  42:55

Very, very glad to hear that. They’re also appreciate. I think it’s really valuable to everybody here specifically from the providers perspective today, too. So we’re at the point where we’ve got about 15 minutes left. So I want to make sure that we’ve got some time to answer a few questions from the audience. And we do have a couple. So we’re all stopped with the discussion just at this point, we may wrap back around at the end. And but let’s go ahead and start with a question, which I think is probably pretty prominent and a lot of minds of the audience members today. And it is I thought this was a topic relating to the relaxation of Stark regs, which we have talked a lot about some relaxation, what is it that I can really get away with?

Ritu Cooper  43:48

Did I catch the short end of the stick run? Well, I don’t know if I would look at us really getting away with I mean, I think this the shift from volume to value is huge. I mean, before the the exceptions that that Ron has mentioned, we really couldn’t pay for for these metric type services. And so I think that we now can pay physicians in a way that we couldn’t before. But with those relaxations I think comes a lot of responsibility. I mean, Ron touched on it, there’s going to need to be a lot of oversight. It’s a requirement under the VBE that there’ll be someone who is the compliance either as a compliance officer or someone who has chosen to be the oversight manager of the VBE. So to make sure that, as Ron was saying that you might have had the value based purpose at the outset of the arrangement, but do you still have it at the time of renewal or some point in between? Are the activities still similar to what you said they were going to be and have they stayed Within that, that range is the population you’re managing a value based population. And for those who are manned by now, I think lots of people have read the regs, you’ll see all those definitions, all those definitions, even though they’re so intertwined, they require you to have oversight. And I think, you know, Darrell was talking about with the commercial reasonableness from that Contract Lifecycle perspective. You might also want to put different things in there from that Contract Lifecycle, part portion as well. And so, I think, yes, we have some relaxations. Yes, there’s some things that we can get away with meaning we can start paying for things that we couldn’t pay for before. But I think that the government has provided some more guidance, and so there’s going to be higher expectations of everyone.

Ron Vance  45:51

I’ll try to that with retail. I think the signaling that we’ve got from these regs is definitely a desire to allow for more, particularly in the value base space, more legitimate reasons to pay physicians or others through these arrangements. And so I think we’ve got some great clarity, we can, quote, get away with new metrics that we didn’t have in the past, we’re not constrained necessarily with the vagaries around what we think we have to demonstrate for commercial reasons. But all of these are going to take a lot of interpretation. So what we can get away with is yet to be defined what I think the market signaling is, we are going to continue to see a march, particularly driven by CMS towards more and more opportunity for value based arrangements. So I’ll stay on that one. I think that whether it’s under the commercial, reasonable standards, or just making sure there’s an interpretation, I’ve met the guidelines, we’ve got some some federal arrangement opportunities, and we’re going to continue to see Partnering for their health systems, or physicians and others to really comply with these new Stark regs. So we can get away with that what is not signaling is that somehow I don’t have to demonstrate reasonableness. It’s not signaling, I don’t have to have documentation. If anything, I think it’s that pressure we talked about to actually prove more facts and circumstances analysis, and to be able to lean in and really do a good job of demonstrating that it’s been thoughtful, it’s been approached, and in particularly the arrangements for risk and partial risks that require improvement, that I’m actually tracking this. So you’re gonna have a lot more interpretation of, quote, what I can get away with. But I think it’s, I think it’s more of a direction to allow us to get out of some of the technical areas that we’re not really clear, or we’re in the way, and movement towards areas that are going to continue to take a lot more interpretation. So the playbook is not clear. But I think we’re gonna see a lot of the market respond and try to take advantage of these new opportunities.

Sara Low  47:51

Okay, Ron, we’ve got another question or two that have come in. So we’ll see if we can get to both of them in the remaining time, but one directly related to you are directed to you. My organization is attempting to partner with more physicians on current and emerging value based arrangements. In light of the new regs, what are new compensation plan opportunities and valuation considerations that we should take into account?

Ron Vance  48:19

Thank you. Like I said before, there’s going to be a lot of movement, we, it’s interesting, our data tells us that for all the noise, you would expect, there’s more current payment based on non productivity value based arrangements, quality service efficiency, but what we see as actual payouts is less than 10%. One of the prompters I think we’re going to see is whether we meet the new value based exceptions, or whether it’s just this movement of trying to have more opportunity to put emphasis on compensation that’s reliant upon those non productivity incentives, you’re gonna see more effort from our health systems from our physician organizations, other partners in that space. So I think that’s a, that’s a clear comp design change. And then all the compliance issues that relate to and I’m there we’re talking about. The other thing I think it’s being singled here is, again, I get back to the broken record, we’re going to have to do a better job of documenting that we’ve actually thought through legitimate purposes, that we’re seeing the behaviors that are expected, and particularly where I have performance improvement. What I think from a soul McCotter standpoint, we see signaling is the opportunity from a market to ensure that my arrangements now are very clear about what our basic performance requirements. And if I have dollars there at risk, under the value based or any other form of incentive component, I’m really clear about when I’ve met those metrics, so I want to be compliant. But I also want good business rationale that I’m going to see achievement and we expect bigger percentages of the comp plans will go in that direction. In some cases, we’ll move significantly away from just pure productivity into a lot more of that non productivity component. So we see that and Again, I think from a valuation standpoint, as I said earlier, I think the other signaling here is, if you’re trying to get into this space, you’re going to have to evaluate Do I have the right tools? Do I have the right ways to capture what I’m doing? You? There’s some pretty sophisticated analyses, in our opinion that would be required to make sure in really mature valuation models for value based arrangements have I have I looked at all the operational infrastructure costs? Am I allocated those appropriately before I start worrying about distributing the money that’s left over? So I think there’s there’s a lot of questions and interpretation about particularly under commercial reasonableness, have I done a sophisticated enough analysis? So we’ll start with the basics we’ve talked about and make sure that I’m baking in those bookends between core performance and standards for at risk component, and make sure I can document and track that well. So I think it’s going to be, I think, a little bit more of the same in some respects, and new opportunities and others. But we’ll have to come back into here and talk about how this is all progressed.

Sara Low  51:02

Thank you, Ron, and you’re in the spotlight. You’ve got we’ve got I think we’ve got about 10 more minutes, a little bit less than that. And I have another question for you. On the value based arrangements topic, what are the pros and cons of these VBA versus other types of arrangements that exists like ACOs, clinically integrated networks, etc?

Ron Vance  51:23

You think because the way they didn’t have a single structure for what could be that it can be basically the author of the value based arrangement? It’s not that it’s exclusive, that it would go through a health system or versus an ACL? So I don’t think that’s a I’ll challenge the premise of the question a little bit, I think, the organization that can use the value based arrangements not limited. What’s the exciting part is that I think we’ve gotten from the start regs, a signaling to us some new metrics, and a real opportunity to share in what those results are. And I think that’s, you know, we’ve had a lot of constraints under traditional gain share. In the past, we had certain OIG guidance with regard to restrictions on how much could be shared out of the pools. I think we’re trying to get to another stage with these stark rakes the advantages, if I meet the guidelines, then I’m able, if I can, specifically where I’m documenting commercial reasonableness, and I’m carefully tracking what is available for distribution, then I think we’ve gotten a new metrics, but we’ve got a path to prove that we have a legitimate reasonable performance for the sharing of the dollars. And I think that’s what CMS is trying to signal we want to move out of the traditional barriers and move into more of a sharing of those dollars across for our health systems for physicians and for others. So I don’t know that it’s an either or if your concern is the need for this interpretation of whether I met those exceptions, if I don’t meet those no exceptions, then I have to go back to what was remaining for fair market value and commercial reasonable standards. I hope that helps.

Ritu Cooper  52:53

Sir. Do you mind if I add to that? So so good, that that question. I think the pros are not having to meet fair market value and commercial reasonableness because they are onerous, and they’re hard. The con was the last statement that that Ron said, is that the requirements are so onerous for the VB EES though, and there are so many trigger points where you could slip up. And remember, we know that Stark is strict liability. Either you meet all of the elements of the exception, or you don’t. And so I think the con is going to be we still really don’t know exactly what everyone needs to do to meet it. We kind of have an idea. And, and I think that’s the part is it. It’s unchartered territory. So, but to me, the biggest pro is is not having that fair market value commercial results. But Sarah, do you see that? There’s I think there’s another question that kind of piggybacks with that. That’s another one. Yeah. Okay. Given that, that fair market, given that value based arrangements that fit the new exceptions, that one, I think is a good.

Sara Low  54:02

Okay, and we’ve got just a couple of minutes before we need to wrap so this will be a good timing for our last one. I just want to mention that if there’s questions we don’t get to, we’ll do our best to wrap back around to everyone that has asked them. So the question is, given that value based arrangements that fit the new exceptions, we’ll have no FMV requirement, can those rates be used as comparables for arrangements that do have FMB requirements? Or do those have to be excluded from FMB analysis?

Ritu Cooper  54:32

Not at run.

Ron Vance  54:38

This is challenging because, yes, we’re going to start capturing obviously, this whole new set of intelligence from market what’s being paid? I think it’s gonna speak more to commercial reasonableness. And I think it’s going to speak to fair market value. If I have the same kind of fact patterns. I’m going to try to look at what market intelligence is telling me but it’s, again, it’s going to be very fact specific. So the applicability of that data point is going to be challenged, is it going to be something that like a default and put into a traditional FMV? Test? I think it’s gonna be pretty challenged there. Because I’m not looking at a discrete point. And most of my the rest of my arrangements, I’m having to look at the totality of compensation. So unless I’ve got a clear carve out for that, that arrangement, I don’t think it’s going to be I can just export that data point, oh, that was paid under this, this arrangement that meant value based exceptions, therefore, it must be a legitimate value based benchmark for me to pay within a non meeting of the exceptions arrangement. So I think it’s gonna be challenged to just import it. I think it’s, again, I think this is going to be important for commercial reasonableness, to try a higher and higher understanding of if I see this fact pattern, I have this legitimate purposes, the set of arrangements, these judgment factors will apply. That’s where I think it’s going to have more applicability. He’s trying to capture that for demonstration of market competitors in other value based arrangements, but I don’t think it’s going to be as strict strictly applicable. That said, we certainly would look at it, we would certainly want to interpret what what that arrangement payout would look like for those that would be in traditional FMV test.

Ritu Cooper  56:19

But run it the key is going to be does the government buy into that? Right? I mean, right. I mean, right now, we’re always so constrained, with the surveys that are out there that are published. And yes, it’s nice now that they’ve finally admitted that you don’t have to stay within the 50th and 75th percentile. And that means strict fair market value that can fluctuate with extenuating circumstances. But I think that’s going to be the question, you know, are they going to look at those VBE ‘s that are out there and, and give weight to them?

Ron Vance  56:50

That’s a great comment. It’s a serious question that we got in. So I made I think we’re going to have more facts and circumstances and tailoring of benchmarks and getting more sophisticated. So maybe I have that data that we just talked about. And that can influence me to think about an adjustment to a benchmark, or an evaluation of how I select my benchmarks. Again, I’ll just say it again, we don’t think benchmarks are out the window. We just think that the looking for a simple benchmark answer is out the window. So this is a as Rita said, as Darrell said, we’re evolving here this this update, discussion isn’t acknowledgment. These are brand new regs are going to require a lot of interpretation. We don’t have to clear playbook. But I think we’re going to try to make our best arguments both on the FMV and the commercial reasonable side.

Ritu Cooper  57:36

Sara, do you see there’s one last one that popped up?

Sara Low  57:40

I did see that. I think we’re about out of time ready to unless we can get up? We think we can answer super quickly, which I think we can, if we can do a really brief answer. Do we think most of the new Stark regs are mainly geared towards employed physicians only or are they also inclusive of contracted?

Ritu Cooper  57:59

I think it’s I think it’s, you know, inclusive contracted? I mean, I think most of what we’re talking about is in that space. Really the employee position one that is really the only one that’s really only for employee position. So yeah, I think it’s definitely inclusive of contracted positions. Great.

Sara Low  58:19

Thank you for that. And thank you for all the questions that came in. I hope that everyone has found this conversation to be valuable. I think that there’s some opportunity to have continued ongoing, panelist discussions on these topics, and maybe a little bit later, we’ll be able to do that. But before I hand it over, back to Ashley an HLA, thank you very much, Ron. Thank you, Rita. And thank you Darrell for joining us in the panel discussion today. And thank you, everyone for inviting us.

Ritu Cooper  58:44

Thank you.


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Sarah Low headshot

Sara Low,
VP of Strategy & Operations, Ntracts

Ritu Kaur Cooper headshot

Ritu Kaur Cooper,
Attorney, Hall Render

Ron Vance headshot

Ron Vance,
Physician Affiliation & Needs Assessments Practice Leader, SullivanCotter

Darrell Buck headshot

Darrell Buck,
Corporate Counsel, Oklahoma Heart Hospital