ROWAN UNIVERSITY POLICY

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Revised Fair Market Valuation

Subject: Office of Compliance & Corporate Integrity (OCCI)

Policy No: OCCI: 2013: C06

Applies: RowanSOM

Issuing Authority: Rowan President & RowanSOM Dean

Responsible Authority: RowanSOM Chief Compliance & Privacy Officer

Adopted: 12/15/2009.
Reviewed: 9/07/2011.
Amended: 7/01/2013.
Last Reviewed: 02/01/2015

I.   PURPOSE

To provide guidance as to Rowan University School of Medicine’s (RowanSOM) process of determining whether a transaction with a Potential Referral Source (as defined below) is made at fair market value in order to comply with Stark Law (42 U.S.C. § 1395nn ) and the Anti-kickback Statute (42 U.S.C. § 1320(a)-7b(b)).

II.  ACCOUNTABILITY

Under the direction of the President, the Dean, General Counsel, and Chief Compliance & Privacy Officer are to ensure compliance with this policy. The deans and chief executive officers shall implement this policy.

III. APPLICABILITY

This policy applies to all RowanSOM operating units, including but not limited to hospitals, physician practices and outpatient centers.

IV. DEFINITIONS

A. Referral Source - an actual source of health care business or referrals to RowanSOM, or between RowanSOM and a physician (or a physician’s immediate family member (as defined at 42 CFR. 411.351) - include, but are not limited to, another Physician, hospitals, long-term acute care centers, nursing homes, clinics, physician group practices, therapists and other individuals and entities who are in a position to influence or make referrals.

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E. Potential Referral Sources - physicians, hospitals, long-term acute care centers, nursing homes, clinics, physician group practices, therapists and other individuals and entities who are in a position to influence referrals.

V. REFERENCES

A. Professional Services Agreements

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G. Voluntary Compliance Plan Effective September 26, 2014

VI. POLICY

Any transaction with an Actual or Potential Referral Source is to be at fair market value. Whenever RowanSOM requires a fair market valuation in order to comply with Federal or State laws and regulations or with its own policies and procedures, no conflict of interest, such as the ability of one party to refer patients or other business to the other, may affect the terms of the transaction or the valuation.

VII. PROCEDURE

Prior to executing any transaction with an Actual or Potential Referral Source, the relevant business unit must determine and secure appropriate supporting documentation that any compensation given or received in the transaction is at fair market value. At a minimum, the following considerations must be included in any fair market value analysis.

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A. Determination of the compensation under fair market principles will begin with a range of benchmark payments, as described below. The appropriate value to select from within the range for a given transaction depends on individual factors. For example, a physician with a considerable experience in an area or a historically documented high level of personal productivity could receive compensation on the high end of the range. Similarly, where office space to be leased is in below standard condition for the market, the lease rate charged may be in the low end of the range.

1. Comprehensive. Any fair market valuation must specifically list what is included in the valuation. Items and services included in the valuation must match those provided for in the agreement and must also match those items and services actually provided to the referral source.
2. Consideration of Facts and Circumstances. All valuations should provide a thorough analysis of the facts and circumstances of the underlying transaction in comparison to industry benchmark data (i.e., MGMA, AAMC, Sullivan Cotter). In certain circumstances, comparing payments against objective benchmark measures or industry practices does not guarantee that a payment meets the standard of fair market value.

B. Rental or Lease of Space or Equipment

1. Limitations. Any rental arrangements between a hospital and physician or otherwise between referral sources may be used as data points in calculating fair market rent, but should not be used exclusively. Rental payments may reflect the value of any similar commercial property with improvements or amenities of a similar value, regardless of why the property was improved.
2. Calculating FMV for a Lease of Space. The fair market value in a lease for space will equal the product of the number of square feet in the space leased and the market value of such property for general commercial purposes. The leased space should include exclusive use space, plus allocated shared space, plus allocated building common space, adjusted for time utilized if used less than full time. Fair market value comparisons should further consider the condition of the space, amenities and services, including outfitted with cabinetry and lighting, furniture, utilities of the occupied and common space, housekeeping, maintenance and hazardous waste disposal, property and liability insurance, telecommunication and internet accessibility. In addition, landlord’s overhead and margin factors may be considered.
3. Calculating FMV for a Lease of Equipment. Generally, many of the above considerations regarding a lease of space apply to a lease of equipment. However, in the case of equipment, due to the nature of medical equipment, sometimes all of the comparables or market values of a transaction type involve entities in a position to refer or generate business to each other. In such cases, one method of calculating fair market value would be to add factors for equipment maintenance and repair, overhead and margin of comparable medical equipment.

C. Personal Service Agreements and Employment Agreements 

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