FMV (Fair Market Valuation) Heads Up

By: Jeff Cohen

FMVs are at the heart of healthcare regulatory compliance when money or anything of value changes hands in a healthcare business setting.  Why?  Two reasons:

  1. Healthcare laws (Stark, the Anti Kickback Statute and the Patient Brokering Act) all target money changing hands in the healthcare business space; and
  2. There are clear exemptions and exceptions that have as an essential ingredient that the compensation (or pricing) is consistent with “fair market value.”

How it Goes—A Six Part Process

Locking down an externally performed FMV (part of the “gold standard” in regulatory compliance) is a process.  Here’s what it should look like:

Step 1.  The healthcare business person or his/her advisors (often accountants) find someone who specializes in performing FMVs for the specific matter (e.g. compensation, price of a business to be acquired);

Step 2.  The LAWYER for the healthcare business is immediately involved in the process BEFORE the FMV firm is engaged;

Step 3.  The LAWYER engages the FMV firm on behalf of the healthcare business client;

Step 4.  The parties (including the lawyer) get on the phone or in a meeting with the “FMV guy” and has a very extensive conversation re the project;

Step 5.  Once the FMV process done, a DRAFT FMV study is prepared and discussed interactively with the healthcare business and the lawyer;

Step 6.  Once finalized, an execution copy is prepared and provided to the lawyer.Continue reading