Selecting a Valuation Firm – Identifying a Good Cultural Fit

Compliance is a non-negotiable priority for hospitals and hospital systems, and the valuation firm you choose plays a big role. Your organization should be working with a valuation firm that is compatible with your company culture. In order to ensure that you are getting the quality opinions you require, you should be working with experts who understand your organization’s unique needs. But what does “cultural fit” mean, in this case? Here are some MD Ranger guidelines for considering whether the valuation firm you are considering will make for a reliable, cooperative, and honest compliance sidekick.

First, consider communication style. Do you feel like you are on the same page when discussing your organization’s goals? Are they honest and open with you about what they can offer? Do they use a lot of jargon, or are they clear and concise when discussing their work? Think over your past conversations. Did you get the sense that your expectations were aligned, or did you doubt whether they understood your needs? If you have any insecurities here, dig deeper. Don’t get caught up in a situation in which your priorities are not being heard or respected. Communication style can tell you a lot about the potential of a relationship; notably, is your organization in attentive and trustworthy hands? Your compliance program needs to be boosted and supported by the valuation experts with which you work.

Work quality standards are extremely important. Do the firms you are considering meet your expectations? Do not settle here. In order to appropriately analyze, negotiate, and document FMV for physician agreements, you need high quality work done on the valuation side.

Are your philosophies aligned? It might sound unrelated to physician contract compliance, but it isn’t. It boils down to the same question of values that all organizations consider. When one organization looks to work with another, the strength of the relationship depends on a similar philosophical approach to the work at hand. During a valuation firm’s pitch to your organization, listen for their “why.” Why are they determined to serve you? What principles drive them? It’s not hard to tell when someone performs their work with integrity. Choose that person.

Finally, find out if the valuation experts you’re talking to have walked in your shoes. Although not a reason to cross someone off your list, it’s a bonus when someone has had similar experience. They will likely show more empathy for the challenges you face and be more attentive and communicative about their work for you.

If you have further questions, email us at This email address is being protected from spambots. You need JavaScript enabled to view it. to find out how we can help. We look forward to hearing from you.

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CIAs: What You Need to Know

When a hospital or other healthcare entity violates the False Claims Act, there are consequences. Often these include entering into a Corporate Integrity Agreement (CIA) with the U.S. Office of the Inspector General (OIG). The purpose of a CIA is to strengthen an organization’s compliance program with policies and procedures approved by the government. The OIG must have confidence that the organization is taking steps to prevent new violations.

What is a Corporate Integrity Agreement?

A CIA is a tool used by the OIG to address violations at healthcare organizations through policies and procedures designed to enforce compliance with regulations. A CIA is usually coupled with a civil settlement between the provider and the government to avoid exclusion from federal health programs.

Who is subject to a CIA?

CIAs have been issued for all types of healthcare entities ranging from hospitals and health systems to physician practice groups, individual physicians, post-acute facilities, dialysis companies, pharmaceutical manufacturers, durable medical equipment suppliers, and many more.

Historically, the OIG always issued a CIA when violations occurred. However, in recent cases where the OIG is confident that the violation(s) will not reoccur, a CIA has not been put into place. Because the OIG can assess a violators’ capacity to change noncompliant behaviors, they can identify organizations who are low risk for repeat violations. To determine whether or not an organization should enter into a CIA, the OIG looks at many factors, including how long ago the violations occurred, whether there was a pattern of misconduct, the compliance procedures in place, and other elements. If an organization self discloses their violations, the OIG may not require a CIA because self disclosure is evidence of an effective compliance program.

What’s in a CIA?

CIAs generally focus on one or more categories of violations: claims review, focus arrangements, quality of care, and covered functions review. CIAs are fairly uniform; however, most include specific requirements tailored to the violation(s) that led to the settlement. CIAs typically run 3-5 years.

All CIAs require:

  • Establishment of a compliance officer and compliance committee
  • Imposition of compliance duties for the Board of Directors
  • Adoption of a code of conduct and applicable policies and procedures
  • Training and education on the code of conduct, policies, and procedures within the first 90 to 120 days as well as annually thereafter
  • Internal reviews in addition to reviews by an Independent Review Organization (IRO) that organizations hire as a third party opinion
  • Screening for ineligible persons, i.e. those excluded from federal health programs and those who have convictions that entail mandatory exclusion
  • Reporting to the OIG of ongoing investigations or legal proceedings, any alleged fraudulent behavior, repayment of overpayments in accordance with the ACA, as well as any other compliance breach or any change in the location or structure of the organization

The OIG publishes all of the CIAs it issues on its website.

Why would an organization accept a CIA?

Typically, an organization enters into a CIA in order to continue participation in Medicare and Medicaid. The OIG will only offer a CIA as an alternative to exclusion if the situation merits it.

In “An Open Letter to Health Care Providers” written in November 2001, the OIG sought to clarify how they determine if a CIA is a good alternative to exclusion. They outlined eight factors:

  1. Whether the provider self-discloses the alleged misconduct
  2. The amount of monetary damage to Federal programs
  3. Whether the case involves a merger or acquisition where the buying entity is liable for the selling entity’s past and future liabilities
  4. Whether the provider is still participating in Federal health care programs or whether they are still in the line of business that gave rise to the fraudulent conduct
  5. Whether the alleged conduct is capable of repetition
  6. The age of the conduct
  7. Whether the provider has an effective compliance program and would agree to limited compliance or integrity measures, and if they would agree to annually certify such compliance to the OIG
  8. Other circumstances, as appropriate. 1

Who enforces CIAs?

Once an organization is under a CIA, the OIG assigns a Monitor. The Monitor has a collaborative role, and works primarily with the organization’s Compliance Officer. The team ensures the compliance program is preventing violations by identifying problems and correcting them. Even organizations under CIAs have compliance challenges; in fact, the OIG has been suspicious if they don’t hear of problems in organizations under a CIA.

What happens if an organization fails to comply with a CIA?

Failure to meet CIA obligations can result in a fine, often of $2,500 per day after the missed deadline outlined in the CIA. While it is rare, a “material breach” of the CIA can lead to a five-year exclusion from federal programs. CIAs define a “material breach” as:

  • Repeated or flagrant violations of the CIA’s requirements
  • Failing to report a reportable event, take corrective action, and make the appropriate refunds
  • Failing to engage and use the required Independent Review Organization or Monitor
  • Failing to meet a deadline or request for information from the OIG 

1An Open Letter to Health Care Providers written in November 2001: https://oig.hhs.gov/fraud/docs/openletters/openletter111901.htm

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Read This Before Your Next Physician Contract Negotiation

Negotiations with physicians can be difficult no matter how positive the relationship between the physician and the organization may be. Conversations about compensation take time and effort to plan and do not always go as anticipated. By preparing carefully for these discussions, you can take strides to achieve the best possible outcome for all parties.

Review all prior and existing agreements

Start by reviewing the contract that is up for negotiation as well as prior contracts with the group or individual. If it is a current agreement that is expiring, review the key terms and scope of services. If it is a new arrangement, familiarize yourself with what has already been offered to the provider and the proposed scope of services. Check and see if additional contracts exist for the physician or group in question. Multiple contracts with the same physician or group could result in overpayment that is sometimes referred to as “stacking”. It may be reasonable to have multiple agreements with the same physician for different services, but you should keep careful documentation of total payments to ensure that the aggregate amount does not exceed market rate compensation for an individual. For example, if an oncologist with a clinical practice is paid to be the medical director of an infusion service as well as the chief of staff and the director of the cancer center and the aggregate hospital payments exceeds the compensation for a full time oncologist, there could be an issue if her clinical revenues reflect a full time practice as well.

Establish goals and objectives

Before beginning a contract negotiation, determine the ideal outcome of the contract in terms of payment and work expectations. Know when you can compromise and when you can’t before any talks with the other party begin. Strategize with others to determine what the physician or group’s goals are; set realistic expectations for the arrangement. Are the expected number of hours realistic? Does the physician have the leadership skills needed to be effective?

Research the Market

Always perform due diligence before starting negotiations. Commercial reasonableness is an important aspect of physician contracting, especially for a new position. Consider if the position is truly necessary for your organization or results in measurable quality improvement, and that it makes good business sense independent of any referrals by the physician or group.

Know reasonable payment rates for the specialty and the service in question. High quality market data is a great resource. While you should be familiar with the entire range, we recommend targeting rates between the 25th and 75th percentiles of market data. It is important to remember that statistically someone must be paid above the 90th percentile and someone must be below the 25th – and there should be reasons and documentation for those payment levels. You should enter the negotiation with quantitative evidence of the range you can support, as well as how your institution and the particular physician(s) compare to the ‘typical’ provider. Factors such as hospital size and trauma status can make a difference in the appropriate payment rate, as can national reputation and the credentials of a particular physician.

Consider alternatives

In many negotiations, you will encounter pushback. Think about alternative payment options and how you can compromise. Prepare several alternatives for obtaining and paying for the service that satisfy your goals and objectives. Discussing alternative approaches can often yield savings or more efficient ways of achieving the same objectives, and provides an opportunity to discuss each party’s objectives and challenges.

Document compliance

Documenting compliance is essential for your compliance program; however, fair market value rate documentation can also facilitate negotiations. Demonstrating that you take compliance seriously and reminding physicians that they too can be investigated and fined for Stark and Anti-Kickback violations, can earn the respect of your physicians, administration, and board.

Review your organization’s contracting and compliance guidelines

If your organization has written compliance guidelines for payment rates, review them so that both you and the physicians with whom you negotiate know the ground rules. If your organization doesn’t have written guidelines, consider creating them. Many organizations don’t pay above the 50th or 75th percentile without a rigorous approval process. Having guidelines creates an objective standard of payment and limits feelings of favoritism among physicians.

Gather all documents you may need in one place

Depending on the size of your organization or the time of year, you may be preparing for many contract negotiations. By keeping all the documentation and notes for each contract together, you can stay organized and reduce confusion and unnecessary missteps. Since many of these documents also support compliance, keeping them centralized can streamline the compliance process after the contract is signed.

Have a draft job description and contract prepared

Creating or reviewing the job expectations internally with staff who will be involved in the program helps to define expectations and parameters for effective leadership. It helps the physician to understand what the position entails and can preclude conflicts during negotiations or later when time records are reviewed.

If you would like to learn more about physician contracting best practices, we have many more resources here.

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Commercial Reasonableness: Testing and Documentation

Even though she isn’t as popular, FMV’s little sister commercial reasonableness is a crucial consideration when determining payment for a physician service. Many recent settlements for Stark and Anti-Kickback violations stem from failure to meet commercial reasonableness standards or from lack of documentation of an agreement’s commercial reasonableness.

What does "commercially reasonable" mean?

The Department of Health and Human services has defined the term as "a sensible, prudent business agreement, from the perspective of the particular parties involved, even in the absence of any potential referrals"1. In the preamble to the Stark interim final rule, Phase II, CMS noted that an arrangement:

will be considered 'commercially reasonable' in the absence of referrals if the arrangement would make commercial sense if entered into by a reasonable entity of similar type and size and a reasonable physician (or family member or group practice) of similar scope and specialty, even if there were no potential DHS [Designated Health Services] referrals.2

This second definition, which is most frequently cited, implies a need to look to the market to identify other entities with similar arrangements, not just the internal needs of the negotiating parties.

Testing for Commercial Reasonableness

Determining commercial reasonableness for a physician service involves asking a series of questions about a payment for the service under consideration.

Business considerations

Determine whether the position makes sense from a business perspective, without consideration of the referrals the particular physician might have to your organization. If the position doesn’t make good business sense for the organization, it probably isn’t commercially reasonable. If instead the position relates to the number or type of referrals this physician or her affiliates make to your organization or its affiliates, it is time to rethink the arrangement.

Ask yourself:

  • Is the service to be provided essential to the operation of your healthcare organization?
  • Is the arrangement reasonably necessary for the healthcare organization from a business or quality perspective?
  • What are the specific benefits to be derived from the position? 

Facility considerations

Not all services are needed at every healthcare facility. A critical access hospital probably doesn’t need a director of bariatric surgery. Step back and think about whether the proposed position is justifiable, necessary, and appropriate for your specific facility.

Ask yourself:

  • Does the volume of patients justify the service?
  • Does the proposed position duplicate other services covered by other physicians or administrative staff under contract? 

Provider considerations

Consider the candidate and be sure the particular physician meets the requirements and is the best fit for the proposed position.

Ask yourself:

  • Do the services covered by the arrangement require a physician or could a midlevel provider or administrator perform the services?
  • Does the specialty of the physician matter for performing the services?
  • Is the amount of time outlined for the services both reasonable for providing the services and reasonable to demand of the physician within the context of her clinical practice? 

Payment considerations

Determining whether or not a service warrants payment is the most important aspect of determining commercial reasonableness. Ensuring that the payment rate is appropriate is also key.

Ask yourself:

  • Does your organization’s market necessitate paying a physician for the position?
  • Are there less costly or more creative payment solutions that may serve be more appropriate for your organization? 

MD Ranger’s percent paying statistic helps organizations determine how often other facilities pay for specific positions.

Percent of MD Ranger Subscribers Who Report Paying for Service
General Surgery Call Coverage
61%
Pathology/Clinical Lab Medical Direction
49%
General Cardiology Call Coverage
35%
Family Practice Medical Direction
12%
Plastic Surgery Medical Direction
7%
Podiatry Call Coverage
4%

Documenting Commercial Reasonableness

Documentation of the steps you take to determine commercial reasonableness is important. Carefully document conversations and research/data surrounding the decision. Keep supporting documentation with the contract. In the event that you are audited, you will need to demonstrate that commercial reasonableness was carefully considered along with FMV. Types of documentation that have helped in commercial reasonableness audits include:

  • Information and statistics about the hospital and the surrounding community that indicate the appropriateness of the position under consideration
  • Benchmarks from published market data or other surveys
  • Analytical reports that document difficulties in meeting hospital obligations or quality initiatives that cannot be met without the proposed resources
  • Meeting minutes
  • Email threads
  • Memos between negotiating parties

Commercial reasonableness is just as important as fair market value when documenting contracts for compliance. Although a ‘gut check’ is a good place to start, documentation of market rates and organization needs is key to a strong compliance program. Commercial reasonableness doesn't have to be a mystery; using tools like MD Ranger's percent paying tables and carefully analyzing physician payments will help solve even the most difficult situations.


1Medicare and Medicaid Programs; Physicians' Referrals to Health Care Entities with Which They Have Financial Relationships 63 FR 1700 (January 9, 1998)
269 FR 16093 (Mar. 26, 2004)

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