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Valuation of Physician Compensation and Other Business Arrangements
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Valuation of Physician Compensation and Other Business Arrangements

Physician compensation arrangements must comply with the fair market value and commercial reasonableness requirements of the Stark Law, the Anti-Kickback Statute, and IRS private inurement regulations, particularly given the increasing level of government enforcement. 

Veralon’s valuation team can provide the fair market value (FMV) compensation opinions you need to assure the compliance of a wide range of financial arrangements between physicians, hospitals, and other healthcare entities.

We have helped healthcare organizations and legal counsel to document and determine the fair market value of physician compensation and service arrangements, including:

  • Full or part-time employment
  • Medical directorships
  • Professional services agreements
  • Management and co-management agreements
  • On-call arrangements
  • Income guarantees
  • Subsidies/collections guarantees
  • Practice and other lease arrangements
  • Session and equipment leases

There is nothing cookie-cutter about the unique forms the arrangements between a health system or hospital and its physicians may take. Only those with extensive experience with the operations, players, and relationships involved can help you determine the ideal structure for each specific relationship. Veralon has the creativity and flexibility to value the full gamut of these business arrangements.

We have conducted our own market-specific compensation surveys for many years. If you are in the metropolitan Philadelphia, Atlanta, Chicago, Los Angeles, or New York markets, contact us to participate in our local physician compensation surveys.

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We detail the terms of physician compensation agreements, including such aspects as position descriptions; productivity and level of effort requirements; and quality of care measures. Where required, we translate administrative, supervisory, and teaching (AS&T) activities into fair and reasonable compensation ranges, or determine service levels and compensation fair market value for contracting hospital-based physician services.

Our approach is not formulaic; we determine FMV by evaluating the facts and circumstances of a proposed arrangement as well as the relevant market for the services being provided. Our innovative approaches to determining fair market value for physician compensation, accounting for unique market characteristics, keep your financial arrangements in compliance while meeting hospital goals and physician expectations.

Academic Medical Centers and Funds Flow

For decades, academic medical centers (AMCs) have used funds flow mechanisms to compensate medical schools for the services they provide. While the components of services are typically delineated in formal contracts, the payment and service levels may not be as formally outlined. In this context, Veralon assists clients to:

  • Delineate and quantify the services being provided by faculty physicians to AMCs
  • Quantify program support requirements in support of AMC mission and medical school resource requirements
  • Determine fair market value for defined levels of service provided by one institution or department for another
  • Develop and review funds flow arrangements for fair market value and commercial reasonableness