Healthcare is a highly regulated industry, and as such, it is imperative for healthcare providers to make sure that their organizations pass government scrutiny.
A common business practice for healthcare providers is to form a Management Services Agreement (MSA) with a Management Service Organization (MSO), which will contractually provide management services to the healthcare provider(s). Typically, an MSO will employ non-physician staff to provide non-medical services such as management information systems services, accounting, bookkeeping, billing and collection services. As payment for these services, the MSO receives a management fee based upon a percentage of the healthcare providers’ net revenues.
MSOs allow healthcare providers to concentrate on delivering high-quality healthcare services while leaving the business support practices to others. However, there are many laws that MSOs and healthcare providers must stay compliant of or face severe consequences, primarily the Stark Law and Anti-Kickback Statute at the Federal Level. In addition, each state has its own laws that require compliance. Within these bodies of law, the government stipulates that contracted compensation in a professional service arrangement between referring parties, such as MSAs, be set at Fair Market Value.
The Stark Law and the Anti-Kickback Statute have civil and criminal liability for any violation. A violation of the Anti-Kickback Statute is subject to civil monetary penalties in the amount of $50,000 per violation plus damages of not more than three times the total amount of remuneration offered, without regard to whether a portion of the remuneration was offered for a lawful purpose. A violation of the Stark Law can result in many different penalties. For instance, the health services provided may not qualify for Medicare reimbursement, or any payment received will need to be refunded. Additionally, any person who “knows or should know” that a referral violates Stark will be liable for up to $15,000 civil money penalty per claim.
In order to establish a safe, compliant, profitable and effective MSO, one of the requirements is to determine whether the MSA demonstrates a fair market value agreement. The determination of the fair market value of an MSA is critical for compliance with existing laws and regulations.
Marshall & Stevens Healthcare Valuation professionals have the skills, expertise, and industry knowledge to assess if the fees within the MSA are at fair market value.
Our MSA Valuation team collaborates with our internal multi-disciplinary professionals to provide the value analyses and fresh independent opinions to fiduciaries, financing sources and investors for public and private company transactions.
Marshall & Stevens understand the highly regulated healthcare industry. We provide independent valuations of physician and dental practices, management services organizations (MSO’s) and agreements (MSA’s), clinics, hospitals, and assets.
The accelerated depreciation benefits (tax savings) from a cost segregation analysis on acquired real estate (sometimes just tenant improvements) can typically pay for a material percentage of the transaction costs and/or multiple financing payments.
Financial reporting compliance requires a determination of fair lease rate.
A large percentage of transactions include lease agreements that are not at current fair market value. This is more often the case when the owner of the business is also the owner of the real estate.
In the acquisition of a medical practice, for instance, the acquiror must not pay a higher than market rate to acquire or lease the property from the seller.
Each audit firm has their preference for the way certain financial instruments should be valued. We initiate a call with the audit team before performing the analyses to reduce the potential for delays and surprises.
We review financial projections against past performance, comparable company performance, and industry forecasts. We ask for support from our clients, as necessary, to make us comfortable with their projections and to provide an explanation in our valuation report.
Marshall & Stevens provides Fairness and Solvency Opinions, valuation analyses, investigative accounting, and expert witness services to assist public and private clients with their important transactions and litigation matters.
Here are a few client success stories from
