A chronic care management firm (CCM Firm) entering into services agreements with various physician practices (Practices) for the provision of general chronic care program management and patient monitoring was seeking a fair market value (FMV) opinion exploring the specialized and complex nature of the services for regulatory and compliance purposes.
Situation
The CCM Firm engaged VMG Health to produce an FMV analysis of general chronic care program management and patient monitoring services to be provided by the CCM Firm’s staff to various Practices. The staff assisted the Practices by providing program management and patient monitoring to the Practices’ patients with specific conditions, including obesity, fatty liver, metabolic syndrome-related diseases, or chronic kidney disease. The patient monitoring services included real–time support and onsite postimplementation follow–up and support services. The CCM Firm did not bill and collect from patients or payers for services rendered. As a result, the sole compensation for the chronic care management and patient monitoring services was a predetermined rate per Current Procedural Terminology (CPT®) associated with the services rendered.
Solution
VMG Health’s FMV analysis of the subject services consisted of a cost approach that relied on three methodologies: top-down physician compensation method, top-down professional RVU method, and a cost-plus method.
Under the top-down physician compensation method, VMG Health analyzed total anticipated revenue and total anticipated costs associated with the subject services. VMG Health estimated anticipated revenue using reimbursement data from the Medicare Physician Fee Schedule and total active patients represented by the CCM Firm. VMG Health took the anticipated revenue and subtracted out a billing and collection expense, the expense that the Practices will incur for compensating their physicians for work related to the subject services, and the CCM Firm’s cost of sales. VMG Health used the remaining revenue to determine what percentage of total revenue should be attributed to the services provided by the CCM Firm and applied the percentage to Medicare reimbursement to each CPT code.
Under the top-down professional RVU method, VMG Health analyzed total anticipated revenue, total anticipated costs, and the implied percentage of overall revenue attributed to professional RVU for the services. VMG Health once again took anticipated revenue and subtracted out a billing and collection expense, the estimated cost of sales, and the estimated revenue associated to professional RVU as this value is attributed to services provided by the Practices’ physicians. The remaining revenue amount was utilized to determine the CCM Firm’s profit as a percentage of total revenue, which was then applied to Medicare reimbursement for each CPT code.
Under the cost-plus method, VMG Health analyzed the CCM Firm’s estimated cost data and applied a markup based on industry data to determine the required amount of compensation to cover costs inclusive of a reasonable rate of return.
Success
VMG Health determined the FMV compensation for the CCM Firm’s provision of chronic care management and patient monitoring services by considering the specific details, facts, and circumstances of the arrangement. The CCM Firm then used the analysis for regulatory and compliance purposes and to support determining the compensation rates included in the services agreements with the Practices.
Contributor:
Haley Condon
