Practical Advice for Your Clients on Common FMV Issues

Published by American Health Lawyers Association

To capitalize on the flood of alignment opportunities available with physicians, hospital executives must work closely with legal counsel to structure compliant physician service agreements (PSAs) that can withstand regulatory scrutiny. Whether a direct employment or contracting arrangement, one compliance topic presents itself in nearly every PSA: fair market value (FMV) compensation. The determination of FMV compensation entails a rigorous and analytical process. Without proper planning, communication, and support, this process can create frustration for both the hospital and the physician.

To complicate matters, recent cases, such as the Tuomey case, caution hospitals to avoid unsupportable valuations and to carefully evaluate the methodology of the valuation expert (1). Undoubtedly, hospitals have and will continue to rely on legal counsel to assist in evaluating the opinions of independent appraisers. This purpose of this article is to provide legal counsel practical advice on avoiding common pitfalls of the valuation process and assessing valuation methodologies.

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