DETERMINING FAIR MARKET VALUE FOR SERVICES RENDERED BY A DESIGNATED COLLABORATING ORGANIZATION

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1 DETERMINING FAIR MARKET VALUE FOR SERVICES RENDERED BY A DESIGNATED COLLABORATING ORGANIZATION One f the mst imprtant features f any cmmercial cntract is the type f cnsideratin the payment that is made by the purchasing party t the selling party that it includes. This is particularly true in the healthcare sphere, an industry that is highly regulated with numerus legal rules addressing the exchange f mney r items f value between healthcare prviders. When a certified cmmunity behaviral health clinic (CCBHC) furnishes services thrugh a cntract with a designated cllabrating rganizatin (DCO), it is critical fr the CCBHC t dcument that the cnsideratin paid t the DCO reflects fair market value (FMV). This dcumentatin shuld be retained as part f the CCBHC s files. The DCO Cntract: A Prcurement f Clinical Services Accrding t the federal Substance Abuse and Mental Health Services Administratin (SAMHSA), when a CCBHC furnishes services under cntract with a DCO, the CCBHC is ultimately clinically respnsible fr all care prvided. 99 In additin, guidance issued by the Centers fr Medicare and Medicaid Services (CMS) makes clear that when a CCBHC prvides a demnstratin service t its cnsumer via a DCO, the CCBHC must bill Medicaid fr services. 100 CMS elabrated: The cst f services prvided n behalf f the CCBHC by DCOs will be reprted in the CCBHC cst reprt used t determine the CCBHC prspective payment system (PPS) payment rate. The CCBHC will typically pay the DCO a cntracted rate fr a defined service. 101 The relatinship between the CCBHC and DCO is, therefre, cntractual under which the CCBHC prcures services frm the DCO n behalf f CCBHC cnsumers. The CCBHC hlds itself as the prvider f the DCO-rendered services. The Federal Rules and Limitatins That Apply t DCO Cntract Payments Several sets f legal rules apply t the cnsideratin paid in a CCBHC/DCO cntracting relatinship. 99 RFA fr SAMHSA Planning Grants fr CCBHC, Appendix II Criteria fr the Demnstratin Prgram t Imprve Cmmunity Mental Health Centers and t Establish Certified Cmmunity Behaviral Health Clinics (RFA, Appendix II), Criterin 4.a CMS Q&A Set II 10/20/15, Questin CMS Q&A Set II 10/20/15, Questin 5. 67

2 1. Principles f Reasnable Cst The first set f legal rules is the principles f reasnable cst that apply t healthcare prviders reimbursed n a cst-related basis. Under the CCBHC demnstratin, states are required t reimburse CCBHCs under a prspective payment system (PPS). The PPS rate is a per-visit rate reflecting the ttal allwable per-visit csts f furnishing the entire bundle f CCBHC services in a base cst-reprting perid. Accrding t a CCBHC cst reprt template issued by CMS, each CCBHC (r ptential CCBHC seeking state certificatin) must include in its base perid cst reprt as cmpnents f the direct csts f furnishing the entire bundle f CCBHC services, (1) the actual r anticipated csts t the CCBHC f prcuring DCO services and (2) any ther actual r anticipated direct csts specifically related t services perfrmed by the DCO (fr example, when a CCBHC cntracts with a DCO t perfrm mbile crisis services, the DCO is cmpensated by the CCBHC fr mileage assciated with travel)). 102 Therefre, the csts that a CCBHC incurs paying DCOs t render CCBHC services are subject t the same principles f reasnable csts as any ther csts that the CCBHC dcuments n its cst reprt. CMS explains that in reprting csts, states must require the prviders t adhere t the principles f reasnable cst in bth 45 C.F.R. Part 75 (Department f Health and Human Services (HHS) Unifrm Administrative Requirements, Cst Principles and Audit Requirements fr HHS Awards) (the HHS Unifrm Guidance) and 42 C.F.R. Part 413 (the Medicare principles f reasnable cst). Accrding t the HHS Unifrm Guidance, where the csts f cntracted services are claimed as allwable, the prvider must dcument their reasnableness. A cst is reasnable if in its nature and amunt, it des nt exceed that which wuld be incurred by a prudent persn under the circumstances prevailing at the time the decisin was made t incur the cst. 103 In determining whether csts are reasnable, cnsideratin must be given t factrs including sund business practices, arm s-length bargaining and market prices fr cmparable gds and services fr the gegraphical area Certified Cmmunity Behaviral Health Clinic (CCBHC) Cst Reprt, Trial Balance and Anticipated Csts tabs, Sectin 1-B); CCBHC Cst Reprt Instructins, OMB # , CMS (#43) pp C.F.R C.F.R (b) and (c). The HHS Unifrm Guidance als includes an extensive set f prcurement standards relating t items purchased r services prcured using federal grant funds r prgram incme. Id This summary assumes that the 68

3 Accrding t the Medicare principles f reasnable cst, prviders f services are required t dcument n cst reprts the actual csts f prviding quality care hwever widely the actual csts may vary frm prvider t prvider and frm time t time fr the same prvider. 105 These csts are apprpriate and helpful in develping and maintaining the peratin f patient care facilities and activities. They are usually csts that are cmmn and accepted ccurrences in the field f the prvider's activity. 106 Bth sets f cst principles specifically designate certain types f unallwable csts, such as csts assciated with entertainment and lbbying. In additin, bth sets f cst principles place limitatins n the allwability f ther types f csts, such as csts incurred in cntracting with a related rganizatin (such as a subsidiary). The main gal f the reasnable cst principles is t ensure that a prvider includes csts n its cst reprt that are n higher than thse necessary and apprpriate t furnish care. Therefre, in including the payment made t a DCO n a cst reprt, it is imprtant that a CCBHC r ptential CCBHC ensure that the payment reflects n mre than the FMV f this type f services in the cmmunity. 2. The Anti-Kickback Statute A secnd applicable set f rules relating t exchange f mney under a DCO cntract is a federal law referred t as the Anti-Kickback Statute. This law prhibits any persns, including healthcare prviders, frm intentinally ffering, paying, sliciting r receiving anything f value (remuneratin) t induce r reward referrals invlving federal health care prgrams r t generate federal healthcare prgram business. 107 One purpse behind this law is t ensure that prviders d nt have an incentive t make medically unnecessary referrals, which in turn culd unnecessarily increase amunts billed t federal prgrams fr healthcare services. Unifrm Guidance prcurement standards d nt cntrl DCO cntracting, because the CCBHC demnstratin will nt invlve the receipt f federal grant funds by behaviral health prviders C.F.R (c)(3). 106 Id (b)(2) U.S.C. 1320a-7b(b). The term federal health care prgram is defined t include bth healthcare prgrams funded directly by the United States gvernment (such as Medicare), and state healthcare prgrams, including the Medicaid and Children s Health Insurance Prgrams (CHIP). Id. 1320a-7b(f). 69

4 Remuneratin exchanged between healthcare prviders can include discunts, since a discunt is an item f value t the recipient f the discunt. In the cntext f CCBHC/DCO cntracting, the Anti-Kickback Statute is relevant t the extent that if a CCBHC purchased services frm a DCO at a rate that reflects a reductin frm FMV, the discunt culd be interpreted as an inducement t the CCBHC t refer cnsumers t the DCO. 108 Dcumenting FMV is imprtant fr purpses f the CCBHC s cmpliance with the Anti- Kickback Statute, chiefly frm the perspective f ensuring that a CCBHC des nt pay the DCO a rate belw FMV. 109 Hw Is Fair Market Value Established? There is n ne measure fr fair market value. The cre cncept is that the cnsideratin under the cntract must crrespnd t the market prices in the area fr the gds being purchased. The key step in determining and dcumenting FMV is t identify an bjective indicatr f the value f the services. Quantifying FMV can be challenging when the CCBHC is cntracting fr a service that has nt histrically been cvered by private insurers r under the Medicare r Medicaid prgrams. The task can be yet mre challenging when the prvider frm which the services are purchased (the ptential DCO) has typically furnished the services n an uncmpensated basis in the past, using grant funds t supprt the uncmpensated csts f care. Belw are several examples f acceptable measures f FMV: Average hurly r annual salary csts fr clinicians furnishing service, based n published salary surveys applicable t the regin. Nte: This measure wuld be mst apprpriate fr services rendered by a single clinician. 108 While the cntracted service itself des nt cnstitute a referral service, ther services that a CCBHC cnsumer accesses at a DCO culd be interpreted as referral services. 109 The Anti-Kickback Statute includes numerus statutry and regulatry safe harbrs. See 42 U.S.C. 1320a-b(b)(3); 42 C.F.R The safe harbrs crrespnd t healthcare payment and business practices that, althugh they ptentially implicate the federal anti-kickback statute, are nt treated as ffenses under the statute. If a prvider in the cmmunity ffers t cntract with the CCBHC r ptential CCBHC t furnish CCBHC services n a discunted basis, and the CCBHC is interested in entering such an arrangement, the CCBHC shuld seek legal cunsel t determine whether the discunted arrangement wuld fall within a safe harbr. 70

5 Fees per unit f service accrding t Medicare r Medicaid fee schedules, r a percentage f thse fees. Where FMV is based n the Medicare Part B Physician Fee Schedule, the Gegraphic Practice Cst Index (GPCI) applicable t the regin shuld be taken int cnsideratin. Where n estimate f FMV fr the services is available based n external data, such as average salaries r ther payrs fees, infrmatin unique t the DCO culd be taken int cnsideratin, such as: The ptential DCO s average charges fr the type f services purchased (based n its schedule f charges). Nte: In general, the payment wuld be based n a percentage f charges, rather than the ptential CCBHC s full charges, since few payrs reimburse services as high as the prvider s charges. The ptential DCO s histrical csts f furnishing the services t be purchased. The CCBHC s basis fr quantifying FMV (fr example, salary surveys that the CCBHC lcated nline and used in negtiating its cntract rate fr purchasing clinical services frm the DCO) shuld be preserved in the CCBHC s prcurement files. 71

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