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Stark II Rules Regarding Determining Fair Market Value for Services from Consulting Physicians

Many providers have asked how they should go about determining fair market value. The Stark II rules make it clear that fees paid to referring physicians for their services will be considered to be at fair market value if an hourly payment is established using either of the following two methodologies:

  • The hourly rate is less than or equal to the average hourly rate for emergency room physicians in the relevant physician market, provided there are at least three hospitals providing emergency room services in the market.

    As a practical matter, this means that providers must obtain the rates at which at least three local hospitals pay physicians who staff their emergency rooms. This info must e documented in writing and maintained by providers to demonstrate compliance. Providers should update this information periodically. Updates to this information should be documented in writing, too.

  • If there are less than three hospitals that provide emergency room services in the geographic area where the provider operates or if providers choose to do so, they may pay physicians at an hourly rate that is determined by averaging the 50th percentile national compensation level for physicians with the same physician specialty or, if the specialty is not identified in the survey, for general practice in at least four of the following surveys and dividing by 2,000 hours. The surveys are:

    • Sullivan, Cotter and Associates, Inc: Physician Compensation and Productivity Survey;
    • Hay Group: Physicians Compensation Survey;
    • Hospital and Healthcare Compensation Services: Physician Salary Survey Report;
    • Medical Group Management Association: Physician Compensation and Productivity Survey;
    • ESC Watson Wyatt: Hospital and Health Care Management Compensation Report;
    • William M. Mercer: Integrated Health Networks Compensation Survey.

Please see the April 2004 issue of "Frontiers" for additional information on the Stark II Exception Regulations.