Question

What do you see as the pros and cons of obtaining fair market value analyses on the compensation paid to physicians, especially when the market rates are benchmarked against national standards? How could this information be used in negotiating rates with physicians?

Answer 1

Ans) Fair market value has no actual definition but the IRS states that it’s defined as “the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. Providers are being challenged more to createthat physician relationships are at fair market value. Physician competition arrangements must adhere with the fair market value and commercial reasonableness requirements of the Stark Law, Anti-Kickback Statute, and IRS private inurement regulations, especially given the growing levelof government enforcement.

Pros:

Sharedshavings- under shared savings or gainsharing arrangements, which is a hospital shares with physician’s savings from cost-savings initiatives, allocation of savings needs to be reasonable and consistent with current market arrangements.

Cons:

Needs Precedence:
To establish market value, you need some sort of historical pricing data to compare with. New products, or products that are one of a kind, often do not have a market value. This can be one of the most discouraging things about market value. People who find unique collectibles feel that they have found something of high value, but they may be forced to sell at a lower price because there is no precedence for market value.

Fluctuations:
Market value can rise or drop quickly depending on the demand for the product. A rise in demand can temporarily create a rise in the market value, so long as the supply is not increased. Once supply has been raised to meet demand, the market value of the product will drop. Business owners need to be aware of the fluctuations in market value and know how to manipulate supply and demand.

- Because the field of medicine deals with circumstances that can determine life or death, it's important that administrators learn and train employees in effective negotiation skills. Effective health care administrators learn collaboration skills when faced with challenges.