Why is a Fair Market Value Defensibility Analysis Different from a FMV Review under the Stark Law?

Episode Date: January 26, 2022

In this episode of Stark Integrity, host Bob Wade (“Captain Integrity”) focuses on a critical—but often underappreciated—aspect of Stark Law compliance: fair market value (FMV) defensibility.

It’s one thing to determine fair market value. It’s another to defend it.

Beyond the Number

As this episode explains, Stark compliance isn’t just about arriving at a compensation figure that appears reasonable. The real question is: can you support and defend that number if it’s challenged?

Regulators, auditors, and enforcement agencies don’t simply accept conclusions—they examine the process, assumptions, and documentation behind them.

What Is Defensibility?

FMV defensibility refers to the ability to clearly articulate and support how compensation was determined. This includes:

• The data sources used (e.g., compensation surveys)
• The methodology applied
• Any adjustments or assumptions made
• The rationale connecting the data to the final compensation figure

If an organization cannot explain “how we got here,” the FMV conclusion may not hold up under scrutiny.

Why It Matters

This episode reinforces that FMV is often a focal point in Stark enforcement actions. Even where organizations believe compensation is appropriate, problems arise when:

• Documentation is incomplete or inconsistent
• Valuation methods are unclear or unsupported
• Adjustments are made without explanation

In these cases, the issue isn’t just the number—it’s the lack of defensible support behind it.

Common Risk Areas

Bob highlights several situations where defensibility becomes critical:

Overreliance on Surveys

Using compensation surveys without context or proper analysis can lead to unsupported conclusions.

Unsupported Adjustments

Making upward or downward adjustments to benchmark data without clear justification creates vulnerability.

Inconsistent Methodology

Applying different valuation approaches to similar arrangements can raise red flags during audits.

Lack of Contemporaneous Documentation

Trying to recreate the analysis after the fact is far less effective than documenting decisions at the time they are made.

Building a Defensible FMV Analysis

This episode emphasizes that defensibility requires a disciplined and consistent approach. Organizations should:

• Use reliable and relevant data sources
• Apply sound and consistent valuation methodologies
• Document assumptions and decision-making processes
• Ensure alignment with commercial reasonableness
• Regularly review and update analyses as circumstances change

Defensibility is not a one-time exercise—it is an ongoing compliance effort.

Practical Takeaways

The key takeaway is straightforward: if you can’t defend it, you shouldn’t rely on it.

Healthcare organizations should treat FMV analyses as more than a compliance formality. They are essential tools for demonstrating that arrangements are structured appropriately and not influenced by referrals.

Final Thoughts

This episode highlights that fair market value is only as strong as the analysis supporting it. In today’s regulatory environment, documentation, methodology, and consistency are just as important as the final number.

For compliance professionals and healthcare leaders, focusing on defensibility strengthens not only individual arrangements, but the overall integrity of the organization’s compliance program.

Click here to listen to this Stark Integrity Podcast Episode:
https://podcasts.apple.com/us/podcast/why-is-a-fair-market-value-defensibility-analysis/id1588939373?i=1000548298825&l=fr-FR