An article in an upcoming issue of hfm Magazine presents groundbreaking research and data analytics that challenge commonly held beliefs about survey data, physician compensation, and fair market value. Mark O. Dietrich (Mark O. Dietrich, CPA, PC) is the author of the peer-reviewed article, which will appear in the July issue of the journal of the Healthcare Financial Management Association (HFMA). He makes the case for the entire healthcare industry to rethink its approach to the FMV of physician pay.

What’s at stake: The government has been reaping hundreds of millions of dollars in fines from hospitals in lawsuits that have emerged out of the acquisition of medical practices. The thrust of the cases is the measurement of the FMV of physician compensation, which has typically been based on survey data. But this practice is often flawed because it is based on several false premises, including that the surveys have statistical significance for the 90% or so of physicians not included in the surveys. Also, survey data can be inconsistent with local-market conditions. The misuse of survey data leads to losses in acquired physician practices, which is the key quantitative analysis the government uses for the test for commercial reasonableness. Significant losses lead the government to believe that hospitals are paying for referrals, a violation of the Stark Law that triggers the big fines.

In the new article, Dietrich advises that the use of surveys should be limited to rough benchmarking and the focus should rather be on localized relative value unit (RVU) data that reflect actual local-market conditions. Dietrich discusses this issue and provides a complete alternative to the reliance on surveys to determine fair market value in the BVR/AHLA Guide to Valuing Physician Compensation and Healthcare Service Arrangements, which he co-wrote with Tim Smith (Ankura).