The Role of Valuators in Compliance and Enhancing Healthcare Business Best Practices

In today’s complex business environment, the role of valuators extends beyond mere number-crunching. Valuators are pivotal in ensuring compliance and enhancing business best practices, contributing to an organization’s overall health and sustainability.

Ensure Compliance

Valuators play a critical role in ensuring that businesses adhere to regulatory requirements. This involves:

• Accurate Financial Reporting: Valuators ensure that financial statements reflect the true value of assets and liabilities, which is essential for compliance with accounting standards such as GAAP or IFRS.
• Regulatory: They assist in preparing precise valuations to ensure regulatory compliance, including accurate value reporting essential for adhering to tax laws, securities regulations, and other legal requirements.
• Risk Management: Valuators help businesses identify and mitigate financial risks by providing precise valuations, ensuring they stay compliant with financial regulations.

While these responsibilities apply to valuators’ roles in general, there are specific responsibilities due to the complex regulatory environment of healthcare. The Stark Law and Anti-Kickback statutes prevalent in most healthcare transactions that customarily involve ‘ opinions are relied upon by both the provider community and the regulators to ensure the transaction complies with the fair market value (FMV) standard.

It is important to note that this responsibility to ensure compliance is often jointly performed with the client’s legal counsel.

Enhancing Business Best Practices

Beyond compliance, valuators contribute to the enhancement of business best practices in several ways:

• Strategic Decision-making:
• Performance Measurement:
• Transparency and Accountability:

A valuator’s role can sometimes place business decision-makers in a difficult position. For example, hospital-physician agreements often require confirmation that compensation aligns with FMV. However, this does not mean the hospital must pay that amount if it is not a sound business decision.

The variables motivating the goals, objectives, and values should be reflected in a physician compensation agreement. The benefit of a valuator’s opinion becomes much more significant when the valuator has the experience to also act as a compensation plan consultant and recommend ways compensation can be paid to achieve these goals while still within the FMV range.

In healthcare mergers or acquisitions, a valuator’s dual role becomes evident. When one entity acquires another, determining FMV for assets and ongoing physician compensation depends on post-acquisition revenue. The transaction follows a broader fair market value standard if Stark regulations do not apply. This expands the valuator’s role in assessing whether the deal is financially viable and aligns with the organization’s goals and values.

There is no question that the valuator’s opinion is critical in ensuring that the amount paid for an asset reflects FMV. However, as we have shown, value is only one aspect of a business’s decision when moving forward with a transaction. Another key element is whether the transaction makes business sense. As discussed, this is especially crucial when the transaction is subject to Stark and Anti-Kickback regulations. Stark violations, in particular, can result in significant fines, penalties, and the loss of the ability to provide services to Medicare patients, often leading to the downfall of a healthcare entity or provider.

Conclusion

Valuators play a crucial role in both regulatory compliance and business best practices. By ensuring accurate financial reporting, supporting regulatory filings, and informing strategic decisions, they help businesses navigate complex regulations while promoting operational excellence. Their expertise mitigates regulatory risks and fosters sustainable growth and long-term success.

For more information about the role of valuators in healthcare regulatory compliance, please connect with Financial Services.