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Commercial Reasonableness and Physician Employment Arrangements: Two Points of View

A common assignment for a health care valuation consultant is to review a proposed employment agreement between a hospital (employer) and a physician (employee) and determine whether the compensation described in the agreement is consistent with fair market value (FMV). In addition to reviewing the agreement from an FMV perspective, valuation consultants are often asked to assess whether the proposed arrangement is commercially reasonable. These reviews are very important components of a hospital’s compliance efforts. Hospitals are employing physicians on an ever increasing basis. The Stark laws require that the compensation hospitals pay to employed physicians is FMV and is part of a commer

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