FMV Expert Chris David of HVG on Regulatory Compliance Risk: the Effect on Private Healthcare Deals

(Credit: Chris David) Chris David
September 20
12:55 PM 2022

Private investment deals in the healthcare space have skyrocketed in the last decade. According to an article by the American Bar Association, in 2021 PE invested approximately $151 billion of capital into healthcare globally, more than double the year prior. And, the number of healthcare PE deals soared 36% percent to 515. Private investment deals are happening faster than ever before. According to PitchBook, many industries, particularly the healthcare industry, are experiencing competition so intense that some deals are closing within a matter of days in an attempt to appease sellers. Unprecedented amounts of private capital flowing into the healthcare space and the speed at which deals are closing are presenting venture capital and private equity firms with heightened exposure to the uniquely treacherous healthcare legal and regulatory landscape.

The healthcare industry is built on a complex web of laws and regulations designed to protect patients. However, some believe private investors' role in the healthcare industry is misplaced because its profit-driven focus is contrary to the ultimate goal of providing the best patient care possible.  In a litigious and highly regulated industry such as healthcare, it's imperative that investors ensure their portfolio companies are operating in strict compliance with unique laws, statutes and regulations. 

The federal Anti-Kickback Statute (AKS) (See 42 U.S.C. § 1320a-7b.) is a criminal statute that prohibits the exchange (or offer to exchange), of anything of value, in an effort to induce (or reward) the referral of business reimbursable by federal health care programs. Possible penalties for violating the AKS include: fines of up to $25,000, up to five years in jail, and exclusion from Medicare and Medicaid care program business. 

The physician self-referral laws (Stark Laws) (See 42 U.S.C. § 1395nn) are a set of United States federal civil laws that prohibit physician self-referral, specifically a referral by a physician of a Medicare or Medicaid patient to an entity providing designated health services (DHS) if the physician (or his/her immediate family member) has a financial relationship with that entity. Although the financial penalties may be even greater than with the AKS, these are non-criminal charges. Penalties for violations of Stark Law include:

  • denial of payment for the DHS provided

  • refund of monies received by physicians and facilities for amounts collected

  • payment of civil penalties of up to $15,000 for each service that a person "knows or should know" was provided in violation of the law, and three times the amount of improper payment the entity received from the Medicare program

  • exclusion from the Medicare program and/or state healthcare programs including Medicaid

  • payment of civil penalties for attempting to circumvent the law of up to $100,000 for each circumvention scheme.

One of the more common elements of the AKS and Stark Law is the fair market value (FMV) requirement.  These federal healthcare laws generally stipulate that deals between and among healthcare companies and private physicians must be transacted at a fair market value price/rate. Healthcare companies and their lead investors should consult with their compliance attorney and a reputable healthcare appraisal firm, such as HealthValue Group (HVG) to ensure the strategic plans are compliant with the strict federal laws.

HVG is a national healthcare fair market value (FMV) and appraisal firm with clients in over 48 states. HVG provides traditional business appraisals of all types of healthcare-related entities including:

  • hospitals

  • surgery centers

  • physician practices

  • physical therapy clinics

  • laboratories

  • home health agencies

  • durable medical equipment companies.  

HVG also issues FMV opinions on a myriad of professional and administrative service arrangements such as physician employment agreements, on-call arrangements, medical directorship duties, telehealth, management service agreements (MSOs), marketing services and speaker programs.   

The firm is a trusted advisor and consultant to life sciences companies, health systems and medical centers and is commonly hired by CEOs, CFOs, compliance officers, in-house counsels and outside counsels. HGV's clients rely on their expertise, research and analysis to comply with the federal Anti-Kickback Statute and Stark Law, which can cost healthcare organizations millions of dollars in penalties and fines if found to be non-compliant. 

HVG generally works alongside the company's compliance attorney when a healthcare company is putting together deals, joint ventures and various unique arrangements. 

Chris David is the founder and managing partner of (HVG), a national healthcare fair market value (FMV) consulting firm. He began his career more than 20 years ago as a CPA at Ernst & Young auditing healthcare companies. From there, Chris transitioned to the management consulting side of various firms like Dixon Hughes Goodman and HealthCare Appraisers, Inc. before launching HVG in Spring of 2010.

Chris' core competencies consist of business valuation analyses, calculation of commercial damages/lost profit and FMV opinions of professional service arrangements. He often serves as a testifying subject matter expert in the areas of healthcare FMV compliance, business valuation and commercial damages. 

Mr. David leads a team of experienced financial analysts who regularly provide FMV consulting, and business appraisals and transaction advisory services to middle-market healthcare companies and some of the nation's most prestigious law firms. Mr. David is one of the nation's leading healthcare FMV experts.

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