What is Fair Market Value (FMV) Compensation?
Fair Market Value (FMV) compensation refers to the reasonable and standard level of pay for a physician’s services, determined by factors such as specialty, geographic location, experience, and employer type.
FMV ensures that physician salaries comply with federal regulations, particularly in contracts involving healthcare entities that receive government funding, such as hospitals participating in Medicare or Medicaid.
Why It Matters
Understanding FMV compensation is critical for physicians negotiating contracts, assessing job offers, and ensuring compliance with anti-kickback and fraud laws.
FMV serves several important functions:
- Regulatory Compliance: The Stark Law and Anti-Kickback Statute prohibit excessive compensation that could be construed as an inducement for referrals. FMV helps prevent legal risks in employment agreements.
- Negotiation Benchmark: Physicians can use FMV data to determine whether their compensation aligns with industry standards and negotiate better salaries and benefits.
- Private Practice Considerations: FMV affects compensation models in private practice, including buy-in agreements, profit-sharing structures, and valuation during acquisitions.
- Fair Pay and Transparency: FMV protects physicians from being underpaid by ensuring employers offer competitive and justifiable salaries.
Example in Practice
Dr. Patel, a cardiologist, receives a job offer from a hospital offering a compensation package that seems higher than industry standards.
Before signing, she reviews FMV data from industry sources such as MGMA (Medical Group Management Association) and SullivanCotter.
She realizes the offer is significantly above FMV and consults a healthcare attorney to ensure it does not violate Stark Law or create future compliance risks.
By leveraging FMV insights, she renegotiates a legally sound and competitive contract.
