Stark Law Definition of Fair Market Value

The term “fair market value” means the value in arm’s-length transactions, consistent with the general market value. ‘‘General market value’’ means the price that an asset would bring, as the result of bona fide bargaining between well-informed buyers and   sellers who are not otherwise in a position to generate business for the other party…

Comments to the Stark Law further define what is involved in a determination of “fair market value.”

Usually, the fair market price is the price at which bona fide sales have been consummated for assets of like type, quality, and quantity in a particular market at the time of acquisition, or the compensation that has been included in bona fide service agreements with comparable terms at the time of the agreement. With respect to the rentals and leases described in § 411.357(a) and (b), ‘‘fair market value’’ means the value of rental property for general commercial purposes (not taking into account its intended use). In the case of a lease of space, this value may not be adjusted to reflect the additional value the prospective lessee or lessor would attribute to the proximity or convenience to the lessor when the lessor is a potential source of patient referrals to the lessee. For purposes of this section, a rental payment does not take into account intended use if it takes into account costs incurred by the lessor in developing or upgrading the property or maintaining the property or its improvements.

Fair Market Value Safe Harbor Definition

The term fair market value means the value of the rental property for general commercial purposes, but shall not be adjusted to reflect the additional value that one party (either the prospective lessee or lessor) would attribute to the property as a result of its proximity or convenience to sources of referrals or business otherwise generated for which payment may be made in whole or in part under Medicare, Medicaid and all other Federal health care programs.