CMS Pub. 100-16, ch. mc86c17b, § 130

HMO/CMP

(Rev. 4, 10-01-01)

Amounts paid by HMO/CMPs to physicians who are employees of the HMO/CMP or a

related facility by common ownership or control will be found reasonable to the extent

they commensurate with amounts paid for similar services performed by similar

physicians in the same or similar locality.

The amount paid (e.g., salaries, capitation, fixed sum, incentive payments) as well as

fringe benefits will be compared in the aggregate to that received by physicians generally

in the community and amounts received by physicians in similar organizations.

Compensation paid by the HMO/CMP for personal services of physicians (e.g., salaries,

wages, incentive payments, fringe benefits) must be distinguished from payments to

physicians for nonpersonal services (e.g., expenses attributable to facilities, equipment,

support personnel, supplies), in determining whether compensation is allowable.

Physician compensation may take various forms, but the aggregate compensation must be

reasonable in relation to the services personally furnished. If aggregate physician

compensation costs exceed what is normally incurred, the excess is not considered

reasonable. Costs incurred for other Part B items and services, including payments to

physicians for nonpersonal services, will be found to be reasonable to the extent they:

• Are commensurate with amounts paid for similar items and services furnished by

similar personnel and suppliers in the same or similar locality;

• Do not exceed those that a prudent and cost conscious buyer would incur to

purchase those services.