Healthcare agreements are often complex, technical, and highly nuanced—but sometimes, the most consequential risks hide in the smallest details. A single wording change, misinterpreted definition, or slight deviation from industry standards can shift the economics of a contract by hundreds of thousands—or even millions—of dollars over the life of an agreement.
A recent HMS Valuation Partners case study illustrates this risk with striking clarity. During a valuation of a lithotripsy technical services agreement, HMS uncovered contract language that—if left uncorrected—would have doubled, or even quadrupled, the hospital’s payments for service. The discrepancy stemmed not from malicious intent or dramatic structural changes, but from a subtle shift in how the contract defined and reimbursed lithotripsy services.
This case highlights a crucial truth: fair market value (FMV) is not only about numbers—it is about clarity, alignment, and the precision of language. Below, we break down what happened, why it mattered, and what healthcare leaders can learn from this experience.
A Small Change with Massive Consequences
The engagement began when a health system asked HMS to review a lithotripsy technical services agreement that had previously been valued based on a per-stone treated compensation methodology. However, HMS discovered that when the final contract was executed, the language had shifted to a per-procedure payment model—an entirely different reimbursement basis. Even more concerning, the contract now defined bilateral cases as two separate procedures billed at a higher bilateral rate.
On the surface, this may seem like a minor editing change. In practice, it fundamentally altered the economics of the agreement.
Lithotripsy, which uses shock waves to break up kidney stones, can involve unilateral or bilateral treatment. Under the original per-stone methodology, compensation naturally scaled with clinical complexity. However, when shifting to a per-procedure model, industry standards dictate specific rules governing bilateral reimbursement—rules that ensure payments reflect only the additional work required, not double the value of the entire procedure.
Industry convention and payer reimbursement (including Medicare) typically recognize bilateral lithotripsy by applying a 150% modifier, not 200%, and certainly not 400% as the revised language implied. Yet, because the new contract interpreted bilateral treatment as two separate full procedures at the bilateral rate, the vendor could have been paid four times the appropriate amount for certain cases.
Misalignment in Contract Language Occur
These misalignments happen more often than organizations realize. Even when valuation teams provide clear FMV guidance, contract revisions made during legal review, negotiation, or vendor discussions can inadvertently change definitions that make the valuation no longer applicable.
And when language changes, the FMV must be re-evaluated.
Correcting Course: HMS’s FMV-Driven Solution
Once HMS identified the discrepancy, the team collaborated with the client to revise the contract language and realign it with both:
- Industry reimbursement standards, and
- The underlying assumptions used in the FMV analysis.
According to the case study, HMS recommended corrections that:
- Properly defined lithotripsy procedural terminology
- Ensured bilateral cases were billed using the 150% modifier
- Restored consistency between valuation assumptions and contract structure
- Removed the risk of excessive payments driven solely by semantics
These corrective steps ensured that the agreement remained defensible, compliant, and financially appropriate for the health system. The vendor was compensated fairly for the work performed—no more, no less—while the hospital mitigated the risk of overpayment that could have raised compliance scrutiny or triggered internal audit concerns.
A Clear Lesson: In Healthcare Contracting, Language Is Money
Small wording changes can have major financial consequences. This engagement underscores a critical point for hospital leaders, legal teams, and contract administrators:
- FMV Assumptions Must Match Final Contract Terms
If the underlying payment basis or procedural definitions change—even slightly—the FMV conclusion may no longer apply.
- Reimbursement Methodology Matters
Contracts must reflect actual industry billing standards, not approximations or assumptions.
- Bilateral Procedures Are Particularly Vulnerable
Many service lines—lithotripsy, radiology, orthopedics, vascular surgery, and more—have bilateral coding rules that substantially affect payment.
- Vendor-drafted language should always be cross-checked
Vendors may propose terms that inadvertently misalign with fair market value, exposing the hospital to risk.
- A valuation is not just a number—it is a safeguard
The valuation process protects organizations from both overbilling and under-reimbursement, ensuring compliant compensation aligned with regulatory expectations.
Why FMV Expertise Is Essential in Today’s Healthcare Landscape
As healthcare organizations navigate increasingly complex vendor arrangements—from mobile services and technical components to staffing, equipment leasing, and telemedicine—FMV oversight has become indispensable.
This case illustrates the importance of FMV beyond compliance:
- FMV ensures financial stewardship, preventing overpayment that strains budgets.
- FMV protects hospitals during audits, supporting defensible decision-making.
- FMV aligns contracts with real-world reimbursement, reducing risk of disputes.
- FMV provides clarity, especially in services involving modifiers, add-on payments, or bilateral billing rules.
In a value-conscious healthcare environment, even a “minor” wording misalignment can dramatically alter costs—and quickly.
Conclusion: Precision in Contracting Protects the Organization
This lithotripsy case study is more than an isolated example—it’s a reminder that language, valuation, and reimbursement must move in lockstep. A small contract revision, left unexamined, could have quadrupled a hospital’s payment obligations and created significant FMV misalignment.
By identifying the discrepancy early and recalibrating the agreement, HMS Valuation Partners helped ensure both compliance and cost-effectiveness, demonstrating the power of rigorous valuation oversight paired with meticulous contract review.
In healthcare contracting, words matter. FMV expertise ensures they never become costly.
