Safety zones are essential for outpatient surgery centers
A recent advisory opinion issued by the Office of the Inspector General (OIG) generated a lot of buzz in the world of outpatient surgery centers (ASCs). However, in some ways the buzz is overrated and ultimately does not change the way CHVs will be allowed to operate. This article presents some key points on what OA 21-02 means and what it does not.
Ownership and referral to an ASC by a physician is not subject to Federal Stark Law, but will involve Federal Anti-Kickback Law (AKS). The AKS prohibits any person from providing “knowingly and willfully” any remuneration to induce referrals, or in exchange for referrals, to patients or companies in the federal health care program. (See 42 USC 1320a-7b (b).) AKS is an intention-based criminal law that enforces liability on both sides of an impermissible “bribe” transaction. Many states have comparable anti-recoil legislation. Since the primary investors in an ASC are physicians, it is important to consider the impact of physician ownership and referral arrangements in structuring any ASC transaction.
As part of the AKS, the OIG has promulgated certain “safe havens” so that if all the criteria for the applicable safe harbor are met, an arrangement may be safe from prosecution. There is a strong safe harbor for single-specialty, multi-specialty, and surgeon-owned or hospital / physician-owned ASCs. (See 41 CFR § 1001.952 (r).) Failure to meet all of the Safe Harbor criteria, however, does not necessarily mean there is a violation of the law, and in fact, many CSAs do not meet all of the applicable criteria. In such cases, the facts and circumstances of the arrangement must be considered in their entirety, to determine whether the necessary intent to induce referrals is present. For this reason, when structuring a ASC transaction, it is important to approach the Safe Harbor criteria and also take into account applicable regulatory guidelines such as OIG advisory opinions. While advisory opinions are limited to the specific parties who requested the opinion (and only to the extent that the facts certified by the applicant are indeed correct), they provide a useful barometer of how regulators would likely consider similar provisions. .
Advisory Opinion 21-02 Remember
AO 21-02 is for a multi-specialty ASC joint venture owned by a healthcare system, certain orthopedic surgeons and neurosurgeons employed by the healthcare system, and a manager / developer. As proposed, the arrangement would not be eligible for “safe harbor” protection for several reasons, notably because the health system would be able to influence referrals to the CHS through its physicians. employees, and also because not all neurosurgeons would. derive one-third of their medical practice income from performing “ASC qualified procedures”. Nevertheless, the OIG considered that the transaction presented a sufficiently low risk of fraud and abuse. Here are some key points from AO 21-02:
Depending on the facts, failure to meet the Safe Harbor criteria for volume or revenue may not pose a significant regulatory risk. For each applicable ASC Safe Harbor, the ASC is intended to serve as an extension of the physician’s practice. (See 41 CFR § 1001.952 (r).) According to the Safe Harbor criteria, at least one third of the annual medical practice income of each physician investor must come from their performance of ASC qualified procedures, and (except for single specialty ASCs) at least one third of the salary Physician’s annual procedures should be performed at the specific ASC. Certain medical specialties, such as neurosurgery, would probably not be eligible for this refuge protection, as these specialties are highly dependent on hospital procedures for inpatients. Nonetheless, AO 21-02 found that this would not create a high risk. It is important to note that neurosurgeons investing in ASC were expected to use ASC regularly as part of their medical practice (whether or not they met the 1/3 income threshold). In addition, specialists would usually personally perform procedures at the ASC. That is, they would rarely refer to other surgeon investors.
Investment in CHWs by hospital doctors or under contract is allowed. Since a hospital is in a position to make or influence referrals directly or indirectly to its employed and contracted physicians, the investment of these physicians in a CHW affiliated with the hospital would not fall within the sphere of applicable security. However, certain precautions can be taken to ensure that the risk of fraud and abuse is sufficiently low. The hospital should not require or encourage employed or contracted physicians to refer patients to the ASC or its physician owners. The hospital should not follow referrals made to the ASC. Finally, no physician affiliated with a hospital should be remunerated in a manner that relates, directly or indirectly, to the volume or value of referrals to the ASC or its investing physicians.
AO 21-02 reinforced a “best practice” that proposed investor physicians should generally be given the opportunity to invest on an equal basis. Each ASC Safe Harbor requires that the ASC not offer ownership to any party based on the volume or value of previous or expected referrals. Although structured appropriately, physicians may hold different levels of equity in an ASC, careful consideration and consultation with a lawyer is recommended. Indeed, if the ASC has multiple levels of ownership or investment criteria, this could imply that physicians are selected based on their presumed referral models. In the arrangement described in AO 21-02, physicians typically held 4-8% of AUC; however, in a footnote, the OIG felt it was important to stress that each physician would determine the percentage of ownership they had and that neither the health system, nor the manager, nor the CHW themselves would participate in the investment decision of doctors.
Investments in physician groups continue to be a “wake-up call” for the OIG. When a group of physicians, and in particular a multi-specialty group, is allowed to invest in an ASC, the OIG has already seen a substantial likelihood of interspecialty referrals for services provided in the ASC. In other words, group physicians for whom ASC is not an extension of their office practice could benefit from their referral to the ASC or their partners who perform procedures there. OA 21-02 reinforced this view, citing that an intermediary entity could be used to redirect income to reward referrals or erode the guarantees provided by direct investment. For this reason, ASC investments that use a holding company or group of doctors as an investor should be structured in consultation with a lawyer.
Finally, it remains important to structure all of the other components of a ASC opportunity to comply with applicable fraud and abuse requirements. For example, jointly owned real estate must comply with the AKS safety rules for space rental and equipment rental, and all services provided by the hospital for the ASC must comply with the safety rule. for personal services and management contracts and performance based payments. In addition, the ASC and its investors should give written notice of their investment interest to referred patients and the ASC should implement other protective measures designed to reduce the risk of fraud and abuse (for example, improper billing).
AO 21-02 drew attention to the CSA regulatory framework. In it, the OIG indicated some regulatory flexibility for investor physicians, such as neurosurgeons or spine surgeons, whose specialties might otherwise prevent them from performing a substantial volume of surgery as part of the ASC. The OA 21-02 is also used to support the possibility for the employees of hospital doctors to invest in an ASC affiliated to the hospital, provided certain safeguards are respected. However, the safeguards themselves are not new and AO 21-02 has not significantly changed the framework within which an ASC transaction must be structured. Likewise, AO 21-02 encourages following well-established practices in structuring a CSA investment opportunity.