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Posts Tagged ‘Ambulatory Surgery Centers’

Ambulatory Surgery Center Exclusions – ASC Safe Harbor Compliance

Monday, February 13th, 2017

Excluding Non-performing Positions from a Physician Owned Surgery Center

Many surgery centers are eventually faced with decisions about how to treat investing physicians who do not perform as many procedure procedures in the surgery center as others.  Under-performing physicians can create political issues in ASCs because investors who perform more surgeries or higher value procedures at the center feel that the other investors are taking a ride on their efforts. Over time, higher producers may start to view those with lower surgery levels as “dead wood”. This dynamic is a perfect set up for violating the anti-kickback statute which specifically prohibits basing investment offering on the actual or expected volume or value of referrals.

​The anti-kickback statute standards that apply to surgery centers are somewhat counter-intuitive. The safe harbors that protect ASC investment interests actually require an investor to make certain levels of referral in order to receive the benefits of the safe harbor. This is different from other types of services which consider additional referrals to be suspect.

​The conditions included in the ambulatory surgery center safe harbors act as a proxy for determining when an investing referrer actually uses the ASC as a natural extension of his or her office practice. If the investor does not meet the Safe harbor threshold they may still use the ASC is a natural extension of their office. The Safe harbor merely provides absolute protection if the thresholds are met.

Where the specific requirements of the safe harbor is not met, the referring physician may still be using the facility as an extension of his or her medical practice. It might just be that the nature of the practice does not support as many referrals as other types of practices.  This does not necessarily mean that the lower volume provider presents any additional risk of violating the anti-kickback statute than a provider that comes closer to meeting the safe harbor standards.

Depending on the practice type, the lower level of referrals might very well still be indicative that the physician uses the facility as an extension of his or her practice.  This may not be what the higher referring physicians wish to hear.   In reality, they may feel that lower volume providers are taking a ride on their higher profitability that is created by there more lucrative practice.  In these cases, strict adherence to the one-third tests for multi specialty ambulatory surgery centers can support the positions of the high-volume surgeons to the detriment of the lower volume surgeons who still realistically create very little risk under the anti-kickback statute. However it becomes convenient that those who are responsible for more income being produced by the ASC can rely upon the number of procedures and percentage of income tests to exclude physicians who legitimately use the ASC is an extension of practice from participation but who have lower surgical volumes.

These types of cases run significant risk of being challenged under the anti-kickback statute by excluded investors or governmental enforcement agencies.  Great care must be taken in surgery centers that contain this dynamic to assure that frustrations of higher volume producers do not lead to actions that create regulatory risk for the surgery center.

Many operating agreements that govern the rules relating to ambulatory surgery center ownership actually create legal compliance risk.  It is critical that the procedures for excluding providers be established in advance, are uniformly followed, and do not raise any inference that additional referrals are being required in order to maintain an investment interest. Efforts to bring investors closer to compliance with safe harbor standards can easily be “turned inside out” and be re-characterized as requiring additional referrals.

Once investors own interests in an ambulatory surgery center, it is very difficult to force redemption without creating a lot of legal risk.  ASCs that use the failure to meet safe harbor standards as a reason to exclude investors run substantial risk.  The ASC Safe Harbor provisions exist to protect arrangements from further scrutiny where they contain elements that the federal government has indicated are reflective of there being a lower level of risk of abuse.  The safe harbors were never intended to be used as a tool to replace a complete risk analysis presented by investors who do not meet all of the terms of the safe harbor.  In this respect, the ASC Safe Harbors are different from other safe harbor provisions under the anti-kickback statute.  The primary difference involves that fact that the safe harbor actually requires certain levels of referrals to be made to the ASC.

With other safe harbors, structuring an arrangement to come close to a safe harbor can be a valid risk mitigation approach.  This is not the case with the ASC safe harbor because requiring investors in an ASC to come closer to the referral threshholds in the ASC Safe Harbor actually invoke the referral prohibition.  Forcing this doctor out of the ASC for simply not meeting the safe harbor creates a violation.

Ambulatory Surgery Centers – Federal Settlement Highlights Safe Harbor Requirements

Monday, September 29th, 2014

ASC Investments Safe HarborsA Tennessee based ambulatory surgery center company has agreed to pay damages to a former employee who filed a suit alleging that physician investments in local surgery center entities violated the Anti-kickback Statute.  The case highlights some of the unique kickback issues that are present in ambulatory surgery center structure.  Specifically, the case demonstrates how investment terms that are intended to assure compliance with the safe harbor regulations under the Medicare Anti‑Kickback Statute (42 U.S.C. § 1320a-7b(a)-(b)) can create evidence of non-compliance if the initial terms of the offering relate, in whole or in part, to the volume or value of expected referrals from the investor in the ASC venture.

In order to comply with safe harbor requirements, ASCs must generally require investing physicians to use the facility as an extension of their medical practices.  However, if the terms of the investment are based on the volume or value of referrals, those same requirements become evidence that referrals are being required in exchange for remuneration.  In the Tennessee case, the ASC management company purchased controlling interests in local surgery center entities at a high multiple of earnings.  Physicians who were referral sources were offered investments at less than 1/3 of the value that was applicable to the non-referring management company.  That differential in value was evidence of “remuneration” under the Anti-kickback Statute and also indicated that investment terms were more advantageous based on expected referrals.

Structuring ambulatory surgery center investments to comply with Anti-kickback requirements is an extremely complex task.  Indications of compliance can become evidence of non-compliance depending on initial investment terms.  Cases such as the Tennessee case illustrate the problems that can occur when safe harbor requirements are not complied with and when decisions on investment or exclusion are made based on past or anticipated referrals.  The Tennessee case also illustrates how these issues come to light.  The Tennessee case was filed as a whistleblower case by a former administrator of one of the local surgery centers who walked away with a settlement in the millions of dollars.

We have published a more complete analysis of the Tennessee case which you can access through the following link   ASC-Investment-Federal-Case

Safe Surgery Checklist Use For Ambulatory Surgery Centers

Thursday, December 15th, 2011

Safe Surgery Checklist Use Mandated for all Ambulatory Surgery Centers

CMS is requiring ambulatory surgery centers to begin using a safe surgery checklist effective on January 1, 2012.  According to CMS, a sound surgery safety checklist could minimize the most common and avoidable risks endangering the lives and well-being of surgical patients. The of the CMS requirement is to assess whether ASCs are using a safe surgery checklist that covers effective preoperative communication and helps ensure that safe practices are being performed at three critical perioperative periods: prior to administration of anesthesia, prior to incision, and prior to the patient leaving the operating room.

CMS believes that effective communication and the use of safe surgical practices during surgical procedures will significantly reduce preventable surgical deaths and complications. CMS view is supported in a November 2010 New England Journal of Medicine study that concluded that surgical complications were reduced by one-third, and mortality by nearly half, when a safe surgery checklist was used.   

CMS does not mandate a specific form of safe surgery checklist.  However, CMS points to the the World Health Organization Surgical Safety Checklist, which was adopted by The World Federation of Societies of Anesthesiologists as an international standard of practice. This checklist can be found at: Safe Surgery Checklist from W.H.O.

The Affordable Care Act required the Secretary to develop measures appropriate for the measurement of the quality of care (including medication errors) furnished by ASCs.   According to CMS, the safe surgery checklist measure assesses the adoption of a best practice for surgical care that is broadly accepted and in widespread use among affected parties. 

Data collection relative to compliance with the safe surgery checklist requirement will begin on July 1, 2013 and end on August 15, 2013.  ASCs will be required to certify that they used a safe surgery checklist for the entire time period from January 1, 2012 through December 31, 2012. The information foon compliance will be collected via an online Web-based tool that will be made available to ASCs via the QualityNet Web site.

ASCs Must Begin Using Safe Surgery Checklists January 1, 2012

Wednesday, December 14th, 2011

Safe Surgery Checklists – New Requirement For Ambulatory Surgery CentersASC Safe Surgery Checklist Requirement

ASCs should mark their calendars for January 1, 2012 which is the date that CMS requires the use of Safe Surgery Checklists to begin.  Beginning in July of 2013, ambulatory surgery centers will be required to certify that they used a safe surgery checklist throughout calendar year 2012.  The safe surgery checklist covers three key preoperative stages.  The three stages include (1) the period prior to anesthesia and sedation being administered, (2) the period prior to incision, and (3) the period prior to the patient leaving the operating or procedure room.

The certification will need to be made by ASCs within a 45 day window period between July 1, 2013 and August 15, 2013.  CMS will be providing a web-based mechanism that providers can use to certify their compliance with the safe surgery list requirement.

CMS does not provide a required form of safe surgery checklist but has rather left this to the discretion of the ASC.  Comments to the regulations point to external sources that have developed safe surgery checklists including the World Health Organization and the World Federation of Societies of Anesthesiologists.  The WHO safe surgery checklist can be found at the following link.  WHO Safe Surgery Checklist

Ambulatory Surgery Center Safe Harbor Regulations

Friday, July 15th, 2011

Ambulatory Surgery Center – Anti-kickback Issues and Safe Harbor Regulation Compliance

Ambulatory Surgery Center StructuresMore and more procedures are being performed in Ambulatory Surgical Centers. The CMS has recently expanded the procedures that it considers to be safely performed in an ASC. Clearly, the trend is to move many procedures to an outpatient facility unless the health care needs of the patient clearly require an inpatient presence. One of the primary sources of capital for these new ASC ventures is often the physicians who are involved in performing procedures in the ASC or sending business to the ASC. From a purely business point of view, it makes sense to have investors who have a direct financial interest in seeing that the business succeeds, However, from the point of view of the party paying for the care, this same financial interest can lead to an increased and arguably unnecessary levels of procedures performed in the facility. The Medicare and Medicaid program, and many states, have enacted the Anti-kickback Statutes and other anti-referral laws that prohibit, or at least limit, the financial interests that a referring provider can have with an organization where there is any control over the referral flow to that entity.

Anti-Kickback Statute Prohibition

This is where the Federal Anti-kickback Statute comes into play by prohibiting the payment of any form of remuneration between parties where referrals are involved. The federal Anti-Kickback Statute proscribes the offering, payment, solicitation or receipt of any remuneration in exchange for a patient referral or referral of other business for which payment may be made by any Federal health care program. Violations of the Anti-Kickback Statute is a federal felony and can result in substantial prison time and criminal monetary penalties. Violation of the Anti-Kickback Statute can also serve as a basis for imposition of Civil Monetary Penalties. Enforcement of the Federal Anti-kickback Statute has been on the rise since the mid-1980s. Today, the federal government has made health care fraud one of its top priorities. We are hearing about new prosecutions on an almost daily basis as the government ramps up its enforcement through the creation of the HEAT program.

ASC Ownership and the Federal Anti-Kickback Statute

When we look at a typical Ambulatory Surgical Center venture, the primary concern is when the physicians who make referrals to the entity and provide services in the entity receive remuneration from the entity, This normally will involve remuneration in the form of a return on an investment interest. The referring physician may purchase an ownership or investment interest in the company that is set up to operate the ASC.  The ASC can be set up with capital contributions from a number of physicians or it may involve a hospital sponsored ASC that seeks additional capital investment from physicians.

Regardless of the exact structure, the Anti-kickback Statute will come into play to govern the structure and ongoing operation of the ASC. The ASC venture must be structured from the start to comply with the Anti-Kickback Statute. It must also be monitored on an ongoing basis to assure that it does not fall out of compliance with the Anti-Kickback Statute.

John H. Fisher

Health Care Counsel
Ruder Ware, L.L.S.C.
500 First Street, Suite 8000
P.O. Box 8050
Wausau, WI 54402-8050

Tel 715.845.4336
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