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February 2000
Volume 64 |
Number 2
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PRACTICE MANAGEMENT
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| New Rules on Investing
in an Ambulatory Surgical Center |
Karin
Bierstein,
Practice Management Coordinator
When physicians contemplate investing in an ambulatory surgical
center (ASC), some of the legal issues that they must address
relate to federal self-referral regulations (Stark I and II) and
the antikickback law. In general, neither set of prohibitions
bars the investment. The latest group of "safe harbors" published
by the Department of Health and Human Services Office of the Inspector
General (OIG), in its ongoing effort to define lawful arrangements
under the antikickback law, muddies the waters with respect to
some ASC investments, however.
Antikickback Law and Safe Harbors
The antikickback statute (42 U.S.C. §1320a-7b(b)) states
that anyone who knowingly and willfully receives or pays anything
of value to influence the referral of federal health care program
business, including Medicare and Medicaid, can be held accountable
for a felony. Violations of the law are punishable by up to five
years in prison, criminal fines up to $25,000, administrative
civil money penalties up to $50,000 and exclusion from participation
in federal health care programs.
Because the law is broad on the surface, many potentially innocuous
(and, in some cases, even beneficial) commercial arrangements
could be prohibited by the antikickback law. The OIG has therefore
issued several sets of regulations designating specific safe harbors
for various payment and business practices that, while arguably
prohibited by the law, would not be prosecuted.
The first 11 regulatory safe harbors were issued in 1991, and
two more were added in 1992. The OIG published a final rule in
the November 19, 1999, Federal Register, establishing eight
new safe-harbor provisions and clarifying or modifying six of
the original 11 proposed safe harbors published in 1991. Additionally,
an interim final rule establishing a safe harbor for shared-risk
arrangements was also published in the November 19 Federal
Register, bringing the total number of safe harbors to 23.
Among these are safe harbors for space and equipment rentals,
personal services contracts, referral services, discount arrangements
and various arrangements such as physician recruitment incentives
in medically underserved areas.
Safe harbors immunize certain payment and business practices
that are implicated by the antikickback statute from criminal
and civil prosecution enforcement under the statute. It is important
to note that failure to comply with a safe harbor provision does
not mean that an arrangement is illegal. An investment that does
not fit squarely within a safe harbor may still be perfectly lawful
if there is no intent to generate remuneration for referral of
Medicare or Medicaid patients. Compliance with safe harbors is
voluntary, and arrangements that do not comply with a safe harbor
will be analyzed on a case-by-case basis for compliance with the
antikickback statute. Parties who are uncertain whether their
arrangements qualify for safe harbor protection may request an
advisory opinion. Instructions on how to request an advisory opinion
are available on the Internet.
Safe Harbor for ASCs
In theory, if physicians can refer patients for services at
an ASC in which they own an interest, the potential return on
their investment in the facility could cause them to refer patients
without real medical necessity. Broad application of this principle
would limit the financing of ASCs drastically, since many of them
depend on physician investment. Among the first set of safe harbors
proposed by the OIG, therefore, was one that would have protected
certain physician investments in ASCs: those investments that
"represent the extension of the physician's office space and not
a means to profit from referrals." It remains the OIG's overriding
concern that the ASC be functionally an extension of the physician's
office "so that the physician personally performs services at
the ASC on his or her own patients as a substantial part of his
or her medical practice," thereby minimizing the "risk of improper
payments for referrals." That principle should be borne in mind
when interpreting safe harbors.
The early version of the ASC safe harbor was limited to payments
to surgeons who refer patients directly to the ASC and who themselves
perform surgery on the referred patients. Responding to more than
200 "comments," the OIG has now expanded the protection of the
safe harbor to ASC ownership by any assortment of physicians within
a single specialty or multiple specialties, or jointly by a hospital
and physicians. Certain requirements must be met:
- The ASC must be Medicare-certified;
- Neither the ASC nor the other investors may make loans
for the purpose of investing;
- Investment interests must be offered on terms not related
to the volume or value of referrals;
- All ancillary services must be directly and integrally related
to primary procedures performed at the ASC, and none may be
billed separately to Medicare/Medicaid;
- There must be no discrimination against Medicare/Medicaid
patients;
- Patients referred to the ASC by an investor must be fully
informed of his or her investment interest.
There are additional conditions that each category of ownership
must satisfy:
- Surgeon-owned ASCs: All of the investors must be one
or more of the following
a. general surgeons or surgeons of the same specialty,
all of whom derived at least one-third of their medical practice
income for the previous year from personally performing procedures
requiring an ASC or hospital surgical setting
b. group practices composed of such surgeons
c. investors who do not provide items or services to the
ASC or its investors, are not employed by the ASC or the other
investors, and are not in a position to refer patients directly
or indirectly to the ASC or its investors.
- Single-specialty ASCs: These are similar to surgeon-owned
ASCs except that the physician investors need not be surgeons,
although they must all be engaged in the same specialty.
- Multispecialty ASCs: Multispecialty ASCs are
probably of greater interest to anesthesiologists than single-specialty
entities. Their investors must satisfy the same standards as
those of single-specialty or surgeon-only ASCs. In addition,
at least one-third of each physician's ASC or hospital procedures
must be performed at the ASC in which he or she is investing.
The reason for this requirement is the OIG's belief that "such
physician investors are unlikely to have significant incentives
to generate referrals for other investors because of the minimal
additional return on investment derived from such referrals."
- Hospital/physician ASCs: This category is likewise
apt to be significant to anesthesiologists. At least one investor
must be a hospital and the others must be either physicians
who would qualify for the safe harbor on their own or nonreferral
investors.
The hospital, unlike physician investors, must not be
in a position to make or influence referrals to the ASC. As one
legal analyst has noted, "The meaning of this requirement is not
clear, because according to discussion in the preamble to the
safe harbor, ASCs may be located near or even on the hospital's
campus (if rent is fair market value and other conditions are
met), thus begging the question of when the OIG thinks a hospital
can 'make or influence' referrals" (Foley & Lardner "Law Watch"
newsletter, November 22, 1999). The ASC space must be dedicated
exclusively to the ASC and not used for the treatment of the hospital's
inpatients or outpatients.
How Does the Safe Harbor Apply to Anesthesiologists?
The answer depends first of all upon the nature of the services
that anesthesiologists perform at the ASCs in which they have
invested -- if they perform services there at all. There will
be no issue if the anesthesiologist is clearly a "nonreferral
investor" who does not make any referrals to, or generate any
business for, the ASC or its investors.
If the anesthesiologist provides pain management services at
the ASC, then the anesthesiologist is clearly "in a position to
refer" and the receipt of any income from the ASCs may potentially
be considered illegal remuneration for referrals. However, if
the anesthesiologist can show that the return on an ASC investment
is not intended to influence referrals, either by satisfying the
conditions of one of the safe harbors or otherwise, there will
be no liability. Assuming that the anesthesiologist belongs to
a multispecialty group, the most important requirements that must
be met in order to fit within the applicable safe harbor are that:
1) income from the ASC in no way depend on the volume of business
performed or referred;
2) at least one-third of his or her clinical practice income be
derived from procedures that can be performed only in a hospital
or ASC; and
3) he or she perform at least one-third of the procedures requiring
a hospital or ASC setting in the investment ASC. Meeting these
conditions will help to establish that the ASC is functionally
the anesthesiologist's office or an extension of another office
in which he or she practices.
What about the physician who provides no other services at the
ASC except surgical anesthesia ?
If he or she satisfies the "one-third/one-third" test, then
this anesthesiologist should not be considered to be receiving
illegal remuneration any more than the pain specialist discussed
above.
The "pure" anesthesiologist is generally not in a position to
refer any patients to the facility or to other doctors who work
at the ASC. It should not matter, therefore, whether he or she
can show that the ASC is functionally an extension of his or her
office. Language in the new regulations, however, removes physicians
who are "in a position to provide items or services to the entity
or any of its investors" from the protection of the ASC safe harbor.
Providing anesthesia for the ASC's patients or serving as the
ASC's medical director (a not infrequent scenario) is a "service,"
at least within the literal meaning of the regulations. There
is one paragraph in the preamble to the rule that specifically
addresses anesthesiologists and it is worth quoting in full:
"Because of the risk of remuneration for referrals, investments
by other physicians, such as anesthesiologists, radiologists
and pathologists, or by nonphysician providers, such as certified
registered nurse anesthetists, are not protected by the safe
harbor if the physician or provider is in a position to provide
items or services to, refer patients directly or indirectly
to, or generate business for, the ASC or any of its investors.
The determination whether an investor should be classified as
a potential referral source is a factual question. As is the
case for investments in small entities (56 FR 35964), we will
accept a written stipulation that for the life of the investment
the investor will not make referrals to, furnish items or services
to, or otherwise generate business for, the entity or any of
its investors, provided that, in fact, the investor's actions
comport with the written stipulation. We wish to make clear
that investments by these physicians and other providers do
not necessarily implicate the antikickback statute. Finally,
we note that we do not consider an investment by a physician's
own wholly-owned professional corporation to be an excluded
nonphysician investment."
Thus it appears that unless the anesthesiologist does no work
for the ASC, the other physician investors or the ASC's patients,
he or she needs to ensure that income from the ASC investment
cannot be construed as an incentive to provide or generate more
Medicare or Medicaid business. The OIG is rather liberal in its
understanding of who is "in a position to refer"; this includes
not only physicians but also certain administrative staff and
such entities as physician practice management companies. "Referring"
means not only ordering Medicare services but also recommending
or arranging for such services.
If the general ASC safe harbor requirements are met, if one-third
of the anesthesiologist's practice consists of services performed
at the investment ASC, and if one-third of his or her clinical
practice income derives from procedures requiring the facilities
of an ASC or hospital, then there is little risk under the antikickback
statute. It is important to note that if the investor is in fact
the anesthesiology group, then each physician member of the group
must satisfy the one-third/one-third test.
It is equally important to remember that the safe harbor does
nothing more than describe scenarios in which the OIG will presume
innocence. As the OIG stated in the preamble to its 1991 proposed
rule, "failure to comply with a safe harbor... may mean that the
arrangement does not fall within the ambit of the statute. In
other words, the arrangement is not intended to induce the referral
of business reimbursable (under a Federal health care program);
so there is no reason to comply with the safe harbor standards,
and no risk of prosecution." Both the lawyers advising anesthesiologists
who are considering investing in a safe harbor and the OIG if
it investigates must consider all of the facts of the arrangement,
including the applicability of any other safe harbors and the
anesthesiologist's good-faith efforts to comply with the law.
Seeking an OIG advisory opinion before entering into the arrangement
remains a key option.
One Final Issue: What About Stark?
Because referral arrangements are prohibited under both the
antikickback rules and the Stark I and Stark II self-referral
prohibitions, there is some overlap between the two sets of rules.
Very generally, though, the Stark rules do not apply to anesthesiologists'
investment arrangements.
Stark prohibits Medicare and Medicaid payments for treatment
resulting from a referral by a physician to a provider of "designated
health services" if the physician or an immediate family member
has a financial interest in the entity providing those services.
The list of "designated health services" does not include medical
or surgical services provided by a physician. There may be instances
in which anesthesiologists do order designated health services
such as "outpatient hospital services" or "clinical laboratory
services" and these instances should be scrutinized for their
legality under Stark. Providing anesthesia or pain management
services at an ASC owned by the anesthesiologist, however, does
not automatically implicate the Stark rules.
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