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September 2003
Volume 67 |
Number 9 |
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OIG Approves Hospital-Physician Joint Ventures
Karin Bierstein, J.D.
Assistant Director of Governmental Affairs (Regulatory)
In a May 2003 Advisory Opinion, the Office of
the Inspector General (OIG) within the Department
of Health and Human Services approved a proposed
joint venture through which a hospital and its
radiology group would own and operate a magnetic
resonance imaging (MRI) facility. Although Advisory
Opinions only immunize the specific transaction
or arrangement addressed, the Opinion in question
suggests how anesthesiologists may invest in surgical
centers in compliance with the federal antikickback
law.
"
The antikickback statute makes it illegal to knowingly
and willfully offer, pay, solicit or receive anything
of value in exchange for the referral of services
or items reimbursable by Medicare, Medicaid or
other federal health programs. The OIG looks closely
at physicians’ investments in medical facilities
because it is concerned that:
“Distributions from
the joint venture may be disguised remuneration
paid in return for referrals. Like any kickback
scheme, such arrangements can lead to overutilization
of services, increased costs for federal health
care programs, corruption of professional judgment,
and unfair competition.”
The difference between physicians who
refer patients and those who do not.
The MRI Facility Advisory Opinion is important
to ASA members because it underscores the difference
between anesthesiologists who, like radiologists,
do not refer the patients for whom they
provide services at a surgical or MRI center and
physicians who do order such services, notably
surgeons. Hospitals, surgical centers, MRI facilities
and sometimes other physicians refer patients
to the anesthesiology (or radiology) group, not
vice versa. Anesthesiologists do not order the
sedation; operating physicians do. The widespread
ignorance of this basic fact comes as no surprise
to anesthesiologists who have negotiated, or attempted
to negotiate, hospital stipends for administrative
services or trauma or obstetrics coverage.
Acute pain medicine services in the surgical setting
are similar to anesthesia in that they are based
on the surgeon’s referral or request (reminder:
postoperative analgesia is considered part of
the global surgical service, although the surgeon
may refer the patient for pain management requiring
special expertise). Chronic pain is another story,
since pain medicine doctors do the referring for
hospital or clinic services. See below.
Demonstrating that the intent is not to
influence referrals even if an investor can
refer. Other factors in the OIG’s
decision follow:
1. Less than 10 percent of the MRI facility’s
revenue would come from business generated by
the hospital or its employed physicians.
2. In order to limit its ability to influence
referrals, the hospital certified that it would:
a. “refrain from taking
any action” to require or encourage affiliated
physicians to refer patients to the MRI facility
(note: the hospital and the radiology group
would continue to operate a hospital-based radiology
department serving inpatients and outpatients);
b. not track referrals made by its affiliated
physicians to the facility; and
c. ensure that compensation to the affiliated
physicians (from employment or personal service
contracts) would not be related to the volume
of referrals but would be consistent with fair
market value.
3. Returns on the investment in the MRI center
would be independent of the volume of referrals
and would be directly proportional to the hospital’s
and radiologists’ respective capital contributions.
4. Ancillary agreements between the hospital
and the radiologists (for clerical support,
an equipment sublease and assignment of the
space lease) would be pass-through arrangements.
Thus they would not generate any profits for
the hospital providing the support or for the
radiologists leasing the equipment and space
and would not “appreciably increase the
risk of fraud and abuse.”
“Safe harbors” for predefined
arrangements that the OIG will not investigate.
The OIG also examined the applicability
of the safe harbor for “small entity investments,”
one of more than 20 defined fact patterns that
the government will not pursue for violation of
the antikickback rules. The proposed MRI facility
would be 100 percent owned by the hospital and
radiologists, however, whereas the small entity
investment safe harbor requires that interested
investors own no more than 40 percent and generate
no more than 40 percent of the facility’s
revenues. The safe harbor did not apply, but although
the OIG saw some risk in the proposed joint venture,
it concluded that “the safeguards put in
place by the Requestors will make that risk sufficiently
low that we would not subject the Proposed Arrangement
to administrative sanctions in connection with
the antikickback law.”
The small entity investment safe harbor also was
considered and found inapplicable in a second
MRI center arrangement on which the OIG issued
an Advisory Opinion in June. There the hospital
and physicians who could refer patients for radiology
services owned approximately 60 percent of the
shares in a rural MRI facility. Nonreferring physicians,
including radiologists and members of the general
community, owned the other 40 percent but generated
60 percent of the center’s revenues.
The first factor noted by the OIG in its decision
approving the arrangement was the appearance of
a bona fide business. Physicians and nonphysicians
had received the opportunity to buy investment
shares on identical terms and conditions for a
fixed unit price. Returns on investment would
continue to be proportional to the capital contributions.
Less than 40 percent of the MRI center’s
revenue came from referrals by “interested
investors.”
The OIG also took into account the fact that the
MRI center in this instance would have complied
with an earlier proposed version of a safe harbor
for rural entities (although not with the final
version). Its status as sole local provider of
imaging services for a rural population with many
elderly or indigent patients was important to
the outcome, although not a factor that the ambulatory
surgical centers in which anesthesiologists typically
invest will claim.
Chronic pain specialists and ambulatory
surgical centers (ASCs). Anesthesiologists
and other physicians who treat chronic pain are
in a position to refer business to ASCs, hospitals,
clinics, etc., in which they have an ownership
interest. They can avoid (or at least minimize)
OIG scrutiny if their arrangements fit within
the ASC safe harbor, reviewed in this column in
the February 2000 NEWSLETTER <www.ASAhq.org/Newsletters/2000/02_00/practmanag0200.html>.
Another 2003 OIG Advisory Opinion is instructive.
The hospital in that case had formed a limited
liability company with a large multispecialty
group for the purpose of developing an ASC. The
company had certified that the return on the ASC
investment would be directly proportional to the
capital contributed. It also had certified that
no employment-related remuneration to any of the
group physicians would be independent of referrals
or of the volume of surgeries.
Because the majority of the group physicians were
primary care doctors and not surgeons, however,
the arrangement failed to satisfy the conditions
of the ASC safe harbor. When a group is the investor,
each group physician must individually qualify
so that the ASC is an extension of their primary
place of service rather than a source of passive
income. The primary care physicians were in a
position to benefit from referring patients for
surgical services provided by their colleagues.
As stated in the Opinion;
“With respect to physician-investors,
the safe harbor is carefully circumscribed to
apply only to physicians who are unlikely to use
the investment as a vehicle for profiting from
their referrals to other physicians using the
ASC. Accordingly, safe harbor protection is limited
to physician-investors who actually use the ASC
on a regular basis as part of their medical practices
or who practice the same specialty as other physician-investors
and are therefore unlikely to refer substantial
business to ‘competing’ physician-investors
when they can earn the fees themselves.”
The Opinion addressed only the applicability
of the safe harbor and only to a multispecialty
physician group. Single-specialty groups, to which
anesthesiologists and pain subspecialists frequently
belong, may find it easier to come within the
safe harbor. It also is important to note that
it is not necessary to meet all the requirements
of a safe harbor in order to obtain a favorable
opinion from the OIG or to survive an investigation.
There can be no violation of the antikickback
law without the intent to induce or receive
referrals. A safe harbor grants a strong presumption
that there is no such intent, but physicians can
make the case through other means.
HIPAA’s Electronic
Transactions Standards: Medicare Issues Guidance
on the October 16 Compliance Deadline
Many medical practices and many third-party payers
will not be able to transmit or receive electronic
claims in the Health Insurance Portability and Accountability
Act (HIPAA) format that will become mandatory on
October 16. ASA’s concern with the potential
“train wreck,” as it is now commonly
called, led us to work with a coalition to urge
the Centers for Medicare & Medicare Services
(CMS) to announce a nonenforcement policy for a
limited number of months.
On July 24, CMS issued its Guidance on Compliance
with HIPAA Transactions and Code Sets After the
October 16, 2003 Implementation Deadline <www.cms.hhs.gov/hipaa/hipaa2/guidance-final.pdf>.
The Guidance was disappointing in that it allows,
but does not require, payers to process noncompliant
claims after the deadline, without penalty, as long
as they can demonstrate good-faith outreach and
testing efforts. Enforcement will be complaint-driven.
In deciding whether to extend a penalty-free period
of time for the payer and the provider to come into
compliance on a case-by-case basis, CMS will evaluate
the compliance efforts of both parties.
Anesthesia practices should continue to press their
practice management systems vendors, clearinghouses
and payers to complete end-to-end testing. As this
column has noted before, the only proof that these
businesses are ready for October 16 is actual payment
on a HIPAA-compliant claim.
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