Physician-owned ASC gets mixed approval from OIG
Can doctors set up their own ambulatory surgical center and refer patients to itwithout breaking federal laws that bar kickbacks for referrals? The latest advisory opinion from Office of the Inspector General of the Department of Health & Human Services gives a qualified yes to that question.
Yet it also raises the question of whether OIG is now intervening in the practice of medicine, says attorney Bob Wolin, at Baker Hostetler in Houston. The advisory opinion comes with a proviso that says the agency's approval is contingent upon how much ASC work the doctors perform, he adds.
The case that spurred the advisory involves five orthopedic surgeons and anesthesiologists who plan to create a joint venture ASC. The physicians asked OIG whether the profits they received would violate the anti-kickback statute.
OIG acknowledges that "it has long been concerned with the risk of abuse posed by health care joint ventures in which investors are also sources of referrals or suppliers of items or services to the joint venture." In particular, the government frowns on doctors who refer patients to facilities in which they have a stake, and thus effectively receive kickbacks through profit distributions. What it wants are operations that can function as independent businesses without being dependent on referrals from investors.
The proposed ASC doesn't meet the safe harbor that protects investors who make referrals to large, publicly traded companies, but own only a small percentage of shares. Nor does the deal fit the safe harbor for small ventures, because all of its investors will make referrals to the ASC, which in turn will get much of its business from investor referrals.
Nonetheless, OIG concluded the deal in question would violate the anti-kickback statute only if the physicians intended to send patients to the ASC to boost their incomes. The safeguards that reassured OIG included:
• The physicians are making substantial investments in the ASC and have exposure for the ASC's lease. This indicates the facility is not a sham operation.
• The doctors perform many ASC procedures and will perform most of their future ASC work at the site. All five physicians currently derive at least 40% of their practice income from ASC procedures.
• Medicare beneficiaries would account for only about 5% of the ASC's revenue. So, any income from Medicare referrals would be only a fraction of what the doctors would earn from private patients.
• Profit-sharing will be based on the size of each physician's investment rather than on the volume of referrals.
• Patients will be given a written disclosure of their doctor's interest in the ASC. This doesn't necessarily guard against fraud, but it does offer "some protection against possible abuses of patient trust," OIG notes.
But: Pay attention to footnote #4 of the opinion, warns Wolin. If income from performing ASC procedures drops below 33% of total medical practice income for any of the physician-investors, the opinion is invalid, according to OIG. This effectively means that OIG will dictate how a doctor practices medicine as a condition for a favorable advisory opinion.
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