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Medicare certification of ambulatory surgery centers
Leasing space in an ASC for nonsurgical services may jeopardize Medicare certification.
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A group of investors owns an ambulatory surgery center. The ASC is Medicare-certified, and provides Medicare ASC-covered list services, including cataract surgery. In addition, the ASC provides LASIK and other surgical services that are not on the Medicare ASC-approved list. The ASC is not as busy as the investors had planned, and in order to generate additional revenue, the investors decide to rent out part of the ASC-certified space for several ophthalmologists to perform consults. The leases are at arm’s length, reflect fair market value and fit within the space lease safe harbor.
Can leasing space in the ASC to physicians who perform nonsurgical services affect the ASC's certification?
In order to participate in the Medicare program, a facility must meet the Medicare definition of an ASC. The Medicare regulations define an ASC as “any distinct entity that operates exclusively for the purpose of providing surgical services to patients not requiring hospitalization” and that meets other regulatory requirements. If an ASC is not a “distinct entity” or operating “exclusively for the purpose of providing surgical services” as CMS interprets these terms, the ASC will no longer meet the Medicare definition. If a facility no longer meets the Medicare definition of an ASC, the ASC cannot be Medicare-certified. If a facility is not Medicare-certified, then Medicare will not reimburse the ASC for surgery performed on Medicare patients.
Applying the Medicare definition to the scenario described, the ASC would not meet the Medicare definition of an ASC. By permitting ophthalmologists to lease part of the certified space for consultations, the ASC no longer “operates exclusively for the purpose of providing surgical services.” In order to maintain the rental arrangement and meet the definition, the ASC must “carve out” the areas of rented space completely from the certified facility, as long as the “carve-out” does not otherwise adversely impact the certification. To avoid uncertainty, inquiry should be made with the appropriate state survey agency.
Until recently, the facts set forth here would have triggered a second issue based on the provision of non-ASC list covered procedures (ie, LASIK) in addition to ASC list covered procedures. Specifically, some CMS officials had expressed the view that the provision of non-ASC list covered procedures by an ASC also would jeopardize the ASC’s Medicare certification.
In fact, however, CMS has acknowledged that Medicare-certified ASCs may provide surgical services that are not Medicare ASC list procedures, as Medicare requires that an ASC be operated for the purpose of providing “surgical” services; it is not limited to “covered” surgical services or services on the ASC list.