BLOG: ABCs and XYZs of ASCs
ASCs are a great opportunity for most orthopedic groups, but the legal issues have the potential to seem overwhelming.
In fact, the legal barriers to ASCs are often less imposing than people expect, though there are some surprising potential traps.
Many people worry about the Medicare antikickback statute and its impact on ASCs. However, there are few important things to keep in mind. First, if you place the ASC within a group practice, the antikickback statute does not apply. When the first set of ASC safe harbors were issued in 1991, the Office of Inspector General explained that:
“Comment: Many commenters requested the OIG to clarify that payments between corporations which have common ownership are not subject to the statute. Commenters cited as examples intracorporate discounts and payments between two wholly owned subsidiaries. Some commenters argued that referral arrangements between two related corporations do not constitute ‘referrals’ within the meaning of the statute and suggested that the OIG define the word ‘referral’ to exclude such activity.
Response: We agree that much of the activity described in these comments is either not covered by the statute or deserves safe harbor protection. We believe that the statute is not implicated when payments are transferred within a single entity, for example, from one division to another. Thus, no explicit safe harbor protection is needed for such payments.”
(56 F.R. 35952; July 29, 1991)
Medicare antikickback statute
If an orthopedic group operates an ASC within its group, the Medicare antikickback statute is irrelevant. As always, one must still worry about state laws, but while most states will require physicians to disclose their ownership to patients, few statutes have laws more restrictive than the Medicare antikickback statute.
It is often a good strategy to enter into a joint venture for an ASC. Joint ventures have the ability to lower overhead per case and improve the odds of obtaining a certificate of need in states where that is necessary. There are a variety of safe harbors that protect ASC joint ventures. However, people often believe that it is necessary to fit squarely within one of the safe harbors. In fact, the safe harbors are entirely optional. The government has noted repeatedly that “Arrangements are not necessarily unlawful because they do not fit in a safe harbor. Arrangements that do not fit in a safe harbor are analyzed for compliance with federal anti-kickback statute based on the totality of their facts and circumstances, including the intent of the parties.” (85 F.R. 77685)
In fact, it is often impossible to satisfy the ASC safe harbors. The safe harbor for joint ventures between a hospital and surgeons requires that the hospital not be in a position to refer patients to the ASC.
Hospital employment
The government has explained that means that if the hospital employs physicians, any ASC in the service area of the hospital will fail to qualify for the safe harbor. Yet, no rational hospital would build an ASC outside of its service area. This means it is nearly impossible for an ASC that is a physician/hospital joint venture to fit within the safe harbor. That is totally fine. It is less important to focus on the terms of the safe harbor, and instead focus on a key question: Is the ASC structured to compensate anyone for sending cases to the ASC? If it is, then there is serious concern under the antikickback statute. For example, permitting individual primary care physicians who send patients to surgeons at the ASC the opportunity to invest in the ASC is risky. By contrast, if you choose to permit the anesthesiologists who perform services at the ASC to invest, that will generally pose little to no risk under the statute.
There are other potential traps for ASCs. Medicare places significant limits on the ability of an ASC to share space with other organizations. Generally speaking, Medicare will only permit an ASC to share space during times that the ASC is not in operation. During its hours of operation, Medicare expects all space, including wait rooms and other non-clinical space, to be under the sole control of the ASC.
My colleague Ryan S. Johnson, JD, and I recently did a 1-hour webinar explaining the legal and practical issues surrounding ASCs, including details on how to structure the ownership and allocate the profit. You may watch it for free here.
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