In a recent advisory opinion, the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) concluded that certain investments by a health system, manager and physicians in an ambulatory surgery center (ASC) did not create a substantial risk of fraud and abuse under the federal Anti-Kickback Statute (AKS) even though the investments did not fall within the protection of the AKS safe harbor for ASCs. The AKS prohibits paying, soliciting or receiving remuneration to induce or reward referrals for items or services that are reimbursable under a federal health care program. As explained in the advisory opinion, returns on investments constitute remuneration under the AKS and there is a particular concern for potential fraud and abuse when the investors are in a position to make or influence referrals to the invested entity.

In this case, the ASC was jointly owned by a health system, a management company and several orthopedic surgeons and neurosurgeons that were employed by the health system. Although their investments did not fall within the AKS safe harbor for ASCs, OIG concluded that the arrangement presented a sufficiently low risk of fraud and abuse and, therefore, the arrangement was not subject to sanctions under the AKS.

The manager would provide certain management services to the ASC, but it also certified that (i) it would not, directly or indirectly, make or influence referrals to the ASC or its physician owners, and (ii) none of the physician owners of the ASC had, or would in the future have, an ownership interest in the manager entity. OIG explained that these two factors mitigated any kickbacks concerns.

With respect to the investments by the health system and physicians, OIG concluded that their investments in the ASC also presented a sufficiently low risk of fraud and abuse because of the following factors:

  • Some of the physicians did not meet one of the requirements of the ASC safe harbor which requires all physician owners of an ASC to derive at least 1/3 of their medical practice income from performing procedures that are qualified to be performed in an ASC setting. Nonetheless, they certified that the physicians would use the ASC on a regular basis as part of their medical practice and would rarely refer patients to other physician investors for ASC procedures. In other words, almost all of the procedures performed at the ASC would be personally performed by the referring physicians. OIG explained that these facts reduced the likelihood of any cross-referrals to other physician investors in an effort to generate profit for the ASC that could in turn be distributed to the investors.
  • The arrangement also included certain safeguards to reduce the health system’s ability to make or influence referrals to the ASC or its physician owners. For example, compensation paid to physicians who are employed by or contracted with the health system would be consistent with fair market value and would not be related, directly or indirectly, to the volume or value of their referrals to the ASC or its physician owners. The health system also certified that (i) it would not engage in any actions that would require or encourage its physicians to refer patients to the ASC or its physician owners, and (ii) it would not track any referrals made by its physicians to the ASC or the physician owners.
  • Other factors also reduced the likelihood that investors would be rewarded for their referrals. For example: (i) neither the ASC nor any investor would loan money or guarantee a loan for any other investor to obtain ownership in the ASC; (ii) the ASC would not offer ownership to any party based on the volume or value of past or anticipated future referrals to the ASC or its other investors; and (iii) capital contributions and profit distributions would be made in proportion to each investor’s ownership interest in the ASC and not in a way that could disproportionately reward referrals.
  • Other arrangements between the parties, such as leasing of space and equipment from the health system to the ASC, and provision of administrative services to the ASC, would comply with the applicable AKS safe harbors for the particular arrangement. In addition, the investors would notify patients that are referred to the ASC about their investment interest in the ASC.
  • The ASC and its investors would treat all patients, including beneficiaries of federal health care programs, in a nondiscriminatory manner and would not bill separately for any ancillary services provided to patients that are directly and integrally related to the procedures performed at the ASC. This minimized the risk of improper billing and potential fraud and abuse under federal health care programs.