On April 29, 2021, the Department of Health and Human Services (HHS) Office of Inspector General (“OIG”) released a new advisory opinion (OIG Advisory Opinion No. 21-02) about an Ambulatory Surgery Center (“ASC”) to be jointly owned by a health system, a physician group composed of five orthopedic surgeons and three neurosurgeons employed by the health system, and a management company that develops ASCs nationwide. The new opinion highlights certain facts that the OIG may find to provide safeguards for an arrangement that does not quite meet the ASC Safe Harbor for hospital and physician investors and may lower such arrangement’s risk of violating the federal Anti-Kickback Statute (42 U.S.C.A. § 1320a-7b).
The arrangement described in the opinion included a health system that would own 46% of a new ASC, a group of physicians employed by the health system that would cumulatively own 46% of the new ASC, and a management company that would own 8% of the new ASC. The OIG analyzed the arrangement under the ASC Safe Harbor for ASCs jointly owned by hospitals and physicians (42 C.F.R. § 1001.952(r)(4)) and noted each of the parties may be in a position to, directly or indirectly, make or influence referrals to the new ASC.
1/3 of Medical Practice Income Requirement
Most notably, the new advisory opinion briefly discusses that three neurosurgeon investors would not derive 1/3 of their medical practice income from ASC-qualified procedures, which is one of the requirements for physician investors under the ASC Safe Harbor. The OIG found that despite failing to meet this requirement for the ASC Safe Harbor, the following facts provided significant safeguards and reduced the arrangement’s risk of violating of the Anti-Kickback Statute: (i) the neurosurgeon investors would use the ASC on a regular basis as a part of their medical practices to personally perform neuroplasty procedures, and (ii) the investors estimated that less than 1% of the aggregate number of ASC-Qualified procedures performed at the ASC each year would be derived from procedures referred by physician investors to other physician investors.
Health System Influence on Referrals
The arrangement also failed to meet the ASC Safe Harbor requirements because the health system would be in a position to make or influence referrals directly or indirectly to the physician investors or the new ASC. However, the OIG found that the following actions presented significant safeguards for the arrangement: (i) the health system certified that any compensation paid to the physicians, either through an employment relationship or personal services arrangement, would be consistent with fair market value and not related to the volume or value of referrals the physicians may make to the ASC or other physician investors, and (ii) the health system would not require, encourage, or track any referrals from the physicians to the ASC or other physician investors.
As with all OIG advisory opinions, the scope of the new opinion is limited to the facts discussed by the OIG and certified by the party seeking the opinion, however the OIG’s analysis of the facts can help other health care providers identify certain actions that may reduce risk of violating the Anti-Kickback Statute in certain types of healthcare business arrangements.
The attorneys at Chilivis Grubman represent clients of all types and sizes in connection with reviewing and negotiating new healthcare business arrangements, including advising on an arrangement’s risks under the federal Anti-Kickback Statute. If you need assistance with such a matter, please contact us today.