JOURNAL ARTICLE

Ambulatory surgery centers—current legal issues 2004 (Part 2)

Scott Becker, Melissa Szabad, Sofia Foltushansky
Health Care Law Monthly 2004, : 3-10
15188633
This article covers several of the emerging issues related to ASCs, the anti-kickback statute and safe harbors, other regulations and relevant court decisions. The ASC Safe Harbors raise several concerns either because they are vague, silent, or provide little guidance as to their requirements. Perhaps the most challenging question under the ASC safe harbor relates to the handling of physicians who do not comply with the various safe harbor tests. As discussed, an ASC should address early on whether physicians who fail to meet or comply with the safe harbor will be redeemed from the venture. In redeeming such physicians, it is important to consider whether the company's operating agreement or shareholder agreement provides for redemption upon such event and whether the redemption will lead to litigation or compliance risks. Along the same lines, since it is illegal to provide any form of value in exchange for referrals under the anti-kickback statute, share sales at below fair market value may be viewed as an illegal kickback in exchange for referrals. Thus, in terms of adding physician owners, a number of guidelines should be followed. An ASC should also carefully consider situations in which it waives or discounts co-payments or deductibles. The safest course for a provider remains to collect the entire co-payment and deductible amounts from patients. Moreover, in the case of Medicare and Medicaid patients, an ASC should never waive or discount co-payments and deductibles unless the patient demonstrates financial hardship. Either way, such a waiver or discount should only be in accord with an applicable charity care or discount policy. A new issue involving the anti-kickback statue, state and federal self referral laws, and Medicare regulations, has gained attention as ASCs are increasingly finding themselves approached by third party vendors to enter into an arrangement, where the vendor owns the equipment and bills a third-party payor for the technical component of the procedure performed with the equipment, and the vendor then pays the ASC a fee for its lease of ASC space to house the equipment. These types of relationships can raise several legal compliance concerns. An ASC should understand that the arrangement could jeopardize its state ASC license and its Medicare certification even though the arrangement does not involve Medicare certified procedures or Medicare patients. Furthermore, this type of business venture might not comply with state and federal self referral laws. ASCs are also increasingly facing situations where a provider performs a procedure for which there is no facility charge for the ASC, but the physician is receiving a professional fee from Medicare. In this situation, ASCs should implement a policy, similar to the example provided in this article, to avoid even the appearance of providing an inducement or reward for referrals of Medicare or Medicaid business by requiring physicians to pay the Center a fee, consistent with fair market value, for the use of the Center for non-Covered Procedures or for performing multiple procedures within the same operative session. Lastly, as touched upon by this article, in the joint venture context, ASCs must take into account several guidelines in order to steer clear from risks associated with tax-exempt entities as an investor and antitrust price fixing issues. Whether a joint venture, of which a tax exempt entity is an investor, is deemed organized and operated in furtherance of the charitable purposes of a tax-exempt partner as set forth in Section 501(c)(3) of the Code depends on the facts and circumstances of each case. Generally, a joint venture will satisfy the guidelines if the tax-exempt investor in the joint venture retains sufficient control over the joint venture to ensure that the joint venture furthers the charitable purposes of the tax-exempt investor and adequately serves the community. In the ASC physician hospital joint venture arena, the principal antitrust concern relates to potential claims of price fixing. Where a hospital is a partner in a joint venture, the hospital and joint venture must take action to assure that the pricing and negotiations of the hospital and the ASC are handled separately. In all of these situations, ASCs and their investors must pay close attention and stay current of the safe harbor concepts, as well as the other regulations, guidelines, and court decisions discussed in this article in order to avoid potential regulatory and litigation risks.

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