There is a possible way out for some ambulatory surgery centers. In certain situations, you can sell equity in your ASC for an amount less than what is considered FMV - without creating meaningful health law regulatory risk. This position is based on the "group practice" and "extension of practice" concepts, which we'll get into. It only applies to surgical centers that are affiliated with physicians in a single-group practice, even if there is an ASC management company or health system also involved as an owner.

Slipping the FMV standard
Let's say a talented surgeon you've long admired is interested in buying a 3 percent stake in your center, which is netting around $800,000 a year. Let's also say that the current FMV multiple for minority interest is around 3. That surgeon might resist writing a check for $72,000 ($800,000 multiplied by 0.03 and then again by a multiple of 3), but he could bring himself to write a check for $24,000, a sales price based on some other basis than FMV (such as book value) or a lower multiple (1 instead of 3).

Single- and multi-specialty group practices that are big enough to justify an ASC affiliated solely with a single-group practice (no outside physician ownership, for example) could benefit from the regulatory analysis that eliminates their needing to meet an FMV standard. Single-group practice ASCs are more prevalent in such specialties as gastroenterology and ophthalmology.

In order to have comfort with the position that the acquisition price for ASC interests doesn't need to satisfy an FMV standard, certain elements should be present in the arrangement. The two most critical:

• All of the physician-owners in the ASC should be members of a single-group practice.
• To have a higher degree of regulatory comfort, the owners should all be physicians who each derive a substantial portion of their incomes from the performance of ASC procedures (for example, no non-utilizer physician owners, such as primary care physicians who provide referrals to the utilizing physicians).

Negotiating the safe harbor
In most ASC equity sales, failure to meet the FMV requirement would produce significant risk under the federal Anti-kickback Statute, a violation of which could result in both criminal and civil penalties. The concern under the Anti-kickback Statute is that the surgery center or its physician-owners are selling the equity interest to the physician for less than FMV in order to induce the physician to start or continue to use the ASC. Under the statute, the discounted price could be deemed prohibited "remuneration" to the physician in order to induce his or her referrals.

The federal Anti-kickback Statute has a safe harbor for group practices. Arrangements in which physicians from a single-group practice have ownership in a separate ASC entity won't meet this group practice safe harbor because, by its terms, the safe harbor only applies to investments in the group practice entity itself and not to ancillary ventures owned by the group or its physicians.

However, it's important to note that this safe harbor does not require the investments in the group practice to be at FMV. Furthermore, the safe harbor for ASCs under the Anti-kickback Statute doesn't explicitly require that an ASC investor pay FMV for an interest in the ASC; rather, the terms on which an investment interest is offered to an investor must not be related to the previous or expected volume of referrals.

So, in the context of an ASC that is owned only by physicians in the same group practice, all of whom use the ASC as an active extension of their practice, it's reasonable to take the position that the ASC isn't violating the Anti-kickback Statute by selling ASC interests to new group practice owners at a price lower than FMV. Instead, you'd base the price on the book value of the ASC's assets or on some other formula that is set in advance and unrelated to a physician's anticipated referrals to the ASC.

Equity in the practice and the ASC
This analysis may be particularly helpful to a group practice that is offering physicians both equity in the group practice and equity in the affiliated ASC. It's important to note that physicians must pay the purchase price entirely in cash, as the ASC and its current owners are prohibited from loaning physicians money to buy in (although third-party bank financing is fine).

Of course, you should consider the tax implications of such a deal and seek the advice and guidance of your healthcare lawyer.