In an "exclusive-use" agreement, a surgeon pays a surgical center a leasing fee for the exclusive use of an OR. This somewhat controversial model is the focus of a breach of contract lawsuit accusing a Houston neurosurgeon of failing to pay a now-defunct surgical center the $304,378.45 he allegedly owed for using the facility as well as the ASC's billing services.

In their exclusive-use agreement, Houston neurosurgeon Richard Westmark, MD, and the Palladium for Surgery Houston agreed to a 50/50 split - 45% to lease the facility and 5% for billing services - of collections, says Matt Maruca, the ASC's attorney. "We received no payment from [Dr. Westmark] as required under the standard exclusive-use agreements," says Mr. Maruca. "That's the allegation." Mr. Maruca adds that the $300,000 accrued over several months, from the middle of 2010 until early this year, and that Dr. Westmark wasn't the only physician that violated the exclusive-use agreement. Dr. Westmark didn't return a message left with his office manager seeking comment.

While Mr. Maruca called exclusive-use agreements "a valid model and a valid use of an ASC license," a leading healthcare lawyer wasn't as certain. "In my experience, this model only has limited utility as it cannot be utilized in a majority of states which prohibit an ASC from sharing its license with any other person," says Joshua M. Kaye, JD, of McDermott Will & Emery in Miami, Fla. "In addition, it is typically not utilized for Medicare, Medicaid or other federal- or state-funded healthcare program beneficiaries due to the potential fraud and abuse issues implicated from such an arrangement." Texas has long been a hotbed for these types of arrangements, often involving plastic surgeons or other physicians that have a significant self-pay patient base, adds Mr. Kaye.

The exclusive use is typically structured as a block of time on specific days of the week - for example, 8 a.m. to 1 p.m. Monday and Wednesday, says Mr. Kaye. The physician bills the patient for services that include both the physician's professional fee and a facility fee. The ASC bills the physician for the use of the space. "In exchange for a fee based on a fair market value, doctors were allowed to use the center," says Mr. Maruca. "We billed under the [physicians'] practice's name. That's how the arrangement worked."

Northstar Healthcare, which holds interests in and manages 3 ambulatory surgery centers, 2 in Houston and the third in Dallas, filed the suit. Mr. Maruca declined to comment on why the Palladium for Surgery Houston is no longer in business.

Dan O'Connor