FACILITY FEE FIGHT Some insurers are asking office-based suites to return years of facility fees they were paid.

Imagine this: You get a letter from an insurance carrier asking you to return a substantial amount of money you'd received for a backlog of paid claims. You've been billing the carrier in the same manner for years, with their approval, and they've paid you each time with no objection. Only now, without warning, they've changed their method of billing for future services, and also revised their policy on past billings. That situation is occurring at hundreds of office-based facilities, where physicians have long been billing separate facility fees in connection with the performance of outpatient surgical procedures, with the explicit consent of insurers, until now.

Devil in the details
In a typical scenario, a physician sets up a dedicated room for surgical procedures under a separate corporate entity (owned by the physician) with a separate tax ID number to receive payments for the services rendered there. This facility is accredited. Full disclosure is made to insurers concerning this arrangement, and the insurers agree in writing to pay separate facility fees in addition to professional fees upon the performance of office-based surgical procedures. Routine billing and claims payment ensue, often for years.

The health insurance industry's recent emphasis on retrospective audits as a mechanism for cost savings has led to notification letters asking for facility fee refunds. Not only won't they reimburse office-based surgeons their facility fees in the future, they're also seeking repayment of previously paid claims.

The insurers cite various explanations for their changing of the billing rules. In New York, a state in which I practice, insurers are claiming that no provider, whether participating or non-participating, can bill for facility fees if the facility at issue has not been licensed under Article 28 of the state's Public Health Law.

No law on the books
But this is a misinterpretation of the law. There is no such statutory requirement. In fact, there are no regulatory guidelines that either explicitly permit or prohibit a physician from billing for a facility fee for a procedure performed in a separate operating room located in a physician's practice office. (Consult with your legal advisor for your state's specific regulations.)

The state department of health has issued an opinion noting the absence of regulations against, or even a prevailing disposition of judgment on, billing for separate facility fees. "The wide variety of fact patterns must be analyzed on a case-by-case basis," the opinion read, "before specific conclusions can be reached about the criminal, civil or disciplinary consequences of particular conduct by corporations or physicians." This statement supports the position that facility fee payment is a contractual issue between a physician and an insurance company, and that there is no absolute prohibition against paying or receiving such a fee if both parties agree to it.

The contractual nature of this issue is illustrated in the merger of Oxford Health Plans with UnitedHealthcare. Oxford, which has paid facility fees for the performance of office-based surgical procedures, has notified its participating providers that it will no longer do so, in order to conform with United's policy, which does not allow such payments.

COMPLETE COMPLIANCE
Getting to 100% on One-Third Tests

SELECTIVE ENFORCEMENT Don't disregard certain surgeons who fail to meet the one-third tests while cracking down on other non-compliant physicians.

Q Physician-owners have to perform at least one-third of their cases in their ASCs to comply with the federal Anti-Kickback Statute. How can you ensure compliance, and what steps can be taken if a physician is not compliant?

A Remember that the "one-third" tests for ASC investment eligibility differ depending on whether the ASC is single- or multi-specialty. In a single-specialty center, at least one-third of each physician-owner's medical practice income from all sources for the previous fiscal year or 12 months must be derived from performing ASC procedures. In a multi-specialty center, a physician-owner must meet this one-third income test and also perform at least one-third of ASC procedures in the owned facility.

Ongoing communication with physician-owners can help to ensure a solid track record of compliance. In order to assess compliance, an ASC might require each physician-owner to provide an annual compliance certificate or attestation. If a physician is unwilling to provide such attestation, or if the ASC has reason to question it, facility leaders may want to consider asking the physician to provide access to information that would demonstrate the one-third compliance.

Many ASCs incorporate such disclosure requirements into their governing documents. As a result, a physician-owner's failure to provide the requested compliance details can give a center the valid right to buy back ownership interests.

Be wary of selectively enforcing the one-third tests. It won't do you any favors with regulators if you disregard physician-owners who fail to meet the quota while performing highly profitable cases, but crack down on the non-compliant physicians whose cases net lower reimbursements.

— Joshua Kaye, JD

Mr. Kaye ([email protected]) is a partner and co-chair of the health care sector at global law firm DLA Piper's Miami office.

Watch your step
Physicians should be aware, however, that the state department of health has also advised that under certain circumstances, such as when the corporate entity being paid the facility fee is owned by a non-professional, the arrangement may constitute professional misconduct and/or criminal violations. Our law firm and the Medical Society of the State of New York have issued replies that this opinion is based on a misinterpretation of the law.

In our view, as health law attorneys, an insurance carrier that has explicitly agreed to the billing of office-based surgery facility fees and that has continually paid such fees without objection, where full disclosure of the accreditation status of the facility has been made, has no legal grounds to seek repayment of claims already paid to providers who relied upon this agreement in submitting claims for facility fees.

However, it remains a weighty decision for every physician who receives such a notification letter from an insurer — challenge the demand, or simply seek to negotiate some form of reduced amount? Considering the amounts being demanded, this decision may be a foregone conclusion.