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OIG frowns on common hospital-physician joint venture
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Publish Date: October 10, 2007   |  Tags:   Accreditation

Anti-Kickback Statute
OIG Frowns on Common Hospital-Physician Joint Venture
A fairly common ASC transaction may run afoul of the federal Anti-kickback Statute, says the OIG in an advisory opinion published last month. We asked Mark Manigan, a healthcare lawyer with WolfBlock Brach Eichler in Roseland, N.J., to interpret the advisory opinion.

The transaction involved orthopedic surgeons who own 94 percent of an ASC selling a 40 percent interest to a hospital. The purchase price was set at fair market value, but would exceed what the orthopedic surgeons invested in the ASC, thereby resulting in a gain for the orthopedists on the sale.

The OIG didn't go so far as to characterize the transaction as illegal. However, in concluding that the transaction "poses a heightened risk of fraud and abuse," the OIG demonstrated a clear unwillingness to bless transactions that fail to fall squarely within an applicable safe harbor, says Mr. Manigan.

The OIG was asked to evaluate whether the transaction would comply with the anti-kickback statute, which renders illegal any payment in exchange for the referral of healthcare services. The hospital-physician ASC safe harbor sets forth many conditions, including the requirement that ASC profits be distributed "directly proportional" to the amount of capital invested. In concluding that the proposed arrangement poses risk under the statute, the OIG noted that:

  • the transaction doesn't qualify for safe harbor protection because profit distributions wouldn't be based on capital invested, but rather on ownership percentages;
  • due to the fact that the hospital will have paid more for its shares than the orthopedists, the orthopedists would receive a higher rate of return on their investment than the hospital, perhaps implying that the purchase price in transactions such as this should be based on the original investment amount as opposed to fair market value; and
  • excluding the non-orthopedists from the sale gives rise to "the possibility that one purpose of the hospital's investment is to reward or influence ? referrals of patients to the hospital or to the ASC."

"While you can reasonably argue that the opinion is narrowly drafted and would apply only to similar transactions, parties entering into any ASC sale transaction, whether it be physician-to-physician or physician-to-ASC development company, should consider the OIG's latest guidance," says Mr. Manigan.

Mr. Manigan found one bright spot in the opinion: The OIG says that none of the identified areas of concern, standing alone or in a combination, necessarily indicates fraud and abuse.

"However, the opinion does little to clear the murky waters already surrounding the anti-kickback statute as it applies to the ASC market," he says. For example, it has long been held that the purchase price for shares in an operating "ongoing concern" ASC should be based on fair market value because a new physician paying less than market value could be construed as a kickback by the ASC to the new physician in exchange for anticipated referrals, says Mr. Manigan. Now, however, that thinking has been called into question.

- Dan O'Connor

Site Lets Patients Assess Their Own Anesthesia Risk
A Web site offers patients a free anesthesia evaluation and a personalized comprehensive printout with questions they can discuss with their anesthesia providers and surgeon before surgery. Anesthesiologist Lynnus Peng, MD, chairman of anesthesia at St. Jude Medical Center in Fullerton, Calif., built www.anesthesiarisk.net to help people understand the potential for drug interactions and other risks before undergoing surgery. The anesthesia risk assessment lets users fill out a detailed 11-part survey with questions on medical issues from diabetes to heart disease to herbal drug use. The survey then generates recommendations for lab tests and pre-surgery preparations, such as stopping certain medications.

In the Know

  • Medical Metal Detector. Inspired by the device used to find lost coins in the sand, Johns Hopkins biomedical engineering majors have invented a small handheld metal detector to help doctors locate hidden orthopedic screws that need to be removed from patients' bodies. The device, inserted in a small incision made near the expected site of an orthopedic screw that needs removal, emits a tone that rises in pitch as the surgeon moves closer to the metal screw. It also serves as a surgical tool to guide the removal of the hardware.
  • Surgical Misadventures Common. About every other day, a hospital or a surgery center in Pennsylvania reports a serious error or a close call to the state's Patient Safety Authority, according to a study. In the two-and-a-half years that ended Dec. 31, the safety authority fielded 175 serious error reports. In 83 reported cases, surgery was performed on the wrong site or the wrong patient. The authority also received reports of 253 close calls where the error was detected before an incision was made. Pennsylvania is the only state that requires the reporting of close calls.
  • Summer Reading. Anesthesiologists Barry L. Friedberg, MD, and Adam F. Dorin, MD, MBA, are proud authors. Dr. Friedberg is the editor of "Anesthesia in Cosmetic Surgery," a 284-page text ($95 by Cambridge University Press). Dr. Dorin is the author of "Jihad and American Medicine: Thinking Like a Terrorist to Anticipate Attacks via Our Health System," due out in November ($49.95 by Greenwood Publishing Group).
  • Propofol Problems. Several patients who received propofol experienced chills, fever and body aches shortly afterward, says the FDA in a June 15 bulletin. The lots of propofol appear to be free of bacteria or endotoxin contamination. The FDA says propofol vials and pre-filled syringes should be used within six hours of opening and limited to one per patient.
  • Drug Patch Death. A West Palm Beach federal jury has awarded $5.5 million to the father of a man who died while wearing a Duragesic drug patch on his arm. Tests reportedly showed the man had at least three times the lethal dose of fentanyl in his system at the time of his death.

Post-operative Cognitive Dysfunction
Does Anesthesia Impair Mental Function?
Your patients might not lose that woozy feeling they experience after emerging from anesthesia for weeks or even months to come, with the elderly being more at risk to have such impaired mental functions as visual recall and semantic fluency after surgery, according to a systematic review on the research into post-operative cognitive dysfunction.

The review in the March Anesthesiology found that in the early weeks after major noncardiac surgery, a significant proportion of people show POCD. Minimal evidence was found that patients continue to show POCD up to six months after and beyond.

Several studies have addressed whether anesthesia impairs the mental ability of elderly cardiac surgery patients, but the study of POCD in noncardiac surgery is relatively new, with many of the studies speculative or involving small samples. The review of 46 studies examined cases ranging from cataract and orthopedic surgery to vascular and thoracic surgery. Key findings:

  • POCD prevalence. Ignoring the one study with a high incidence of POCD, the other studies produced POCD rates of between 6.2 percent and 9.4 percent in the surgical group and between 2 percent and 4 percent in the control groups studied. Major surgery produced between 26 percent and 33 percent POCD compared with 7 percent for minor surgery.
  • Older patients more likely to show POCD. A large study with a control group that compared patients aged 40 to 60 years with a previous group aged over 60 years concluded that the younger group showed significantly less POCD at both seven days (P = 0.0064) and three months (P = 0.026). The review cautions that the research has concentrated mainly on an older age group, with only nine studies examining participants with a mean age of less than 60 years. Two single-group studies reported that older patients were more susceptible to early decline and one of the controlled studies found that age over 70 years was a risk factor for early POCD. Further support that older age is associated with early POCD comes from a study that examined a middle-aged sample (40 to 59 years) and found POCD in 19.2 percent of subjects. Two other researchers found POCD in 25.8 percent and 32.7 percent of their samples who were older than 60 years.
  • Complications or POCD? Two studies suggest that patients who may have been sicker or requiring more extensive inpatient surgery may be more likely to have POCD than those undergoing outpatient surgery. The review questions whether increased rates of POCD in those with complications are more of a reflection of the additional medication to deal with the complications than to POCD. Similarly, the review questions whether symptoms such as pain and some types of post-op medication may lead to poorer neuropsychological performance. It's possible that these factors may also lead to larger declines in the days after surgery when pain and the use of medication may be at its greatest and to less POCD at later assessment times, says the review.
  • General vs. regional. It's logical to think that general anesthesia causes POCD after noncardiac surgery and that the use of alternative methods of anesthesia for the same procedure should result in a reduction or a removal of POCD. However, the evidence suggests that using regional anesthesia as an alternative to general doesn't result in any reduction in POCD, notes the review.

- Nathan Hall

Post-op Cognitive
Dysfunction vs. Delirium
Post-operative cognitive dysfunction differs from post-op delirium, which tends to be a transient and fluctuating disturbance of consciousness that tends to occur shortly after surgery. POCD is a more persistent problem of a change in cognitive performance as assessed by neuropsychological tests. It manifests as problems with memory, attention, concentration, speed of motor and mental response, and difficulties with learning.

Such pre-operative factors as a history of alcohol abuse can have a significant effect on post-surgical cognitive function, the results of two earlier studies published in the journal Anesthesiology show.

A Hard Time for Software
Who's to Blame for Electronic Medicare Billing Bottleneck?
You can blame the rash of denied and delayed Medicare payments frustrating facilities nationwide on a "perfect storm" of software production complications, late-breaking changes on how electronic claims are to be filled out, and incompatible hardware and services, says a leading healthcare software provider.

In a letter to users of SourceMedical software, Scott Palmer, president and chief operating officer of the company's surgery division, acknowledged the rejected Medicare claims and delayed Medicare payments facilities have been dealing with because of glitches in the payor billing process.

"We believed we took all necessary steps to be well prepared for updating our 2,800 customers currently using the AdvantX, SurgiSource and Vision applications," says Mr. Palmer. But the simultaneous updates left the company overwhelmed with a longer-than-normal service backlog of customer calls seeking technical assistance.

A flurry of late changes to forms and requirements by the National Uniform Billing Committee, the National Uniform Claim Committee, Medicare and other payors complicated and delayed product testing and rollout, says the company. And clients using printers and even billing clearinghouses that aren't supported by SourceMedical's latest software may also face incompatibility issues in submitting claims forms. A recent e-mail from the Centers for Medicare and Medicaid Services also identifies outdated software and the misuse or failure to use the newly issued National Provider Identifier in claims as other culprits for billing difficulties.

"We didn't get payments from Medicare for more than a month," says one ASC administrator. "It was all because the interface between our billing software and the electronic billing clearinghouses wasn't working. Medicare would deny our claims if we didn't drop all the right information in the right boxes on the electronic form." She says claims were denied because she substituted her center's National Provider Identification number for its tax ID number when Medicare required them both.

For its part, SourceMedical says it intends to improve its customer support in the future through increased Web and e-mail communications; a higher level of quality assurance, product testing and technician cross training; and the staggered release of claims-focused updates.

- David Bernard

Surgery With A Guarantee
Would you guarantee that lap chole for 90 days? What about that carpal tunnel repair? Cardiac surgeons at Geisinger Health System in Danville, Pa., are a part of a program that, in effect, offers the sort of warranty most people associate with purchasing appliances. Patients can participate in ProvenCare, a program that offers them full care from pre-op to inpatient to post-op for a single fixed price. The care program includes treating complications 90 days after the procedure. To ensure best practices, staff follow 40 verifiable processes derived from the American Heart Association and the American College of Cardiology.

"We're so confident that this approach will optimize outcomes and minimize complications that we're sharing the financial risk with patients and payors." says Alfred Casale, MD, surgical director for Geisinger Heart Institute. "The warranty is really just our means of communicating our confidence in our standards."

The early results of this program are promising. Over a nine-month period (from February to November 2006), mean hospital charges fell by 5.2 percent and the patient's length of stay decreased by 12 percent.

- Nathan Hall