As more established surgical centers enter marriages of convenience with hospitals to exploit a quirk in the way surgical services are reimbursed, how long will it be before federal regulators seal a loophole that's just too seductive for some physicians and hospitals to resist?

It's a joint venture with a twist, it smells a little fishy and it goes something like this: Instead of the ASC billing payers and patients for the cases it performs on hospital outpatients, the hospital pays the ASC a per-procedure fee presumably at fair market value, then bills payers under its provider and tax identification numbers.

Of course, payers reimburse hospitals about 40 percent more per surgical case than ASCs, so the joint venture and its investors get richer quicker. Let's say an ASC receives an average of $1,200 for each of the 3,000 cases it performs per year. That's $3.6 million. That same ASC performing those same 3,000 cases can receive an average of $3,000 per case if those cases are billed out by the hospital. That's $9 million.

The government has a name for this kind of gamesmanship: "under arrangements." Critics have less flattering names. Shameless gouging. Circumvention scheme. Scam. Fraud.

"They can be viewed like that," says healthcare lawyer Scott Becker, JD, CPA, who warned the physicians who attended his weekend conference last month in Chicago to view the under arrangements model with caution. "Economic-ally, they're extremely attractive to both physicians and hospitals. It's a win-win for them. But what's really going on is you're operating for all practical purposes as a surgery center and billing as a hospital outpatient department."

This bait-and-switch tactic exploits and insults the intent and the spirit of Medicare coverage rules that explicitly provide for payment to a hospital for services provided by an outside entity under arrangement to the hospital's patients. Besides decorum, the thin line of defense against under arrangements is that the ASC must qualify as part of the hospital for purposes of Medicare, which means that the ASC must meet Medicare requirements for hospital-based status. As healthcare lawyer Eric Zimmerman, JD, points out, if state law permits the facility to be licensed as part of the hospital, CMS will require that it be so licensed, which may be problematic if the facility is already licensed as a freestanding ASC.

The bottom line: Under arrangements JVs based solely on better reimbursements don't speak very well of physician ownership or of the ambulatory surgery industry. Just because there's a loophole, it doesn't mean you have to jump through it.