Meridian Surgical Partners, a Brentwood, Tenn.-based ASC development and management firm, agreed in September to pay $5.12 million to settle a whistleblower lawsuit in which the former business office manager of a Florida facility accused the company of engaging in Medicare fraud through kickbacks for physician referrals. The settlement almost certainly signaled that the days of quick-and-dirty physician buy-ins are over.

According to the suit, Meridian had purchased a 60% share of the Treasure Coast Surgery Center in Stuart, Fla., for $96,000 a share. Shortly afterwards, it sold ownership interests to physician-utilizers for $25,000 a share. The whistleblower, Thomas Reed Simmons, claimed this transaction violated the federal Anti-Kickback Statute because the physicians' purchase price was less than fair market value and as such was a disguised kickback in exchange for their anticipated patient referrals to the ASC.

Mr. Simmons noted that the physicians immediately enjoyed a 50% return on their investments. Since their referrals included Medicare patients, his lawsuit argued, the cheap buy-ins also could be considered a form of defrauding the federal insurance program. While Meridian aggressively denied any wrongdoing in its syndication, the company paid handsomely — $3.32 million in restitution to the U.S. government ($913,000 of which went to Mr. Simmons) and $1.8 million in court costs — to make the matter disappear, just 2 weeks before its scheduled trial date in a Tennessee federal court.

The federal Anti-Kickback Statute is exceedingly broad in scope, and many normal transactions can easily find themselves under scrutiny. The ASC safe harbors later added to it create further grayness in discerning exactly how a transaction might legitimately work. ASC owners and operators are not defenseless against whistleblowers' allegations, although taking a few precautionary steps can help to prevent them.

The best defense is documentation. Those facility owners who undertake physician buy-ins without fair market value support do so at their own peril. In order to defend against a potential kickback claim, ownership interests should be sold at fair market value, with supportive market guidance from a reputable valuation company included in the file, particularly if the sale price is much lower than recent market indicators (as it was in the Meridian case). Many owners struggle with how to price their shares, but there are solid valuation principles that can be relied upon to justify different purchase prices for the same product. For example, a controlling interest is worth more than a minority interest that can be terminated without cause. From a practical standpoint, supporting your purchase price with documented valuation guidance from an independent, third-party expert is an ounce of prevention.

Keep compliance consistent. ASC owners may want to consider reinvigorating their compliance efforts with the following strategies. Establish and maintain a strong compliance program through the continuing training of staff, professionals and owners on the boundaries of healthcare rules and regulations, and empower them to speak up if they see transactions they don't approve of.

Amicable departures. Facility leaders should seek to address compliance issues in exit interviews with departing employees. When you're discussing their reasons for leaving, find out whether anything in the facility's operations was a factor. This can serve as compliance due diligence and lead to corrective action.