DON'T GET TRAPPED Is your facility's anesthesia arrangement a kickback liability risk?

Physician-owners who try to profit from anesthesia services often violate, knowingly or unknowingly, the Anti-Kickback Statute, putting themselves at risk of fines, disqualification from federal healthcare programs and even incarceration. These so-called "company model" arrangements, in which the physicians' practice employs the anesthesia providers and bills for their services, also raise a pair of serious compliance questions:

• Is granting exclusive rights to a physician-owned anesthesia company a kickback in itself?
• Would participation in a company model arrangement invalidate the facility's use of the statute's ASC safe harbor?

The following scenarios show how the company model might unexpectedly spark regulatory trouble.

Exclusive arrangement
The Green Acres ASC is in desperate need of new business. For 10 years, it has contracted with Centerville Anesthesia, a group of 6 anesthesiologists working full-time at the facility, to provide services.

A group of 9 surgeons approaches Green Acres. They're interested in investing in the ASC and bringing all of their cases to its ORs. But, they say, they'll also need to bring along their own anesthesiologists, the Black Hat Anesthesia Company.

The Green Acres administrator notifies Centerville Anesthesia that the ASC has elected to terminate its services, exercising the without-cause provision in their contract. However, the administrator assures them that all of the anesthesiologists will be offered jobs with Black Hat. The catch: Those jobs will be compensated at a lower rate due to the profit tapped by Black Hat's physician-owners, something that's not within the administrator's control, and perhaps not even discussed during the termination meeting.

The administrator may have cleared the way for more green to flow into Green Acres. But she probably hasn't considered whether granting an exclusive contract to Black Hat may itself be a kickback, and a violation of federal criminal law.

The Anti-Kickback Statute prohibits rewards for the referral of federal healthcare program patients. While many people commonly envision this as a ban on cash transactions, the statute doesn't make any such distinctions. A reward is a reward, as far as regulators are concerned.

The new surgeons demanded the anesthesia contract for Black Hat, in which they obviously saw value, as a condition for bringing their business to the ASC. That's a kickback. Additionally, the Department of Health and Human Services' Office of Inspector General has stated on numerous occasions that the opportunity to generate a fee (such as those that Black Hat will earn for the surgeons) can constitute illegal remuneration under the statute.

As a result, in this scenario the likelihood is high — in fact, it's almost a certainty — that the ASC, the new surgeons and Black Hat all engaged in a conspiracy to violate the Anti-Kickback Statute.

Safe or slippery?
Let's consider another situation. Brownfields Surgery Center has been contracting with Sleepytime Anesthesia for 5 years. But the Brownfields physician-owners have decided they want to capture a piece of the anesthesia fees that arise from their referrals, and don't renew Sleepytime's exclusive contract. Instead, they enter into one with Brownfields Anesthesia, a wholly-owned subsidiary of the ASC.

So now when a patient undergoes a procedure at Brownfields Surgery Center, the surgeons bill for their professional services, the ASC bills for the facility fee (the profit from which finds its way back to the physician-owners as distributions) and Brownfields Anesthesia bills for services rendered (the profit from which also finds its way into physician-owners' pockets, also as distributions from the ASC).

Of those 3 cash flows, the third — from Brownfields Anesthesia by way of Brownfields Surgery Center — is both problematic and a complicating factor. Here's why.

First, there's no regulatory exception or "safe harbor" from the Anti-Kickback Statute that covers anesthesia profits returning to physicians as a result of their referrals. This doesn't necessarily constitute a violation of the statute. But the danger for the surgeons in our example is that their anesthesia profits will vary with the volume and value of their referrals, which is a significant red flag.

Second, including anesthesia profits in the distributions that physician-owners receive through the surgery center essentially demolishes the safe harbor upon which they rely for their investment in the center itself. The statute's ASC safe harbor protects returns on investments only in connection with Medicare-certified ASCs, which it defines as operating exclusively for the purpose of providing surgical services. In this view, anesthesia services are not considered surgical services.

The bottom line
ASCs considering company model ventures usually focus on regulatory compliance as it pertains to the structure of the business. But you shouldn't ignore the issues involved in their dealings with the company, or the impact they may have on your continued compliance with anti-kickback law.

BRIGHT IDEA
Occupancy Sensors Save Energy

LIGHT SAVER Replacing standard light switches with occupancy sensors conserves energy consumption in such low-traffic areas as facility restrooms.

Replace standard on-off wall switches in low-traffic areas with occupancy sensors. The sensors fit into standard wall switchboxes. Anyone with an understanding of basic electrical wiring and proper certification can easily install them. With the sensors in place, lights are activated immediately when someone enters the area and will remain on for a preset time after the person leaves. This significantly reduces electrical consumption in rooms that are empty much of the time and where people forget to turn off the lights when they leave — areas such as restrooms, staff lounges, storage areas and file rooms.

Doug Luba
Outpatient Surgery Center of Hilton Head
Hilton Head, S.C.
[email protected]