Recently, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services issued an advisory opinion regarding two types of Proposed Arrangements between an anesthesia provider (AP) and physician-owned ambulatory surgery centers (ASCs). This came as a result of a request for an opinion from an AP who, because of competitive market pressures, was considering one of two new business relationship models. Under the AP’s current professional arrangement, the ap offers exclusive anesthesia services to ASCs, employs personnel to meet the anesthesia needs of the ASCs, and independently bills patients and third party payors, including Medicare, for professional fees. The ASCs bill the same parties for professional services plus a facility fee for materials and ancillary staff.
- Under Proposed Arrangement A, the AP would continue to provide exclusive anesthesia services to the ASC and to bill independently. Additionally, the AP would pay a market value “management services” fee to the ASC for each non-Federally funded patient. The ASC would both collect this fee and continue to charge a facility fee to Federal and third party payors.
- Under Proposed Arrangement B, the ASC physician-owners would set up a separate subsidiary to exclusively provide anesthesia services to their patients. The subsidiary then would hire the AP as the exclusive independent anesthesia services contractor, handle all billing with the assistance of the AP and its staff, pay the AP out of fees collected, and retain any profits.
In analyzing the legality of the two arrangements, the OIG considered two questions: 1. Does either arrangement violate the Federal anti-kickback statute, and, 2. Would any safe harbor protection apply?
Under the anti-kickback statute, it is a criminal offense to offer, pay, solicit, or receive any remuneration for referrals reimbursable by a Federal health care program. This statute seeks to ensure that referrals are based on sound medical judgment and not financial or other incentives. Regarding Proposed Arrangement A, although the AP would pay a management services fee only for non-Federal health care program patients, this does not reduce the risk that the fee might be paid by the AP to induce referrals from the ASC of all types of patients. Additionally, the arrangement allows the ASC to be paid twice for the same services, and this could unduly influence the ASC to select the AP as the exclusive provider. The OIG concluded that Proposed Arrangement A could violate the anti-kickback statute. No safe harbor protections apply.
Safe harbor protections for ASCs, employment, and personal services and management contracts were determined to not apply to Proposed Arrangement B. The Subsidiary does not qualify as a Medicare-certified ASC because it would not provide surgical services, only anesthesia services. As such, its income and the profits distributed to the ASC physician-owners would not be protected by any safe harbor provisions. Additionally, the OIG is concerned about exclusive arrangements between those who refer business (the ASC physician-owners), and those who furnish goods or services reimbursed by a Federal health care program (the AP). The AP and the ASC physician-owners both would benefit financially in Proposed Arrangement B, with the AP receiving its negotiated rate and the physician-owners receiving residual profits from the subsidiary after expenses and payment to the AP. The OIG concluded that Proposed Arrangement B would permit the physician-owners to receive compensation in the form of profits from the subsidiary from referring patients to the AP; this payment would be for services that they themselves could not provide. The more than minimal risk of fraud and abuse and the prohibited remuneration both would be in violation of the Federal anti-kickback statute.
Physicians should be aware of this development, as it may affect current and future professional relationships. A health care attorney can offer assistance in interpreting the potential impact of the OIG decision and evaluating the need to restructure business arrangements.
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