ASCs must charge a fair market value for equity in an ASC, which can be difficult for a newer facility to calculate, Krieg DeVault, a lawyer from Meritas, wrote in a Nov. 12 Lexology article.
Here are five things to know about equity investment:
1. A newly formed entity with no facility, no license and no payer contracts should be valued at significantly less than an ASC with even a short operating history.
2. Mr. DeVault recommends obtaining a formal valuation from an independent third-party valuation firm with specific experience valuing ASCs to avoid violating anti-kickback rules.
3. Some ASCs just pick an equity price that they find meaningful, Mr. Devault said. But if a competing facility charges something distinctly different, he wrote, it could trigger a government investigation.
4. A below-fair-market-value arrangement sometimes forms out of habit or because of a concern that newer physicians may not be able to afford the buy-in.
5. When a physician retires or stops using an ASC, there are no longer referrals from that physician back to the ASC, and so no kickback violations can occur.