There are several key legal issues that can impact surgery centers. The situation with surgery centers (as well as all providers) as to legal exposure was changed dramatically by the Patient Protection and Affordable Care Act. Under the PPACA, the rules as to what can be the premise for a False Claims Act case were changed. It used to be that a False Claims case could be only brought for a traditional "false claim." In essence, someone billed for something that was not performed (e.g. upcoded a procedure). Now, a person can bring a False Claims suit against a surgery center or any provider based on a Kickback or Stark Act violation. Hence, if there is an improper payment relationship, any claims that are generated from that relationship become fodder for a False Claims case. This is true even if there wasn’t a false claim but rather a procedure actually performed but derived from some sort of kickback. This expanded arena for claims is critical because (1) any person, not just the government, can bring the claim, and (2) the damages, $11,000 per claim and triple damages, are enormous.
This may seem like a small change. In reality, it greatly increases the number of False Claims cases brought against surgery centers and other types of providers.
This article outlines four key issues facing surgery centers.
1. Sales of shares. It is now more important than ever that shares be sold to physicians at no less than fair market value. In a recent False Claims case, a surgery center was attacked for allegedly selling shares below fair market value to their surgeons. In that case, there were a number of facts and circumstances that gave some strength to the plaintiff’s case. A surgery center may want to have valuations performed to assess the price for the sale of shares. If not a true valuation, an ASC should have significantinternal research and back up for the purchase price. The safest concept is to have a true valuation. Further, if there are rationale differences in share prices among different parties, it is very important to be able to defend those share price differences.
2. Anesthesia relationships. Over the last several years, there have been an increasing number of attacks on surgery centers and their efforts to profit from anesthesia. Some efforts to profit may be legal; some are more concerning. Here, the onslaught began with an American Society of Anesthesiologists letter to the Office of the Inspector General. Later, anesthesiologists asked for an advisory opinion and received an advisory opinion that commented negatively on certain anesthesia relationships. In more recent months and years, there have apparently been some False Claims cases related to anesthesia relationships and, rumor has it, a criminal investigation related to a surgery center.
With the situation as it stands, and this level of activity around the area, surgery centers are well served to take a close look at their anesthesia relationships and whether they can be defended from a kickback perspective. There is a whole spectrum of options from very low risk to very high risk. The ultimate outcome of a case depends greatly on the facts and circumstances of the situation.
3. Physician owned distributorships. In certain physician-owned distributorships, the effort of the physician to sell implants or devices to a surgery center is seemingly a naked grab for the surgeon to profit from doing cases at the center. In essence, the surgeon selling the equipment or devices doesn't drive lower prices for the surgery center or provide other benefits. It may simply provide a mechanism by which the surgeon profits each time he does a case at the surgery center. In such situations, the surgeon may not have a real device business. In an ideal situation, the center and surgeon would be able to show that the center receives substantial financial benefit from buying from the surgeon unrelated to him or her doing cases at the center. Here, it would also be clear that the physician actually doing cases at the center is not tied to whether or not they buy from the surgeon.
There have been a few False Claims cases related to POD situations. Surgery centers (and other providers) want to make sure that they can defend their relationship as really providing value to the hospital or surgery center.
4. Redemption transactions. Many centers redeem physicians for failure to meet a safe harbor. On its face and in a vacuum, this should not be illegal. However, it is critical that a surgery center, when redeeming somebody for lack of safe harbor compliance, be able to show true compliance and/or proper motives and an effort to assure the center is legally compliant and focused on compliance. In contrast, there may be times where it appears that a surgery center is really redeeming a physician because they have explicitly said that they are upset with the physician for not doing as many cases as other physicians, and they want the physician to do more cases. The more that the redemptions are tied simply to case volume and are not handled in a way that is substantially fair to all physicians in a non-discriminating manner, and with the chance for somebody to have plenty of opportunity to cure their defect, the more risk there is to such a redeeming situation. The law, and what is completely lawful as to redemptions and what is not, is constantly evolving and very interesting.
5. Other issues. There are several other legal issues that are interesting in the surgery center context. These are evolving HIPAA issues, out-of-network issues, non-compete issues and a variety of other issues that drive risk in surgery centers.
This may seem like a small change. In reality, it greatly increases the number of False Claims cases brought against surgery centers and other types of providers.
This article outlines four key issues facing surgery centers.
1. Sales of shares. It is now more important than ever that shares be sold to physicians at no less than fair market value. In a recent False Claims case, a surgery center was attacked for allegedly selling shares below fair market value to their surgeons. In that case, there were a number of facts and circumstances that gave some strength to the plaintiff’s case. A surgery center may want to have valuations performed to assess the price for the sale of shares. If not a true valuation, an ASC should have significantinternal research and back up for the purchase price. The safest concept is to have a true valuation. Further, if there are rationale differences in share prices among different parties, it is very important to be able to defend those share price differences.
2. Anesthesia relationships. Over the last several years, there have been an increasing number of attacks on surgery centers and their efforts to profit from anesthesia. Some efforts to profit may be legal; some are more concerning. Here, the onslaught began with an American Society of Anesthesiologists letter to the Office of the Inspector General. Later, anesthesiologists asked for an advisory opinion and received an advisory opinion that commented negatively on certain anesthesia relationships. In more recent months and years, there have apparently been some False Claims cases related to anesthesia relationships and, rumor has it, a criminal investigation related to a surgery center.
With the situation as it stands, and this level of activity around the area, surgery centers are well served to take a close look at their anesthesia relationships and whether they can be defended from a kickback perspective. There is a whole spectrum of options from very low risk to very high risk. The ultimate outcome of a case depends greatly on the facts and circumstances of the situation.
3. Physician owned distributorships. In certain physician-owned distributorships, the effort of the physician to sell implants or devices to a surgery center is seemingly a naked grab for the surgeon to profit from doing cases at the center. In essence, the surgeon selling the equipment or devices doesn't drive lower prices for the surgery center or provide other benefits. It may simply provide a mechanism by which the surgeon profits each time he does a case at the surgery center. In such situations, the surgeon may not have a real device business. In an ideal situation, the center and surgeon would be able to show that the center receives substantial financial benefit from buying from the surgeon unrelated to him or her doing cases at the center. Here, it would also be clear that the physician actually doing cases at the center is not tied to whether or not they buy from the surgeon.
There have been a few False Claims cases related to POD situations. Surgery centers (and other providers) want to make sure that they can defend their relationship as really providing value to the hospital or surgery center.
4. Redemption transactions. Many centers redeem physicians for failure to meet a safe harbor. On its face and in a vacuum, this should not be illegal. However, it is critical that a surgery center, when redeeming somebody for lack of safe harbor compliance, be able to show true compliance and/or proper motives and an effort to assure the center is legally compliant and focused on compliance. In contrast, there may be times where it appears that a surgery center is really redeeming a physician because they have explicitly said that they are upset with the physician for not doing as many cases as other physicians, and they want the physician to do more cases. The more that the redemptions are tied simply to case volume and are not handled in a way that is substantially fair to all physicians in a non-discriminating manner, and with the chance for somebody to have plenty of opportunity to cure their defect, the more risk there is to such a redeeming situation. The law, and what is completely lawful as to redemptions and what is not, is constantly evolving and very interesting.
5. Other issues. There are several other legal issues that are interesting in the surgery center context. These are evolving HIPAA issues, out-of-network issues, non-compete issues and a variety of other issues that drive risk in surgery centers.