OASC | BUSINESS

Shaky Ground?

IF THE OIG IS ASKING, YOU MAY WANT TO EXAMINE YOUR BUSINESS RELATIONSHIPS WITH ANESTHESIA SERVICES PROVIDERS.

By Virginia Pickles, Contributing Editor

Some of the most important and complex relationships in the ASC arena are those between surgeon-owners and providers of anesthesia services. Not only must the two groups be philosophically aligned when delivering patient care, but they must be in sync with one another’s business operations. As both entities are also striving to maximize profitability, they may employ some creative business strategies that push those boundaries.

Two examples came to light in 2012 when a large anesthesia services provider proposed new business models to better compete in the anesthesia market and sought an advisory opinion from the Office of Inspector General (OIG). Although not declaring either arrangement illegal, the OIG concluded that both would potentially violate the federal anti-kickback statute (AKS) and trigger administrative sanctions and civil monetary penalties. Although the opinion addressed two scenarios specific to one anesthesiology group, the OIG’s detailed discussion of ASC-anesthesia joint ventures prompted others to examine their own financial relationships for compliance risks.

Attorneys Alan E. Reider and Allison Shuren, partners at Arnold & Porter, Washington, DC, specialize in healthcare issues with a focus on compliance and fraud-and-abuse counseling. We asked them to put this advisory opinion in perspective and to discuss the pros and cons of some potential business models involving ASCs and anesthesia services providers. First, we’ll take a quick look at the opinion that prompted some concerns.

Per-patient Management Fee

In the first scenario, the anesthesiology group would continue as the ASC’s exclusive provider of services and would pay the ASC a per-patient management fee. The fee, which would be at fair market value and in addition to the facility fee, would cover certain nonphysician services, such as nursing assessments, assistance with billing documentation and space for the anesthesiologists, their staff and records. Medicare beneficiaries would be excluded from the management fee calculation.

The OIG noted it has a “long-standing concern about arrangements under which parties ‘carve out’ federal healthcare program beneficiaries or business generated by federal health care programs from otherwise questionable financial arrangements,” suggesting that these arrangements may disguise kickbacks for referrals. The OIG also noted the anesthesiologists would be paying for services already covered by the ASC’s facility fee. Essentially, the ASC would be paid twice for the same services, which could be considered an inducement.

“In this scenario, anesthesiologists would pay the ASC for certain overhead functions related to the surgical cases they would service, essentially, some kind of management fee,” Ms. Shuren says. “They stated they wouldn’t pay that fee on Medicare beneficiaries, because they could see that the government would be very concerned about that. In fact, the government basically stated they were essentially paying for the referrals, which is a kickback.

“The other important take-away is that excluding Medicare beneficiaries from a proposed transaction that might be a problem under the AKS doesn’t take it out of the scope of concern for the Inspector General,” Ms. Shuren says. “Paying kickbacks related to commercial payer patients could, at a minimum, build loyalty or expectations that you will refer Medicare patients, as well.”

Mr. Reider notes, “The Inspector General made a fairly strong statement that this arrangement would not be blessed, and I don’t think anybody would have ever thought it would be blessed. It was a very aggressive and, in my view, improper proposal.”

Sham Companies

In the second scenario, the ASC’s physician-owners would form separate companies to provide anesthesia services. These companies would hire the anesthesiology group as an independent contractor. The subsidiary companies would bill for and furnish all anesthesia services provided at the ASCs, and the anesthesiologists would be paid for services, including recruiting and credentialing, supplies management and overseeing regulatory compliance. “This would be a joint venture between the anesthesiologists and the surgeons,” Ms. Shuren says. “The surgeons, as owners of the business, would reap dividends on any profits the organization made.”

The OIG determined “more than a minimal risk of fraud and abuse” exists with this arrangement, and it cited long-standing concerns about joint ventures between those in a position to refer business and those furnishing items or services for which Medicare or Medicaid pays. In addition, the ASC’s physician-owners would be expanding into a related area by contracting with the anesthesia provider. This relationship would pose minimal business risk for the ASC owners, and the anesthesia services would depend entirely on referrals from the ASC. The OIG concluded this relationship appeared designed to permit the physician-owners to do indirectly what they cannot do directly (i.e., receive compensation for their referrals to the anesthesiology group).

“This proposal was less aggressive, and the Inspector General’s opinion should not be interpreted too broadly,” Mr. Reider says. “If the facts were changed just a bit, in my view, the relationship could very well have been appropriate.”

Legitimizing Scenario #2

According to Mr. Reider, if physicians establish an independent medical practice to provide anesthesia services, and the practice employs anesthesiologists and certified registered nurse anesthetists (CRNAs) and pays them a fixed fee, thereby maintaining business risk and not merely entering into sham agreements, the relationship shouldn’t trigger AKS liability. “In fact, such an arrangement may be required by limitations in state law,” he says. “For example, state law may prohibit an ASC from employing physicians, and this would be a reason to establish a separate practice to employ or contract with an anesthesiologist to provide services at an ASC.”

Similarly, insurance considerations may also serve as the basis for establishing a separate medical practice, rather than employing the anesthesiologist in the surgeons’ practice. “As long as the arrangement is structured so that the anesthesiologists are compensated by the practice in a manner that reflects fair market value, particularly at a fixed salary so that the practice assumes risk, the risk of triggering the AKS should be minimized,” Mr. Reider says.

Other Appropriate Business Models

Although the scenarios described in OIG Advisory Opinion 12-06 were proposed by a specific anesthesiology group — the “requestor,” in OIG terms, isn’t identified when the opinion is made public — the opinion sent a ripple through the ASC community, as physician-owners and administrators examined their own contracts with anesthesiologists.

“Several clients asked for our help to make sure they were in compliance,” Mr. Reider says. “One in particular employed an anesthesiologist and a nurse anesthetist and wanted us to review their employment contracts. This is not the relationship that was presented in the advisory opinion, but the ASC administrator realized there could be potential issues and wanted to make sure they were doing things the right way. Obviously, in our view, that’s a good thing.”

In fact, Mr. Reider notes, the employment model, whereby an ASC or an ASC subsidiary or a physician’s group employs an anesthesiologist or CRNA, is generally one of the “safest” types of relationships. (For an exception, see “Beware ‘Creative’ Employment Arrangements.”)

“In the employment model, anesthesia services are billed by the surgery center or the physician practice, whomever the employer is, and the anesthesiologists are paid a flat fee or on a per-procedure or per-diem basis,” he explains. “The only general issue that we focus on is making sure it’s a bona fide employment agreement and that the compensation is a fair reflection of the work performed.”

The staff-privilege model is also a fairly straightforward business relationship. “Similar to a physician who has staff privileges at an institution, the anesthesiologists or CRNAs have privileges at the ASC but otherwise maintain a completely independent relationship, billing patients directly for their respective services,” Mr. Reider says.

In the contract model, an independent anesthesiologist provides all anesthesia services in an ASC on a contractual basis, being paid a flat amount or per diem. “Essentially, the anesthesiologist is assigning the right to bill and collect payments for the individual services to the ASC, and the ASC assumes the risk if volume is down,” Mr. Reider says.

An Intelligent Approach

According to Mr. Reider, some news reports and editorials published immediately after the release of OIG Advisory Opinion 12-06 suggested that all relationships between ASCs and anesthesiologists were illegal, which is simply not true.

“It’s important to keep in mind that advisory opinions are not statements by the government that something is illegal,” Mr. Reider says. “The government is simply stating it’s not going to bless these arrangements. Obviously, there are opportunities for surgeons to have improper relationships, which do create some serious compliance risks, but if relationships are structured correctly, that should not happen.

“As long as Medicare continues to pay physicians, there will be issues about improper relationships,” Mr. Reider adds. “I think this advisory opinion did a service, because it sensitized the industry to potential compliance risks associated with anesthesiology contracts. It’s just another reminder that physicians have to be intelligent about how they go about their financial relationships with referral sources.” ■

Editor’s note: You can read the full text of OIG Advisory Opinion 12-06 at oig.hhs.gov/fraud/docs/advisoryopinions/2012/AdvOpn12-06.pdf.