OIG nixes investment partnership in ambulatory surgery center

A group practice's proposal to allow referring health professionals to invest in an ambulatory surgery center would run afoul of the federal anti-kickback statute, states a recent advisory opinion by the U.S. Dept. of Health & Human Services' Office of Inspector General.

Legal experts said the Oct. 19 opinion affirms the government's stance that the arrangements can be susceptible to fraud and abuse and are permissible only under specific conditions.

The medical group -- comprised of optometrists and ophthalmologists -- proposed to include the optometrists as investors in three surgery centers the ophthalmologists owned with a hospital. The optometrists refer patients to the ophthalmologists for medical treatment and sometimes assist the surgeons in pre- and postoperative care at the surgery facilities, according to the opinion, which did not disclose the medical group's name.

The OIG concluded that the arrangement fails to meet key safe harbor requirements because the optometrists do not perform the surgeries at the ambulatory center. The federal exceptions mandate that physician investors perform ambulatory surgery center procedures on a regular basis.

The OIG reiterated its "long-standing concern about the potential for investments in [ambulatory surgery centers] to serve as vehicles to reward referrals indirectly."

Although the scenario involves optometrists and ophthalmologists, Pittsburgh-based regulatory expert Beth Anne Jackson, an associate at Thorp Reed & Armstrong LLP, said the proposed relationship is comparable to any primary care or multispecialty group looking to partner in a similar way with surgeons to whom it regularly refers.

"The justification for allowing surgeons to own a portion in an [ambulatory surgery center] is that for surgeons, it's effectively an extension of their practice," Jackson said. Even though various specialists often work together on postsurgical care, "the OIG is saying that doesn't matter."

At the same time, the agency's chief counsel, Lewis Morris, acknowledged that physician-owned facilities offer some patient benefits, which is why the government promulgated specific safe harbors.

In this case, however, the OIG found "no discernible safeguards to minimize the significant risk" that the proposal could result in illegal profits for the optometrists.

The opinion indicates that "the OIG has drawn their line, and they are going to stick with it," said Leah B. Stewart, a health care regulatory lawyer with Vinson & Elkins LLP in Austin, Texas.

Experts say many doctors are looking to ambulatory surgery center investment for added income, particularly in the face of inadequate Medicare payments and increased responsibility for hospital charity care.

New Jersey health lawyer John D. Fanburg, who specializes in joint ventures, said doctors aren't just investing in the facilities for their economic potential. Physician-owned centers can be less expensive and more patient-friendly than a hospital. The smaller ambulatory facilities also can offer improved quality of care and patient access, said Fanburg, a partner at the law firm WolfBlock.

Nevertheless, the ventures remain subject to federal scrutiny because of the potential to disguise illegal referrals and encourage unnecessary medical procedures, he noted.

To avoid legal risk, Stewart recommended that doctors seek counsel when considering investment in an ambulatory surgery center to make sure the arrangement is carefully structured in line with federal requirements.