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		July 2003 Safe Harbors for Ambulatory Surgery Centers DHHS brings clarity to complying with anti-kickback statutes Steven M. Goldstein

On November 19, 1999, the Office of Inspector General (OIG) of the Department of Health and Human Services, the agency responsible for enforcing the anti-kickback statute, issued eight new safe harbors under the statute, along with regulations clarifying several of the existing safe harbors. These safe harbors are final versions of the ones proposed by the OIG in 1993. While there are several aspects of the new regulations that merit discussion, the ones that seem to be attracting the most interest are those dealing with ambulatory surgery centers (ASCs).

Although most everyone is aware of the anti-kickback statute by now, a brief summary may be helpful. In essence, the statute prohibits the payment of any form of remuneration to induce the referral of business (goods or patients) reimbursed by Medicare, Medicaid, or other government-funded health care programs. The anti-kickback statute is a criminal statute, and therefore requires a showing of intent in order to prove a violation. The OIG has promulgated numerous safe harbors under the anti-kickback statute, which shield arrangements falling within the safe harbors from prosecution. Arrangements which fall outside of the safe harbors do not necessarily violate the statute, but do not have the immunity from prosecution which the safe harbors provide. The anti-kickback statute is similar to but differs from the Stark law, which is a civil statute. An arrangement must comply with both the anti-kickback statute and the Stark law, and falling within a safe harbor does not necessarily guarantee compliance with the Stark statute.

Because ASCs have been viewed as cost-saving mechanisms, they have been favored by the Federal government. Until the new regulations, the only official guidance that we had to reflect this favorable treatment were proposed safe harbors issued by the OIG in 1993. That proposed safe harbor was fairly limited in scope. It protected only ASCs owned entirely by surgeons performing procedures at the ASC. The new safe harbor significantly expands the scope of protection, permitting four types of ASCs: (1) surgeon-owned ASCs; (2) single-specialty ASCs, in which all of the owners are licensed in a single specialty; (3) multi-specialty ASCs, consisting of owners from more than one specialty; and (4) hospital/physician ASCs, consisting of ownership by both physicians and hospitals.

All four of the ASC safe harbors contain the following general requirements:

• The ASC must be a Medicare-certified ASC.
• The ASC must have operating and recovery room space dedicated exclusively to the ASC.
• Patients referred to the ASC by an owner must be fully informed of the owner’s interest. This requirement already exists under Arizona law.
• The terms offered to a physician investor must not be related to previous or expected business generated by the investor for the ASC, the payments to the investor must be directly proportional to his or her capital investment in the ASC, and there are no loans or loan guarantees given by the ASC or its investors to other investors to enable them to invest in the ASC. These requirements are consistent with other joint venture safe harbors which have been in existence for some time.

All ancillary services for federal health care program beneficiaries must be directly and integrally related to primary procedures performed at the ASC, and none may be separately billed to any federal health care program. The ASC may not have a separate clinical lab, for example, which bills separately from any surgical procedure performed at the ASC.

Neither the ASC nor its investors may discriminate against federal health care program beneficiaries. Therefore, the ASC and its investors must treat Medicare and Medicaid patients on the same basis as they treat private pay patients. If a physician is not accepting any new patients, he or she is not required to treat Medicare and Medicaid patients.

Each of the four separate ASC safe harbors has unique provisions. Both the surgeon-owned and single-specialty ASCs require the investors to be in a position to refer patients directly to the ASC and to perform surgery on those patients. They also permit unrelated investors, who are not employed by the ASC or any investors, are not in a position to provide items or services to the ASC or its investors, and are not in a position to make or influence referrals directly or indirectly to the ASC or its investors. In addition, each surgeon or single-specialty investor must derive at least one-third of his or her medical practice income for the previous fiscal year or twelve-month period from the performance of Medicare-reimbursed procedures. These procedures do not have to be performed at the ASC. The requirement is intended to ensure that surgery is a substantial part of the investor’s practice.

The multi-specialty ASC safe harbor is similar to the first two. However, with this safe harbor, the "one-third" rule is satisfied only if the procedures are performed at the particular ASC.

Finally, the hospital/physician ASC, in addition to the general requirements described above, prohibits the ASC from using any space, equipment, or services of the hospital unless it is leased or provided in compliance with the applicable safe harbor. A hospital investing in an ASC may not include on its Medicare cost report any cost associated with the ASC. The hospital also may not be in a position to make or influence referrals, directly or indirectly, to any investor or the ASC. This latter requirement applies, for example, if the hospital owns physician practices, or if it is affiliated with a "friendly" professional corporation. This latter requirement could prevent many hospital/physician ASCs from complying with the safe harbor.

While the ASC safe harbors greatly expand what the OIG had previously permitted, the OIG specifically refused to expand any safe harbor protection to other types of facilities such as end-stage renal disease facilities, lithotripsy units, comprehensive outpatient rehabilitation facilities (CORFs), radiation oncology facilities, or cardiac catheterization facilities.

The ASC safe harbors should cause physicians to consider investing in ASC facilities. Those physicians who already own an interest in such facilities should review the structure and operation of those facilities to try to take advantage of the safe harbors. At a minimum, it is refreshing to see the OIG expand the scope of arrangements which are permitted, rather than continue to indicate what the medical community may not do.

These materials are designed to provide general information prepared by professionals in regard to the subject matter covered. It is provided with the understanding that the author is not engaged in rendering legal, accounting, or other professional service. Although prepared by professionals, these materials should not be utilized as a substitute for professional service in specific situations. If legal advice or other expert assistance is required, the service of a professional should be sought.