By John H. Fisher II
April 11, 2017
A relatively recent case involving buy-in terms in an ambulatory surgery center demonstrates how different valuations for referral sources and non-referral sources can be evidence of remuneration under the Medicare Anti-Kickback Statute (42 U.S.C. § 1320a-7b(a)-(b)). The case also demonstrates how the initial investment terms that favor referral sources can foreclose reliance on safe harbor regulations.
The case involved an ambulatory surgery center management company that purchased an interest in an ambulatory surgery center. The company then offered shares of the company for investment to physicians who were in a position to refer surgical cases to the surgery center. The physician investment was structured to meet the terms of the safe harbor regulations for ambulatory surgery center investments (“ASC Safe Harbors”). The ASC Safe Harbors provide protection from remuneration received by a referring physician as a return on investment as long as the physician meets certain minimum practice revenue and surgical volume requirements. Physician investors must generally receive at least 1/3 of their practice income from the provision of surgical procedures and perform at least 1/3 of their surgical procedures in the center in which they hold an investment interest.
The problem with the way the investment interest was structured is the different valuation that applied to the purchase made by the management company and the investment offer made to the referring physicians. The management company purchased its investment at a much higher price than was offered to the physicians. The differential valuation violated a threshold requirement of the ASC Safe Harbors that prohibits the initial investment interest to be based, in whole or in part, on the volume or value of referrals the investor might make to the entity. It was very difficult for parties to justify the different value applied to the physician investment. The only apparent difference appeared to be the physician investors were the referral sources for the surgery center.
This case specifically involved an ambulatory surgery center investment but the concept of differential valuation could apply in other situations involving the Anti-Kickback Statute. Different values paid to or received from referral sources and non-referral sources can suggest that at least one of the reasons for the differential is the volume or value of potential referrals. This points out a general area of risk assessment for health care providers. Areas where different pricing is applied to referral sources and non-referral sources could signify a potential violation of the Anti-Kickback Statute.
Other Blogs and Articles Involving Ambulatory Surgery Centers
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