There are several different legal issues that face the surgery center industry. This article briefly outlines 11 core legal risk areas. 1. Share Sales. Here, a key issue relates to selling shares at below fair market value in order to obtain or bring in cases. It is also problematic where physicians are offered more or less shares based on the volume or value of their business.
2. Out of Network Business with Payors. Increasingly, payors are attempting to bring all kinds of different actions against centers related to out of network business. At the same time, out of network business remains an important part of the profit component of many surgery centers.
3. Safe Harbors for Redemption. There are strong arguments that it is appropriate to use safe harbors to redeem a physician who is not meeting the safe harbor due to the fact that the center wants to be safe harbor compliant. There are also evolving interesting arguments as to how to use the safe harbors lawfully and whether they are being used for the right purposes legally. Where not used for the right purposes, there is a risk in redeeming physicians.
4. Minimum Case Numbers. Some centers attempt to set high minimum case numbers for physicians to remain owners of the surgery center based on a number of different theories. There remains significant risk that this will not be enforceable and/or that this might be viewed as inappropriately conditioning ownership or referrals. Surgery centers have some risk of being faced with qui tam or false claim cases brought by employees or competitors based on a number of different issues including case requirements or usage requirements.
5. Anesthesiology and Pathology Relationships. Many surgery centers and owners attempt to profit from anesthesiology and pathology relationships. Many of these may be legal. However, the more that these are focused on providing physicians with profits and the physician are not actively engaged in the work, or supervising the work, and to the extent that this is intended to provide profit in exchange for referrals, the more concerning these relationships can be.
6. HIPAA and Data Breach Issues. Increasingly, centers have to spend money working on or responding to data breach or security breach issues, for example, where certain amounts of patient medical records are inadvertently disclosed or lost.
7. Physician Owned Distributorships. In many situations, physician owned distributors can actually save a center or hospital a great deal of money. At the same time, because so much of the business is often based solely on that physician's referrals, there can be the appearance that the physician is being paid for something that is really not his core business and that it is really an excuse to pay him or her money in exchange for cases.
8. Equipment Lease and Lithotripsy Relationships. There are situations where physicians own equipment and then rent it to a surgery center on an annual basis or per click basis. These can be argued to be in exchange for business development as opposed to for actually being the best distributor or renter. The lithotripsy business continues to be almost wholly tied to urologists owning the lithotripters that are used for their procedures.
9. Overnight Stay and Recovery Care Facilities. Increasingly, surgery centers look to handle more complex cases that require some level of recovery care and overnight stay. Here, there is nothing fundamentally wrong with this. However, it is generally not permissible for Medicare patients and many states have limitations on what kind of cases can be done in a surgery center that may require recovery care.
10. Medical Staff Privileges Issues. Increasingly, ASCs face disputes over medical staff and privileges issues as centers and providers get more cautious about medical quality at their facilities. This often can also tie into ownership issues and there can be accusations that medical staff privileges issues are used as a means to pressure a physician as to ownership issues.
11. Co-Management and Relationships Coupled with HOPD Conversions. Increasingly, centers may convert to a hospital outpatient department with the intent to increase reimbursement and then provide co-management responsibility to a physician company. Here, it is critical that the co-management agreement be entered into for reasonable purposes and at fair market value. In essence, that it not an excuse to provide the physicians with funds to continue bringing cases to the center.
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2. Out of Network Business with Payors. Increasingly, payors are attempting to bring all kinds of different actions against centers related to out of network business. At the same time, out of network business remains an important part of the profit component of many surgery centers.
3. Safe Harbors for Redemption. There are strong arguments that it is appropriate to use safe harbors to redeem a physician who is not meeting the safe harbor due to the fact that the center wants to be safe harbor compliant. There are also evolving interesting arguments as to how to use the safe harbors lawfully and whether they are being used for the right purposes legally. Where not used for the right purposes, there is a risk in redeeming physicians.
4. Minimum Case Numbers. Some centers attempt to set high minimum case numbers for physicians to remain owners of the surgery center based on a number of different theories. There remains significant risk that this will not be enforceable and/or that this might be viewed as inappropriately conditioning ownership or referrals. Surgery centers have some risk of being faced with qui tam or false claim cases brought by employees or competitors based on a number of different issues including case requirements or usage requirements.
5. Anesthesiology and Pathology Relationships. Many surgery centers and owners attempt to profit from anesthesiology and pathology relationships. Many of these may be legal. However, the more that these are focused on providing physicians with profits and the physician are not actively engaged in the work, or supervising the work, and to the extent that this is intended to provide profit in exchange for referrals, the more concerning these relationships can be.
6. HIPAA and Data Breach Issues. Increasingly, centers have to spend money working on or responding to data breach or security breach issues, for example, where certain amounts of patient medical records are inadvertently disclosed or lost.
7. Physician Owned Distributorships. In many situations, physician owned distributors can actually save a center or hospital a great deal of money. At the same time, because so much of the business is often based solely on that physician's referrals, there can be the appearance that the physician is being paid for something that is really not his core business and that it is really an excuse to pay him or her money in exchange for cases.
8. Equipment Lease and Lithotripsy Relationships. There are situations where physicians own equipment and then rent it to a surgery center on an annual basis or per click basis. These can be argued to be in exchange for business development as opposed to for actually being the best distributor or renter. The lithotripsy business continues to be almost wholly tied to urologists owning the lithotripters that are used for their procedures.
9. Overnight Stay and Recovery Care Facilities. Increasingly, surgery centers look to handle more complex cases that require some level of recovery care and overnight stay. Here, there is nothing fundamentally wrong with this. However, it is generally not permissible for Medicare patients and many states have limitations on what kind of cases can be done in a surgery center that may require recovery care.
10. Medical Staff Privileges Issues. Increasingly, ASCs face disputes over medical staff and privileges issues as centers and providers get more cautious about medical quality at their facilities. This often can also tie into ownership issues and there can be accusations that medical staff privileges issues are used as a means to pressure a physician as to ownership issues.
11. Co-Management and Relationships Coupled with HOPD Conversions. Increasingly, centers may convert to a hospital outpatient department with the intent to increase reimbursement and then provide co-management responsibility to a physician company. Here, it is critical that the co-management agreement be entered into for reasonable purposes and at fair market value. In essence, that it not an excuse to provide the physicians with funds to continue bringing cases to the center.
More Articles on Surgery Centers:
7 Ways to Kick-Start a Positive Surgery Center Culture
Inside the Medicare Accreditation Process: 5 Crucial Points From ASC Inspector Dr. David Watts
10 Top Things to Know About Surgery Center Real Estate Investments