Background: The "company model" is the name given to a type of suspect anesthesia joint venture likely violative of the federal antikickback law. In its simplest form, it involves the creation of a business structure by the surgeons controlling the flow of referrals to an ASC in order to profit from the provision of anesthesia services at the facility. Read my article The Company Model: Is Making Less Money To Work at a Surgicenter Worth Jail Time? appearing in the January 2011 issue of Anesthesiology News and available on our website at www.advisorylawgroup.com/articles.html
It's one thing to make a profit from medical practice - in fact, I'm more than all for it.
It's quite another to extort a kickback for the referral of patients. That's a crime. In connection with Medicare and Medicaid patients it's a violation of the federal antikickback statute (the "AKS"). In fact, simply offering or soliciting remuneration for referrals is a crime under that statute.
Over the past several years, the so-called "company model" of anesthesia services has taken form, through which ASC owner surgeons have extracted a share of fees from the anesthesiologists working at the facility.
But the company model is not simply an anesthesiologist's issue. No matter your medical specialty, it takes only a short leap of imagination to see those in a position to control referrals of your patients leveraging that power into the formation of an entity to provide those services.
The AKS prohibits remuneration, that is, the transfer of anything of value, for referrals. It also prohibits offering or soliciting that remuneration.
Certain exceptions, known as safe harbors, define permissible practices not subject to the antikickback statute because they are unlikely to result in fraud or abuse. The failure to fit within a safe harbor does not mean that an arrangement violates the law; there's just no free pass.
HHS's Office of Inspector General (the "OIG") coordinates enforcement of the AKS.
The OIG uses the term "joint venture" to mean any arrangement, whether contractual or involving a new legal entity, between parties in a position to refer business and those providing items or services for which Medicare or Medicaid pays. Some joint ventures are legal - others are simply disguised violations of the AKS.
The OIG issued two important alerts on joint ventures, its 1989 Special Fraud Alert on Joint Venture Arrangements, republished in 1994, and a 2003 Special Advisory Bulletin on Contractual Joint Ventures, describing the features of suspect arrangements.
In essence, suspect ventures involve an owner in one line of health care business which expands into another related health care business line to serve the owner's federal health care program patients. The expansion is accomplished by contracting with an existing provider of the second business line - that is, a potential competitor as to the second business line. The owner essentially arranges for the existing provider to run the new business line for the new venture, with the owner participating in the profits from what are essentially its own referrals.
Case law makes clear that even when a venture has many legitimate purposes - for example, the simple expansion of business to generate more profits -- the fact that even one purpose is to profit from referrals of services is a violation of the law.
Safe Harbors Are Not So Safe
Both the AKS and the OIG's regulations set forth "safe harbors," i.e., requirements, which if complied with, provide assurance that the payment practice will not be considered a violation of the AKS.
The OIG's position is that good faith is required for protection within a safe harbor. Additionally, as the OIG made clear in the 2003 Special Advisory Bulletin, although a safe harbor may protect the payments in one direction, the discount given in the other direction may not be protected and therefore may trigger prosecution.
The Tighter the Economy the Stickier the Fingers
As the general, and the healthcare, economies become tighter, more individuals and entities in a position to generate referrals will consider the profitability of joint ventures. A subset will disregard the issue of legality.
It does not take much of a leap to see anesthesia company model thinking permeating into other areas: Orthopedic surgeons forming entities to capture a portion of the cash flow to pain management specialists, or, in an almost full circle, internists setting up entities to capture the profit of referrals to gastroenterologists. Of course, these situations are rife with compliance concerns.
But other seemingly benign relationships are just as potentially problematic: For example, a situation in which a hospital, through its affiliated foundation, controls enough referrals to pressure other physicians into a relationship with its new accountable care organization.
Unfortunately, there's no bright line test and the facts and circumstances of each situation must be fully analyzed to achieve an understanding of the potential risk. But in terms of potential penalties, fines, exclusion from Medicare and Medicaid, and even jail time, understanding the risk is worth substantially more than just a good night's sleep.
When you're ready, let's talk.