United States: Safe Harbors For Investment Interests In Ambulatory Surgical Centers

Of all of the safe harbors proposed by the OIG in 1993, the most anticipated and heavily commented on was the safe harbor for investment interests in ambulatory surgical centers ("ASCs"). The OIG received nearly 200 comments relating to the proposed safe harbor. Partially in response to those comments, the final version of this safe harbor codified at 42 C.F.R. 1001.952(r) has been significantly modified from the version originally proposed. Developed to protect ASCs that are designed as extensions of the physician’s office space, the safe harbor protection extends to a multitude of arrangements between physicians, hospitals, and disinterested investors. This is a significant modification from the proposed version, which covered only ASCs owned exclusively by surgeons. Accordingly, the following four categories of permissible ASC joint ventures are recognized under the new safe harbor subject to compliance with certain other requirements:

• Surgeon-Owned ASCs. All of the physician investors must be general surgeons or surgeons engaged in the same specialty (e.g. orthopedic surgeons);
• Single-Specialty ASCs. All of the physician investors are engaged in the same medical practice specialty (e.g. gastroenterologists);
• Multi-Specialty ASCs. The physician investors are in different specialties (e.g. general surgeons, orthopedic surgeons, and gastroenterologists); and
• Hospital/Physician ASCs. At least one of the investors is a hospital and the physician investors fall into one of the other three categories.

Common Requirements. Each category has requirements–specific to the type of investor–that must be met to ensure that the ASC fits within the scope of the safe harbor. Moreover, all of the ASC safe harbor categories must meet certain common requirements, such as:

• The ASC’s operating and recovery room space must be dedicated exclusively to the ASC, thus, a shared suite arrangement between the ASC and a hospital or other entity would not be entitled to safe harbor protection;
• Patients who are referred by an investor must be fully informed of the investor’s interest in the ASC;
• The terms on which an investment interest is offered to an investor must not be related to the previous or expected volume of referrals, services furnished, or the amount of business otherwise generated from the investor to the ASC; and
• All ancillary services for Federal health care program beneficiaries performed at the ASC must be directly and integrally related to primary procedures performed at the ASC and none may be separately billed to Medicare or other Federal health care programs.

The Final Rule extends the ASC safe harbor to cover a multitude of financial arrangements subject to compliance with the stringent requirements listed above and certain other requirements depending on the type of ASC. The OIG’s commentary provides that the safe harbor shall not be extended to protect other types of facilities such as lithotripsy facilities, ESRD facilities, CORFs, radiation oncology facilities, cardiac catheterization centers, or optical dispensing facilities. The Final Rule fails to offer protection to these other types of clinical joint ventures, but structuring such joint ventures in a manner consistent with the rationale and purpose of the ASC safe harbor will arguably serve to mitigate the risk of abuse and potential for OIG scrutiny and/or prosecution.