The Anti-Kickback Statute

The AKS prohibits any business relationship in which anyone knowingly and willfully receives or pays anything of value in return for a patient referral where a federal healthcare program is footing all or part of the bill.  California’s anti-kickback laws apply the same principle even more broadly to all payors.

It is important to remember that not every prohibited kickback arrangement involves the direct exchange of money for referrals.  For purposes of the anti-kickback statute, “remuneration” includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind. In the context of an ASC-anesthesia services arrangement, remuneration from the anesthesia provider to the ASC or its owners must be reviewed to determine whether it unduly influences the selection of the anesthesia provider’s services, versus it being a fair market payment for billing services, for instance.

Common Models

ASCs have three general models of providing anesthesia services to their patients: the Fee-For-Service Model, the Employment/Engagement Model, and the Company Model.

In the Fee-For-Service Model, the ASC allows Anesthesia to come in and perform the support service for the surgeons, with anesthesia doing its own professional billing and collection.  There is no financial connection between the ASC and Anesthesia, so the compliance risks are entirely minimal.

In the Employment/Engagement Model, where the ASC engages Anesthesia as an independent contractor, the ASC pays Anesthesia a fixed rate for services and then the ASC bills and collects for the anesthesia service.   The ASC takes the collection risk on denied claims, and may or may not make a margin on anesthesia services.  So long as the parties fulfill the seven requirements of the personal services safe harbor of the Federal Anti-Kickback Statute, 42 U.S.C. Section 1320a-7b  (b), there is likely manageable risk under the ordinary situation.  Although this arrangement is riskier than the Fee-For-Services Model, careful attention to drafting may address concerns with corporate practice of medicine laws and may satisfy the personal services and management safe harbor to the AKS set forth in 42 C.F.R. section 1001.952(d).

In the Company Model, the ASC (or the medical group owning the ASC in corporate practice ban states) forms a separate entity which hires/retains anesthesia and provides anesthesia to the ASC.  The anesthesia company then bills and collects the professional anesthesia fees, pays the anesthesiologists, and dividends the profits, if any, to the ASC.  While this model reduces the denials from commercial insurers who look askance, at times, at the ASC itself submitting both facility fee and anesthesia professional billings, it raises significant concerns under the AKS. The risks of this model are significantly higher than those of the Fee-For-Service Model and the Employment/Engagement Model, and entities may need to re-assess their risk and/or restructure their arrangement to comply.

Problematic Arrangements

Whenever an entity other than the professional service provider bills for physician fees of any kind, including anesthesia, there can be AKS questions.

The OIG reviewed a proposed relationship in which an anesthesia provider billed and retained all collections from patients and third-party payors, including Medicare, but was also contractually obligated to pay the ASC a “management services” fee for the non-Medicare patients.  It was not entirely clear exactly what management services were provided for the payment to the ASC, and whether such payments were fair market value for the services.  In OIG Advisory Opinion No. 12-06 (2012), the OIG concluded that the ASC would be paid twice for the same activity:  once by collecting the facility fee from the payor (designed to compensate it for the activities it undertook) and again by the management fee paid to the ASC by Anesthesia.  Worse, at least optically was the fact that the “management fee” was calculated on a per patient basis (for items/services supposed to be covered by the facility fee only).   In short, this arrangement had all of the hallmarks of a referral fee.

In another proposed arrangement reviewed in the same OIG Advisory Opinion, the OIG took on a version of the Company model, where, subsidiary companies owned by the ASC would contract with an anesthesia provider and bill for the provider’s anesthesia services.  The subsidiary companies would pay Anesthesia a negotiated rate.  The OIG concluded that this relationship would pose more than a minimal risk of fraud and abuse, because the subsidiary companies would generate anesthesia revenue that would be paid to them even though they were not Medicare certified under Title 42 C.F.R. Part 416.

A third example challenged by the OIG was where a fee opportunity by the engaging medical group was created where none would otherwise exist.  In OIG Advisory Opinion No. 13-15 (2013), the OIG reviewed a proposed relationship where a psychiatrist/anesthesiologist from the group would provide all anesthesia services, except when on vacation.  During vacation coverage, a separate anesthesia group provided the anesthesia but was required to reassign its right to bill and collect for anesthesia services to the group in exchange for a per diem rate.  The OIG concluded that the arrangement was designed to permit the psychiatry group to do indirectly what it could not do directly, that is, to receive compensation which it otherwise was not entitled to receive.  Again, the federal government concluded that the arrangement presented a significant risk that the retention of anesthesia revenues in this circumstance raised the presumption that this was nothing more than a referral fee.

Conclusion

What we can tell from these OIG opinions and other decisions, is that an ASC can provide billing and collection services for Anesthesia, but they must be at Fair Market Value, and otherwise meet the personal services safe harbor of the AKS.  If there is excessive revenue being retained by the ASC, or where there is really no service being provided by the ASC to Anesthesia, the parties run a risk that the arrangements may be considered a mere referral fee and run afoul of the AKS.  Given that anesthesia-related billing revenue continues to be a frequent focal point for many ASCs, ASCs and their owners are encouraged to carefully review their relationships with anesthesia providers to ensure that they are compliant and not running afoul of the anti-kickback laws.