EXECUTIVE SUMMARY

Ambulatory surgery centers (ASCs) are vulnerable to False Claims Act violations because of their corporate structures and relationships.

• False Claims Act violations resulted in more than $3.5 billion in settlements and judgments in 2015.

• It can be challenging for ASCs to make certain their business structure and relationships do not violate federal laws.

• When an ownership structure is legally problematic, the ASC could bill for procedures properly and still be in violation.


Healthcare professionals have paid millions in fines, gone to prison, and lost their licenses over violations of the False Claims Act (FCA), Anti-Kickback Statute, and Stark Law in 2017. Collectively, False Claims Act violations resulted in more than $3.5 billion in total settlements and judgments in 2015 and close to $6 billion in 2014.

In one recent $4 million settlement, a New York health system and its hospitals were sued by a whistleblower physician, who alleged the hospitals had engaged in improper financial relationships with physicians making referrals. (Read more about the case at: http://bit.ly/2yvcJBu.)

In another case, a South Carolina hospital paid more than $7 million in an FCA settlement in which the health system billed for services while not following regulations. For instance, the hospital billed for radiation oncology services for Medicare patients when a qualified practitioner was not available, as required by regulations, to provide assistance and direction during the procedure. (Read more about the case at: http://bit.ly/2zuBOg5.)

“Everyone obviously understands that if you submit a bill for something that didn’t happen, or you lie about whether a doctor did the procedure, or you bill a higher-level service than what was provided, you can’t do that,” says John G. Martin, Esq., partner with Garfunkel Wild in Great Neck, NY.

“But surgery centers, because of their corporate structure, relationships, and applicable laws and regulations, have a particular vulnerability that is not necessarily apparent,” Martin says. “Many have fairly complex business arrangements with a wide range of third parties.” For example, surgery centers frequently engage in business relationships with anesthesiologists, medical device/supply vendors, and other physicians. Making certain these business arrangements do not violate federal and state laws can be challenging, he explains.

ASC owners and directors must understand that when they form their centers and enter into business transactions, they could be exposed to FCA liabilities if they run afoul of the applicable laws and regulations, says Robert Del Giorno, Esq., partner with Garfunkel Wild.

A business arrangement that does not comply with federal regulations could be enough to trigger an FCA liability, even if the ASC provides medically necessary care and services, Del Giorno says.

“When your ASC structure and business relationships violate laws like the Anti-Kickback Statute or Stark Law, you can have False Claims Act liability regardless of whether or not you are appropriately providing services that are medically necessary to patients,” Del Giorno notes.

The stakes are high. If an ASC’s business relationship with referring and practicing physicians runs afoul of the Anti-Kickback Statute, FCA, or Stark Law, then claims submitted to Medicare could be considered false claims — if the claims were submitted during the period in which the ASC is in violation.

“Even if you bill the patient accurately, if your ownership structure or referral relationships violate the regulations, then that could result in a violation,” Martin warns.

The best solution is prevention. ASCs should seek legal advice about their business arrangements and referrals relationships from lawyers who specialize in healthcare law, Martin suggests.

“When we see people get into trouble, it’s when they try to figure this out themselves or when they use the same lawyer that they use for personnel matters, and that lawyer tries to figure it out,” he says. “That’s where we often see people end up as defendants in False Claims Act cases.”

Most ASCs will hire healthcare legal experts when they land in trouble, but that is an extraordinarily expensive delay. “Once you are in court, the costs can quickly become prohibitive. FCA cases are complex, and, with liberal rules of discovery, can take years to resolve. Plus, you are going up against the government, who has unlimited resources,” Martin says.

Both Republican and Democratic administrations like prosecuting healthcare fraud because they see fraud and abuse settlements as a way to reduce healthcare costs. So, the federal government, generally regardless of who’s in power, regularly increases the resources to investigate and pursue fines, Martin adds.

ASCs that have not seen their business relationships scrutinized by healthcare legal experts should take their contracts to an expert and ask him or her to review the contracts for problems before the government knocks on the door.

“If the answer is ‘there is a problem,’ then fix it right away, and you might have to disclose it to the government and pay back money,” Martin says. “If you don’t fix it or disclose it and pay back [the appropriate fine], you raise your risk and exposure considerably.”

The government created a disclosure program in which organizations that voluntarily disclose problems typically will not face the heaviest penalties, such as treble damages and per-claim penalties. While they must pay back any money gained related to the problem, the penalties for the violation can be considerably less, Martin notes.

The key to avoiding FCA violations is to make sure the ASC is structured right and offers a compliance program as well as appropriate policies and procedures, Del Giorno says.

“Detecting these types of issues and mitigating them results in less risk and consequences than if it blows up in a whistleblower suit,” he adds.