ASCs can run into regulatory trouble by simply creating a poorly structured business ownership agreement or by paying one owner physician more than another. Two health law experts highlighted common mistakes healthcare professionals make regarding the FCA, Anti-Kickback Statute, and Stark Law.

• Make or receive improper referrals. The Anti-Kickback Statute and Stark Law apply to patients referred to an ASC for services and to any business in which they own an interest or from which they take money for referrals. Issues can arise regarding paying for referrals or referring patients to an ASC which one owns. These are broad and sometimes confusing laws with complicated exceptions that are called exceptions and/or “safe harbors,” says John G. Martin, Esq., partner with Garfunkel Wild.

“If you fit within one of those exceptions, the government has said that even if it sounds like you are doing what you otherwise can’t do, you are not generally subject to liability,” Martin says.

An ASC should obtain expert legal help to determine whether it meets a safe harbor or exception. “If you don’t fit into a safe harbor, there is a risk,” Martin warns. “It doesn’t mean you are violating the Anti-Kickback Statute, but you don’t have that safe harbor protection.”

If the federal government investigates the ASC, then investigators will scrutinize any excessive compensation paid to doctors, including owners, which appears to be a payment in exchange for a referral. The rules are complicated, arcane, and might even come down to calculating how much of an ASC’s doctor/owner’s business is referred to the ASC, Martin says.

“If you’re a general practitioner and you don’t do any kind of surgery or procedures that are generally done in an ASC, but you refer all your patients to the ASC you own, then you’re profiting off the ASC getting your referrals, and that relationship can run afoul of the laws and regulations,” Martin explains.

ASC owners and management should focus on their business relationships to make sure they comply with referral and other requirements under the Anti-Kickback Statute and Stark Law, Martin adds.

In July, a federal jury convicted a Houston physician who paid illegal kickbacks to a healthcare group in exchange for patient referrals. The physician also was convicted of engaging in a scheme to defraud Medicare of $1.5 million in fraudulent claims for unnecessary home healthcare services. (Read more about the case at:

• Deviate from standard physician compensation. The government generally understands that it’s not feasible for each surgeon to create his or her own ASC. It’s expected that ASCs will be owned by a group of doctors and/or other healthcare individuals, hospitals, or companies, Martin says. The problem is determining how the owners invest in the ASC, as well as how they are compensated, explains Robert Del Giorno, Esq., partner with Garfunkel Wild.

“You can get into serious trouble when providers who bring more referrals pay less for their shares, are ‘loaned’ money by other owners of the ASC to buy their shares, and/or receive a higher return on their investment,” Del Giorno says.

For instance, ASCs will be out of compliance if they reward the harder-working surgeon owners.

“There is a problem if one owner says to another, ‘I bring in 10,000 cases, and you bring in 1,000 cases, so I should pay less for my shares or get a greater return on investment,’” he explains. “If you structure your ASC in that way, you will likely end up in hot water and at significant risk.”

In May, two Missouri providers agreed to pay $34 million to settle FCA violations that stemmed from an improper relationship with referring physicians. Here, the oncologists based their compensation, in part, on a formula that took into account the value of their referrals of patients to the infusion center operated by the defendants. (Read more about the case at: The bottom line is that ASCs cannot reward co-owners based on who refers the most business, Martin says.

Some organizations have attempted to structure these rewards in a less obvious way, such as appointing the rainmaker as medical director and then paying the medical director an exorbitant salary that is not commensurate with the person’s actual job duties or fair market value, Martin notes.

“That’s problematic,” he says. “The requirement is that you pay fair market value for necessary services that are actually provided. The best way to do that is to get an expert to evaluate the salary.”

This is counterintuitive because in most businesses, it makes sense for the person who puts in the most time and produces the best results to receive a better payout, Martin says.

“But in the medical industry, the government frowns on rewarding people based on referral volume, out of concern that it will result in excessive or unnecessary treatments,” he says. “So, if you pay these doctors based on which one brings in the most cases, then each has an incentive to maximize their cases.”

The danger for ASCs is that if the organization has created a poorly structured referral relationship with its physician owners and one or more members are paid in excess of their ownership, then there is risk that those physicians’ referrals could be viewed as tainted and subject to the FCA.

“There’s the potential for liability there, and the government could go back a minimum of six years of claims,” Martin warns.

• Engage in improper relationships with anesthesiologists. Anesthesiology services are profitable, with high rates of reimbursement, so some ASC owners have tried to find creative ways to capture some of this revenue, Del Giorno says. But, for the most part, they can’t do this legally without absorbing real risk.

“If we’re talking about a garage owner, and someone comes in and is doing work in my garage, then the owner could charge the mechanic 20 bucks for the use of the garage,” Martin says. “But you can’t do the same thing in an ASC.”

The ASC bills a facility fee for the service, which includes certain anesthesia costs, and the anesthesiologists separately bill patients directly for the professional component. As a result, there is generally no quid pro quo for the payment to the ASC. As with any similar relationship, the government wants to make sure the ASC is not picking the anesthesiologists who pay the ASC for the privilege of providing services in the ASC.

The Office of Inspector General (OIG) has responded negatively to two different arrangements in which an ASC would capture revenue generated by anesthesiologists. One proposed arrangement included charging an anesthesiologist group a management fee for certain space, assessments, and billing documentation assistance. The OIG rejected this because the ASC’s Medicare reimbursement already included payment for these items “and the ASC would be getting paid twice under that arrangement.” The OIG also rejected the creation of a separate company by the ASC owners, which would then contract with the anesthesiology group to effectively provide all the services. The OIG viewed this as a vehicle to capture some of the revenue otherwise paid directly to the anesthesiologists rather than a bona fide anesthesiology practice. (Read more at:

“The OIG made clear that you can’t do indirectly what you can’t do directly,” Del Giorno says.

• Engage in an improper relationship with medical supply distributors. “There are plenty of examples, outside of the ASC context, where physicians have set up inappropriate relationships with medical supply companies,” Del Giorno offers. “Just yesterday, I read a recent case about a physician who had his fiancée set up a company to be an intermediary with the medical device distributor, saying to the device company, ‘This is the distributor I work through, so if you want me to buy and use your device, I’m not going to do it unless it comes through here and you pay this person a commission,’” he recalls.

This type of violation could result in a fine and/or a prison sentence.

• Assume the government is too busy to check every ASC’s business relationships. Government regulators might not have the time to check out every ASC or healthcare organization, but the law solves that problem by providing whistleblowers with windfall rewards.

“The truth is there are resources out there looking for these violations,” Martin says. “A fast-growing area is ‘relators’ — whistleblowers, who, under the False Claims Act, can sue you on behalf of the government.”

If they’re successful, such whistleblowers can earn a lot of money. Some recent cases involved relators who received millions of dollars. Whistleblowers can be almost anyone who learns about a violation. One often finds current or former employees, owners, and/or competitors who have learned of a potential violation.

“Anyone who knows how contracts are written, or maybe one doctor is talking to a friend and mentions how he gets paid,” Martin says. “Anyone can bring this action, and they share in whatever the recovery is.”

The government can join the individuals in the action, which is called “intervening,” but even if the government doesn’t intervene, the whistleblower still can move forward with litigation and potentially recover some of the money.

“There are professional relators who look for certain things they know that providers or hospitals or ASCs tend to do a lot, and they search this out,” Martin explains. “They may have no connection to the practice, but if they can figure out what’s happening, they will file a lawsuit, and it can be like having a winning lottery ticket.”

Be aware that the government and/or whistleblowers could discover any improper dealings or arrangements any time. Competent healthcare counsel should scrutinize relationships between referral sources and recipients before the government does so.