Some ASCs shell out millions of dollars to settle False Claims Act or federal Anti-Kickback Statute violations. These often are the result of whistleblower reports and could have been caused by ASCs not conducting proper research before selling shares in the business.

“A lot of times, the government piggybacks false claims into anti-kickback violations,” says Ashley Morgan, JD, CMCO, CMRS, senior associate attorney at Liles Parker, a national healthcare law firm based in Washington, DC. “[The government] might get information from data-mining, which they can use for post-payment audits.”

Other sources can be patient complaints and information from state licensing boards. One case in Florida involved the operator of an ASC who was accused of selling a minority ownership interest for less than fair market value to physicians — who were sending Medicare patients to that ASC, Morgan says.

ASCs are permitted to sell minority ownership interest to physicians under specific rules of a safe harbor in the Anti-Kickback Statute. This provision allows for the sale to occur if the price is fair market value. The sale price must be in writing and must not be based on the value of referrals, Morgan explains. In the Florida ASC case, the government determined the physicians did not pay fair market value, which resulted in a $5.1 million settlement. (Editor’s Note: One can read many more details about the Anti-Kickback Statute online at:

ASCs that end up in compliance trouble often land there because leaders were not cautious when choosing tactics to improve their competitiveness in the healthcare marketplace.

There was a case in Tennessee that involved how an ASC compensated a referring physician for direct services to that ASC. This facility settled for $5.12 million with the federal government and had to enter into a corporate integrity agreement. ASC leaders were required to hire an independent review organization to ensure they met documentation requirements, Morgan says.

“You’re allowed to have a medical director, as long as the person is under contract and the contract specifies what the person will do and how much the person will be paid,” she explains. “The work has to correlate to the amounts they’re going to be paid. You can’t just say you’ll pay [someone] $2,000 every week to do nothing more than looking over charts and signing orders.”

The payment has to be fair market value, and the same salary would have to be paid to anyone who was hired for that job, she adds. “There is a lot of competition out there, and they have to get referrals from doctors for services,” Morgan says. “Some organizations out there will just do the wrong thing.”

An ASC administrator might argue that everyone else is doing this, and he or she has to do this to get referrals. “We tell providers, ‘You have to get a good compliance plan in place and make sure referrals are up to date,’” Morgan says. “If [providers] never have had a problem before, they typically do not want to hear this advice. [Providers] see everybody else doing it, and they worry that if they don’t do it, they won’t make any money.”

Some physicians might even encourage incentives for referrals. “Sometimes, doctors pay a price for these relationships, but sometimes I see that the doctors will turn on the provider and say, ‘I never signed any of those orders or referrals,’” Morgan says. “They act like they don’t know what is going on.”

Under the Anti-Kickback Statute, it is illegal to offer, accept, or solicit for referrals. The rule concerns any instance of knowingly offering anything of value, both monetary and nonmonetary gifts. If physicians have an ownership stake in a healthcare entity, federal officials will target the doctors in their investigation.

“But more often, [federal investigators] go after the entities because the entity has more money and the entity is the one offering payment for physicians’ services,” Morgan says.

Financial penalties can be severe, but other sanctions physicians could face might be even worse. For instance, one case resulted in a physician’s exclusion from the Medicare program, Morgan reports.

“In Florida, a managing surgeon at an ASC was alleged to have performed medically unnecessary procedures on Medicare patients. Two whistleblowers brought the [complaint] to the federal government, which filed a case against the ASC and managing physician,” she recalls. Together, the ASC and physician settled for $4 million, which was on top of the physician’s five-year Medicare banishment. During that time, the doctor will only be able to provide cash-and-carry medical services. After five years, the physician can reapply to be in the Medicare program.

If one is banned from Medicare, Morgan says that is “a death knell for providers.” A banned physician cannot work at any organization that takes federal money. Further, Morgan says that a Medicare ban could damage relationships between the provider and hospitals or other private payers. “If Medicare doesn’t want you providing services, they don’t want you, either,” Morgan adds.

ASCs and surgeons can steer clear of federal violations by documenting all relationships with referring physicians and following Safe Harbor guidelines. They also should encourage employees to report problems. Management should follow up on these reports.

“If employees report something to you, and you don’t do anything about it, then they might take their complaint to the federal government,” Morgan warns.

Employees may be tempted to speak out because the federal government will pay whistleblowers up to one-quarter of a total settlement. From federal investigators’ perspective, it saves time to pursue cases brought by whistleblowers because those whistleblowers have collected evidence already.

ASCs can avoid becoming ensnared in these investigations if leaders take steps to improve their regulatory compliance:

Evaluate relationships with referral sources. Scrutinize contracts and lease agreements with physicians, Morgan suggests.

“Take a look at the ownership structure to make sure that investors are sources of referral, and get a compliance program in place,” she says.

Train staff about compliance. ASCs should make sure staff know and follow all policies and procedures. It is especially important to not put one person in charge of compliance.

“I always say it takes a team to run anything, including an ASC,” Morgan says. “The team has to understand your responsibilities and what repercussions will be for noncompliance with the compliance plan.”

Ensure employees are comfortable reporting problems. “If you have employees comfortable with reporting things to you, you can stop the bleeding,” Morgan says.

Organizations can discover problems early on by listening to their staff.

“I highly recommend that providers set up an anonymous reporting or compliance hotline or email where employees know they can use this to provide information,” Morgan says. “A lot of times, employees don’t want to come forward because even though there are anti-retaliation laws, they’re worried they’ll be retaliated against.”

Morgan adds that ASCs can contract with outside companies to handle a compliance hotline and reporting.

Fix any problems discovered internally. “Figure out the scope of the problem, and if there was an overpayment from Medicare, then make a repayment to the government,” Morgan says. “The government doesn’t expect you to be perfect. They expect you to try.”

Once an organization admits to a problem and rectifies it, the government typically will not take the case any further, she notes.

All these steps can help prevent costly noncompliance investigations and settlements. It is not easy or cheap to take these steps, but it is worth the effort, Morgan says.

“It’s like insurance,” she adds. “No one wants to pay for it, but when you need it, you’re glad you have it.”