OIG widens door for ASC hospital agreements

The Health and Human Services’ Office of Inspector General (OIG) recently approved two proposed ventures involving ambulatory surgery centers (ASC) that health care attorneys say increase the flexibility hospitals have in this area.

The first advisory approves an existing ASC joint venture between a hospital-affiliated entity and an entity owned indirectly by five ophthalmologists, and the execution of three related ancillary agreements.

"This is a very good opinion because it is a sophisticated transaction with management agreements and facility support agreements," says Katie McDermott, a health care attorney with Philadelphia-based Blank Rome. "It very much reflects real-world health care operations, and the OIG did a very good job of sorting through the sophistication of the transaction and dealing with many of the complicated issues."

The catch is that hospitals are not supposed to be a referral source, McDermott says. But in this case, the OIG read significant flexibility into a hospital’s participation in ASCs on the basis that hospitals must be competitive with physician-based ASCs.

"They clearly are reading this, at least from the hospital perspective, in a flexible way that will allow for these relationships to develop and not taking a rigid extreme position in terms of reading those particular safe harbors," she says.

"I thought they were taking a hard look and trying to be a little more creative," agrees Bob Homchick, a partner with the law firm Davis Wright in Seattle. He notes there is a policy to encourage the use of ASCs in general because it is a less expensive way of delivering services than in the hospital.

Homchick says that is true regardless of what sector of the health care community has a piece of the action because it is viewed as a cost control. "People have tried to make the analogy to dialysis centers and other freestanding imaging centers," he says. "But I have heard from the regulators that they consider ASCs to be unique."

In some ways, that policy is encouraging, Homchick says. "On the other hand, if you are going to apply the logic of joint ownership to ASCs, why doesn’t it apply in all of these other contexts? There is a little sleight of hand here."

The second opinion approved a medical center’s proposed acquisition of an ownership interest in an operating ambulatory surgical center that is currently owned by a group of gastroenterologists.

McDermott says the recent opinions reflect an important trend under way in the OIG. "We are getting some pretty favorable guidance on some of these health care relationships in terms of how the OIG would view such an arrangement," she says. "That is becoming increasingly helpful in analyzing compliance and risk issues."

She says that in some of the earlier opinions there was a fear to say too much. "These ASC advisories are particularly useful," she says.

Al Shays, a health care attorney in Sonnenschein Nath’s Washington, DC office, says that, unlike the ASC advisories, the OIG’s two advisory opinions released Nov. 21 on hospice services break little new ground.

In one advisory, the OIG approved a hospital’s proposed donation of free office space to an entity that provides free end-of-life services to patients with terminal illnesses.

However, it gave a "thumbs-down" to a payment arrangement between a Medicare-certified hospice and certain nursing facilities. At question were services provided to residents of such facilities who are eligible both for Medicaid and Medicare hospice benefits.

The OIG said it could not issue a favorable opinion because the requester failed to provide the agency with sufficient information. "That rarely happens," notes Shays.

According to Shays, providers typically have the opportunity to withdraw their request if the OIG suggests they will issue a negative opinion. In fact, most opinions now are negotiated. "There is a lot of give and take," says Shays. "They often point out concerns and ask for additional safeguards, but it must be remembered that providers are negotiating with the party that carries all of the negotiating leverage."