OIG issues Advisory Opinion 07-13

From the American Health Laywers Association: OIG Advisory Opinion 07-13 – issued October 12, 2007, and posted October 19, 2007

Advisory Opinion 07-13 analyzes the proposed addition of optometrists as owners of three single-specialty ophthalmology ambulatory surgical centers (ASCs) that are currently owned by ophthalmologists and a subsidiary of a nonprofit hospital system. Based on the facts in the advisory opinion request, which included "no discernable safeguards," the OIG found that the proposed addition of the optometrists to the ownership of the ASCs could potentially generate prohibited remuneration in violation of the anti-kickback law and, thus, issued an unfavorable advisory opinion.

The advisory opinion request relates to a group practice and a surgical center. The group practice is composed of 8 ophthalmologists, 9 optometrists, and a wholly-owned subsidiary of a nonprofit hospital system. The group practice employs the ophthalmologists and optometrists. The ophthalmologists and optometrists own 68.23% of the group practice and the hospital owns the remaining 31.77%. The surgical center operates three Medicare-certified, single-specialty ophthalmology ASCs. Currently, the 8 ophthalmologists own 54.33 % of the surgical center and the hospital owns the remaining 45.67%. The optometrists do not have an ownership interest in the surgical center at this time.

The optometrists make referrals to the ophthalmologists for the treatment of actual or suspected eye disease or injury. The group practice employees, including the optometrists, agree to refer patients for non-inpatient services to the group practice facilities or to the surgical center ASCs. The ophthalmologists perform ASC procedures at the surgical center ASCs. While some of the optometrists assist the ophthalmologists in the pre- and post-operative work in the surgical center ASCs, they do not actually perform any ASC procedures at the surgical center ASCs.

The proposed arrangement is for the hospital to sell some of its ownership interest in the surgical center to the optometrists over a 3-year period. The terms would be the same for each investor without regard to the volume or value of referrals. The price of the ownership interest would be determined in accordance with an independent appraisal of fair market value. No investor would receive financial assistance from the group practice, the surgical center, the hospital, or any other investor.

The OIG began its analysis by stating that ASC joint ventures that include investors in a position to generate surgical business are "susceptible to fraud and abuse." Despite its long-standing concern about ASC joint ventures, the OIG noted that it has promulgated a safe harbor to protect physician ownership of ASCs under certain circumstances. The OIG noted that a key requirement under the safe harbor is that physician-investors perform ASC procedures on a regular basis while other investors are not in a position to generate referrals to the ASC or its investors.

The OIG found that the proposed arrangement fails to meet the safe harbor requirements, because the optometrists do not perform ASC procedure, but are in a position to generate referrals for the ophthalmologists and, indirectly, for the surgical center ASCs. The OIG then considered whether the proposed arrangement posed a minimal risk under the anti-kickback law, so that protection might be granted through the advisory opinion process. The OIG refused to grant protection, finding "no discernible safeguards" to minimize the risk that the proposed arrangement could be a disguised effort to allow the optometrists to profits from their referrals to the ophthalmologists who use the surgical center ASCs.

Advisory Opinion 07-13 appears to be a fairly straightforward analysis under the ASC safe harbor. It emphasizes that the ASC safe harbor is intended only to protect situations where the ASC is an extension of the physician-investors' practice. The ASC safe harbor generally will not protect physician-investors who do not perform ASC procedures on a regular basis.