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| OIG: Joint Venture Could Run Afoul of Anti-Kickback Statute
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The Office of Inspector General last week published an advisory opinion that casts doubt on whether a fairly common ASC transaction runs afoul of the federal Anti-kickback Statute.
The transaction involved certain shareholders in a physician-owned ASC selling 40 percent of the ASC to a local hospital. The OIG didn't go so far as to characterize the transaction as illegal. However, in concluding that the transaction "poses a heightened risk of fraud and abuse," the OIG demonstrated a clear unwillingness to "bless" transactions that fail to fall squarely within an applicable safe harbor.
Some key elements of the transaction in question: Orthopedic surgeons own 94 percent of the ASC and gastroenterologists and anesthesiologists own the remaining 6 percent. The hospital would purchase 40 percent of the ASC from the orthopedic surgeons and the other physicians would not participate in the sale. The purchase price was set at fair market value, but would exceed the amount of capital the orthopedic surgeons invested in the ASC, thereby resulting in a gain for the orthopedists on the sale. No other entity was offered the opportunity to purchase the ASC interest being sold. Post-closing, the profit distributions from the ASC would be done pro-rata based on ownership interests.
The OIG was asked to evaluate whether the transaction would comply with the Anti-kickback Statute. The statute renders illegal any payment, or receipt of payment, in exchange for the referral of healthcare services. In order to provide guidance to the regulated community regarding the application of the statute, the OIG has published safe harbor regulations that define transactions that are immune from prosecution. The hospital/physician ASC safe harbor sets forth many conditions, including the requirement that ASC profit distribution be "directly proportional" to the amount of capital invested.
In concluding that the proposed arrangement poses risk under the Anti-kickback Statute, the OIG noted that: the transaction doesn't qualify for safe harbor protection because profit distributions wouldn't be based on capital invested, but rather on ownership percentages; due to the fact that the hospital will have paid more for its shares than the orthopedists, the orthopedists would receive a higher rate of return on their investment than the hospital, perhaps implying that the purchase price in transactions such as this should be based on the original investment amount as opposed to fair market value; and excluding the non-orthopedists from the sale gives rise to "the possibility that one purpose of the hospital's investment is to reward or influence ... referrals of patients to the hospital or to the ASC."
In a bright spot in the opinion, the OIG stated that none of the identified areas of concern, standing alone or in combination, necessarily indicates fraud and abuse. However, the opinion does little to clear the murky waters already surrounding the Anti-kickback Statute as it applies to the ASC market. For example, it has long been the conventional wisdom within the healthcare bar that the purchase price for shares in an operating, "ongoing concern" ASC should be based on fair market value because a new physician paying less than market value could be construed as a kickback by the ASC to the new physician in exchange for anticipated referrals.
Clearly, any ASC transaction involving hospitals and physicians has to be analyzed in the context of this opinion. While reasonable arguments can be made that the opinion is narrowly drafted and would apply only to similar transactions, parties entering into any ASC sale transaction, whether it be physician-to-physician or physician-to-ASC development company, should consider the OIG's latest guidance.
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| Anesthesiologist Blamed for Hepatitis C Infections
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Three cases of hepatitis C infections appear to have been transmitted by a New York City anesthesiologist during the administration of IV medications for outpatient procedures, according to the New York City Department of Health and Mental Hygiene. The health department says its investigation is ongoing and it can't rule out the possibility of additional infections. During the investigation, the anesthesiologist in question isn't practicing.
While the cluster of infections appear to have occurred last August, the health department is currently contacting the roughly 4,500 patients who received IV anesthesia from the suspected anesthesiologist between Dec. 1, 2003, and May 1, 2007. During that time the anesthesiologist reportedly practiced at 10 outpatient facilities in New York.
A spokesman for the health department says the three infections occurred during various types of cases and didn't identify specific procedures for fear of dissuading at-risk patients from getting tested if their procedure was not named.
"Transmission of hepatitis in a medical setting is rare, but as a precaution we are reaching out to anyone who could have potentially been exposed," says Marci Layton, MD, the health department's assistant commissioner for communicable diseases. "We are contacting all potentially exposed individuals to advise them to seek testing."
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| Are Your Medications Labeled Properly?
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Ninety-seven percent of nurses responding to a recent survey say they're concerned about the possibility of medication errors occurring at their facility and 72 percent say they routinely label syringes for use in medicating patients. But only 37 percent claim that injectable medications are always labeled at their facility and only 51 percent are aware that pre-labeling syringes does not meet the Joint Commission's National Patient Safety Goals requirement that all medications and containers be labeled, since labeling should be done only when the medication is prepared.
The 2007 Study of Injectable Medication Errors, co-sponsored by the American Nurses Association and Inviro Medical Devices, polled 1,039 nurses nationwide on medication and syringe use routines at their facilities.
Respondents suggested that the most common factors contributing to medication errors were a rushed and busy environment (78 percent), bad handwriting (68 percent), missed or misunderstood orders (62 percent) and look-alike or sound-alike medications (56 percent). They also believe that sufficient staffing (81 percent) and more consistent syringe labeling (68 percent) would reduce such errors.
Eighty-one percent of respondents say their facilities use safety syringes, but 58 percent complain that they have no voice in their facility's selection of safety sharps. Fifty-five percent report having suffered needlestick injuries.
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| News and Notes
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Ninety-seven percent of nurses responding to a recent survey say they're concerned about the possibility of medication errors occurring at their facility and 72 percent say they routinely label syringes for use in medicating patients. But only 37 percent claim that injectable medications are always labeled at their facility and only 51 percent are aware that pre-labeling syringes does not meet the Joint Commission's National Patient Safety Goals requirement that all medications and containers be labeled, since labeling should be done only when the medication is prepared.
The 2007 Study of Injectable Medication Errors, co-sponsored by the American Nurses Association and Inviro Medical Devices, polled 1,039 nurses nationwide on medication and syringe use routines at their facilities.
Respondents suggested that the most common factors contributing to medication errors were a rushed and busy environment (78 percent), bad handwriting (68 percent), missed or misunderstood orders (62 percent) and look-alike or sound-alike medications (56 percent). They also believe that sufficient staffing (81 percent) and more consistent syringe labeling (68 percent) would reduce such errors.
Eighty-one percent of respondents say their facilities use safety syringes, but 58 percent complain that they have no voice in their facility's selection of safety sharps. Fifty-five percent report having suffered needlestick injuries.
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