Archive March 2014 XV, No. 3

Legal Update: The Dangers of Trying to Profit from Anesthesia

Risk running afoul of anti-kickback law when you take what's not yours.

Mark Weiss

Mark Weiss, JD


kickback liability risk DON'T GET TRAPPED Is your facility's anesthesia arrangement a kickback liability risk?

Physician-owners who try to profit from anesthesia services often violate, knowingly or unknowingly, the Anti-Kickback Statute, putting themselves at risk of fines, disqualification from federal healthcare programs and even incarceration. These so-called "company model" arrangements, in which the physicians' practice employs the anesthesia providers and bills for their services, also raise a pair of serious compliance questions:

  • Is granting exclusive rights to a physician-owned anesthesia company a kickback in itself?
  • Would participation in a company model arrangement invalidate the facility's use of the statute's ASC safe harbor?

The following scenarios show how the company model might unexpectedly spark regulatory trouble.

Exclusive arrangement
The Green Acres ASC is in desperate need of new business. For 10 years, it has contracted with Centerville Anesthesia, a group of 6 anesthesiologists working full-time at the facility, to provide services.

A group of 9 surgeons approaches Green Acres. They're interested in investing in the ASC and bringing all of their cases to its ORs. But, they say, they'll also need to bring along their own anesthesiologists, the Black Hat Anesthesia Company.

The Green Acres administrator notifies Centerville Anesthesia that the ASC has elected to terminate its services, exercising the without-cause provision in their contract. However, the administrator assures them that all of the anesthesiologists will be offered jobs with Black Hat. The catch: Those jobs will be compensated at a lower rate due to the profit tapped by Black Hat's physician-owners, something that's not within the administrator's control, and perhaps not even discussed during the termination meeting.

The administrator may have cleared the way for more green to flow into Green Acres. But she probably hasn't considered whether granting an exclusive contract to Black Hat may itself be a kickback, and a violation of federal criminal law.

The Anti-Kickback Statute prohibits rewards for the referral of federal healthcare program patients. While many people commonly envision this as a ban on cash transactions, the statute doesn't make any such distinctions. A reward is a reward, as far as regulators are concerned.

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