As seen in Modern Healthcare

Written by Alex Kacik featuring LBMC Shareholders’ Katie Tarr and Brad Bonde.

Health systems continue to invest in ambulatory surgery centers. While reimbursement rates are typically significantly lower than the inpatient setting, ASCs provide lower-cost alternatives and free up inpatient capacity.

It’s also uncertain how much of the existing regulatory framework the Biden administration will keep intact, said Brad Bonde, a shareholder at LBMC.

“There is probably a little hesitancy to make an assumption on what came out last year until there is more clarity or any indication on if regulators have the desire to go in and change it,” he said.

Several safe harbors in previous iterations of the anti-kickback statute remain intact. While all the safe-harbor criteria do not have to be met, providers that do not hit most of the conditions invite regulatory scrutiny.

A physician’s investment interest must not be tied to referrals and returns must be directly proportional to the amount of capital invested. Hospitals cannot directly or indirectly influence referrals and real estate, equipment and compensation must be offered at fair market value.

The so-called “one-third” rule has historically been hard to meet. It stipulates that at least a third of a physician’s total practice income must come from ASC procedures and the doctor must perform at least a third of such procedures at the ASC that they’ve invested in.

“A lot of times specialists won’t meet the strict requirements of the one-third rule because the reimbursement on the inpatient side is so much higher than the type of cases you can do on the outpatient side,” Gordon said. “What the feds are looking for is that physicians who invest have to be generating the referrals themselves—they have to be the surgeons that are doing the cases and use the center as an extension of the practice.”

While most hospitals with ASCs operate them as physician joint ventures, only a third allowed employed physicians to invest in ASCs—the lowest number in three years, according to the Avanza report. That could be related to hospitals with low risk tolerance, experts said.

“Rather than risk being out of compliance with the complicated law, which could in turn increase their risk profile, some hospitals are choosing not to permit physician ownership,” said Katie Tarr, a shareholder at LBMC.