There’s an unfortunate side effect of the increasing velocity of the movement of care from the hospital to the independent setting (for example, think independent ASC/outpatient setting instead of hospital outpatient department instead of inpatient surgery). 

That's the fact that many independent facilities and ventures either lack the institutional structure (e.g., a compliance department or competent legal counsel) or are far more entrepreneurial and risk-desensitized than hospital systems (which are still not paragons of compliance) to appreciate the severity of what I call the “stupid compliance mistake,” stupid in the sense that they’re as obvious as a plate of pasta.  

Let’s look at kickbacks as an example.

In everyday terms, the federal Anti-Kickback Statute (AKS) prohibits the knowing and willful remuneration — that is, the offer, solicitation, receipt, or transfer of anything of value — for referrals of “federal health care program” patients. The affected programs include Medicare, Medicaid, TRICARE, and about a dozen others. 

This is a criminal statute. Violation can lead to fines of up to $25,000 for each kickback, in addition to even greater civil penalties, plus prison time of up to 5 years for each kickback. So, for example, paying a kickback in connection with 10 Medicare claims can land you in prison for 50 years. 

Sure, maybe you won’t end up doing that much time, but as I recently wrote on the blog [see Drugs, Sentencing, and Lock (and Roll on to Another Kickback Prosecution)] two former medical practice partners, Drs. John Couch and Xiulu Ruan, were sentenced, respectively, to 20 and 21 years in federal prison. (The duo was also ordered to make restitution of $6,282,023.00 to Medicare, $3,649,092.97 to Blue Cross/Blue Shield of Alabama, $2,285,170.70 to Tricare, and $1,695,929.00 to United Heath Group.)

In addition, violations of the AKS can trigger other federal and state crimes. Most, perhaps all, states have some companion statute prohibiting kickbacks of “fee-splitting.” Others have laws criminalizing “commercial bribery.” The transactions and communications underlying kickback violations, for example the exchange of emails or even electronic banking transfers, constitute wire fraud. And, that’s just the start. 

Yet a chain of ASCs in Georgia seemingly entered into a deal with a CRNA group to accept drugs paid for by nurse anesthetists in exchange for exclusive contracts. 

ASCs are reimbursed by both federal healthcare programs and commercial payors on a CPT code based system. Inherent in the reimbursement is payment for associated costs, including anesthesia drugs. Demanding or offering free drugs (or for that matter, free services such as “helpers” to “assist” the CRNAs in the ASC) leads both to AKS (as well as False Claims Act) hell. 

In the fallout of that Georgia deal, the CRNA group involved, Sweet Dreams Nurse Anesthesia, paid $1,034,416 to the United States government plus $12,078.79 to the State of Georgia to resolve the AKS allegations. 

In fact, the allegations were broader than just free drugs: the U.S. Attorney also alleged that an affiliate of Sweet Dreams agreed to fund the construction of an ASC in exchange for contracts for Sweet Dreams’ selection as the exclusive anesthesia provider at that facility and a number of other ASCs. How did they miss the danger in that stupid idea?

In fairness, it must be noted that Sweet Dream fully cooperated with the governmental investigation and that, legally speaking, the claims were only allegations, in that there was no determination of, and Sweet Dreams did not admit, liability. (But Sweet Dreams is out the $1,046,494.79 paid in settlement plus what one might guess is a huge amount of attorneys’ fees.) 

Yes, I know that as business moves from the hospital to the outpatient setting, many physicians and other providers are finding it harder to compete for business, and that many controlling the business are brazen about wanting something back. And, yes, I know that many who control facilities don’t think (why they don’t think is another question) about the compliance issues inherent in the business relationships they propose or accept.  

However, the real world impact of ASCs (and pharmacies and clinical labs, etc.) gone wild is investigations (which cost money, lots of money, to deal with), whistleblower lawsuits (which cost money, lots of money, to deal with), and criminal prosecutions (which cost money, lots of money, to deal with plus, as with Drs. Couch and Ruan, decades behind bars). 

If you can’t trust a hospital that claims that the arrangement has been vetted by its attorneys and is compliant (you can’t), you certainly can’t trust an outpatient facility, or your co-owners of the outpatient facility, to tell you that a stupid compliance mistake isn’t really a stupid compliance mistake.

The takeaways for you:  

1. Be careful. 

2. We can perform a compliance assessment of any proposed dealings with those who refer to you, or to whom you refer.

3. We can perform a "red team" compliance assessment (i.e., a simulated government investigation) of your current dealings. It's better to find your own weaknesses than to permit a whistleblower or an FBI agent to find them for you.

All Things Personal 
 

The reality is that some practices can be sold, some can never be sold, and some have nothing to sell. The reality also is that there are a number of strategic alternatives to a practice sale.

A perfect storm of factors is accelerating the market for hospital-based medical group mergers and acquisitions.