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OIG: Proposed Anesthesia Arrangements Could Lead to Administrative Sanctions

Thursday, June 21, 2012
By James Swann

Two proposed arrangements in which an anesthesia services provider would enter into contracts with physician-owned professional corporations or limited liability companies to provide exclusive services could lead to administrative sanctions, according to an advisory opinion (No. 12-06) released June 1 by the Department of Health and Human Services Office of Inspector General.

The anesthesia provider currently maintains staff at outpatient surgery/endoscopy centers, which are owned and operated by the physician-owned professional corporations or limited liability companies, and independently bills patients and third-party payers, including Medicare.

In one proposed arrangement, the anesthesia provider would pay a management services fee to the outpatient surgery/endoscopy centers.

In return for the management fee, the outpatient centers would provide pre-operative nursing assessments, adequate space for the anesthesia provider's staff (including personal effects and medical records), and help with transferring billing documents to the anesthesia provider's billing office.

The management fee would be on a per-patient basis and would exclude patients covered by federal health care programs.

Second Arrangement.
Under the second proposed arrangement, the owners of the outpatient centers would create subsidiary companies to provide anesthesia services to patients. The wholly owned subsidiaries would then hire the anesthesia provider as an independent contractor to provide anesthesia-related services, including:

recruiting anesthesia personnel;


  • ordering equipment;

  • helping the subsidiary choose an anesthesia billing company;

  • monitoring regulatory compliance;

  • creating financial reports;

  • establishing quality assurance programs; and

  • providing logistical support.


The anesthesia provider would be paid by the subsidiary subject to negotiations.
Legal Analysis.
OIG said the first arrangement, involving the payment of a management fee, would implicate the anti-kickback statute.

“The OIG has a long-standing concern about arrangements under which parties 'carve out' Federal health care program beneficiaries or business generated by Federal health care programs from otherwise questionable financial arrangements,” the advisory opinion said.

Although the centers would only be charging a management fee for patients not covered by federal health care programs, the anesthesia provider would be providing services to all patients, including those covered by federal health care programs.

The centers would continue to bill all patients for facility fees, while at the same time billing the anesthesia provider a management fee for services that the facility fee is supposed to cover, OIG said.

“In short, the Centers would be paid twice for the same services, and the additional remuneration paid by the Requestor [the anesthesia provider] in the form of the Management Services fees could unduly influence the Centers to select the Requestor as the Centers' exclusive provider of anesthesia services,” the OIG advisory opinion said.

Additional Analysis.
As for the second proposed arrangement, OIG said it seems “designed to permit the Centers' physician-owners to do indirectly what they cannot do directly; that is, to receive compensation, in the form of a portion of the Requestor's anesthesia services revenues, in return for their referrals to the Requestor.”

OIG said the owners and operators of the centers could receive remuneration from the second arrangement as a result of the difference between the amount collected by the subsidiaries for providing anesthesia services and the amount paid by the subsidiary to the anesthesia provider.

“The OIG has also stated on numerous occasions its view that the opportunity for a referring physician to earn a profit, including through an investment in an entity for which he or she generates business, could constitute an illegal inducement under the anti-kickback statute,” OIG said.

By James Swann


The OIG advisory opinion is at http://oig.hhs.gov/fraud/docs/advisoryopinions/2012/AdvOpn12-06.pdf.

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