Ambulatory Surgeons

Investing In or Opening an Ambulatory Surgery Center? Beware of State & Federal Regulations

Investment in ambulatory surgery centers (ASCs) is soaring. Physicians, hospitals, and health systems are attracted by the high margins, significant growth potential, payer influence, and efficient patient care. Beyond financial due diligence, make sure you are adhering to these state and federal regulations before opening or investing in an ambulatory surgery center:

  • The Anti-Kickback Statute
  • The Texas Corporate Practice of Medicine (CPOM) doctrine
  • Centers for Medicare & Medicaid Services (CMS) certification and reporting requirements
  • Texas’ Ambulatory Surgical Center Licensing Act

The Anti-Kickback Statute and Stark Law

The Anti-Kickback Statute and Stark Law regulate how providers can give and take patient referrals. Ambulatory surgery center referrals by an owning physician are not subject to Stark Law but will implicate the federal Anti-Kickback Statute (AKS). Fortunately, the AKS also contains “safe harbors” for ASCs, which protect physician-owned ASCs and certain joint ventures from laws preventing self-referral.

To meet the conditions of the AKS safe harbor, the ASC must serve as an extension of the physician’s practice, meaning at least one-third of each physician’s annual practice income must come from ASC procedures.

Additional criteria depend on the ownership structure and the types of procedures offered by the ASC. The AKS safe harbor contains four categories:

  1. surgeon-owned ASCs
  2. single specialty ASCs
  3. multi-specialty ASCs
  4. hospital/physician-owned ASCs

Each category has its own criteria, but all must satisfy certain core criteria to be exempt from both criminal prosecution and civil penalties under the Anti-Kickback Statute:

  • The ASC must be certified under 42 CFR Part 416 of the Social Security Act;
  • Loans from the entity or other investors to physician investors are prohibited;
  • Investment interests must not be related to the volume or value of referrals;
  • Distributions must be directly proportional to the amount of the capital investment of that investor;
  • All ancillary services must be directly and integrally related to primary procedures performed at the ASC and none may be separately billed to Medicare or other federal health care programs;
  • Neither the ASC nor physicians practicing at the ASC can discriminate against Medicare patients; and
  • Patients must be aware of their referring physicians’ ownership interests.

Our health law attorneys have decades of experience setting up compliant ambulatory surgery centers and can advise you on the criteria for your specific ASC category.

The Texas Corporate Practice of Medicine Doctrine & ASC Ownership Structures

The Corporate Practice of Medicine (CPOM) doctrine limits who can open medical practices and provide medical services in Texas, including ASCs. Many people may be involved in running an ASC, but you need to take care that your pay structure does not violate the CPOM doctrine.

Pay special attention to who owns and operates the practice, how surgeons are employed and paid, and how the ASC is managed. Our team of Texas healthcare attorneys can help you design an ownership structure that complies with the Texas CPOM.

Centers for Medicare & Medicaid Services (CMS) Certification and Reporting Requirements

Becoming a certified provider for Medicare & Medicaid Services (CMS) is complex and can be difficult – even for traditional providers. For ASCs, the rules are even more specific.

For example:

  • ASCs must be certified and approved to enter into a written agreement with CMS.
  • ASCs must operate exclusively for the purpose of providing surgical services to patients not requiring hospitalization.
  • ASCs cannot share clinical space or mix operations with an adjacent physician’s office but, if permitted by state law, common area may be shared so long as the common space is not used during concurrent or overlapping hours of operation.
  • ASCs cannot share space with a hospital or Critical Access Hospital outpatient surgery department, or with a Medicare-participating Independent Diagnostic Testing Facility (IDTF).

In addition, ASCs are required to report quality of care data for standardized measures to avoid penalties.

Full conditions for Medicare or Medicaid coverage can be found in 42 CFR Part 416 of the Social Security Act, or consult our healthcare attorneys for guidance.

Texas’ Ambulatory Surgical Center Licensing Act

Chapter 243 of the Texas Health and Safety Code is known as the Texas Ambulatory Surgical Center Licensing Act. It defines an ASC as “a facility that operates primarily to provide surgical services to patients who do not require overnight hospital care” and outlines licensing requirements, fees, special exemptions, minimum standards, rules, and inspections.

Per this state law, the Texas Health and Human Services Commission is responsible for the licensing and regulation of ASCs in Texas. ASC licensing requirements in Texas include:

  • Licensing application (form 3210) submitted approximately 90 calendar days prior to the projected opening date of the facility
  • IRS letter assigning the EIN
  • Certificate of Filing from the Office of the Secretary of State
  • An ownership structure chart showing the levels of ownership, legal names, and related EIN numbers
  • A non-refundable licensing fee of $5,200
  • An architectural review of the facility by Texas HHS’ Architectural Review Unit
  • The administrator, medical chief of staff and/or director of nurses listed on the license application must attend a presurvey conference

This state license must be renewed every two years, and facilities are subject to unannounced onsite inspections at any reasonable time, either for a routine review of licensure requirements or in association with an investigation into possible state or federal violations.

Regulatory Compliance for ASCs

If you own, operate, or invest in an ASC, do not trust regulatory compliance to just anyone. Instead, choose Hendershot Cowart P.C. to put our 35-year-long legacy of helping set up and guide thriving healthcare practices on your side.

We believe in relationships, loyalty, and strong communication, and we strive to be your lawyers for life.

Whether you are just starting to get involved with an ASC, or you just want to check your regulatory compliance, give us a call at (713) 909-7323 or contact us online to discuss your situation and get to know us better.

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