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Can Physicians Invest in ASCs?

Physician investment in an ambulatory surgical center (ASC) can implicate federal and state fraud, waste, and abuse statutes, including the federal Anti-Kickback Statute (AKS). Such investment may be permissible, but requires careful regulatory analysis and structuring of the arrangement.

The AKS prohibits a person from knowingly offering, paying, soliciting, or receiving anything of value to induce or reward referrals for services covered by a federal healthcare program. Due to the breadth of the statute, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) was required to release a number of “safe harbors,” where conduct that might otherwise implicate the AKS would nonetheless be protected from prosecution.

Physician investment in an ASC implicates the AKS where the physician refers to the ASC. The rationale behind this part of the statute is that the physician may refer patients to the ASC for this physician’s own financial gain as an investor in the ASC, rather than for the good of the patient or the necessity of the procedure.

Four safe harbors are available to protect certain physician investment in ASCs, depending on the type of ASC (surgeon-owned, single-specialty, multispecialty, or hospital/physician). To qualify for safe harbor protection, an arrangement must meet all elements of the applicable safe harbor. A common element of all the safe harbors is the Practice Income Test, which generally requires that at least one-third of each physician-investor’s medical practice income from all sources for the previous fiscal year or previous 12-month period be derived from the performance of procedures performed at the ASC.

An arrangement that does not meet the Practice Income Test, or any other elements of a safe harbor, cannot rely on the protection of that safe harbor. However, an arrangement that does not satisfy a safe harbor is not automatically unlawful. Instead, one must carefully review the facts and circumstances of the arrangement and analyze the risk of the arrangement. In the case of physician investment in ASCs, where an arrangement does not meet the Practice Income Test, OIG generally considers whether the physician-investors will refer patients to the ASC for procedures that they will not personally perform, whether the physician-investors will make use of the ASC for their own procedures, and what circumstances cause the physician-investors to fail the Practice Income Test (for example, they may perform a high volume of inpatient procedures). Careful analysis of these and other factors should inform any physician investment in an ASC and the structuring of the arrangement under the AKS.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding new developments in healthcare law and regulation. If you or your healthcare entity has any questions pertaining to the Anti-Kickback Statute or healthcare compliance, please contact an experienced healthcare attorney at 248-544-0888 or

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