State self-referral laws, for ASCs, serve in a complementary position to the Medicare and Medicaid Fraud and Abuse Laws and the Federal Stark Act. From a structuring
perspective, ASCs must comply with both the federal laws and the relevant state laws. The state laws, as a general rule, have three principal impacts on ASCs:
They may expressly prevent ownership by either referring and performing physicians and/or by non-performing physicians. The second category includes primary care physicians who refer but do not perform.1 The laws can require disclosure of ownership to patients.
The laws extend coverage to include nongovernmental patients (self-pay and commercially insured patients).
A lawyer working with ASCs is charged with understanding the impact state law will have on ASC structures, providing structuring choices and disclosing the impact of the laws to clients. This disclosure is often made through memoranda or a client
memorandum. However, the lawyer may also use the disclosure, in a private placement memorandum, for example, to set up defenses to govern- mental challenges. Here, he or she must set up the challenge, but not mislead a client as to the risks under applicable state law. Finally, the contractual agreements should provide means for attempting to restructure agreements in the event that state or federal laws change or are interpreted to prohibit physician ownership. This chapter provides an overview of the impact of state self-referral laws on ASCs.
I.
TYPES OF PROHIBITIONS AND LAWS
State self-referral laws typically are of one of three types. First, they may modeled after the Stark Act and prohibit relationships with regard to certain services. Second, they may be similar to the Federal Fraud and Abuse Statute. Here, they may more generally
prohibit remuneration and kickback re specific services. Third, they may require disclosure to patients.
State restrictions are often found in either a state self-referral act, an anti-kickback statute or in a state physician code. State department health and attorney general opinions and actions often supplement the acts and codes through advisory opinions and
interpretations.
A. Requiring Performance
1 Federal law implies favor with surgeons who invest and perform services in ASCs but disfavors
The clearest impact that state statutes often have on ASCs is the clarity of their restriction on ownership by nonperforming physicians. Per these statutes, surgeons, but not primary care physicians or group practices, may be permitted to own ASC interests. Examples of this type of legislation are set forth below. These laws serve to extend the proposed federal safe harbor for surgeons a step further by actually prohibiting ownership by nonsurgeon referring parties.
Montana. Mont. Code Ann., 5 39-71-1108 (1998). Physicians self referral prohibition.
(1) Unless authorized by the insurer, a treating physician may not refer a claimant to a health care facility at which the physician does not directly provide care or services when the physician has an investment interest in the facility, unless there is a demonstrated need in the community for the facility and alternative financing is not available [emphasis added]. The insurer or the claimant is not liable for charges incurred in violation of this section.
Illinois. § 225 Ill. Comp. Stat. 47/20 (1998). Prohibited referrals and claims for payment.
Sec. 20. Prohibited referrals and claims for payment. (a) A health care worker shall not refer a patient for health ser- vices to an entity outside the health care worker's office or group practice in which the health care worker is an investor, unless the health care worker directly provides health services within the entity and will be personally involved with the provision of care to the referred patient [emphasis added].
Maine. 22 Me. Rev.Stat. Ann 5 2085 (1997). Prohibited referrals and claims for payment.
1. PROHIBITED REFERRALS. A health care practitioner may refer a patient to an outside facility in which that health care practitioner is an investor only when that health care practitioner directly provides health services within the facility and will be personally involved with the provision of care to the referred patient [emphasis added].
North Carolina. N.C. Gen. Stat 5 90406 (1999). Self-referrals prohibited.
(a) A health care provider shall not make any referral of any patient to any entity in which the health care provider or group practice or any member of the group practice is an investor.
“Referral” does not mean any designated health care service or any referral to an entity for a designated health care service which is provided by, or provided under the personal supervision of, a sole health care
provider or by a member of a group practice to the patients of that health care provider or group practice.
New York. N.Y. Pub. Health Law § 238–a (1998). Prohibition of financial arrangements and referrals.
1. (a) A practitioner authorized to order clinical laboratory services, pharmacy services, radiation therapy services or x-ray or imaging services may not make a referral for such services to a health care provider authorized to provide such services where such practitioner or immediate family member of such practitioner has a financial relationship with such health care provider.
2. Subdivision one of this section shall not apply in any of the following cases:
(a) practitioners' services─ in the case of practitioners' services provided personally by, or under the supervision of, another practitioner in the same group practice as the referring practitioner [emphasis added].
The New York Statute differs from certain of the foregoing in that it applies to specific services as opposed to all services.