OIG Blesses ASC Joint Venture Arrangement Owned by Physicians, Health System, and Management Company

Client Alert

Gibbons Special Alert

May 13, 2021

In its April 29, 2021 Advisory Opinion (OIG Advisory Opinion No. 21-02), the Office of Inspector General gave notice that an arrangement involving joint ownership of an ambulatory surgery center (ASC) among surgeons, a health system, and a management company would avoid administrative sanctions based largely on a range of certifications made by the health system investor. A close look at the ownership structure and related set of certifications governing the proposed conduct of its owners may herald an optimistic forecast for the future of jointly owned ASCs.

Ownership Structure

  • Health System owns 46 percent.
  • Eight Surgeons own 46 percent (each individual owns between 4 percent and 8 percent).
  • Management company owns 8 percent.

Other Legal Parameters and Pertinent Elements of the Arrangement

  • Capital contributions are made in proportion to ownership interest.
  • Profit distributions are made in proportion to ownership interest.
  • No loans are permitted from the ASC or any investor to another investor for the purpose of obtaining an ownership in the ASC.
  • Ownership is not offered based on previous or expected referrals.
  • The ASC would operate at a newly constructed facility that would be owned by a real estate joint venture owned by the health system, the management company, and the physician investors; however, the arrangement would comply with all relevant anti-kickback safe harbors (i.e., space rental, equipment, personal services, management contracts, and outcomes based payment arrangements).
  • Patients would receive written notice of the investors’ ownership interests and would be treated in a nondiscriminatory manner.
  • No indirect investors would be allowed.

Health System’s Certifications

  • Health system will not track referrals to the ASC.
  • Health system will not take actions to encourage or require its employed physicians, medical staff, or independent contractor physicians to refer to the ASC or to refer to the ASC’s physician investors.
  • Compensation paid by the health system to its employed physicians, medical staff, or independent contractor physicians, including physician investors in the ASC, would be fair market value and would not be related to referrals to the ASC or its investor physicians.
  • Physician investors would regularly use the ASC for their own patients and would personally perform procedures for them at the ASC.
  • Physician investors would rarely refer patients to each other for ASC procedures; ASC procedures performed by physician investors arising from referrals from other physician investors would be less than 1 percent of ASC annual volume.
  • Patients of the physician investors and the ASC would be treated in a nondiscriminatory manner.
  • Ancillary services provided to patients who were beneficiaries of federal health care programs would not be separately billed and would directly relate to the procedures performed at the ASC.
  • None of the costs associated with the ASC would be included in the health system’s cost reports unless otherwise required by a federal program.
  • The health system would not submit any claims to federal programs for any services associated with the ASC.

OIG’s Analysis

The OIG acknowledged that the arrangement did not satisfy all applicable anti-kickback safe harbors and pointed out, accordingly, that the offer or payment of investment returns from the ASC to its investors indeed constituted remuneration under the anti-kickback statute. Notwithstanding, the OIG determined that the arrangement presented a “sufficiently low risk” of fraud and abuse, and therefore, it would not impose administrative sanctions on the health system or the manager, i.e., the requestors of the advisory opinion. The OIG made the following key determinations:

  • The physician investors would not be significant sources of cross-referrals to each other because the physician investors would be using the ASC to perform procedures for their own patients on a regular basis and would rarely refer cases to other physician investors.
  • The arrangement includes safeguards to reduce the risk of inappropriate referrals (e.g., compensation would be fair market value and would not be related to referrals).
  • The arrangement includes safeguards that reduce the risk that investors who are referral sources would be rewarded for their referrals (e.g., loans to investors by other investors or by the ASC for the purpose of acquiring an ownership interest in the ASC would not be permitted, no pass-through investing would be permitted, and ownership interests would not be based on previous or expected referral patterns).
  • The arrangement includes safeguards that reduce the risk that investors would receive profit distributions for referrals to the ASC (e.g., the arrangement with the real estate joint venture would comply with all applicable anti-kickback safe harbors, and patients would receive notice of the investors’ interests in the ASC).
  • The arrangement includes safeguards that reduce the risk of improper billing (i.e., patients would be treated in a non-discriminatory manner, ancillary services would not be billed separately, and the ASC’s expenses would generally not be reflected in the health system’s cost report; nor would the health system submit claims to federal programs in connection with the ASC’s activities.


This favorable opinion by the OIG is arguably a roadmap for ASC developers. The proposed arrangement includes a set of structural parameters that we expect will be considered in other settings, even though the OIG’s determinations and analysis set forth in this advisory opinion are expressly limited to the facts presented to the OIG by the requestors and only applies to them.

On the other hand, this advisory opinion may also serve as a useful reality check for potential ASC investors whose vision can’t be sustained within the self-imposed guardrails agreed upon by these requestors.

For more information about how this recently published advisory opinion could apply to your health care enterprise, or for additional information about current regulatory and sub-regulatory guidance issued by federal and state agencies concerning the anti-kickback statute and related fraud and abuse laws, contact Barry Liss, Co-Leader of the Gibbons Healthcare Practice.