Last month's OIG advisory opinion that frowned on surgical centers' profiting from anesthesia revenue put a smile on the faces of many anesthesia providers.

"You're no longer permitted to extort anesthesia: That's the message the OIG is sending," says James Horvath, CRNA, owner of Steel City Anesthesia in Youngstown, Ohio. "These kickback schemes should all go away. These are our professional fees."

"I don't think you should have to pay for the privilege of working at an institution," adds anesthesiologist James J. Thomas, MD, one of the owners of Anesthesia Associates of Kansas City. "It offends me on a personal level because my hard-earned money ought to come to me."

More than half (54%) of the 526 readers we polled last month say that ASC physician-owners shouldn't profit from anesthesia (see "Reader Survey") Thanks to the OIG opinion, they just might get their wish.

How surgeons wet their beaks
Advisory Opinion No. 12-06 concluded that both of the increasingly popular fee-splitting models an anesthesia provider asked it to examine "could potentially generate prohibited remuneration under the anti-kickback statute and that the OIG could potentially impose administrative sanctions." A review:

• Fee-for-service model. The ASC bills the anesthesia provider a per-patient management fee for such "management services" as pre-op nursing assessments, office space and equipment storage. The OIG said this arrangement would implicate the anti-kickback statute because the fee that the anesthesia group would pay would be for some of the same services that the ASC facility fee is intended to cover. The ASC would essentially be paid twice for the same services, said the OIG.

Joe Laden, president of Ohio River Valley Associates, a physician-owned management services organization in Louisville, Ky., details how the fee-for-service model might work. The average anesthesia reimbursement for a GI case is $200. The GI center charges its anesthesia provider $50 in "management services" for each patient. If the center does 5,000 cases per year, that's $250,000, a pretty hefty price tag for anesthesia privileges.

"A GI doc will look you right in the eye and ask, 'How much money are you going to kick back to me per case?' They'll reformulate it as payment for expense-sharing, but paying for our footprint is still outright criminal kickback behavior," says Mr. Horvath.

If you do your math right, Mr. Horvath says it's easy to make the fee-for-service model appear to be a legitimate expense-sharing model. Say a 5,000 square-foot ASC's yearly expenses are $144,000, and anesthesia personnel, equipment and supplies use 25% of that space, making anesthesia responsible for $36,000 in expenses per year. If the ASC does 900 cases per year, the facility asks anesthesia for a tidy $40 per case: 900 x $40 = $36,000.

• Company model. The company model is a favorite of GI centers, where sometimes the reimbursement for anesthesia is more than that for the procedure. The ASC forms and owns a separate anesthesia shell company that bills for anesthesia services, hires the anesthetists at a negotiated rate either as independent contractors or as employees, bills for anesthesia services and then shares in the profits generated by the anesthesia service fees.

The American Society of Anesthesiologists says the company model creates incentives and pressures for anesthesiologists to administer anesthesia against their clinical judgment. "If you're sharing in the revenue, it's in your best interest to give more people anesthesia than what is necessary," says Mr. Horvath.

The OIG ruled that the physician owners' investment in the anesthesia company wouldn't be protected by the ASC safe harbor, saying that the company model "is designed to permit the centers' physician-owners to do indirectly what they cannot do directly: to receive compensation, in the form of a portion of the anesthesia services revenues, in return for their referrals to the anesthesia provider."

"How is the company model different from a family doc or ER doc working for $125 an hour in an urgent care center where the owner-physician pockets twice that for every hour his 'employee' works?" asks Mr. Horvath.

Says the ASA in a February letter to the OIG, "We firmly believe that the company model is fraudulent and abusive to anesthesia providers and patients. We believe the best approach is to have anesthesiologists working directly for a hospital, ASC or if operating independently, anesthesiologists should be paid fairly for their service without having to unfairly remit their income to a facility under the company model."

RIP, franchise fees
Healthcare lawyers say the negative OIG advisory opinion gives anesthesia practices solid footing to refuse to pay a "franchise fee" to surgical centers. Though more disapproving finger wag than enforceable law, the OIG opinion "will embolden anesthesiologists to start complaining," says lawyer Mark Weiss of Advisory Law Group in Los Angeles. "They've been afraid that if they complained, the [facility] would dump them. Now they can call the OIG and say the [facility] asked for a kickback. This sends a loud-and-clear message to surgeons and ASCs that the regulatory body in charge of prosecuting kickbacks looks at this in a scary way."

"For those clients that are paying ASCs part of their anesthesia revenues, get out of those contracts immediately," writes lawyer David M. Vaughn of Vaughn & Associates in Baton Rouge, La., in an e-mail.

As anesthesia providers celebrate not having to fork over part of their fees to surgeons any longer, ASC physician-owners used to drinking from 3 revenue streams — facility fees, procedural fees and anesthesia services fees — will have to get by on 2, even though their mindset might be that it's their patients and their facilities, so why shouldn't they share in the anesthesia revenue?

"Surgeons think that if they're bringing patients to the table," says Mr. Horvath, "that we should participate in their kickback schemes and thieving ways."