The Justice Department’s decision to decline prosecution of Campus Eye Management Holdings while separately indicting its founder turned a spotlight on a corporate structure that has become the default architecture for private-equity-backed provider roll-ups.
The structure, with the management services organization sitting atop a professional practice, with an ASC often bolted on underneath, isn’t unique to ophthalmology. Dental support organizations, dermatology platforms, orthopedic and spine ASC networks, and GI roll-ups are largely built the same way.
Here are five things to know:
1. Most states bar corporate ownership of a medical practice under the corporate practice of medicine doctrine, according to a report from Holland & Knight. PE firms get around that by acquiring a management company rather than the practice itself — the MSO — that owns the billing, real estate, equipment, staffing and often the ASC, while a nominally independent physician or optometrist owns the professional practice on paper, according to a report published in the Thomson Reuters Health Law Handbook. The MSO handles the money; the clinician handles the license.
2. That split is what creates the exposure. An MSO’s revenue is a function of volume and mix, that pushes more procedures, more diagnostic tests and more referrals into the ASC it manages. The clinicians generating that volume are legally separate from the entity capturing the economics. Any compensation arrangement that links a management company’s fees to referral-generating activity, rather than a fixed, fair-market-value rate, sits close to the Anti-Kickback Statute’s core prohibition, because the structure was built to separate ownership from clinical decision-making in the first place, according to a blog post from law firm Ruskin Moscou Faltischek.
3. According to the indictment against founder E. Bruce DiDonato, the alleged scheme paid ophthalmologists kickbacks tied to surgery referrals, concealed through sham consulting agreements, layered on top of unnecessary or duplicative diagnostic eye tests billed to Medicare, generating roughly $3.4 million in fraudulent claims. The testing and referral volume fed directly into the ASC and practice the MSO managed.
4. Mr. DiDonato sold a stake in Campus Eye to private equity investors in 2021, marketing the deal in part on the strength of the Medicare reimbursements later alleged to be fraudulent, according to the Justice Department. For health systems, physicians and investors evaluating an MSO-backed practice or ASC acquisition, a platform’s historical billing and coding practices are a standard fraud-and-abuse diligence item in healthcare M&A, not just a valuation input, according to a report from Mintz, and Campus Eye shows DOJ is willing to look backward past a change of ownership when that diligence gets skipped.
5. Campus Eye is DOJ’s first healthcare-sector resolution under its new departmentwide Corporate Enforcement and Voluntary Self-Disclosure Policy — a milestone several law firms, including WilmerHale, Holland & Knight, DLA Piper and ArentFox Schiff, flagged in client alerts within days of the announcement. DOJ credited Campus Eye’s parent company with voluntary self-disclosure, full cooperation and timely remediation, and the company paid $1 million in restitution. It shows the department is willing to fully decline prosecution of the corporate entity while still pursuing the individual who ran it.
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