Compliance Guidelines Related to Selling Units in an ASC to Physician Investors

This article provides guidance on selling units in an ASC to physician investors. This is based on federal cases related to the syndication of interests in hospitals, labs and joint ventures and Office of Inspector General comments related to ASCs. In the ASC sector, centers face the combination of the ASC safe harbor (for which compliance in a multispecialty ASC requires the performance of a certain number of outpatient cases at the center) and the divergent concepts in the federal Anti-Kickback Statute Fraud (e.g. that an investor cannot be required to refer cases to an entity in which he or she is an investor). A longer form of this paper is available. If you would like a copy, please e-mail Scott Becker at

A. Actions and statements to avoid

  1. Do not offer less or more shares or a higher or lower price based on the number, volume or value of referrals a physician can generate.
  2. Do not reallocate shares based on the volume or value of referrals.
  3. Do not focus on individual distributions being tied to the number of patient referrals. Never make any indications that could lead a potential investor to believe that referrals or performance will determine an individual's "piece of the pie." Focus on overall distributions and profits.
  4. Physicians should not be allowed to invest based upon the fact that they can generate referrals for another physician who may use the center.
  5. Avoid providing physicians with estimates as to the amount of revenue that will be generated from their referrals or from another physician's referrals.
  6. Except as to compliance with the one-third tests, do not develop investor eligibility determinations based on the number of potential referrals. In evaluating physicians, examine compliance with all of the safe harbor criteria.
  7. Do not create "target lists" of physicians based on their ability to make high amounts of referrals.
  8. When creating target lists, avoid making notations indicating the potential number of referrals, the growth potential of the physician's practice, that a certain physician is a good target (based on referrals), etc.
  9. Avoid using age as an influencing factor when targeting physicians.
  10. Subject to non-discrimination rules, consider excluding Medicare and Medicaid referrals from any internal revenue and investment analysis.
  11. Do not offer remuneration or special treatment under various disguises, such as directorship contracts or discounted lease arrangements, in order to induce investors.
  12. Do not pressure a physician investor to shift their current referral patterns.
  13. Do not make any indications to investors that low-referring physicians will be pressured to withdraw.
  14. Units should be sold at fair market value.

B. Actions that can be taken

  1. Offer equal amounts of units per investor.
  2. Offer units at the same price per unit.
  3. Offer units at the then fair market value per unit.
  4. Provide investor with the current financial statements and not their potential revenues.
  5. Offer units to only physicians that will comply with the safe harbors — meet all tests and not just the one-third tests.
  6. Clarify that the hospital or management company partner does not generate referrals for the ASC.
  7. Review investors against compliance with the requirements of the safe harbors.
  8. An ASC may ask physicians why they choose not to use the ASC.

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