Too many clinics and doctors are running afoul of the anti-kickback rules (see list below) and find themselves facing serious litigation and eventual multi-million dollar settlements. To state the obvious, physicians and clinic managers need to take second look—with the help of counsel—at their anesthesia arrangements.
Here are some sobering and cautionary tales of physicians and their clinics who did not.
Sham Joint Ventures and Subsidies
Earlier this year, the Department of Justice (DOJ) announced a settlement with Georgia-based Care Plus Management, LLC and its creators Paul D. Weir and John R. Morgan, M.D.
In the original complaint, the government alleged that Care Plus Management obtained “referrals of anesthesia services through the payment of kickbacks to referrers; in this instance, the referrers are gastroenterology doctors (“GIs”), vascular surgeons, podiatrists, and a few others who do surgeries at and have ownership in ambulatory surgical centers (“ASCs”) in which CPM [Care Plus Management] provides anesthesia service.” Per the complaint, the kickbacks were allegedly paid through two modalities over a four-year period.
The first modality purportedly involved Care Plus Management forming “sham joint ventures” with the referring physicians. Care Plus Management would then allegedly pay “kickbacks for the referrals disguised as ‘profits.’”
According to the Department of Justice, Weir and Dr. Morgan, through Care Plus Management, allegedly offered the physician owners of outpatient surgery centers partial ownership in anesthesia entities (the “sham joint ventures”). This was purportedly an incentive that Weir and Dr. Morgan had created to induce the owners to award them exclusive anesthesia service agreements.
Under this arrangement, according to the DOJ, the physician owners supposedly “received compensation in the form of a portion of the revenue from the anesthesia services.”
That’s not the only part of the arrangement that the government had issue with. The second modality involved Care Plus Management purportedly paying “subsidies for anesthesia drugs and supplies to the referring physicians.” These types of incentives can raise legal issues. Per the Department of Justice, “free or below-fair-market-value goods or services may be used as a vehicle to disguise or confer an unlawful payment for referrals of Federal health care program business.”
The $7.2 Million Settlement
While the above claims are allegations only, they cost Weir, Dr. Morgan, Care Plus Management, and Care Plus Management’s 18 anesthesia entities $7.2 million. That’s the settlement amount they agreed to pay to resolve the kickback allegations.
The relator in the matter was Care Plus Management’s former senior vice president and chief operating officer. He has received more than $1.3 million from the settlement.
Surgical Services
Just five months prior to the announcement of the Care Plus Management settlement, the Department of Justice had announced another settlement involving anesthesia providers.
This one covered three anesthesia providers, numerous Georgia outpatient surgery centers and their physician-owners, and an administrator.
The original complaint was filed against Stanford Plavin, M.D.; Ambulatory Anesthesia of Atlanta, LLC; Northwest Georgia Orthopedic Surgery Center, LLC; United Surgical Partners International, Inc.; Surgical Care Affiliates LLP; Surgical Care Affiliates Perimeter Surgery Center; and a number of John Does.
According to the original complaint, Ambulatory Anesthesia of Atlanta provided anesthesia services “to over 15 hospitals and ambulatory surgical centers throughout Georgia.” Dr. Plavin was the managing partner of Ambulatory Anesthesia of Atlanta. Ambulatory Anesthesia of Atlanta is affiliated with Northside Anesthesiology Consultants, LLC.
The alleged illegal activity, according to the complaint, took place over a 10-year period. The DOJ said that Ambulatory Anesthesia of Atlanta and Northside Anesthesiology Consultants purportedly “made payments for drugs, supplies, equipment and labor, and provided free staffing to a number of Georgia outpatient surgery centers in order to induce the centers to select” Ambulatory Anesthesia of Atlanta and Northside Anesthesiology Consultants to be their “exclusive anesthesia providers.”
The government further claimed that these alleged arrangements were negotiated by Dr. Plavin.
Furthermore, according to the original complaint, Ambulatory Anesthesia of Atlanta’s purported illegal activity included paying operating expenses and costs to secure an exclusive anesthesia contract with Northwest Georgia Orthopedic Surgery Center.
These payments allegedly included the salary of a nurse to “provide pre-operative assessment services.” However, Northwest Georgia Orthopedic Surgery Center’s “global fee for its surgical services from Medicare, Medicaid and other payers already included payment for the functions” of the nurse. The government argued that this payment was “unnecessary, improper and simply a kickback” to secure an exclusive anesthesia contract.
Another allegation stated that operating expenses and costs including the salary of a pre-operative nurse and a technician to perform preoperative assessments for Surgical Care Affiliates Perimeter Surgery Center were supposedly paid through its global fees. These payments, the government claimed, added up to an exclusive anesthesia contract “worth approximately $2.3 million in revenue annually.”
In the original complaint, the government further asserted that these arrangements were similar to other arrangements that Ambulatory Anesthesia of Atlanta had with other centers in the Atlanta area. If true, the actions would appear to violate the Anti-Kickback Statute and the False Claims Act.
A $28+ Million Settlement
As a result of the litigation, the parties agreed to pay more than $28 million to resolve the allegations. The Department of Justice press release on the matter provided an extensive list of those who entered into settlement agreements with the government. The list from the press release is as follows:
- Ambulatory Anesthesia of Atlanta, LLC
- Arif A. Aziz, M.D.
- Jean Calhoun
- Jay A. Cherner, M.D.
- David Finkelman, M.D.
- Alan M. Fixelle, M.D.
- DCA Diagnostics, L.L.C.
- The Endoscopy Center, LLC (Savannah)
- Endoscopy Consultants, LLC
- Gastrointestinal Specialists of Georgia, P.C.
- Georgia Endoscopy Center, LLC
- I. Diagnostics Endoscopy Center, L.L.C.
- Eugene H. Hirsh, M.D.
- Steven McIntosh, M.D.
- North Fulton Medical Center, Inc.
- Northside Anesthesiology Consultants, LLC (“NAC”)
- Northwest Georgia Orthopaedic Surgery Center, LLC
- Stanford Plavin, M.D.
- Thomas Riddick, M.D.
- Bruce A. Salzberg, M.D.
- Gary S. Simon, M.D.
- David N. Socoloff, D.O.
- United Surgical Partners International, Inc.
- Wellbrook Endoscopy Center, P.C.
The relators in this matter had previously provided anesthesia services to Northwest Georgia Orthopedic Surgery Center and Surgical Care Affiliates Perimeter Surgery Center. They claimed their relationship ended when Dr. Plavin and Ambulatory Anesthesia of Atlanta, per the complaint, “agreed to provide a kickback in order to attain exclusive contracts with those centers.” The relators have already been paid over $4,700,000 from the settlement.
Sweet Dreams
The allegations and settlements discussed above are not the first of their kind. For example, in 2016 Sweet Dreams Nurse Anesthesia paid more than a million dollars to settle claims that it purportedly paid unlawful kickbacks to ambulatory surgery centers.
Again, according to the DOJ, one alleged scheme involved Sweet Dreams providing “free anesthesia drugs to ambulatory surgery centers (ASCs) in exchange for the ASCs granting Sweet Dreams an exclusive contract to provide anesthesia services at those ASCs.” Another alleged scheme involved a Sweet Dreams affiliate agreeing to “fund the construction of an ASC in Marietta, Georgia, in exchange for contracts for Sweet Dreams’ selection as the exclusive anesthesia provider at that facility and a number of other podiatry-based ASCs affiliated with the Marietta ASC.”
Cautionary Tales
The above settlements should act as cautionary tales for physicians and other providers as they highlight the types of arrangements that can pose legal issues for all parties involved. Providers should proceed with caution when entering into anesthesia contracts. Especially, as illustrated by the above cases and their multi-million dollar settlements, those involving joint ventures or cost sharing arrangements.
Providers should also keep in mind that the government may not be the only entity interested in uncovering purportedly illegal arrangements. When it comes to the False Claims Act, whistleblowers have a financial incentive to bring a lawsuit on the government’s behalf. This means that anesthesia contracts may come under scrutiny from both the government and other parties, including former employees and competitors.
