Einiger & Associates

New York Healthcare Law

Category Archive for ‘Office Based Surgery’

Are you an Authorized Provider?by Scott Einiger, Esq.

Are you an Authorized Provider of an Office Based Surgery Accredited Facility?

I Background
Private practices that perform office-based surgery (OBS) as defined by PHL § 230-d must be accredited by one of the DOH designated accrediting agencies. (Joint Commission, AAAASF or AAAHC)

Multiple aspects of practices seeking to provide office-based surgery are evaluated and surveyed as part of the accreditation process including, but not limited to: the legal structure of the practice; the education, training and licensure of physicians, podiatrists and other health care practitioners providing care to patients; policies, procedures and protocols used to guide selection and care of patients and operations of the practice; physical plant and equipment used in the care of patients, etc.

All office locations of the OBS practice must be accredited and any/all new locations where OBS will be performed must be accredited before any OBS procedures are performed.

Once a practice is accredited the question arises: what practitioners are permitted to utilize its space? For example may a practitioner who rents space at an accredited facility utilize its space to perform OBS procedures.

II Definition of covered OBS procedures
As set forth on the Department of Health Q and A section of its website:
Examples of procedures that fall under the OBS law include but are not limited to: upper endoscopy, colonoscopy, rhinoplasty, mammoplasty, lithotripsy or vascular access related procedures when accompanied by moderate or deep sedation, major upper or lower extremity nerve blocks, neuraxial or general anesthesia. Most procedures like botulinum toxin injections and minor integumentary procedures are performed with minimal or no sedation therefore can be performed in offices not requiring OBS accreditation. Generally, magnetic resonance imaging (MRI) procedures are not subject to this law. However, MRIs and other imaging studies that involve administration of intravenous contrast must be performed in an accredited OBS office if the patient involved receives moderate or deep sedation, major upper or lower extremity nerve blocks, neuraxial or general anesthesia.

PHL § 230-d indicates that OBS does not include minor procedures and procedures accompanied by minimal sedation. The statute defines minor procedures as: (i) procedures that can be performed with a minimum of discomfort where the likelihood of complications requiring hospitalization is minimal, and (ii) procedures performed with local or topical anesthesia; or (iii) liposuction with removal of less than 500 ml of fat under unsupplemented local anesthesia.

Presently PHL § 230-d onl applies to physicians, physician assistants and specialist assistants. As of February 17, 2014, the OBS law also applies to podiatrists privileged by the State Education Department to perform ankle surgery. This law does not apply to procedures performed by dentists, or podiatrists not performing ankle surgery or other health care professionals.

III. Who may Practice in an OBS setting
Only those practitioners who are “part of the practice”, as defined below, may perform procedures or provide anesthesia services in an accredited OBS office. Renting space in and of itself does not permit a licensed practitioner to otherwise perform OBS in an accredited facility.

Physicians or non-physician licensed health care practitioners may not perform OBS unless they are part of the practice or affiliated with the practice as employees of the OBS practice or working under a contractual arrangement with the OBS practice to perform procedural and/or sedation/anesthesia services, as applicable.
The contractual agreement must at a minimum spell out the terms of the affiliation between the accredited OBS practice and the affiliated physician or non-physician health care provider(s) and at a minimum require the following:

• Credentialing and privileging of all licensed independent practitioners (physicians, podiatrists, nurse practitioners, certified registered nurse anesthetists);
• Adherence to the accreditation related policies, procedures and protocols of the accredited practice including but not limited to patient rights, provision of care, infection control and record keeping;
• Participation in the quality management and performance improvement activities of the OBS practice, and;
• Reporting of adverse events identified in PHL § 230-d (See Q&A 23 above).
Physicians/licensed practitioners who are not part of or affiliated with an accredited OBS practice as set forth above may not perform procedures or provide anesthesia services in an accredited setting on their own behalf simply because they have entered into arrangements such as real estate leases that allow them to use space in an accredited OBS setting. The accrediting agency of the OBS practice must be made aware of all OBS practice affiliations and credentialed/privileged practitioners.

Failure to properly structure your Accredited facility contractual arrangements with other practitioners in accordance with the law may result in licensure investigations or civil actions that could result in catastrophic liability for both parties.

(1)Public Health Law (PHL) §§ 230-d defines Office-based Surgery as “any surgical or other invasive procedure*, requiring general anesthesia, moderate sedation, or deep sedation, and any liposuction procedure, where such surgical or other invasive procedure or liposuction is performed by a licensee** in a location other than a hospital, as such term is defined in article twenty-eight*** of this chapter, excluding minor procedures**** and procedures requiring minimal sedation

(2) Invasive procedures are: procedures performed for diagnostic or treatment purposes which involve puncture, penetration or incision of the skin, insertion of an instrument through the skin or a natural orifice, or insertion of foreign material other than medication into the body.

• Invasive procedures include, but are not limited to, the injection of contrast materials such as used for an MRI or CT scans when these imaging procedures are accompanied by moderate or deep sedation, major upper or lower extremity nerve blocks, neuraxial or general anesthesia

New Law, New Liability, New Economicsby Scott Einiger, Esq.

Office-Based Surgery: New Law, New Liability, New Economics

The recent amendment of Subsection 48 to New York Education Law, Section 6530 and Section 230-d to the Public Health Law will likely have far ranging implications to physicians 1 who perform office-based surgery 2 The new law requires accreditation on or before July 18, 2009 for the physician seeking to perform office-based surgery (OBS) in his or her office. Additionally, practitioners must consider prior opinions from the Department of Health (DOH) governing corporate structure and the New York State self-referral laws (“mini-Stark”) to avoid potential violations of the corporate practice of medicine doctrine, illegal fee sharing and licensure requirements that could have repercussions to the physicians’ license and his or her livelihood. Finally there will be an enormous economic impact as the market shifts to embrace this new facility construct as cost containment is a central feature of the evolving health care delivery system.

While seemingly an unimportant decision, the designation of the name of the facility and the corporate structure is crucial to communicating clearly who you and your facility are, as the name of the OBS practice is how the practice will be known to the world. Therefore, providers need to be aware of certain prohibitions in the name which can automatically result in accusations by carriers of misrepresentation and may even lead to licensure issues with the DOH, as certain words specifically implicate that the OBS practice is an Article 28-licensed facilities and are hence “off limits”. Further disclosure of ownership of the new facility needs to be made under federal self referral laws (“Stark”) and mini-Stark to avoid violations of federal and New York State law.

Specifically, use of the words “center” or “clinic” in New York are prohibited as they are presumptive of an Article 28-licensed facility, and carriers will suggest that providers are fraudulently misleading them into paying licensed rather than accredited facilities. Under Section 600.8 of the New York Compilation of the Codes, Rules, and Regulations, “Criteria for determining the operation of diagnostic or treatment center under Article 28 of the Public Health Law”, the rule states that “It shall be prima facie evidence that a diagnostic or treatment center is being operated when any provider of medical health or health services describes itself to the public as a ‘center’ or ‘clinic’ ….” By this rule, “center” or “clinic” is strictly reserved for an Article 28-licensed facility. Thus, physicians should not use “center” or “clinic” for an OBS facility to prevent any confusion by carriers that might be seeking to use this technical violation as an opportunity to reclaim monies paid for professional or facility fee charges, or allegations by DOH of any misrepresentation by the OBS facility trying to mislead the public that it is an Article 28-licensed surgical center.

Additionally, prior to the new law’s implementation, the Department of Health had opined as to the nature of the entity which engages in office-based surgery. In a March 21, 2006 opinion, the DOH’s general counsel stated that the corporation designated for office-based surgery must be owned as a professional entity. As explained by the DOH, if a physician is sharing fees with a general business corporation, he or she might be viewed as engaging in illegal fee splitting with the lay entity (e.g. LLC or Inc). 4 While our firm continues to view the facility fee charge as a technical component, the DOH has made clear that the safest course of action for a provider is to form a professional entity.

In selecting a professional entity, the physician has the choice of a professional corporation (PC), a professional limited liability corporation (PLLC) and a limited liability partnership (LLP) 5 . It would be prudent for the physician to consult with an accountant before selecting a corporate form, as each professional entity has different tax consequences. Notably, each of the aforementioned corporate forms is approved by the Department of Education, which is responsible for the licensing and the regulation of licensed professionals.

The corporate form is also crucial since your professional corporation may employ nurses, physicians’ assistants, other physicians or health care professionals. In New York, under the corporate practice of medicine doctrine, only a professional entity may employ health care professionals. 6 As such, it would be a violation of the corporate practice of medicine doctrine for a lay entity to employ medical professionals. Moreover, the nurse or professional hired by the general corporation could also be guilty of professional misconduct for sharing fees with the corporation, which are criminal and licensure violations.

According to the Board of Regents, the unauthorized practice of medicine by a nurse would be a crime. Moreover, the facility and/or physician could be referred to the Attorney General’s office resulting in criminal implications and possibly referred to the Office of Professional Medical Conduct for licensure implications of the owner/practitioner. Therefore, the ramifications of failing to comply may be severe.

Failing to correctly structure the facility or selecting a name that is misrepresentative of the medical practice can also lead to problems with reimbursement or a recoupment demand by a managed care carrier. In a decision by the New York Court of Appeals in Mallela v. State Farm (“Mallela”) 7 providers were deeply impacted as the Court held that, at least in the no-fault insurance context, where a medical entity is intentionally fraudulently incorporated and where insurers show such “behaviortantamount to fraud”, insurers may recoup monies paid for services rendered. While the judicial guidelines are somewhat vague, it is clear that technical violations as to corporate structure are not sufficient for insurers to pursue recoupment attempts from providers. Noteworthy to providers, subsequent rulings have indicated that this pursuit of overpayment demands by carriers based on corporate structure may be expanded beyond the no-fault world and have import for private carriers. As such, corporate structure becomes crucial to avoid such Mallela-type issues and a carrier’s attempt to recoup reimbursement.

The proper corporate structure may be handled seamlessly with the right team in place to assist in this process. The physician should work with healthcare legal counsel and with an accreditation consulting company to assist them throughout the corporate structuring and accreditation process.

As a fully integrated healthcare firm, we have available a network of consultants willing and able to help you with the accreditation and corporate structure process. We would be more than happy to discuss any of the aforementioned or matters incident thereto. For accreditation consultation and billing, as well as accreditation questions, the firm has an affiliation with high quality consultants who can provide such information.

1 The new law applies to licensed individuals who are authorized to practice their profession underArticles one hundred thirty-one or one hundred thirty-one-B of the Education Law, which include any licensed physicians (i.e., an M.D., or D.O.) and licensed physician assistants and/or specialist assistants. Practitioners such as dentists, podiatrists or chiropractors are not covered under the office-based surgery law.
2 Office-based surgery is defined in the new law as any “surgical or other invasive procedure, requiring general anesthesia, moderate sedation, or deep sedation, and any liposuction procedure, where such surgical or other invasive procedure or liposuction is performed by a licensee in a location other than a hospital […] excluding minor procedures and procedures requiring minimal sedation.”
3 Please note that approval of any specific name requested by a provider is subject to the approval by the Department of Education.
4 Notably, the Department of Health stated in its March 21, 2006 opinion that “[a] physician who shares with a [general] business corporation a portion of an additional or enhanced fee for the physician’s costs to perform professional services in the physician’s office might be sharing fees in violation of Education Law § 6530(19).”
5 Please note a LLP is required to have at least two partners.
6 In a 1998 Report by the Board of Regents, Sections 6512 (stating it is a felony for an unlicensed person to practice medicine) and 6513 (stating the unauthorized practice of medicine is a crime) of the Education Law, “it is clear that business corporations cannot hire a licensee to provide professional services because the law neither authorizes such action nor provides an exemption.” Indeed, as highlighted by the Board of Regents, the corporate practice of medicine doctrine “serves to protect the public from a business relationship that could place constraints upon professional judgment, unduly limit professional practice, invade the professional integrity of the professional, or permit the business to make professional decisions.”
7 After many lower court decisions and appeals, Mallela (known as “Mallela III”) was ultimately decided by the United States Court of Appeals for the Second Circuit. 4 N.Y.3d 313 (NY, 2005).

Are You Structured for Office Based Surgery?by Scott Einiger, Esq.

The ability to perform office-based surgery is extremely valuable, not only from a financial standpoint, but from a patient care standpoint as well. By cutting the hospital out of the equation, money is saved by the patient, by the doctor and even by the insurance company. Perhaps more importantly, it allows the patient to be monitored more closely by the doctor.

In the past, the primary method of being authorized to perform office-based surgery was certification as an ambulatory surgical center (ASC). These certifications are available in limited quantities and are a challenge to obtain. Now, the law allows a new option: accreditation for office-based surgery.

At the law firm of Einiger & Associates, health law attorneys know how to work quickly to help medical practices become authorized to perform office-based surgery.

Structuring Medical Practices for Office-Based Surgery
A medical practice cannot simply request to be accredited to perform office-based surgery. There are regulatory compliance issues that must be addressed first, regulatory compliance issues that require a specific corporate structure.

Our attorneys can assist in structuring medical practices appropriately in order to obtain certification to perform office-based surgery, while avoiding liability related to Stark and anti-kickback laws, as well as other regulations.

Becoming Accredited to Perform Office-Based Surgery
Becoming accredited to perform office-based surgery can take a significant amount of time. Our experience means that we know how to maneuver through the process in an efficient manner.

Our lawyers will work with the appropriate accrediting bodies to demonstrate that our clients have the knowledge and the equipment to perform office based surgery.

OBS Legal Updateby Scott Einiger, Esq.

The passage of New York’s Office Based Surgery (OBS) Law on July 14, 2007 (Public Health Law §230-d) was significant for physicians in New York State who perform procedures or surgeries in an office setting, or a cost effective alternative to procedures in a hospital/Article 28 setting. The new law does not discuss the economic impact of becoming an accredited OBS facility (which accreditation is required to occur on or before July 14, 2009), or the legitimacy of reimbursement for facility fees. However, the law’s potential economic impact on physicians is substantial, both in the cost that must be incurred to become accredited and the cost to put additional systems in place to improve the standard of care.

What is clear from our most recent meeting with the Department of Health (DOH) (in conjunction with the leadership of MSSNY in July 2008), and the updates on the DOH website, is that the DOH has recognized that facility fee reimbursement is not prohibited under New York State law, but rather a permissible negotiation between carrier and provider provided full disclosure is provided to the carriers about the accredited nature of the practice.

As background to the continuing evolution of this issue, the OBS Law (Public Health Law §230-d) requires accreditation and adverse event reporting for physicians who perform “office based surgery”, as that term is defined in the statute . The adverse reporting requirement became effective for offices performing covered procedures or surgeries as of January 14, 2008, notwithstanding their accreditation status. In fact, already recalcitrant offices have been notified of investigations by the DOH related to their failure to make statutory reports in accordance with Public Health Law, §230-d, thereby subjecting them to possible licensure sanction.

At this point, there are three accrediting organizations which have been approved by the DOH specifically The Joint Commission, the Accreditation Association for Ambulatory Health Care (AAAHC) and the American Association for Accreditation of Ambulatory Surgery Facilities, Inc. (AAAASF). Regardless of which state approved accreditation agency is used, the accreditation process takes time (many of our clients have reported a three to four month process from application to accreditation). Therefore, physicians interested in continuing to perform office-based surgeries or procedures should begin the process now in order to complete the process before the July 14, 2009 deadline, which is rapidly approaching. The sooner accreditation is completed, the sooner physicians can safely continue to perform such procedures in their office without fear that accreditation process will not be concluded by the statutory deadline. Failure to become accredited by such deadline and continuing to perform such procedures thereafter in an unaccredited office will expose physicians to potential sanctions under the professional licensure statute in New York.

Typically, in order to achieve accreditation, the accrediting organization will require a “corporate organization” to undergo the accreditation process. Although a physician may choose to perform OBS within his/her medical practice, and it is not legally required that a separate entity be created exclusively for OBS, it is generally recommended since the statute does not require that the portion of a physician’s practice not performing surgery or procedures be included in the accreditation process.

A separate professional entity earmarked for OBS is legally advisable for a host of reasons, including risk management, asset protection, professional liability avoidance, marketing, etc. Historically, the insurance companies have requested that a medical practice billing facility fees form a separate entity to “house” its OBS and for facility fee reimbursement purposes. In light of this request from the carriers, and the DOH opinion of March 21, 2006 described below, many physicians performing OBS have formed a separate professional entity for their OBS practice.
In a March 21, 2006 DOH opinion, Don Berens, then DOH general counsel, examined the question of whether a general business corporation could bill for facility fees . The DOH concluded that generally speaking, billing of facility fees by a general business corporation, which then shared its revenues with a physician, could be construed as a violation of the corporate practice of medicine doctrine and could constitute illegal fee splitting . For that reason, and those reasons referenced above (quality assurance, marketing, risk management, identification to the carrier, etc), it was, and continues to be recommended that OBS practices be structured as professional entities. In order to clarify the DOH’s opinion on appropriate corporate structure and facility fee reimbursement issues for OBS practices, a meeting was held on July 14, 2008, when a Senior Partner from Abrams Fensterman, et al, Scott Einiger, Esq., travelled to Albany with Don Moy, Esq. (General Counsel of the Medical Society of the State of New York), Dr. Scott Tenner (the President of New York State Society for Gastrointestinal Endoscopy (NYSGE)), and other interested parties to meet with Tom Conway, Esq., the General Counsel of the DOH and his team. The meeting was comprehensive, and touched upon significant topics related to OBS, including facility fee reimbursement, corporate structure concerns and a request by the DOH for further data to evaluate the components of facility fee reimbursement.

Most recently, the DOH raised concern about the corporate structure of OBS practices as professional entities. Through a recent e-mail exchange on a healthcare law list serve, and for the first time in nearly two years, the DOH, through Senior Attorney, Michele Petruzzelli, has weighed in on the issue of corporate structure. The DOH commented that an OBS facility should not be set up as a distinct professional entity from the existing medical practice if done solely for billing purposes. In other words, the DOH cautioned against a mere billing “shell”.
Nearly simultaneously with this exchange, the DOH updated the “Frequently Asked Question” (FAQ) section of its website on June 5, 2008 to indicate that it might be illegal billing fraud for an OBS practice to bill third party insurers for a facility fee under a different corporate entity, such as a business corporation or a professional corporation, especially if the rate has not been negotiated with the third party insurer (See FAQ 45). As per the DOH website, “Only the OBS practice should be submitting bills to third party insurers.”

In order to clarify the DOH’s opinion on appropriate corporate structure and facility fee reimbursement issues for OBS practices, a meeting was held on July 14, 2008, when a Senior Partner from Abrams Fensterman, et al, Scott Einiger, Esq., travelled to Albany with Don Moy, Esq. (General Counsel of the Medical Society of the State of New York), Dr. Scott Tenner (the President of New York State Society for Gastrointestinal Endoscopy (NYSGE)), and other interested parties to meet with Tom Conway, Esq., the General Counsel of the DOH and his team. The meeting was comprehensive, and touched upon significant topics related to OBS, including facility fee reimbursement, corporate structure concerns and a request by the DOH for further data to evaluate the components of facility fee reimbursement.

MSSNY and the consortium of healthcare attorneys attempted to demonstrate at this meeting that the OBS professional entity would not be formed as merely a billing “holding company”, but rather would be set up as a separate professional entity for reasons such as identification to the carrier, asset protection, cost containment, quality of care, access to care, risk management, civil and licensure protection, and clear differentiation from the medical (non-surgical) practice for accreditation purposes. The DOH highlighted that it must be apparent that the professional OBS is practicing and rendering professional services, and not merely formed to charge a fee for “bricks and mortar” (e.g. facility fee) or administrative/operational/non-professional services.

Most significantly, the DOH confirmed that facility fee billing and reimbursement by OBS practices is neither prohibited nor required by New York State law, and does not require a written contract between the carrier and provider. Rather, the provider can negotiate with the carrier directly to pay a facility fee so long as he or she fully discloses that the OBS practice is accredited through one of the approved accrediting organizations, and is not an Article 28-licensed entity.

Notably, the DOH indicated that it will not advocate that facility fees must be paid to individual practices by carriers, and that a legislative amendment would be needed in order to require facility fee reimbursements to physicians who obtain OBS accreditation. The problem remains that if carriers do not pay accredited OBS practices, there may well be a crisis in access to health care, refuse to perform such office based procedures and have no incentive to become accredited if they are not reimbursed adequately for their additional accreditation, operation and other expenses. This may well result in offices refusing to provide services well suited in the office setting like endoscopy.

Although the meeting with the DOH was certainly informative, many issues remain unresolved, specifically regarding corporate structure. As such, until further clarification is sought, we recommend that the safest course to follow is for your existing OBS corporate structure to be analyzed by experienced healthcare counsel to ensure that the OBS entity is practicing medicine in accordance with the law in New York (as the accredited OBS practice must provide professional services and should not be formed merely for billing purposes). The OBS practice, if distinct, must further address appropriate patient disclosure under the Stark laws, and full disclosure to carriers notifying them of its accredited status to rebut any claims of confusion or representation.

As the OBS law has introduced the possibility of significant economic impact for many physicians, and significant savings to health care carriers as an alternative to Article 28 facilities, it is important that these discussions continue with the DOH and the carriers directly. It is also important that the legislature address the significant new issues raised in order to ensure that accredited OBS practices are created and structured appropriately and in compliance with all applicable laws so that the new law does not cause a crisis in access as offices which are not fairly compensated will have no incentive to create accredited facilities thereby lessening access to needed office based procedures and surgeries.

Other contributing attorneys: Stacy A. Steinberg, Esq., and Stacey J. Lipitz, Esq.

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