Anesthesia Group Settles Kickback Allegations to Obtain Exclusive Agreements With Ambulatory Surgery Centers

On August 5, 2016, the United States Attorney for the Middle District of Georgia announced a civil settlement in which Sweet Dreams Anesthesia, a partnership of certified registered nurse anesthetists (CRNAs), paid over $1,015,000 to resolve allegations that Sweet Dreams paid kickbacks to ambulatory surgery centers to induce Medicare and Medicaid patients by providing free anesthesia drugs and through other financial transactions.

This case is a reminder to physicians and physician-owned ambulatory surgery centers (ASCs) that financial and other types of incentives offered by other providers to obtain and secure business from physicians may be considered a kickback by the government in violation of the Federal Anti-Kickback Statute and other fraud statutory authorities.

Specifically, Sweet Dreams Anesthesia paid $1,034,416 to settlement allegations that it violated the federal False Claims Act and $12,078.79 that it violated the Georgia False Medicaid Claims Act by paying illegal kickbacks to several ASCs in Georgia. A CRNA, who was a former managing junior partner, filed a qui tam action under the False Claims Act alleging that Sweet Dreams Anesthesia had submitted false claims arising out of services performed at podiatry surgery centers, unbundled post-operative nerve blocks, and provided kickbacks to several “client” ASCs.

The whistleblower suit filed by this former CRNA noted that Sweet Dreams would market its services as a way to “increase profits” for the hospital or ambulatory surgery center that hires them, and that Sweet Dreams Anesthesia was “Medicare/Medicaid compliant.” However, the whistleblower contended that Sweet Dreams Anesthesia knew it was improper to place a patient under general anesthesia while not under the direction and responsibility of a duly licensed physician. Accordingly, Sweet Dreams knew that it was improper to place a patient under general anesthesia while only under the supervision of a podiatrist.

Another allegation in the whistleblower’s suit was that Sweet Dreams convinced podiatry ASCs that they would benefit financially through facility fees if they contracted with Sweet Dreams. The whistleblower’s complaint alleged that Sweet Dreams utilized a billing form that limited the type of anesthesia to a more expensive billing option. Specifically, the billing form used by Sweet Dreams did not include monitored anesthesia as a type of anesthesia billing option, even though this was the anesthesia level being provided by Sweet Dreams.

The complaint filed by the whistleblower also alleged that Sweet Dreams instructed their CRNAs to separately charge for the blocking of multiple, individual nerves instead of billing for one comprehensive code that would encompass an entire nerve block. This “unbundling” of services allegedly allowed Sweet Dreams to separately bill and be paid for more than they were entitled under applicable payor coverage and payment rules.

An interesting aspect to this settlement is that the government intervened in the whistleblower’s suit only as to certain allegations and based on “certain civil claims against Sweet Dreams” that the government alleges are violations of the Federal Anti-Kickback Statute.

First, the government contended that Sweet Dreams allegedly violated the Federal Anti-Kickback Statute by providing uninvoiced (i.e., free or at no cost) propofol to ASCs for use in surgery on Medicare patients. The Georgia Medicaid program made a similar allegation against Sweet Dreams. By providing the propofol, Sweet Dreams Anesthesia is effectively relieving ASCs of the cost of purchasing anesthesia drugs for surgical cases when the cost of purchasing anesthesia drugs are included in the facility fee paid by Medicare to ASCs.

In addition, the government contended that it has certain civil claims against Sweet Dreams based on allegations of violating the Federal Anti-Kickback Statute by agreeing to fund the construction of an ASC in Marietta, Georgia in exchange for Sweet Dreams selection as the exclusive provider at that facility and several ASCs owned by the same physician owners.

This settlement contains several important aspects for physicians when considering anesthesia and other ancillary provider agreements. One aspect is clear that anesthesia drugs must be an expense of an ASC if an ASC is going to be paid a facility fee by Medicare and other payors which contains reimbursement in part for anesthesia drugs used in a surgical case.

Another important aspect is that the government continues to take its long standing position that health care providers are subject to liability under federal and state fraud and abuse laws if they provide direct or indirect remuneration to another health care provider to secure an exclusive contract to provide professional health care services payable by the Medicare or Medicaid programs.

Written by: Clay J. Countryman

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