Physicians R Us (the “Company”) is proposing to build an ambulatory surgical treatment center (“ASTC”) that will provide outpatient ambulatory surgery and ancillary services. To help with financing the ASTC, Company intends to sell shares of the company to physician investors who will utilize the facility and refer patients to the ASTC (the “Proposed Arrangement”). As members of the Physicians R Us Advisory Board (the “Board”), you have been asked to give an advisory opinion regarding the Proposed Arrangement.
Specifically, the Board is being asked to opine whether a physician’s referrals for certain services are prohibited under section 1877 of the Social Security Act (the “Act”). In your response, address the following questions:
1. Would the investment in and ownership of the ASTC by physicians, who will refer patients to the ASTC and who will perform surgeries at that ASTC, violate the prohibition in section 1877 of the Act against certain physician referrals?
2. Is the proposed location of the ASTC a rural area under the rural provider exception in section 1877(d)(2) of the Act (referencing the rural definition in section 1886(d)(2)(D) of the Act)?
3. Would the rural exception in section 1877(d)(2) of the Act apply to the proposed ASTC arrangement?
4. Under section 1877 of the Act, can non-surgeon physician investors in the ASTC refer patients there without violating the Federal prohibition against referring patients to an entity with which a physician has a financial relationship?

 

 
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