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5 Warning Signs that Your Ambulatory Surgical Center Could Soon Be Visited by the FBI

Key Points:

  • The FBI has started to investigate ASCs in various parts of the country.
  • The government focuses its investigations on Stark Law, Anti-Kickback, and medical billing violations.
  • Physicians and owners of ASCs should take active steps to avoid any gaps in their compliance structure in order to not become subject to draconian sanctions and penalties.
Lynette Byrd
Attorney Lynette S. Byrd
Healthcare Team Lead
Former Federal Prosecutor

Ask any ambulatory surgery center (ASC) operator and you will hear several concerns regarding the state of operations and functionality. Perhaps more than any branch within the healthcare industry, the 6,000 registered ASCs are experiencing increased scrutiny and ever rising denials of claims. Worse, ASC operations used to be more or less an exclusive area for private insurance audits, but now these operations have now attracted the attention of the U.S. Department of Justice and are being targeted for criminal investigations. By any standard, ASCs are under attack, and caution is in order. Here are five issues these freestanding surgical centers have overlooked regarding potential government scrutiny.

Whistleblower Actions

Too often, internal problems begin with a disgruntled employee. If an employee is disgruntled for any reason, he or she can “blow the whistle” on perceived illegal activity occurring within the ASC. A whistleblower action occurs when a person with inside knowledge, often an employee, informs law enforcement about illegal activity he or she thinks has occurred. These actions can contain blunt and dangerous allegations. Regarding ASC operations, someone can blow the whistle about all kinds of potential activity, such as billing for services not provided, upcoding violations, Stark Law violations, Anti-kickback violations pertaining to the anesthesia company model business structure and incident-to billing violations. No one can prevent an angry employee from making accusations, but ASCs can take proactive measures regarding legal and operational compliance to ensure any accusations levied are unfounded.

Increase in Claims Denial

Don’t think that a 25% or 30% claims denial is typical or the industry standard. High claim denials can lead to further probing from insurance carriers and now, government entities to ensure claims are being submitted accurately. ASCs need to make sure the underlying paperwork supporting the billed claims are correct. If not correct, private and government entities can infer this “incorrectness” is due to fraud. To decrease claims denials, ASCs must ensure medical necessity for any procedure performed or service rendered, and the supporting paperwork must accurately detail this medical necessity. The paperwork must be tailored to each individual patient and boilerplate language or pre-printed templates should not be used as they raise the probability of denial. If an ASC is audited on a claim that is only backed up by boilerplate language, the ASC will have a hard time reversing this denial.


Historically, an ASC receiving an audit request was not a big deal – audits were viewed as commonplace and simply the price of doing business. Now, audits of ASCs are more targeted, meaning the receipt of an audit request is the result of a pre-thought investigation. If an ASC is the subject of an audit, that means either a private of government agency believes the ASC is doing something wrong. If your ASC gets an audit letter, look at who signs the letter. If the letter is signed by a listed fraud investigator, you are put on notice that your ASC is being investigated for fraudulent activity and a potential referral to government law enforcement is possible.

Corporate Structure Fraud

The FBI is taking a close look at how physician investors are compensated by ASCs. In order to become an investor, a physician has to do so by way of a private placement memorandum. It is critical to understand that what is detailed in the memorandum has to be executed on the operational side of the ASC. Even if the terms of the memorandum are compliant with state and federal law, the FBI can still investigate physician investors if these terms are breached in practice. For example, are there any side arrangements made that deal with physician compensation that are not in the memorandum? Even if something is not on paper, do not think you and your ASC are safe. Illegal and fraudulent compensation schemes can still be uncovered in various ways, such as financial record tracking.

Lack of True Compliance Features

Effective compliance measure should not be an afterthought for any ASC. ASCs often ignore recommendations to have effective compliance policies and procedures in place and this ignorance can have severe consequences should an ASC find itself under investigation. ASCs are subject to numerous federal and state laws and must be in compliance with these laws to avoid potential civil and criminal penalties. Outside professionals, such as compliance consultants or federal healthcare attorneys are needed by any ASC to establish effective compliance policies that will stand up to government scrutiny. If an ASC does find itself subject to a fraud investigation, a strong compliance policy can be an extremely effective and powerful line of defense to negate any fraudulent intent.

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