HIPÓTESIS

Exemptions are commonly provided for a number of actions. For example, one state articulates the following situations as not qualifying as an ASC and thus not requiring a license or CON.7 The following is a typical exemption:

(2) “Ambulatory surgical facility” does not include:

(i) The office of one or more health care practitioners seeking only professional reimbursement for the provisions of medical services, unless:

1. The office operates under contract or other agreement with a payor as an ambulatory surgical facility regardless of whether it is paid a technical or facility fee; or

6 _{Id. at 67,045.}

2. The office is designated to receive ambulatory surgical referrals in accordance with utilization review or other policies adopted by a payor;

(ii) Any facility or service owned or operated by a hospital and regulated under Subtitle 2 of this title;

(iii) The office of a health care practitioner with not more than one operating room if:

1. The office does not receive a technical or facility fee; and

2. The operating room is used exclusively by the health care practitioner for patients of the health care practitioner;

(iv) The office of a group of health care practitioners with not more than one operating room if:

1. The office does not receive a technical or facility fee; and

2. The operating room is used exclusively by members of the group practice for patients of the group practice; or

(v) An office owned or operated by one or more dentists licensed under the Health Occupational Article.8

Counsel in many situations is charged with determining whether an exemption is available and what steps must be taken to meet the exemption's conditions. Exemptions are often provided for :

 relocations

 expenditures below a certain amount  practice-related surgery

 expansion below a certain amount or size  Operation by an HMO

 Change of ownership or acquisition.

The goal is to receive as much certainty as possible that the operation meets an

exemption so as to avoid a situation where, as a result of private party or state action, the

ASC (even if built out) cannot be licensed, certified or used. For example, a response from the State of Georgia to one request to “perfect” an exemption was drafted as follows:

Marcelo N. Corpuz, III Ross and Hardies

150 North Michigan Avenue Chicago, Illinois 60601-7567

RE: Request For Letter of Non-Reviewability For Physician Owned, Single Specialty Ambulatory Surgical Facility

Dear Mr. Corpuz:

The State Health Planning Agency is in receipt of your correspondence of March 12,1999, requesting a letter of non-reviewability for a physician- owned ambulatory surgery center. Thank you for your efforts to comply with the State's Certificate of Need (“CON”) laws...

It is the understanding of the Agency that Drs. V, W, X Y and Z are owners of a single group practice, XYZ Associates, P.A., which is a single specialty orthopedic practice. These five physicians plan to construct a new medical office building, to be located in Georgia. The medical office building will house their clinical practice, and will also include an ambulatory surgery suite. The surgery center will be operated by a limited liability company to be known as XYZ Surgery Center, LLC. These five physicians are the only persons who will perform surgical procedures in the proposed office based surgical facility, and all have documented ownership interests in both the group practice and the entity that will operate the surgery center. The proposed office based surgery suite will comprise approximately 5,000 square feet, and have two (2) operating rooms. The capital expenditure to establish the center will be approximately $1,050,365. This amount includes $400,000 for capital construction, and $650,365 for new and used equipment. Any surgeons who may wish to operate in the center in the future must have documented ownership interests in both the medical practice entity and a separate surgical center entity.

Based on the foregoing information, the Agency can classify this surgical center as a single-specialty, physician owned, ambulatory surgery facility. Please accept this letter as an official letter of non-reviewability for this site.

I hope that this letter adequately addresses this issue. Please do not hesitate to contact the Agency should there be any further questions or concerns about this matter.

Sincerely, General Counsel

cc: Health Care Section (ORS)

The exemption letter articulates both a limit on use to practice-affiliated surgeons and a limit on expenditures. Even if an exemption letter is granted, however, practitioners must be aware that the issuance of the exemption letter may be challenged administratively or in court. Thus, it is incumbent upon the ASC's legal counsel to be able to defend the assertions and representations made in the initial request for an exemption. Accordingly, the practitioner must be able to substantiate all facts and figures with the proper

documentation (e.g., copies of contracts, agreements, etc.). A failure to do so may result in the rescission of the exemption letter.

Common Exemption Issues

Issues often raised in the ASC exemption process are:  Will the ASC meet a group practice exemption?  Can the center do “23-hour” cases?

 Can the expansion or buildout be structured to fit below a certain dollar threshold?

Practice-Based Exemption

Many states provide that licenses or CONS are not needed for practice office- based ASCs. Requirements to meet the exemption vary from state to state. Conditions often include:

 Medicare certification will not be pursued.

 Only practice-affiliated doctors may use the ASC.

 The state may impose a limit on the number of operating rooms and/or the amount of ASC expenditures.

For example, the following provision permits office-based surgery to be per- formed without a CON or license as long as the ASC is used by a single practice and

expenditures are below $1,000,000.

(iii) Surgery in an operating room environment, including but not limited to ambulatory surgery; provided, however, this provision shall not apply to surgery

performed in the offices of an individual private physician or single group practice of private physicians if such surgery is performed in a facility that is owned, operated, and utilized by such physicians who also are of a single specialty and the capital expenditure associated with the construction, development, or other establishment of the clinical health service does not exceed the amount of $1 million…9

A similar Kentucky provision exempts offices from CON unless they attempt to obtain Medicare certification:

(2) Nothing in this chapter shall be construed to authorize the licensure, supervision, regulation, or control in any manner of:

(a) Private offices and clinics of physicians, dentists, and other practitioners of the healing arts, except any physician's office that meets the criteria set forth in KRS 216B.015(4);

(b) Office buildings built by or on behalf of a health facility for the exclusive use of physicians, dentists, and other practitioners of the healing arts; unless the physician's office meets the criteria set forth in KRS 216B.015(4), or unless the physician's office is also an abortion facility as defined in KRS 2168.015, except no capital expenditure or expenses relating to any such building shall be chargeable to or reimbursable as a cost for providing inpatient services offered by a health facility.10

Another type of office exemption permits practice use as long as the principal use is for the practice. Many states have this type of concept.

(vii) “Ambulatory surgical facility” means a facility primarily organized or established for the purpose of performing surgery for outpatients and is a separate identifiable legal entity from any other health care facility. Such term does not include the offices of private physicians or dentists, whether for individual or group practice, and does not include any abortion facility as defined in Section 41-75-1 (e).11

23-Hour Stay Cases

As more procedures have moved to ASCs, debate has focused on whether the ASC can perform cases that require a 23-hour stay or a stay longer than four hours. The Medicare procedures list has traditionally been developed using the pr that only cases that require less than a four-hour recovery will be placed on its list. In policies and licensing for

9 _{Ga. Code Ann. § 31-6-2 (1998).}

10 _{Ky. Rev. Stat. Ann. 5 216B.020 (1998).} 11 _{Miss. Code Ann. 9 41-7-173 (1998).}

ASCs, states have either used HC or developed their own criteria for the types of cases that can be performed in ASCs.

States using the ASC standards will often limit the ASC to cases that do not require 23- hour or overnight recovery. Many other states will permit non-Medicare 23-hour stay cases to be performed.

As Medicare changes its criteria to expand the ASC list to 3-hour cases an payors add further pressure to use the lowest-cost sites for surgery, it is likely that more and more states will permit 23-hour recovery cases in ASCs.

Expenditure Limitations

Many states permit expansion of ASCs or the provision of surgical services as long as the expenditures are below a certain limit. For these states, it is critical to understand what expenditures are counted toward the limits. For example, in many states, the ASC is permitted to exclude expenditures made by the landlord, expenditures for the shell of the building and expenditures that will be leased or that will be operating expenditures. By carefully defining what is and what is not included in expenditure limits and confirming by letter such inclusions and exclusions with state, it is often possible to build a much larger plant and ASC than one anticipated.