Client Alert

OIG Approves Hospital/Physician ASC Joint Venture; Cautions Against Valuing Intangibles

August 18, 2009

Michael G. Mckinnon

The Office of Inspector General of the Department of Health & Human Services (OIG) issued an advisory opinion on July 22, 2009 (Advisory Opinion 09-09) stating that it would not impose administrative sanctions under the federal anti-kickback laws on a proposed ambulatory surgery center (ASC) joint venture between a general acute care hospital (the Hospital) and seven orthopedic surgeons (the Surgeons), even though the proposed transaction did not fit within the anti-kickback safe harbor for ASC joint ventures. In analyzing the proposed transaction, the OIG borrowed heavily from earlier advisory opinions that approved similar hospital-physician joint ventures, making its conclusion not surprising. However, the opinion provides valuable insight on the OIGs position (or confusion, some might argue) with regard to valuation techniques used to compensate hospitals and physicians for their contributions to the joint venture. In a footnote in the opinion, the OIG expressed its suspicion of transactions which give credit to either joint venture party for contributing general intangibles to the joint venture.

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