In preparation for the July 2009 deadline which requires all offices that perform office-based surgery[1] to be accredited by a “nationally-recognized” accrediting agency, many practices are changing their corporate structure and beginning the accreditation process.  Prior to restructuring your medical practice it is imperative that you are aware of recent comments by the Department of Health.  As the Department of Health was behind the enactment of the office-based surgery accreditation requirement and failure to comply with the parameters of the statute fall under the purview of the Commissioner of Health, the Department of Health has served as an advisory board on all structuring issues.  In fact, the Department of Health has held several meetings with New York law firms and the Medical Society of the State of New York to discuss the implementation of the new office-based surgery statute and the statute’s effect on medical practices.  

In an attempt to clarify how medical practices are to be structured under the office-based surgery statute, on August 6, 2008 we spoke with Tom Conway of the Department of Health General Counsel's office. We asked Mr. Conway the correct way to structure a practice that wants to bill a facility fee for office-based surgery performed; specifically, we asked whether it was okay to have a separate entity bill a facility fee.

Mr. Conway relayed that, in fact, the Department of Health is sensitive to the type of entity billing payors for fees and that should a practice utilize the “wrong” corporate structure to bill third party payors there may be an issue of fraud.  As indicated on the Department of Health Website (see below), and as stated by Mr. Conway, a lay business entity (Inc., LLC) is not an appropriate entity to form for billing a facility fee.  In addition, a professional entity (PC or PLLC) that bills facility fees must be an entity that “practices” medicine as well as serving as the facility component of the medical practice.  Reason being, that by definition, a professional entity must be in existence to provide professional services[2].  If the professional entity is in existence just to bill facility fees then that entity is a fraudulent entity operating outside the scope of its existence.  As such, we recommend that all of our clients who wish to pursue accreditation for office-based surgery do so by accrediting their professional entity that operates as their primary medical practice. If a practice chooses to create a new professional entity and chooses to bill facility fees out of that entity, then that entity must also bill for the professional component of services as well.  

[1] Any surgical or other invasive procedure performed outside of a hospital, diagnostic and treatment center or other Article 28 facility in which moderate sedation or deep sedation or general anesthesia is utilized to provide comfort to the patient in order to perform the procedure. Only one surgical procedure is specifically included in the definition of OBS– liposuction of greater than 500cc's of fat. [2] NY CLS Bus Corp § 1503

Also, The Department of Health Website states:

44. Can an OBS practice bill third party insurers for a facility fee under a different corporate entity such as a business corporation or a professional corporation ? [Revised as of June 5, 2008]

No, this might be illegal if the rate has not been negotiated with the third party insurer. In order to collect the facility fee, the different corporate entity, with its own taxpayer identification number, might be holding itself out as a professional entity. Under State Education Law (SEL) § 6513, the unauthorized use of a professional title is a crime. In addition, this might also be considered billing fraud. Both of these possible criminal actions might affect the entity billing the facility fee as well as the OBS practice itself. Only the OBS practice should be submitting bills to third party insurers.

For additional information on this topic, contact Jennifer Kirschenbaum at (516)-747-6700 ext. 302 or at


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