What You Need to Know About Office-Based Surgery Laws

February 1, 2018

A brief overview of laws and issues related to office based surgical practices.

In the past decade, there has been a steady increase in the number and types of surgical procedures performed in an office-based setting by various practitioners – including general surgeons, gastroenterologists, ophthalmologists, radiologists, dermatologists, podiatrists, dentists and other specialists.  While advances in medical technology have enabled more procedures to be performed in an office setting, patient safety concerns remain crucial and warrant a re-examination of legal and regulatory oversight.  Practitioners performing office-based surgery (OBS) should be familiar with the laws and leading issues associated with OBS procedures.

Although the precise definition varies from state-to-state, an OBS procedure is generally any surgical or diagnostic procedure performed in a physician’s medical office that is invasive or involves subcutaneous penetration, excluding minor surgical procedures.  Most jurisdictions classify procedures as “surgical” or “invasive” by reference to the type and level of sedation or anesthesia used. 

In many states, an OBS medical practice is exempt from licensure requirements that apply to other surgical facilities, such as hospitals or ambulatory surgical centers (ASCs).  Unlike these larger institutional surgical facilities, OBS practices do not have to satisfy the more stringent physical plant, safety and sanitary requirements imposed on the licensed facilities. Accordingly, an OBS medical practice can be located in any structure or suite of rooms established by one or more physicians for the private practice of medicine, but is typically limited to one surgical operating room. 

OBS practices are generally subject to less stringent requirements because  OBS procedures are relatively low risk and do not require the full complement of emergency room equipment and staff on hand in case of patient emergencies, which are mandatory in hospitals and ASCs.  Receiving treatment in the OBS setting may be more efficient and convenient for the patient, especially where risk of an adverse outcome is low, and an overnight stay or a longer recovery time is unnecessary.

States regulate OBS practices to varying degrees.  In some states, such as Massachusetts, an OBS practice is not required to register or obtain facility licensure.  Rather, such practices are regulated by the state medical licensing board, which regulate surgical practitioners’ in the ordinary course of the board’s oversight responsibilities, and a practitioner performing OBS procedures may simply have to check off a box or complete an additional form when renewing his or her license.  In other states, offices performing OBS must register with the state’s department of health or the respective practitioner’s licensing board.  The registration process is intended to provide some degree of oversight and accountability for OBS practices, without subjecting them to full hospital or ASC licensure requirements (e.g., lower or no registration fees and no or fewer state inspections).   The more stringent states, such as New Jersey, will require OBS practices to obtain facility licensure from the state’s department of health under recently enacted statutory amendments, just like an ASC or a hospital (but perhaps with less rigorous requirements as compared to larger facilities). 

States also differ with respect to operational and regulatory requirements, such as surgery time limits, procedure specific limitations (e.g., maximum percentage of body fat removed during liposuction), the level of life support certification required for staff members, additional continuing medical education (CME) requirements (e.g., mandatory CMEs on anesthesia), and credentialing or board certification or eligibility requirements for practitioners.  Some states, such as New York, also require post-procedure incident or adverse event reporting to a state regulatory agency.  Although some states oversee OBS compliance internally (e.g., department of health), many states require or encourage OBS practices to achieve compliance by obtaining registration with the Centers for Medicare & Medicaid Services (CMS) or accreditation from an approved agency. 

While state regulations vary to some degree as to which procedures trigger an accreditation requirement, many states require or encourage OBS practices to obtain accreditation from a private agency (or certification as an ambulatory surgical center from CMS).  Accreditation agencies require OBS practices to satisfy certain operating and office standards, which ensure that procedures are performed in a sanitary and safe manner.  These standards are developed additionally to verify that support staff is qualified, trained and experienced and that anesthesia is administered by a qualified professional, with adequate oversight. 

Accrediting agencies also set forth requirements concerning cleanliness of operating rooms and adequacy of personnel and equipment to respond to emergency situations (e.g., staff members are to be certified with advanced cardiovascular life support training).  Accreditation can be obtained from several agencies, such as the Joint Commission, the American Association for Accreditation of Ambulatory Surgery Facilities (AAAASF) and the Accreditation Association for Ambulatory Health Care (AAAHC). 

Physicians interested in establishing or joining an OBS practice should also determine whether the OBS practice can charge a “facility fee” in addition to the reimbursement paid to physicians for professional services.  OBS practices are not always guaranteed to receive a facility fee – i.e., payment for the use of the physical location and equipment.  While rules and policies governing the payment of facility fees vary from state-to-state, third-party payors often deny payment of a facility fee charged by an OBS practice. 

As such, revenues attributable to OBS procedures may be limited to the professional fee reimbursement for such procedures.  Profits margins will be further limited if the professional fee reimbursement does not adequately cover expenses associated with an OBS practice, such as rent, equipment maintenance, wages for non-profession extenders or technicians (who generally cannot bill for their services), and compliance with regulatory and accreditation requirements. 

Given the broad spectrum of regulation and different requirements applicable to performing OBS procedures across jurisdictions, Physicians interested in or already running OBS practices should carefully navigate through the legal and economic considerations required to perform OBS procedures in their medical offices.

Conor F. Murphy (LLipsky@ebglaw.com; 973-639-8297) is a Senior Counsel of Epstein Becker & Green, P.C. in the Newark office, and Yulian Shtern (YShtern@ebglaw.com; 973.848.7719) is an Associate in the Newark office, of Epstein Becker & Green, P.C., a national law firm with a primary focus on health care and life sciences.