>Mark F. Weiss, J.D.


Mark F. Weiss, J.D.

The Mark F. Weiss Law Firm, a Professional Corporation
Dallas, TX

Kick Back and Read the Latest on the Company Model of Anesthesia Services


In two recent go-rounds with the U.S. Department of Justice, the so-called company model of anesthesia services took two major hits. In one, Tenet announced the pending $66 million settlement of a whistleblower suit filed in Oklahoma. In the other, two Florida physicians resolved allegations, one via a $1.718 million civil settlement, and the other via a guilty plea in a criminal prosecution.

Each of those cases illustrates arguments that can be used to attack and deflect company model schemes.

A quick refresher: In its most direct form, the company model involves the formation, by surgeon-owners of a facility, of an entity to provide all of the anesthesia services at the facility.

The model has long been regarded either as a blatant violation of the federal Anti-Kickback Statute ("AKS") which prohibits the offer or acceptance of remuneration for referrals of patients covered by federal healthcare programs . . . or, by others (surgeons), as a perfectly proper way of doing business.

That latter viewpoint appears to be crumbling.

Tenet and the Oklahoma Center for Orthopaedic and Multispecialty Surgery

In its 10-Q filing for the quarter ended 9/30/19, Tenet Healthcare disclosed an agreement to settle, for $66 million and other costs, a whistleblower suit involving, among other allegations, that it participated in a company model scheme. Note that a settlement is not an admission of guilt.

The lawsuit, entitled U.S. ex rel. Wayne Allison, etc., et al. v. Southwest Orthopaedic Specialists, PLLC, et al., centers around numerous Oklahoma orthopedic surgeons, their practice, Southwest Orthopaedic Specialists ("SOS"), the surgical hospital they created, Oklahoma Center for Orthopaedic and Multispecialty Surgery ("OCOM"), and the Tenet-related entities that purchased and/or control the surgical hospital.

Among the allegations were that the SOS surgeons and others, including Tenet's subsidiary USP Oklahoma, formed a company model entity, Anesthesia Partners of Oklahoma, LLC, to which OCOM granted the exclusive anesthesia contract.

The allegations essentially attack the existence of the exclusive contract as an AKS violation (the SOS surgeons controlled approximately 2/3 of the OCOM's revenue – their anesthesia company got the contract). They also attack the fact that the surgeons' referrals to OCOM were referrals to their anesthesia company; the surgeons' profit distributions from the anesthesia company depended directly on the volume and value of their referrals to OCOM, another theory of AKS violation.

Drs. Daitch and Frey

Jonathan Daitch, M.D. and Michael Frey, M.D., both pain medicine physicians, co-owned Advanced Pain Management Specialists, P.A. ("Advanced Pain") in Fort Myers, Florida. They also owned Park Center for Procedures, LLC ("Center"), and an anesthesia company, Anesthesia Partners of SWFL, LLC. ("Anesthesia Partners"), the exclusive provider of anesthesia services for Advanced Pain.

In 2015, a CRNA at the Center filed a whistleblower suit, U.S. ex rel. Christine H. Oha, et al. v. Advanced Pain Management, etc., et al., alleging that Daitch, Frey, and other defendants had engaged in various kickback schemes, among which were that Daitch and Frey unnecessarily ordered, and Anesthesia Partners unnecessarily performed, MAC and general anesthesia on patients undergoing pain management procedures.

After investigation, the government intervened in the case for purposes of settlement.

According to the DOJ's December 2018 press release, the government entered into a $1.718 million civil settlement with Daitch, which included the additional allegation that Anesthesia Partners contracted with CRNAs at contracted rates and then profited by billing the full amount to Medicare and Tricare.

That allegation is based on the theory that there's an inherent kickback in the "discount" relationship between the surgeon or facility-controlled anesthesia company and the anesthesiologists and/or CRNAs it employs or engages.

The resolution with Frey was more costly: The U.S. Attorney filed both an Information (the set of criminal charges) and his signed plea bargain agreement on the same day. As recited in the plea deal, the government agreed not to charge him with kickbacks relating to his ownership of Anesthesia Partners. In February 2019, Frey was sentenced to 18 months in federal prison and ordered to pay $472,112.88 in restitution plus other fines and penalties.


Although there is no governmental proclamation that the company model is per se illegal, the concepts set out in the cases profiled above, together with other support, form a potent tool in defeating proposed company model schemes and in attacking those in existence.


Mark F. Weiss is an attorney specializing in the business and legal issues affecting physicians and physician groups on a national basis, practicing at The Mark F. Weiss Law Firm, with offices in Dallas, Texas and Los Angeles and Santa Barbara, California. He is also the co-founder of the investment bank, Steering Advisors, LLC. He can be reached by email at markweiss@steeringadvisors.com or at markweiss@weisspc.com.

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