The risk of forced redemption
This is not what busy physician-owners want to hear, but the ASC
safe harbors were never intended to be used as a tool to exclude
existing investors. Yes, lower performing docs can create an under-
current of resentment and in some cases might create compliance
risk. But hasty action to exclude a lower-performing surgeon can
create regulatory risk for your surgery center. Some mistakes I
often see centers make:
• Forcing out lower-producing physicians. Using exclusion claus-
es in your operating agreements to squeeze out lower-performing
docs can backfire. Redemption provisions often put too much focus
on the safe harbors instead of considering whether the AKS is vio-
lated.
• Letting the environment create "bad facts." Evidence of
derogatory comments (deadwood doc), scheduling inequities, unfortu-
nate emails or evidence of plotting to freeze out an investor can create
more risk than failing to meet a safe harbor.
• Threatening to involuntarily redeem shares. Pressuring under-
performing investors to increase their volume of referrals to the
ASC to meet safe harbors creates risk under the AKS. A letter
demanding or even suggesting that a surgeon perform more surgery
A P R I L 2 0 1 7 • O U T PA T I E N TS U R G E R Y. N E T • 2 9
risk presented by improper exclusions. In fact, many operating
agreements contain provisions that actually create first source
evidence supporting the claim of an excluded investor. There are
ways to reduce the risk associated with excluding underperform-
ing investors, but using the safe harbor requirements to force
redemption is not one of them. — John H. Fisher, II
