• Recent OIG Advisory Opinion Calls Proposed Arrangement between Physician Groups Potentially Illegal
  • September 6, 2008 | Author: Kim Harvey Looney
  • Law Firm: Waller Lansden Dortch & Davis, LLP - Nashville Office
  • In its Aug. 26, 2008 Advisory Opinion, No. 08-10, the Department of Health and Human Services Office of Inspector General (OIG) said a proposed relationship between two physician groups potentially violates the anti-kickback statute. The block lease arrangement called for one group to provide space, equipment and personnel to another physician group. The OIG expressed concern and compared the proposed relationship to certain problematic joint ventures that have been the subject of previous Special Fraud Alerts and Special Advisory Alerts on Contractual Joint Ventures. The OIG's position increases the risk that arrangements that on the surface seem acceptable, may not be. The totality of the circumstances and arrangements between healthcare providers must be examined carefully to ensure that they will be considered compliant.

    In the request for an advisory opinion, the Requestor, a physician group that provides cancer treatment services--including IMRT--in a free-standing facility, sought guidance on whether it would be permissible for it to enter into an arrangement with certain urology groups. In the arrangement, the urology groups would enter into a series of written agreements that would allow them to lease, on a part-time basis, the space, equipment, and personnel services necessary to perform IMRT. The lease would be for fixed periods of time in the same space where the Requestor provides IMRT services. The Requestor would supply the urology groups with radiation supplies and billing services and the individual radiologists who normally perform services billed by the Requestor would enter into agreements with the urology groups to supervise the IMRT procedures. Compensation for the leases was to be fixed amounts set in advance that would not vary based on usage. The amounts would be set at fair market value pursuant to an independent fair market value study. The leases were to be for a one-year term, and the urologists would pay the Requestor the fees pursuant to the agreements, regardless of the number of patients referred or whether they collected fees for the procedures. The urologists would then keep the difference between what they paid the Requestor and what they were paid by Medicare and other payors.

    The OIG felt that the proposed arrangement had many of the common elements that are found in suspect joint ventures, including the following:

    • The urology groups would be expanding into a related line of business, IMRT, which is dependent on referrals from the urology groups, by contracting with an existing provider of the related item or service.
    • The new service would be provided to the urologist's existing patient population, including patients covered by federal healthcare programs.
    • The urology groups would not actually participate in performing the service, but would contract substantially all the operations, including the professional services necessary to perform the IMRT.
    • The urology groups would have little or no risk.
    • The urology groups would be in a position to ensure the success of the venture, not only by referring to the IMRT, but also by choosing IMRT over other forms of treatment.

    The OIG concluded that the parties' contractual relationship might be designed to permit the Requestor to do indirectly what it could not do directly, which is to allow the urologists to share in the profits from their IMRT referrals - an impermissible remuneration. While the OIG could not comment on the intent of the parties, which is necessary to show an actual violation of the anti-kickback statute, they felt there was significant risk that the proposed arrangement would be an improper contractual joint venture that would be used as a vehicle to reward the urology groups for their referrals. The OIG considered the opportunity to generate a fee remuneration that could implicate the anti-kickback statute.

    Providers need to be increasingly careful in their business dealings to ensure that they do not run afoul of the myriad of healthcare regulations. The Advisory Opinion is confirmation of the OIG's position that, in spite of the fact that an arrangement might be technically compliant within a Stark exception or an anti-kickback safe harbor, the opportunity for a referral source to generate a profit from a business arrangement may make the arrangement illegal. Given that any administrative sanctions imposed could be quite severe, providers need to carefully analyze the entire transaction and make sure that what they are doing is not seen as a mechanism to do indirectly what they cannot do directly.