Mid-Atlantic Health Law TOPICS

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Q & A on Maryland Magnets

Doctors often need to refer their patients for diagnostic tests, such as x-rays, magnetic resonance imaging, known as MRIs or magnets, or computed tomography, know as CTs, before the doctor recommends appropriate treatment. Some believe that such modalities may be over-utilized if the referring doctor has a financial interest in the x-ray machine, MRI or CT. Therefore, Maryland's self-referral law prohibits a physician from referring a patient to an entity with which the physician has a financial relationship, unless the arrangement meets one of the law's several exceptions.
One of the exceptions allows a physician to refer patients for "in-office ancillary services," such as x-rays or blood work, to the extent that those services are provided in the referring physician's office. However, the applicable language specifically states that a physician, other than a radiologist, may not use this exception when referring a patient for MRI, CT or radiation therapy services.
As a result, non-radiologist physicians who own an MRI, CT or provide radiation therapy in Maryland have often structured their referrals to utilize one of the other independent exceptions to the Maryland self-referral law. However, on January 5, 2004, the Attorney General of Maryland issued an Opinion that drastically affected those arrangements.
Q: What did the Attorney General conclude?
A: Prior to the Opinion, many people in the medical community had relied on the "group practice" exception when making referrals to magnets. The group practice exemption allows a physician to refer a patient for services provided by another member of the practice's group, provided that those services are supervised by someone employed or under contract with the group. The Opinion specifically states that that exception is not available for MRIs, and by implication also not available for CTs or radiation therapy.
Q: Is the Attorney General correct?
A: Maybe yes, maybe no. In the Opinion, the Attorney General states that the Maryland legislature, in excepting MRIs from one exemption, namely the "in-office ancillary services" exemption, intended to exclude all referrals to magnets from non-radiologist owners. Although legislative intent is always difficult to ascertain, the Attorney General is correct that legislative intent is sometimes used to interpret a statute. However, the Attorney General ignores the fact that there are numerous Maryland cases holding that one cannot read words into a law that the legislature did not enact. While MRIs, CTs and radiation therapy were carved out of the in-office exemption, they were not carved out of Maryland's group practice exemption. Therefore, a court could easily conclude that the group practice exemption is available to Maryland non-radiologists, notwithstanding the Maryland Attorney General's Opinion to the contrary.
Q: Aren't physicians allowed to refer to in-office magnets they own under the federal Stark law?
A: Yes, but Maryland physicians must comply with both federal and Maryland law, and the wording of Maryland's self-referral law does not exactly mirror the language of Stark.
Q: Does the Attorney General's Opinion have the force of law?
A: No. An Opinion of the Attorney General is just that -- his opinion. However, it is a good indicator of how the Attorney General views the subject, and consequently, how the statute may be enforced in the future.
Q: Can a non-radiologist group that owns a magnet continue to own it and continue to refer to it?
A: Given the Attorney General's stance, a non-radiologist group that refers patients to a magnet or a CT that the group owns, or refers patients for radiation therapy that the group provides, is exposing itself to significant risk under the Maryland self-referral law.
Q: What kind of risk?
A: The Board of Physicians could initiate an action to take away or suspend the group's physicians' licenses or order other appropriate remedies. Payors or patients could also initiate suit to recover all monies paid to providers for services that were provided in violation of the law. Of course, the group could defend such actions by arguing that the Attorney General is incorrect, and such a defense may or may not be successful.
Q: Can a group that owns a magnet avoid these consequences if it stops using the magnet?
A: Not entirely. While such discontinuance will likely help with respect to the Board of Physicians, such discontinuance will not insulate the group from regurgitating prior fees, if an action is brought to recover such fees within three years of payment. Discontinuance will also have obvious economic consequences for the group.
Q: Can a group with a magnet sell it and continue to refer to it?
A: Maybe yes, maybe no. Such a sale would trigger the provisions of a federal statute known as the Anti-Kickback law. Safe harbors under that law provide that a sale can take place between two parties, but no referral relationship can exist between the parties subsequent to the sale. Accordingly, even a sale at fair market value would not necessarily insulate a group from federal prosecution, including being prohibited from participating in the Medicare and Medicaid Programs. In other words, choosing such a course of action would be like jumping from one frying pan into another. On the other hand, a group with a magnet could sell it to a party with whom it has no subsequent referral relationship, although such action could have significant tax and economic consequences for the group.
Q: Can a group lease a magnet to a radiologist and refer patients to the radiologist?
A: Probably. Such an arrangement should be legal under applicable laws, provided that payments under the lease are made at fair market value, and the lease is in writing and has a term of at least one year. However, it is possible that, if asked, the Attorney General would conclude that the Maryland General Assembly intended to exclude non-radiologists from all exemptions under the Maryland self-referral law in situations involving magnets, notwithstanding that the language of the statute is otherwise.
Q: If a group leases a magnet to a radiologist, and refers to the radiologist, should the lease have a fixed monthly rental, or a per use (known as a per-click) rental?
A: A fixed rental would put the parties in a more favorable regulatory position. Although a per-click lease is not necessarily a violation of any law, such leases are potentially questionable under the federal Anti-Kickback law.
Q: Can a group not only lease a magnet to a radiologist, but also lease space and personnel to the radiologist, and refer to that radiologist?
A: Yes. Leases of space and personnel are also legal under applicable law, so long as the leases are written and have a term of at least one year, and the rental is set at a fair market value. Again, it is possible that the Attorney General might disagree with this conclusion.
Q: May a group indemnify some of its owners from the consequences of ignoring the Attorney General's Opinion?
A: No. Indemnities that encourage people to violate a law are unenforceable. However, a risk adverse owner of a group practice who wants to comply with the Opinion, while his or her partners do not, might be able to protect his or her license by not referring patients to the group's magnet, and by refusing to accept any direct or indirect economic benefit from the group's ownership of the magnet. Nevertheless, such a dissenting owner could still be economically harmed if the group is ever forced to regurgitate fees, depending upon how the group funds such repayment. Accordingly, such a dissenting owner might choose to leave the group to better insure protection from continuing, potential violations of the law.
Q: Will all this uncertainty ever become clearer?
A: Maybe. If a suit is brought, and the matter reaches Maryland's highest appellate court, then that court will ultimately decide whether non-radiologists in Maryland may or may not refer patients to MRIs or CTs, or for radiation therapy, when the referring physician has a financial interest in such services. Alternatively, the Maryland General Assembly could amend Maryland's self-referral law to clarify the competing language.


September 22, 2004




Rosen, Barry F.


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