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Unfavorable Review of Radiation Joint Venture

Last year, the Office of Inspector General for the Department of Health and Human Services (OIG) issued an unfavorable advisory opinion letter in regard to a proposed joint venture between urologists and a radiology group. The opinion is important for several reasons, including the OIG's position that "safe harbors" are not always safe.
A. The Facts
The proposed joint venture involved a urology group leasing treatment and examination rooms in a radiation therapy cancer treatment facility that provides intensity- modulated radiation therapy (IMRT). The facility was owned by a radiology group, and in addition to providing the space and equipment, the radiology group was also to provide substantially all of the administrative, clinical, billing and collection services for the urology group's use of the facility. Importantly, the proposal required the urologists to pay fair market value for the leased space, equipment and services.
Prior to the proposed arrangement, the urologists referred their radiation therapy patients outside of their practice. However, under the proposed arrangement, the urologists were to operate a portion of the facility as an extension of their office practice.
B. The Opinion
The federal anti-kickback statute (AKS) prohibits the knowing and willful payment or solicitation of remuneration to a person in exchange for referrals of patients who are beneficiaries of federal health care programs. However, in 1987, Congress required the OIG to publish safe harbors that describe payment practices that do not violate the AKS. In fact, two of those safe harbors describe the types of fair market leases and personal services agreements that are incorporated in the proposed joint venture.
Further, while parties to a proposed joint venture need not seek the OIG's blessing before proceeding, health care providers may request an advisory opinion letter from the OIG as to whether a proposed arrangement violates the AKS. In this case, the requesting parties asked whether the proposed joint venture resulted in an illegal "kickback" to the urologists for their use of the facility, notwithstanding that the proposed lease and services agreement fell within the OIG's safe harbors.
In its opinion, the OIG explained that AKS violations can arise when physicians expand into a related health care business, without committing significant capital, financial or human resources. Moreover, the OIG concluded that the proposed joint venture could very well violate the AKS, depending upon the parties' intent. Therefore, instead of getting the OIG's blessing, the requesting parties received just the opposite.
The OIG also concluded that the safe harbors only protected the rental and service payments being made to the radiology group by the urologists. Importantly, the OIG stated that the urologists' "opportunity" to generate a profit from payments from federal health care programs would not receive the protection of the arguably applicable safe harbors. While that latter interpretation of the safe harbors could be challenged in court, the fact that it is the OIG's position is, nevertheless, significant.
The bottom line is that complex joint ventures among multi-disciplinary health care providers pose special risks under federal law. Further, as indicated by the IMRT opinion, that risk is heightened when physicians expand into related health care businesses, without committing significant capital or human resources.
It also should be noted that regulatory risks involving joint ventures between doctors of different specialties are even greater in Maryland, because Maryland has special rules involving radiation therapy, magnetic resonance imaging and computerized axial tomography, and because the Maryland Board of Physicians frowns upon independent contractor relationships between health care providers of differing specialties.


June 22, 2009




Rosen, Barry F.


Health Care