Block Leases Between Physician Groups May Be a Problem
On August 26, 2008 the OIG issued Advisory Opinion No. 08-10, expressing significant concern for a proposed block lease arrangement between a physician group that operates a free-standing facility providing certain cancer treatment services, including intensity-modulated radiation therapy (IMRT) and a urology group that often treats patients who might benefit from receiving IMRT.
The proposed arrangement involved the urology group entering into a series of contracts that would create a "block lease" of the other physician group's IMRT facilities, including space, equipment, administrative and clinical personnel, and radiologist services to supervise the IMRT procedures. In evaluating the arrangement under the federal anti-kickback statute, the OIG noted that the urology group would not actually participate in performing any component of the IMRT service and would contract out substantially all of the services, including all of the professional services.
The OIG concluded that the proposed arrangement was designed to allow the group owning the IMRT facility to do, indirectly, what the anti-kickback statute is intended to prohibit it from doing directly ... "pay the urology group a share of the profits for their IMRT referrals." The OIG concluded that by agreeing to a deal that gave the urology group the opportunity to retain the difference in reimbursement between what was paid for IMRT services provided to the urology group's patients and the rents and fees it would pay to purchase the services, the urology group would be receiving improper remuneration for referrals for IMRT services.
For physician groups currently engaged in block lease arrangements, this Advisory Opinion should be reviewed carefully. Counsel to such group may need to advise their clients that a renegotiation of existing arrangements is required in order to bring such financial arrangements squarely into compliance with the federal anti-kickback statute and avoid the risk of civil and criminal sanctions.
A copy of Advisory Opinion 08-10 can be found here.
