Advisory Opinion No. 08-10: Review Of Block Lease Arrangement

In late August, the Office of the Inspector General of the

United States Department of Health and Human Services

("OIG") issued Advisory Opinion No. 08-10, which reviewed

a block lease arrangement involving urologists using Intensity

Modulated Radiation Therapy ("IMRT"). This Opinion

reflects continued government antipathy toward shared ancillary

services among referring physicians. Similar concerns have driven

recent Stark III and related changes, such as the anti-mark-up

rule.

At issue in Advisory Opinion No 08-10 was a fairly common

structure pursuant to which urology groups would lease from a

radiation oncology physician group practice, on a part-time basis,

space, equipment, personnel and radiation and other supplies and

administrative and billing services needed to perform IMRT.

Compensation would be a fixed amount set in advance, that would not

vary based on utilization. The agreements are certified to be at

fair market value, a one year term, and are in effect assumed in

the opinion to have met all other Anti-Kickback Law Safe Harbor

requirements.

Noting that even if the agreements making up the proposed

arrangement could each satisfy the applicable Anti-Kickback Law

Safe Harbor conditions, the OIG wrote that it would only protect

the amount paid by the urology groups to the radiation oncology

group practice for services rendered or space or equipment leased.

The OIG noted, however, that "in this Opinion, we are

concerned about potential compensation to the Urologist Groups, who

are sources of referral to the [radiation oncology group] for the

very services to be provided under the Proposed Arrangement."

In the Special Advisory on contractual joint ventures issued in

2003 and the 1989 Special Fraud Alert on joint venture

arrangements, the OIG found that a sham relationship is not

protected by technical compliance with Safe Harbors. Applying those

principles here the OIG reasoned that the retained profit of the

urologist group after paying all amounts due to the radiation

oncology practice was effectively remuneration. In other words, by

agreeing to provide services that they could otherwise provide for

less than the available reimbursement, the radiation oncology

group's leases of space, equipment and personnel to the

referring groups provided the referring groups with an opportunity

to generate a fee and a profit. Finding that profit could be a

kickback if made with the requisite intent, the OIG stated that

"there is a significant...