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The proposed arrangement
The requestor of the advisory opinion is a physician group practice that provides cancer treatment services in a free-standing facility that provides radiation and chemotherapy treatments for a wide range of cancers, including intensity-modulated radiation therapy (IMRT), which is frequently used to treat prostate cancer. Patients with prostate cancer who receive IMRT at the facility are referred to the requestor by area urologists. The physician group practice has proposed to enter into an arrangement with some of these urologist groups, which participate in Medicare and which "neither provide IMRT as part of their practices nor own facilities that provide IMRT. Some of the urologist groups currently refer most of their prostate patients to the [physician group practice], and some refer primarily to a competing facility."

Key points of the proposed arrangement:

1. The physician practice group would enter into a series of written agreements with the urologist groups in which the urologist groups would lease, on a part-time basis, the space, equipment, and personnel services necessary to perform IMRT.

2. Each urologist group would lease examination and treatment rooms at the facility for fixed periods of at least eight hours per week, in the same space where the physician practice group provides IMRT.

3. The urologist groups would also lease from the physician practice group equipment and personnel necessary to provide their patients with IMRT.

4. The physician practice group would provide the urologist groups with radiation supplies and billing services.

5. Individual radiologists associated with the physician practice group who normally perform services billed by the physician practice group would enter into contracts with the urologist groups to supervise the IMRT procedures as independent contractors.

6. In exchange for the space, equipment and services, the urologist groups would pay the physician practice group premises rent, equipment rent, personnel expenses, and communication and administrative expenses; this compensation would be fixed (one year, with an option to renew upon 90-day advance written notice), fair market value, set in advance, and would not vary based on use of premises, equipment or services.

7. The professional and technical components of the IMRT would be billed to Medicare using billing numbers assigned to the urologist groups, which would pay the amounts owed under the agreement regardless of the number of patients they referred to the facility and regardless of whether they collected fees for the procedures from Medicare or other payors; the urologist groups would retain the difference between the fees collected and the amounts owed to the physician practice group.

Analysis of the arrangement The proposed arrangement would establish a type of joint-venture between the physician practice and urologist groups, and it exhibits several common elements of what constitutes a suspect joint-venture arrangement, says the OIG. Foremost is the potential compensation to the urologist groups, who are sources of referrals to the physician practice group for the very services to be provided under the proposed arrangement:

Under the Proposed Arrangement … the Urologist Groups would be expanding into a related line of business, IMRT, which is dependent on referrals from the Urologist Groups. The Urologist Groups would not actually participate in performing the IMRT, but would contract out substantially all IMRT operations, including the professional services necessary to provide the IMRT. On the whole, the Urologist Group would commit little in the way of financial, capital, or human resources to the IMRT and, accordingly, would assume very little real business risk. … [A] Urologist Group's actual financial and business risk would be minimal. The Urologist Groups would be in a position to ensure the success of the business, not only by referring to the [physician practice group's] facility for IMRT, but by the choice of IMRT over other available therapies for prostate cancer. Although not essential to our conclusion, we note that, in negotiating the agreements that make up the Proposed Arrangement, the lease times as well as the amount of space, equipment and staff leased or contracted for could readily be determined based on the historical patterns of referrals by a particular Urologist Group. Thus the parties could easily ensure that the business generated by the Urologist Group would be sufficient to meet or exceed the rent and fees.

Other elements of the proposed arrangement that the OIG is concerned about include the following:

• The [physician practice group] is an established provider of the same services that a Urologist Group would provide via the Proposed Arrangement and is in a position to directly provide the IMRT in its own right, billing Medicare in its own name, and retaining all available reimbursement.

• A Urologist Group would use the premises, equipment and staff of the [physician practice group] to serve its own patient base — the very patients some of the Urologist Groups have historically referred to the [physician practice group] or other outside suppliers for the same services.

• The aggregate income to the Urologist Groups under the Proposed Arrangement would vary with referrals from the Urologist Groups to the Facility, and, because the various agreements could be tailored to fit the historical pattern of referrals by the Urologist Groups, so might the income to the [physician practice group].

• The [physician practice group] (and its individual Radiologists engaged as independent contractors by the Urologist Groups) and the Urologist Groups would share in the economic benefit of the IMRT.

"We are unable to exclude the possibility that the parties' contractual relationship is designed to permit the Requestor to do indirectly what it cannot do directly; that is, pay the Urologist Groups a share of the profits from their IMRT referrals," writes the OIG. "Illegal remuneration can be the difference between the money paid by a referral source to a manager/supplier and the reimbursement received by the referral source from the Federal health care programs. By agreeing to provide services it could otherwise provide in its own right for less than the available reimbursement, the Requestor may provide the Urologist Groups with the opportunity to generate a fee and a profit. The opportunity to generate a fee is itself remuneration that may implicate the anti-kickback statute."

Download a PDF of OIG Advisory Opinion No. 08-10.