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Block Leasing of Group Practice Facilities – Anti-Kickback Statute Risks

Block Leasing of Ancillary Services – Risks Under The Anti-Kickback Statute

Block Lease Anti-kickback StatutePhysician groups will often look for ways to share the expenses of excess capacity of high cost center ancillary services.  One approach that is sometimes considered is leasing the ancillary center to another physician group. 2009 changes to the Stark Regulations established new requirements for part-time leasing arrangements.  “Per use” arrangements are now prohibited under the Stark Law which applies when the ancillary service is categorized as a designated health service under the Stark Law.  Comments to the 2009 Stark Regulations maintained an opening to permit some  “block leasing” or “time sharing” arrangements.  CMS left open the parameters that must be met making compliance a bit tricky.  But block leasing arrangements are at least possible in theory under the Stark Law.  Until a few years back, block leasing arrangements were a relatively common way to permit separate physician groups to, in effect, share an ancillary service line. An OIG Advisory Opinion that was issued in 2010 cast a significant shadow on block leasing arrangements; including those arrangements that previously appeared to be legitimated under the Stark Law.  The 2010 Advisory Opinion refused to endorse a block leasing arrangement between two physician groups.

OIG Advisory Opinion 08-10, an oncology group asked the OIG to approve a block lease of  a radiation therapy facility to various different urology groups.  The block lease included all equipment, facility, and staff necessary for the urology group to provide radiation therapy services for their own patients.  The block leasing arrangements were structured in a manner suggested by CMS comments to be legitimate under the Stark Law.   Even though the arrangement likely complied with the Stark Law, the OIG raised concern and refused to endorse the arrangement under the Anti-Kickback Statute.  The OIG expressed concern that the block lease was nothing more than a  vehicle to permit the urology groups to profit from their referrals for radiation therapy services.  The OIG seemed to focus on many of the same factors that it had previously identified in joint venture arrangements.  For example, the OIG pointed to the fact that the oncology group was an existing provider of radiation therapy services and that the urology group was a natural referral source for those services.  Viewed from this angle, the OIG considered the block leasing arrangement to be nothing more than a cleaver way to compensate the urology group for its referrals.

The OIG noted that the opportunity for the urology groups to profit from radiation services amounted to “remuneration” under the anti-Kickback Statute.  The OIG looked past the fact that at least part of the arrangement complied with a safe harbor and instead focused on the overall “big picture” of the arrangement.

Advisory Opinion 08-10 related to a radiation therapy center.  The reasoning in 08-10 applies equally to all types of ancillary services.  Because the OIG’s concerns arise from the Anti-Kickback Statute, the concept is not limited to “designated health services” under the Stark Law.  Leasing any ancillary service and providing the opportunity for a physician group to profit from billings for that service are called into question by the opinion.

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John H. Fisher

Health Care Counsel
Ruder Ware, L.L.S.C.
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