In Advisory Opinion 08-10, the OIG concluded that a proposed “block lease” arrangement between an oncology physician practice and a group of urologist referral sources would potentially violate the Anti-kickback statute.

The oncology group in question provides various cancer treatments in a facility setting, including a procedure called Intensity-Modulated Radiation Therapy (“IMRT”) which is used to treat prostate cancer. Patients who receive IMRT are typically referred by urologists.

The proposed arrangement involved the leasing of space, equipment and personnel to the urologists so that the urologists could see patients at the facility at least eight hours per week and could also perform the IMRT procedures (through the lease arrangements) instead of referring the services to the oncology physician group.

The OIG noted its longstanding concern about certain joint venture arrangements between those in a position to refer business and those who furnish items or services for which Medicare and Medicaid pay, especially when all or most of the business of the joint venture is derived from one of the joint venturers. The following points were found to be problematic:

1. The urologist group would be expanding into a related line of business which is dependent on referrals from urologists.

2. The urologists would not actually participate in the performance of IMRT, but rather would contract out substantially all IMRT operations (including the professional services).

3. The urologist group would commit little in the way of financial, capital or human resources and would assume very little real business risk.

4. The urologist group would be in a position to ensure the success of the business by referring to the facility’s IMRT operations and also choosing IMRT over other forms of treatment.

5. The oncology physician group is a provider of IMRT services and could provide the services in its own right.

6. The urologist group would use the leased facilities, equipment and personnel to serve the very same patient base that used to be referred to the oncology group.

7. The aggregate income to the urology group would be based on volume/value of referrals because historical data could be used to fit the historical value of referrals.

8. Both groups would share in the economic benefit of the IMRT.

The OIG did not comment on whether any of the individual contracts might meet the Anti-Kickback safe harbors for personal services or equipment and space leases, but indicated that if the intent of the relationship was to pay remuneration through the IMRT services for referrals to the cancer treatment facility, then the Anti-Kickback Statute would be violated.

Providers and their counsel should be very aware of arrangements such as this, that might technically meet various safe harbors, but still contain an overriding prohibited intent to induce referrals.