Corporate Compliance

Joint ventures

Compliance Monitor, January 26, 2007

Q: We are internal medicine and family practice physicians who have individual practices, and who are members of a non-profit community hospital's medical staff. The hospital has talked to us about jointly investing in an imaging center. Is this something we can do?

A: It all depends on the imaging services involved. You need to be sure that if you do engage in any ventures such as the proposed imaging center, you satisfy the safe harbors of the anti-kickback statute.

To comply with the law, there can be no inference that any payment you receive is for the referral of your patients to the imaging center. That means that your investment interests in the imaging center must not bear any relationship to the likely referrals to the patients you could make. In other words, if you were to refer 10% of the patients and receive 10% of the interest, and somebody else were to refer 20% of the patients and receive 20% of the interest, the government would infer them to be payments for the referrals of those patients.

However, if everyone had the same investment interest, for example, 10%, regardless of the patient referrals, then it would potentially meet one of the requirements for the investment interest safe harbor. More importantly, it will be hard to argue that there was any intent to violate the anti-kickback statute.

There are other conditions to be met in order to comply with safe harbors, or to get as close to a safe harbor as you can, if you cannot get into one. The bigger problem you may have with an imaging center is that a large number of imaging services are "designated health services" under the Stark Statute, and you may not refer any of your patients to the center if you have a financial interest in the center, unless you can satisfy one of the Stark exceptions. If you do, the center may not bill Medicare for providing services to those patients.

Finally, examine if state laws could be implicated by the proposed arrangement.

Thanks to John Reiss, Esq., a partner with the Philadelphia-based law firm Saul Ewing LLP, for answering this week's question.

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