Block time leases bring new challenges to radiology practice

May 1, 2007

A new weapon has entered the unending battle for medical imaging turf. It is called block lease, and you can expect one to arrive soon at a hospital or MRI center near you.

A new weapon has entered the unending battle for medical imaging turf. It is called block lease, and you can expect one to arrive soon at a hospital or MRI center near you.

Three features of block leasing give radiologists reasons for concern: Block leases are legal, except in Louisiana and Maryland, where they are prohibited. They are ethically questionable enough to scare away many reputable radiologists. They effectively help some imaging centers and hospitals capture market share at the expense of competing radiologists.

A block lease gives a referring physician group the rights to specific appointment times on an MR, CT, or other type of scanner. The referring group gives the imaging center a fee to rent equipment and pay personnel to operate it and handle office administration. In exchange, the referring group obtains the right to bill insurers for imaging performed on their patients.

A block lease carries financial risk: If the referring group cannot fill the slots with paying patients, it loses money. Potential financial awards are substantial, however. The referring physician can collect a dollar for every fifty cents spent on lease time at the imaging center.

Block lease deals have been crafted to meet legal requirements of the Stark self-referral and anti-kickback statutes. Until now, users have been confident about the legality of these deals, but a widely publicized lawsuit is challenging that assumption. Illinois Attorney General Lisa Madigan is bringing a case against 19 Chicago-area imaging centers. Her action shows leasing arrangements are vulnerable to state insurance and consumer fraud laws.

Even if the lease agreements survive this legal challenge, the ethics of the deals are questionable. Like other forms of self-referral, leasing turns patients into commodities that are bought and sold. Under such conditions, the objective of MRI or CT becomes less about solving diagnostic problems and more about making money. Historically, opportunities to self-refer have led to overutilization abuses. Nothing suggests that block lease users are not wandering down the same path.

Imaging services operators who refuse to participate in block leases end up being hurt financially by them because they work so well. Leases create an irresistible incentive for physicians to shift referrals to services that return a financial reward. Operators who refuse to participate in leasing lose customers.

Referring physicians, especially family practitioners, find these deals very attractive. They have been taking a financial beating from managed care at the same time radiologists were becoming some of the best paid physicians in medicine. They may even think that block leasing levels the playing field by redistributing income.

It is hard to imagine how patients benefit, however. Anecdotal experience suggests patients have to wait longer, travel farther, and accept less convenient times for their imaging.

Providers have less money for equipment upgrades and replacement, and payers are stuck with higher costs. Financial incentives may result in patients getting scans they don't really need.

Some believe the answer is in legislation to prohibit these deals. Persuading lawmakers to regulate referring physician licensing will be impossible, however, if the success of these leases as a marketing strategy is the only tangible argument against them.

A more forceful argument requires research to measure the actual effect of block leasing on utilization rates, patient care, and equipment performance. Radiologists can protect themselves by urging private payers to adopt facility accreditation as a prerequisite for payment. Mandatory preauthorization review can filter out inappropriate utilization.