HHS launches investigation of Radiation Care

July 1, 1992

Radiation therapy firm Radiation Care was dealt a stunning blowlast week when federal officials announced that the company isbeing investigated.The inquiry is the latest in a string of setbacks Radiation Carehas experienced in connection with its

Radiation therapy firm Radiation Care was dealt a stunning blowlast week when federal officials announced that the company isbeing investigated.

The inquiry is the latest in a string of setbacks Radiation Carehas experienced in connection with its investment structure, whichincludes self-referring-physician ownership.

The inspector general of the U.S. Department of Health and HumanServices is investigating both Radiation Care and T2 Medical,according to a spokesperson for the inspector general's office.

Radiation Care is based in Atlanta; T2 Medical, which provideshome infusion therapies, is headquartered in Alpharetta, GA. Thecompanies were founded by Thomas E. Haire, who remains chairmanof both firms.

Radiation Care and T2 Medical were informed of the investigationafter an Atlanta grand jury asked both companies to provide documentsabout their investment structures. The grand jury's action wasthe result of a request from HHS, according to a Radiation Carespokeswoman.

Federal officials would not comment on the nature of the investigation,but it is believed to be related to self-referring-physician investmentin the companies.

Earlier this year, Radiation Care was embroiled in a legislativeslugfest in Florida over joint ventures after the company announcedits plans to open a radiation therapy center in Orlando.

That battle ended with a ban on physician self-referral and theimposition of a cost cap on medical procedures in radiation therapy,clinical labs, medical imaging and physical therapy (SCAN 6/3/92and 4/8/92).

Radiation Care was able to get the Orlando center up and runningbefore the ban took effect, but has been blocked from openingadditional joint-ventured centers in the state.

The firm began diversifying into imaging in the wake of the Floridarebuff, using stock trades to buy out physician investors in fourimaging centers. This structure keeps Radiation Care in compliancewith safe harbor regulations because the company has over $50million in net tangible assets, according to David P. Meyers,vice president of operations at Radiation Care.

There is less opportunity for abuse under Radiation Care's investmentstructure than at other joint-ventured firms because physicianinvestors do not own specific centers, but rather own stock inthe company, according to the Radiation Care spokeswoman.

"We complied with every kind of Medicare rule and regulationand we feel confident that the outcome (of the investigation)will be positive for the company because we've been absolutelyin compliance," the spokeswoman said.

In other self-referral news, a special session of the FloridaLegislature last week failed to modify the state's controversial115% cost cap on procedures in medical imaging, physical therapy,clinical labs and radiation therapy (SCAN 6/17/92, 6/3/92 and4/8/92).

A bill that would have increased the cost cap and applied it onlyto joint-ventured facilities failed to win enough votes to moveforward because of Republican opposition, according to Rep. ElaineBloom (D-Miami).

The bill was the last opportunity for legislators to modify thecost cap before the end of the special session.

Republicans decided to oppose the cost cap reform bill becausethey intend to challenge the existing cost cap law on constitutionalgrounds, Bloom told SCAN.

"They decided to risk it all," she said.