Proceed with caution in restructuring centers

September 11, 1991

Imaging center operators should move slowly in modifying jointventures to comply with the Health and Human Services safe harborregulations (SCAN 8/14/91), according to Charles Booth, an imagingcenter consultant. Pending regulatory and judicial action

Imaging center operators should move slowly in modifying jointventures to comply with the Health and Human Services safe harborregulations (SCAN 8/14/91), according to Charles Booth, an imagingcenter consultant. Pending regulatory and judicial action couldaffect Medicare anti-kickback enforcement, he told SCAN.

"It would be less than prudent to fully comply now beforethe implications of these developments are known," he said.

With several additional safe harbors pending, imaging centeroperators have yet to learn the full extent of federal policyon self-referral, he noted. The Health Care Financing Administrationis considering a new safe harbor that would exclude radiologistsunder specific conditions from the pool of clinicians subjectto the rules.

A second proposed regulation has also been leaked, Booth said.The rumored "active investor exemption" would excludegeneral partners who handle the center's daily management andassume personal liability for its debt. It is also rumored thatthe safe harbors will be amended to allow hospital participationunder specific conditions.

Rumors were plentiful in the month following the regulations'July 31 publication. One tale originating in southern Californiatied the new rules to a conspiracy aimed at forcing operatorsto sell their centers to the federal government. The punchlineto this widely circulated story had the Bush Administration usingthe services as a starting point for socialized medicine.

The outcome of the Inspector General's appeal of the HanlesterLaboratory ruling also factors into the aggressiveness of federalactions, Booth said.

In the Hanlester case, a California administrative law judgeruled that the government must show that an explicit quid proquo arrangement existed between the medical business and its physicianinvestors, according to Thomas Greeson, American College of Radiologycounsel.

The judgment requires physical evidence beyond verbal agreementsshowing that the purpose of the investment was to enable the physiciansto profit from patient referral.

The Health and Human Service appeals council is expected torule on the inspector general's appeal this month.

"If Hanlester is not reversed, the inspector general willhave a difficult time using his civil exclusionary authority againstproviders who fall well outside the safe harbors," Greesonsaid.

It is that exclusionary authority that empowers the inspectorgeneral to bar providers from Medicare participation.

Medicare's new relative value scale for physician paymentsmight have a tangential effect on the reaction of joint venturesto the safe harbors. The tentative RVS plans disappointed mostphysicians, Greeson said.

As a result, some practitioners will not accept new Medicarepatients in their private practices and will be less likely toprotest when their imaging centers drop Medicare entirely, Boothsaid. Because of these emerging trends, ventures that restructurenow could lose out later, he added.

Imaging center managers should formulate an aggressive plandescribing how their organizations intend to comply with the safeharbors, Booth said. They should, however, suspend implementationuntil all the safe harbors are known. Documents should be preparedthat note why implementation was delayed.

This strategy should provide limited protection if the imagingcenter is investigated before it can implement the plan. It alsoprepares the business to prudently restructure at the right time,Booth said.

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