Rumors abound that beginning October 1, 2009, urologists who hold a financial stake in IMRT equipment will no longer be able to refer their patients with prostate cancer for treatment to facilities using that equipment. These rumors are fueled by misinformation about the scope of upcoming changes to the Stark Law regulations, which govern physician self-referral. Although it is true that urologists may have to restructure certain arrangements, the reality is that lawful ways will remain for them to share in the profits associated with IMRT treatments furnished to prostate cancer patients they refer after new Stark Law restrictions take effect.

The upcoming regulatory changes will impose restrictions on certain “under arrangement” contracts between urologist owners and hospitals for the use of free-standing radiation therapy facilities. If a free-standing facility provides turnkey radiation therapy services under a contractual arrangement with a hospital and the hospital bills for the "under arrangement" radiation therapy services as either a hospital inpatient or hospital outpatient service, the facility must meet the requirements of the “rural provider” exception under Stark in order to protect referrals from a urologist who has an ownership interest (either directly or through a joint venture) in the facility. Nonetheless, urologists should be allowed to refer patients to free-standing facilities they own that furnish “under arrangement” services to hospitals, provided that the facility furnishes only equipment use and tech services, and not supervisory services. Moreover, the upcoming changes to the regulations do not affect the in-office ancillary services exception, which has remained essentially unchanged since the Stark Law was originally enacted in 1989. As a result, despite the upcoming changes, all urologists will continue to be able to provide IMRT in their offices or in a central facility owned by their group practice, provided that they do so in full compliance with the long-standing in-office ancillary services exception rules.

Urologists also still will be permitted to lease radiation therapy equipment to hospitals directly or through joint ventures and refer patients to the hospital that is using the leased equipment for IMRT services that it bills. However, starting October 1, 2009, urologist owners are no longer permitted to receive per-use or percentage-based rental payments for equipment used in treating patients referred by the urologist owner to the hospital. Rather, urologist owners will have to be paid by the hospital on a flat fee (e.g., $X/month) or block lease (e.g., $Y/per month for use between 1:00-5:00 pm Mondays, Wednesday and Friday) basis. Urologists holding per-click or percentage leases on IMRT equipment who have not done so already should begin negotiations now to restructure those lease arrangements with hospitals. Otherwise, they will be forced to stop referring their prostate cancer patients to their hospital lessees for treatment this fall.

Turnkey “under arrangement” deals with hospitals that involve urologist-owned free-standing radiation therapy facilities also require immediate restructuring attention if the urologist owners want to continue making referrals for IMRT to the hospitals. The practical implications of the changes in the Stark regulations aimed at "under arrangement" deals with hospitals are that urologist-owned free-standing radiation therapy facilities that have been providing turnkey “under arrangement” services will have to be: (1) integrated into the owners' group practices (thus foregoing a split of the higher OPPS or IPPS payments with the hospital), (2) converted to leasing arrangements with the hospital (which will not be able to use per-click or percent payments), or (3) converted to joint venture management companies that supply everything but the supervision.

If you need additional information or assistance with deal restructuring, please contact one of our attorneys listed on the side of this page.