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Mobile LeasingDiagnostic TestingArrangements

There have been a number of healthcarelegislative initiatives in recent years designedto restrict or substantially limit diagnostictesting arrangements and regulatory enact-ments have necessitated the restructuring ofcertain imaging transactions. However, aphysician’s ability to furnish and bill fordiagnostic testing services under a properlyconstructed mobile leasing model remains alegally supportable framework to enhancephysician practice revenue. This article pro-vides a brief overview of the elements thatcomprise a typical leasing model structureand examines some of the healthcare regu-lations that must be considered in connec-tion with these arrangements. It also dis-cusses the current legal status of the leasingmodel, which permits (and, we expect, willcontinue to permit) appropriately struc-tured diagnostic testing arrangements in thephysician office setting.

The Leasing Model Although there may be minor structuralvariations, the leasing model typically com-prises the following elements. A mobileleasing entity (the “mobile company”)enters into a written contractual agreementwith a physician group under which it leasescertain portable diagnostic testing equip-ment, a qualified technologist, and often theassociated imaging supplies to enable thephysician group to furnish certain diagnos-tic testing services to patients of the practicein the group’s office. Although the mobilecompany will supply the leasing services,

the physicians (as the lessees) will exercisethe required degree of supervision of thediagnostic testing services and, thus, thephysicians will be the entity that is consid-ered to be the provider of (and entitled tobill for) the diagnostic services.

In practice, the leasing services modelprovides physician groups with in-officeaccess to the equipment, personnel, andsupplies with which they are then able tofurnish the technical component (TC) ofthe diagnostic testing services to theirpatients. The physicians will bill Medicareand other third party payors for the diag-nostic tests. The leasing services must bestructured as a block lease arrangement,subject to certain minimum hourly require-ments (which subject the physicians to gen-uine financial risk and,as a result, enable thephysicians to rebut the characterization ofthe arrangement as an “on demand” lease).The physicians must pay the mobile com-pany a fixed fee for the contractually leasedblock of time (ie, without reference to thenumber of studies performed), in which thefee must be (i) supportable as fair marketvalue and (ii) established in advance of thearrangement.Note that, in addition to beingthe provider of the TC (through the leasingservices arrangement),provided that certain

standards are met, the physician group alsocan furnish (and bill for) the professionalcomponent (PC) of the diagnostic tests.

Healthcare RegulatoryConsiderations Because diagnostic testing arrangements(including the leasing model) potentiallyimplicate a number of different healthcareregulations, physicians employing a leasingmodel in connection with furnishing imag-ing services through their practices mustensure their particular contractual arrange-ments are constructed in a manner thatcomplies with all applicable legal require-ments. While any meaningful legal analysisis dependent upon the facts and circum-stances of the particular transaction, it hasbeen our experience that, so long as certainstructural safeguards are integrated into the arrangement (ie, in particular, factorsthat [i] demonstrate the nexus between the physician group’s core services and thediagnostic imaging services, and [ii] permitthe group to show that the group is at suffi-cient financial risk under the leasing serv-ices arrangement), the leasing model canbe structured in a manner that complieswith the Federal Stark Law, Medicare’s

By Adrienne Dresevic, Esq. and Carey Kalmowitz, Esq.

The leasing model can be structured in a manner that

complies with the Federal Stark Law, Medicare’s Anti-Markup

Rule, Medicare’s IDTF regulations, and the Medicare

and Medicaid Anti-kickback Statute.

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Anti-Markup Rule (AMR), Medicare’sindependent diagnostic testing facility(IDTF) regulations, and the Medicare andMedicaid Anti-kickback Statute (AKS). Asa result, physicians can lawfully bill for thediagnostic testing services provided pur-suant to the leasing model.

The Federal Stark Law Physicians that furnish diagnostic imagingservices under the leasing model mustdetermine whether, under the group’s par-ticular structure (including the location inwhich the tests will be furnished), they willbe able to provide the services in a mannerthat meets Stark’s in-office ancillary serv-ices exception (IOASE). Notably, a physi-cian practice will be able to furnish (andlawfully bill for) diagnostic testing servicesunder the leasing model, provided that thepractice (i) qualifies as a “group practice”under Stark, (ii) bills for the testing serv-ices under the group’s provider number,(iii) supervises the tests in accordance withapplicable Medicare rules, and (iv) fur-nishes the diagnostic testing services in thesame building in which the group’s physi-cians furnish professional medical servicesunrelated to the tests (eg, physicians’ serv-ices). If these elements are met, which, inthe majority of physician practices shouldbe reasonably achievable, the testing serv-ices will comply with the IOASE.

Further, with respect to those physiciangroups that will bill for the PC of the services,if an employed physician provides the inter-pretation, for purposes of compliance withthe Stark physician services exception (PSE),there is no on-site requirement.However, theMedicare AMR will apply to the serviceswhich means that if the physician providesthe PC of the services off-site, he/she must“share a practice”with the physician by pro-viding at least 75% of his/her professionalservices for such physician group.

The Medicare Anti-Markup Rule Physicians that operate under a leasingmodel must also ensure that their diagnos-tic testing arrangements are structured ina manner that does not cause the servicesto fall within the purview of the AMR’spayment limitations. The Centers forMedicare and Medicaid Services (CMS)

adopted 2 alternative tests for determiningthe applicability of the AMR:

1. Alternative 1. If the performing physi-cian (ie, the physician who supervisesthe TC, performs the PC, or both) per-forms substantially all (ie, at least 75%)of his or her professional services forthe billing physician or other supplier,the services will not be subject to theAMR payment limitations.

2. Alternative 2. TCs conducted and super-vised in,and PCs performed in,the “officeof the billing physician,”which includesthe “same building,” by an employee orindependent contractor physician avoidthe AMR payment limitation.

Notably, physicians should readily be ableto satisfy Alternative 1 if they provide atleast 75% of their professional servicesthrough the billing practice. It is also pos-sible for the physicians to satisfy Alterna-tive 2, provided that the physicians furnishand supervise the services in-office.

Medicare IDTF Regulations Pursuant to guidance issued by CMS, theleasing model does not fall within thepurview of the IDTF regulations. Thus,physicians that employ leasing services canbill Medicare directly for the diagnosticimaging services furnished in conjunctionwith the leasing model (ie, without theneed for the group to enroll as an IDTF).

The Medicare and MedicaidAnti-kickback Statute Although the leasing model does implicatecertain legal risks that the Office of Inspec-tor General typically reviews in its AKS jointventure guidance, a carefully structuredleasing model will incorporate compellingmitigating factors which reduce risk. Forexample, the leasing model contemplates a block leasing schedule, which requires thephysicians to utilize the leasing services for aminimum amount of time per week (ormonth, depending upon the nature of thetest). The physicians must pay a fair marketvalue fee for the blocks of time to whichthey subscribe, irrespective of the volume ofservices that they provide (and thus the rev-enue derived from the services). In this way,a group cannot subscribe for the leasing

services solely when the group is assured ofearning a profit (ie, on an “on-demand”basis). As a result, the group is required tobear the financial risk that the contractualpayments to the mobile company poten-tially might exceed the revenue from thediagnostic imaging services furnished inconnection with the leasing services.

Finally, an appropriately structuredleasing model should also permit thegroup to show a reasonable nexus betweenthe diagnostic testing services provided inthe physician’s office and the physician’score medical practice. If these elements arein place, the physician group should be inreasonable position to defend the arrange-ment as being compliant with the AKS.

The Current State of MobileLeasing Arrangements Despite healthcare regulatory changes thathave been enacted in recent years, the lawcurrently permits appropriately structureddiagnostic testing arrangements in thephysician office setting utilizing the leasingmodel. Accordingly, incorporating diag-nostic imaging into a practice can permitphysician groups to expand the continuumof care provided to patients, while, at thesame time, enhancing practice group rev-enue. Although a leasing model will need tointegrate certain elements (ie, safeguards ofthe type discussed above) to mitigate poten-tial legal risks, if these are included, in thesubstantial number of cases, a leasing modelcan be structured in a manner that achievesa physician group’s business objectives,whileat the same time complying with applicablehealthcare regulatory constraints.

Adrienne Dresevic, Esq. is contributing as a guestcolumnist.She is a founding member of The Health LawPartners, P.C. She is a member of the American BarAssociation, State Bar of Michigan, Health Law Section,American Health Lawyers Association, and serves as aneditorial board member for the ABA’s e-Source and theABA’s Publications Committee.Ms.Dresevic can bereached at adresevic@thehlp.com

Carey F. Kalmowitz, Esq. is contributing as a guestcolumnist and is a founding member of The HealthLaw Partners, P.C. He is a member of the State Bar ofMichigan, the Michigan Society of Hospital Attorneys,the American Health Lawyer’s Association, and theAmerican Bar Association. Mr. Kalmowitz can bereached at ckalmowitz@thehlp.com

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