The Illinois attorney general's office has provided additional details in its lawsuit against a number of imaging center firms accused of paying illegal kickbacks to referring physicians in exchange for equipment per-click leasing deals.
Attorney General Lisa Madigan earlier this year filed suit against MIDI LLC and several other imaging center operators, charging that their practice of leasing blocks of time on their imaging equipment to referring physicians was a violation of the state's antikickback laws. The lawsuit has nationwide implications due to the increasingly common practice of per-click leasing, in which referring physicians get a reduced rate for imaging services from equipment operators but bill insurers directly at a higher rate, and pocket the difference.
The Illinois case began when competing imaging center operator John Donaldson filed a whistleblower complaint in February 2006 charging that per-click leasing practices made it more difficult for his firm to obtain patient referrals. The state of Illinois intervened in the case by filing its lawsuit in January.
On April 27, the attorney general filed an amended complaint with the Circuit Court of Cook County in Chicago that offers new information about the case. The complaint charges that the leasing programs began in 1999, "when Defendants and referring physicians began using these agreements in an effort to boost the referring physicians' revenues and ensure a steady volume of business for Defendants' imaging facilities."
In its claim against MIDI, the lawsuit states that imaging facilities controlled by the firm have been a party to at least 37 separate agreements with physicians or physicians' groups in Illinois. Under each of the agreements, the physician would pay MIDI a set fee for diagnostic imaging procedures, generally $400 for an MRI scan without contrast, and the physician or the MIDI entity on behalf of the physician would bill the patient or the patient's insurer for the same procedure, with the physician retaining the balance of the insurance reimbursement that exceeded MIDI's fee. Neither MIDI nor the physician disclosed the existence or the terms of the relationship to patients or insurers, according to the complaint.
The complaint goes on to state that in some cases, the referring physician or MIDI "falsely represents on the insurance claim form that procedures performed at a MIDI facility were actually performed at the referring physician's own facilities." In other cases, "the referring physician or MIDI falsely represents on the insurance claim form that the imaging services were personally furnished by the referring physician or his or her employee under his or her direction." For procedures performed outside per-click leasing arrangements, MIDI would bill patients or insurers directly, at higher rates than MIDI receives from its physicians with leasing deals.
Leasing 'scenarios'
The complaint also cites MIDI training materials for its marketing representatives, which include scenarios on how referring facilities can profit from per-click leasing arrangements. In one scenario, the insurer's average reimbursement rate for an MRI is $800. MIDI's global fees are $475, and the "overage" cost is 10%, leaving $277 for the referring physician to pocket. With a referral rate of 40 scans per month, the referring physician would generate annual revenue of $132,900, the complaint states.
In the second scenario, the insurer's average reimbursement is $700. MIDI's global fee remains $475, with a 10% overage cost, leaving the referring physician with $177 per scan. That produces annual revenue of $84,900 at a referral rate of 40 scans per month, according to the complaint.
The complaint also details specific arrangements entered into by each of the other defendants in the lawsuit. For example, one facility, Golf Diagnostic Imaging of Des Plaines, signed at least 23 "facility leases" since September 1999 with referring physicians who agreed to pay Golf a "rental fee" that was generally $550 to $600 per hour, but that sometimes was expressed as a set fee for a procedure, such as $400 for MRI without contrast, according to the complaint.
Golf employees scheduled procedures with patients, and procedures were performed at Golf's facility by Golf personnel and using Golf's equipment, with Golf also employing the radiologists who read the studies, the complaint charges. Golf's agreements usually call for referring physicians to bill patients or the patient's insurer for services performed by Golf, the complain states, but leasing agreements state that "Golf 'will assist Lessee in setup of billing system.'"
Under some agreements with referring physicians, Golf prepared and submitted bills to patients or insurers on behalf of referring physicians, using the physician's provider identification number, the complaint charges. Golf also collected payments and deposited them in the referring physician's bank account "as payment for the referral," the complaint states.
Golf also produced a "Global Billing" chart for referring physicians that showed the procedures performed at the facility, the time charged for each procedure, the amount Golf would charge referring physicians for each procedure, and the amount per procedure that would be billed to patients or their insurer. The chart "makes it easy for referring physicians to determine how much illegal profit they will make by referring patients to Golf under the Agreement," the complaint states.
Arrangements set up by other imaging facilities include Elk Grove MRI, Northwest Corporate Imaging Center, Open MRI of Northern Illinois (also known as Nydic Open MRI of America -- Buffalo Grove), Nydic Open MRI of America -- Westchester, Central States Imaging, Gurnee Radiology Center, Rand Imaging Center, and National Medical Imaging of Palos Heights.
Representatives for both MIDI and Golf Diagnostic Imaging were not available to comment as of press time.
Impact on imaging quality?
The leasing deals may have implications for the quality of imaging services being delivered in Illinois, according to the complaint. Facilities that pay "kickbacks" have less money to invest in up-to-date equipment, thus reducing the quality of images services, the complaint charges.
The lawsuit also cites the anti-competitive effect of the deals among imaging centers in the state.
"Imaging centers who participate in these unlawful Agreements make it difficult for other imaging centers who do not participate in these Agreements to stay in business," the complaint states. "Some imaging centers in the Chicago area have been forced to close because they were unable to obtain referrals from doctors without entering into unlawful kickback agreements."
The complaint asks the court for a number of remedies, including the issuance of a temporary restraining order, and thereafter a permanent injunction, preventing the dissipation of proceeds from leasing deals. It also asks that the defendant imaging centers be forced to surrender any proceeds generated by the arrangements. Finally, the suit asks that a number of civil penalties be assessed against the defendants for violating the state's insurance fraud, consumer fraud, and whistleblower laws.
At least one Chicago-area radiologist hopes that the lawsuit puts the damper on a practice that he believes is contrary to the ethical and professional standards of physicians. Dr. Leonard Berlin, chairman of the department of radiology at Rush North Shore Medical Center in Skokie, IL, said that while his facility does not participate in per-click leasing deals, he has felt pressure to do so from referring physicians.
"We try to get our referrals the old-fashioned way, by giving good service," Berlin said. "There is no question that in the last two years we've had a drop of referrals. It's obvious that some of it is related to doctors now sending their patients elsewhere because they have leasing arrangements."
Berlin hopes that in the next stage of its investigation, the AG's office will target referring physicians, who in some cases are driving the demand for per-click leasing deals.
"I hope that at some point they will include some referring physicians (in the lawsuit)," Berlin said. "Kickback is a two-way street."
By Brian Casey
AuntMinnie.com staff writer
May 17, 2007
Related Reading
Illinois AG's lawsuit may chill equipment leasing deals, January 24, 2007
Illinois AG joins leasing suit against MRI centers, January 18, 2007
CA bill to ban leasing deals moves forward, July 10, 2006
Government response to escalating imaging costs, December 12, 2005
Whistleblower accuses radiologist of referral, lease kickbacks, July 19, 2005
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