Court of appeals rules on 'under arrangement' relationships, 'per-click' equipment leases

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As the old saying goes, “you win some, you lose some.” With its decision in the case of Council For Urological Interest v. Sylvia Mathews Burwell, a court of appeals upheld one aspect of a CMS rule change made in 2008 while striking down another.

First, the U.S. Court of Appeals for the District of Columbia Circuit upheld CMS’s updated limitations to “under arrangement” relationships. Under arrangement relationships involve a hospital contracting a third party to provide services to that hospital and its patients. The rule change in question prohibited these kinds of relationship between referring physician-owned companies and hospitals, and the court said this represented a reasonable interpretation of the Stark law.

There are certain exceptions to this new limitation, such as one that states radiologists, radiation oncologists and pathologists can still consult at the request of another physician, even if they have an ownership interest in the company being billed by the hospital.

The court took on another regulation updated in 2008 in the same ruling, this time coming out against CMS’s decision to prohibit “per-click” or “per-use” equipment rental contracts. Equipment owned by physicians, the court ruled, can be leased to hospitals and carry fees that are applied each time that equipment is used, or “clicked.”

The court seemed to fault CMS for the reasoning behind the restriction more than the actual restriction itself, and two judges dissented because they thought CMS’ reasoning was valid. This makes it seem possible that the prohibition of “per-click” rental contracts may return sometime in the future, but in its detailed analysis of the case, the law firm McDermott Will & Emery concluded CMS may drop the point and move forward.

The case of Council For Urological Interest v. Sylvia Mathews Burwell came about in 2009, when a urologist trade association sued HHS Secretary Sylvia Mathews Burwell in response to the 2008 rule change.