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Does MRI Venture Make Hospital A Felon?

April 12, 2011
Written by: , Filed in: Diagnostic Imaging, Practice Management
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St. John’s Medical Center, a 108-bed facility in Jackson, Wyoming, that provides both acute and long-term care, is wrestling with whether to start its own MRI center.

The reason: the trustees fear that the hospital’s current joint MRI venture with a group of doctors and other investors may put the hospital—and them personally—in violation of federal law.

The hospital owns 38 percent of  Teton MRI—which makes a lot of money. Profits in 2008 totaled $1.5 million. In the past two years, according to the Jackson Hole Daily newspaper, the hospital has received about $600,000 in dividends from Teton MRI, plus about $26,000 annually in rent for the space Teton MRI occupies at the hospital and $400,000 annually in management fees.

Some members of the local community have complained that the profits are excessive. But that’s not why the trustees are considering whether the hospital should leave Teton MRI and spend $1.5 million or more, plus $125,000 every year in maintenance costs, on its own MRI machine.

Instead, trustees fear that the hospital may be violating two federal laws: an anti-kickback measure and the Stark Law. The former makes it a felony to solicit or receive payments in return for referrals that are eligible to be reimbursed by federal or state health-care programs. The latter prohibits physicians from referring Medicare or Medicaid patients to an entity with which the physicians have a financial relationship.

Both laws provide for exemptions, but, as with so many things involving health-care laws and regulations, lawyers disagree on whether the exemptions apply to St. John’s.

After weeks of discussions, the trustees are still sorting through conflicting legal opinions. If a violation of either law is found, the hospital could lose its nonprofit status as well as Medicare and Medicaid reimbursements. And hospital officials—perhaps including the trustees—could be fined or jailed.

St. John’s isn’t the only entity facing such issues. Some hospital or joint radiology venture may end up having to be a test case to allow the courts to sort things out. Understandably, there’s not a lot of jostling to be the first to volunteer.

Related seminar: Musculoskeletal MRI


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