8 Legal Considerations for Establishing or Expanding a Hospital Radiation Oncology Program

Brandon Schirg, JD, and Brent Hill, JD, partners at Waller Lansden in Nashville, Tenn., specializing in healthcare law, give eight legal considerations for establishing or expanding a hospital radiation oncology center or department.

1. Structuring. Mr. Schirg says it's important to understand, first and foremost, what the hospital's goals and needs are with respect to patient care and outcomes, reimbursement and physician involvement. These elements determine the type of structure a radiation oncology center or department could take: a freestanding center or a hospital-based facility. All rules within the Centers for Medicare and Medicaid Services, such as the Medicare program's reimbursement as well as provider-based and physician self-referral regulations, need to be thoroughly combed, he adds. The center or department must satisfy all applicable legal requirements.

2. Compensation/reimbursement.
All radiation oncology centers and hospital departments must comply with the applicable federal and state fraud and abuse statutes.  As a result, any compensatory agreements between a physician and the hospital or center need to be at fair market value and should be vetted and reviewed legally. In many cases, a fair market value appraisal or analysis will need to be done to ensure that an oncology department or center is not paying above market rates for the services it is obtaining from physicians, Mr. Hill says. In terms of reimbursement, the hospital needs to understand the impact that the structure of the radiation oncology center will have on its reimbursement.  For example, some services are only reimbursed when they are provided in a hospital setting, and hospital-based radiation oncology centers are paid at higher rates than non-hospital based facilities for some procedures. Mr. Schirg says the government and other third-party payors realize hospitals typically treat sicker patients and have greater overhead costs, so there's usually a bump in their reimbursements.

3. Stark Law. Establishing or expanding a radiation oncology department or center requires full knowledge and awareness of the Stark Law. Under the Stark Law, radiation oncologists are generally the only type of physicians who are permitted to have ownership in a radiation oncology center. As a result, medical oncologists, neurosurgeons and general surgeons cannot participate as equity owners.  However, Mr. Schirg adds that while radiation oncologists are treated differently under the Stark Law, the hospital or center must still take every precaution to ensure that the radiation oncologists' ownership interests and referral practices are within the confines of the law. "Overall we're seeing a heightened sense of scrutiny," Mr. Hill says. "It doesn't mean you can't do it. It just means you have to be more on the up-and-up."

4. Certificate of Need. Depending on the state, a prospective radiation oncology center or department might require a certificate of need. Generally, the need for a CON is typically based on two items:

•    The establishment or initiation of the provision of radiation therapy services, or
•    The cost of the equipment and/or facility that will be needed to provide the services.

If equipment costs a lot or if the entity itself will cost more than expected, a prospective oncology department or center might need to obtain a CON, Mr. Schrig says, when it otherwise would not.

5. Utilization.
Before even setting up a radiation oncology department or center, the likely utilization must be known, Mr. Schrig says. The expected utilization or volume is needed to determine whether the facility will cover its operating costs and, most importantly, whether it will be able to develop the proficiency, experience and skill needed to provide quality services to its patients. If there are several other cancer centers in a city, an entity should analyze whether it could be financially viable and provide the desired quality of care before actually sinking money into a joint venture or freestanding radiation oncology center.

6. Physician/oncologist reputation. The volume of a cancer center or department directly correlates to the reputation of the physicians and radiation oncologists who treat the cancer patients, Mr. Hill says. With so much information available on the Internet, finding the right physicians will bolster the quality, reputation and sustainability of the facility. "Cancer patients are generally smart consumers," Mr. Hill says. "Cancer is a disease that is treated for a long period of time, and they are drawn to physicians that are leaders in the field."

7. Accreditation and licensure. Mr. Schirg says working with licensing and accreditation bodies about the expectations for the facility is essential. The licensure and accreditation requirements for freestanding radiation therapy centers and off-campus,  hospital-based radiation oncology departments is not always clear, so a hospital or facility may need to jump through some additional hoops in order to make its vision a reality, he says.

8. Requisite supervision.
Mr. Schirg says this is a commonly overlooked step, but all radiation oncology centers must ensure they meet the physician supervision requirements for the procedures they perform. This is typically a bigger issue for freestanding or off-campus, hospital-based radiation oncology centers. Mr. Hill adds that these locations generally must have a physician present during regular business hours, so the administration must figure out how to have some staff there.

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