Other States May Follow Illinois in Per-use Leasing Crackdown

Misleading lease agreements between physicians and imaging centers are hiding illegal kickbacks, according to Lisa Madigan, the Illinois attorney general. Industry analysts, as a result, are advising radiology providers and referring physicians to examine their leasing arrangements carefully to avoid problems. In some cases, radiologists may be unaware that they are engaging in a type of per-use leasing that violates federal antikickback statutes.

John Donaldson, an Illinois imaging-center owner, filed suit in February 2006 against 11 companies operating 19 imaging centers in the Chicago area; after sealing the suit and conducting its own investigation into the merits of the allegations, the Illinois attorney general's office intervened in the matter on January 17, 2007. Under Illinois laws that resemble federal whistleblower statutes, Donaldson claimed that the centers were using false leasing practices to conceal kickbacks to referring physicians.

The suit holds that physicians referred MRI cases to the imaging centers, which performed the studies using only their own staff, but billed the insurers under the physicians' names. Although the physicians had no actual involvement in conducting the studies, they received reimbursements under the terms of contracts that made the physicians appear to be leasing MRI facilities from the imaging centers in order to perform the studies themselves. In reality, the suit claims, the physicians were merely being compensated for their referrals.

Under the Consumer Fraud and Deceptive Business Practices Act and the Insurance Claims Fraud Prevention Act, private citizens can initiate legal proceedings against companies doing business in Illinois. This prompts state investigation of the matter; in this instance, the attorney general has now taken over the suit, alleging that the imaging centers actively recruited some referring physicians for the fraudulent leases that the suit describes. The referrals involved are said to number in the thousands.

Filed in Cook Country Circuit Court, the case names defendants including MIDI LLC (owner of Open Advanced MRI), Golf Diagnostic Imaging, Northwest Corporate Imaging, Open Neuro MRI, and Rand Imaging. The state will seek restitution and damages for the insurance reimbursements affected by the referrals, and will also try to obtain an injunction to halt such practices. The amount of money involved in the alleged wrongdoing has not yet been calculated, the attorney general's office says. Typically, the referring physician might receive half of the approximately $800 charged by the imaging center per case.

Because hidden kickbacks could be driving up imaging volumes and, as a result, overall health-care costs, additional states are likely to join Illinois in active pursuit of offenders of this kind. Florida and Louisiana began investigations of the sham leasing practice last year. Some observers have called the per-use leasing arrangements common between radiologists and referring physicians.