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D.C. hospital to keep revenue from use of CyberKnife

MedStar-Georgetown Medical Center Inc. has won again in its effort to keep revenue generated from its use of a high-tech device it purchased to treat cancer patients without surgery.

The Court of Special Appeals has held that Georgetown need not share with Radiosurgery Management Associates LLC the money the D.C. hospital receives for treatments using the CyberKnife, which fights tumors with radiation rather than surgery. RMA argued it was entitled to a share of the revenue because it provided financial assistance to Georgetown when the hospital purchased its first $3 million CyberKnife in 2001.

In return for helping Georgetown with that initial purchase, RMA did receive a share of the hospital’s revenue from the use of that first CyberKnife.

But in 2007, Georgetown bought a second CyberKnife on its own and has not shared the revenue from treatments — expected to run into the millions of dollars — with RMA, its earlier benefactor.

RMA sued, saying Georgetown’s refusal to share violated their joint-venture agreement. Georgetown countered that their relationship was not a joint venture but a lease arrangement that was limited to procedures performed with the first CyberKnife.

Montgomery County Circuit Judge Michael D. Mason agreed with Georgetown last year. He said the hospital had no legal obligation to share with RMA revenue generated from using the second CyberKnife, which Georgetown had bought on its own.

Maryland’s intermediate appellate court affirmed Mason’s decision last week.

Had Georgetown and RMA entered into a joint venture, their risk of loss would have been “shared,” the Court of Special Appeals held. But, under their initial “Operating Agreement,” potential losses were allocated separately to each party, the appellate court added.

“We’re obviously disappointed with the Court of Special Appeals’ decision,” said RMA’s attorney, Jeffrey M. Schwaber. “We are considering our options.”

Schwaber is with Stein, Sperling, Bennett, De Jong, Driscoll & Greenfeig PC in Rockville.

Georgetown attorney Stanley J. Reed said the appellate court correctly interpreted the companies’ business arrangement.

“The revenue was distributed fairly and pursuant to the agreement of the parties,” said Reed, of Lerch, Early & Brewer Chtd. in Bethesda. Steven P. Hollman, of Hogan Lovells in Washington, D.C., served as Reed’s co-counsel and argued the case before the Court of Special Appeals.

The Court of Special Appeals’ unreported opinion is available as RecordFax #10-1110-05 (35 pages).