If You Are Renting Space with Another Practice (Part 2)

This blog post follows our previous blog post about HIPAA compliance concerns with subleasing or sharing space with another practice. Subleasing or renting rooms carries other legal risks, besides HIPAA concerns, that this blog post covers. If you are starting a practice or med spa and plan to sublease or rent space from another practice, or would like to discuss this blog post, you may contact our healthcare law firm at (404) 685-1662 (Atlanta) or (706) 722-7886 (Augusta), or by email, info@littlehealthlaw.com. You may also learn more about our law firm by visiting www.littlehealthlaw.com.

Providers Who Accept Medicare and Medicaid Also Need to Comply with Federal Fraud and Abuse Requirements to Ensure the Compensation for the Shared Rental Space Reflects the Fair Market Value of the Rental Space.

Federal regulators have flagged rental arrangements where entities share space with physicians for over 25 years. In 2000, the Department of Health and Human Services’ Office of Inspector General (HHS-OIG) issued a Special Fraud Alert highlighting concerns that rental payments may appear to be disguised kickbacks to induce referrals. Federal fraud and abuse laws, such as the Anti-Kickback Statute, have regulatory exceptions and safe harbors for rental spaces, and rental arrangements must meet all the requirements of the exception or safe harbor to comply with the exception or safe harbor. Although federal fraud and abuse laws, such as the Anti-Kickback Statute, apply to practitioners who take Medicare and Medicaid, and providers who do not accept insurance carry less risk than providers who accept Medicare and Medicaid of violating these laws, providers should be aware of the regulatory requirements for rental arrangements to reduce their risk of non-compliance.

To satisfy the exception or safe harbor, the rental arrangement must meet the following requirements: (1) The lease arrangement is set out in writing, signed by the parties, and specifies the premises it covers; (2) the duration of the lease arrangement is at least one year; (3) the rented or leased space does not exceed what is reasonable and necessary for the legitimate business purposes of the lease arrangement and is used exclusively by the lessee; (4) the rental charges over the term of the lease arrangement are set in advance and consistent with fair market value; (5) the rental charges over the term of the lease arrangement do not take into account the volume or value of referrals; and (6) the lease arrangement would be commercially reasonable even if no referrals were made between the lessee and lessor.

As it relates to rental arrangements, “fair market value” means the value of the rental property without adjusting the value of the rental space for referrals. As it relates to shared spaces, “fair market value” is the based on the ratio of the amount of space used by the provider sharing the space to the total amount of space in that rented space. For example, if a physician is renting a room from another provider, the fair market value of the rental arrangement for renting the room should be based on the square footage of the room itself.

If you are starting a practice or med spa and plan to sublease or rent space from another practice or would like to discuss this blog post, you may contact our healthcare law firm at (404) 685-1662 (Atlanta) or (706) 722-7886 (Augusta), or by email, info@littlehealthlaw.com. You may also learn more about our law firm by visiting www.littlehealthlaw.com.

 

 

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