Thursday, March 10, 2011

Stark and Anti-Kickback Laws: a Real Estate perspective

Stark and Anti-Kickback Laws violations have MAJOR impacts when they occur.  It's important that anyone dealing in medical leasing understand them. 

How major are the impacts?  Becker's Hospital Review recently released an article describing real-world cases from 2010.  The 8 of these cases that drew penalties drew hefty penalties... they summed to over $205 Million. That's right - the penalties averaged over $25 Million each. More on these penalties later.

The Laws
So what is the Stark Law?  It's a federal law stating that a physician cannot refer patients to any entity that pays that physician in any form or fashion.  If the physician sees a benefit, they can't refer.

And what is the Anti-Kickback Law?  It's an adjunct to the Stark Law that makes it a criminal act (personal AND corporate) for a practitioner to allow their personal interests to influence the type of medical treatment a patient receives under a Medicare claim.

Real Estate
What do these laws have to do with real estate?  Many hospitals own real estate, and doctors frequently refer patients to hospitals for services.  It creates a perfect environment for favors to pass back and forth, so a number of special rules have been set in place for such leases.  The real estate rules touch a list of lease aspects that MUST be understood, monitored, and even proactively managed.  A few of the rule topics include:
  • fair market rent value
  • term duration
  • size leased versus industry norms
  • holdover restrictions
  • what entities use the space (and don't)
Violate the rules - knowingly or not - and you're subject to the penalties described below.  I've spoken with attorneys who tell me that even self-reported violators have been hit with penalties.

Penalties
The penalties themselves are not negligible.  For a felony conviction, an individual can be fined as much as $250,000 and a corporation can be fined as much as $500,000... not to mention the potential of up to 5 years in jail.  Commit a misdemeanor, and the fine maxes drop to $100,000 and $200,000 respectively.  BUT... all of these penalties are per incident. And there's one other consideration:  When an investigation occurs, it's going to be very intrusive to both the hospital and practitioner.  Records will be seized.  Systems will be locked down.

In summary, it's critical that these laws be understood and heeded in medical leases.   Ask your commercial real estate agent if they're familiar with the Stark and Anti-Kickback Laws.  If you're not confident in their answer, find a specialist.  If you don't know of one in your area, call our team.  We're national and we'll help you find one.  The stakes are just too high to ignore.

Here's to your success,
John
404.547.2009

Special note: I do not practice law would make a very poor substitute for an attorney.  I'm happy to share my experience and the knowledge that comes through my practice of real estate.  But if you need specific legal advice, you're going to want to rely up on specialized legal counsel.  Feel free to call if you lack such counsel... my team and I are happy to help you find the right resource.

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