Balancing FASB Lease Standards and Stark Law Requirements for Medical Office Buildings

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Balancing FASB Lease Standards and Stark Law Requirements for Medical Office Buildings

For lease and property managers of medical office buildings, managing your leases goes beyond collecting rent and ensuring that you have a comprehensive view of your portfolio. Compliance requirements and regulations, such as FASB and Stark Law, present unique challenges that must be addressed so that the organization doesn’t face hefty fines or penalties.

What is FASB?

The Financial Accounting Standards Board was established in 1973 to “establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernmental entities that provides decision-useful information to investors and other users of financial reports.” 


There are a number of standards that have been established that must be adhered to by nongovernmental companies and organizations. In late 2015, FASB announced that they are proceeding with a new accounting standard that requires these organizations to include lease obligations on their balance sheets.

The new standards are expected to be published in early 2016. As a result, some companies will have to change the way that they manage their leases. Investing in a lease administration solution can simplify the process to adhere to key requirements set forth by FASB.

Key resources about FASB:

What is Stark Law?

Stark Law covers three separate provisions that governs physical self-referral for Medicare and Medicaid patients. A component of this includes the regulation of how medical office space is leased out to doctors.

As part of Stark Law, there are specific requirements that must be met in order for the lease to adhere to Stark Law. This includes:

  • Written agreement of at least one year
  • Space determined reasonably necessary for legitimate business purpose and includes proportional allocation of common area expenses
  • Rent established in advance and based on fair market value
  • Commercially reasonable agreement

Hospitals and healthcare organizations who have not been in compliance with Stark Law have faced multi-million dollar fines. To ensure you are in compliance, you can leverage a lease administration solution designed to meet the unique challenges that Stark Law presents hospitals and healthcare organizations.

Key resources about Stark Law:

Get help from the experts to transition smoothly to the new lease accounting standards.

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