This is the second in a series of four blog posts discussing the top concerns for healthcare landlords. In case you missed it, check out our first blog post, “Top Concerns for Healthcare Landlords: Timeshare Leasing.”
When it comes to managing leases for hospitals and healthcare systems, keeping track of payment dates and amounts serves as one piece of the puzzle.
From the Affordable Care Act (ACA), Stark Law and Anti-Kickback Statute, there are a number of different laws and regulations that hospitals and healthcare systems must adhere to when managing their leases in order to remain in compliance.
Affordable care act.
Changing legislation of the Affordable Care Act (ACA) requires greater efficiencies in the healthcare sector, which are driving hospitals and healthcare systems to acquire physician practices to meet the increased demand of additional insured patients.
As streamlining of services become more of a reality, relocating physician tenants in non-traditional ways will continue to challenge healthcare facility and real estate teams. Non-traditional ideas, like grouping different specialists together for maximum efficiency, drives overall efficiency. But in the day-to-day office reality, they create challenges as different specialists have varying office demands.
When it comes to hospital campuses, which are already constrained for space, additional physician practices on campus can create problems that require creative ideas to fix. Different systems have addressed challenges in varied ways, such as re-purposing under-utilized space that already exists and moving into new areas that were not previously being served by the hospital or healthcare system.
The Anti-Kickback Statute protects federal health care programs and patients by making it a crime to offer or receive payment in exchange for referrals for services/goods to entities in which the physician has a financial relationship. This can include the rental amount, which must be fair market value and fixed in advanced, as well as rental space, which must be the appropriate size and available to the physician for the amount of time necessary to carry out the business purpose for the space.
Violations of the Anti-Kickback Statute can result in up to five years in prison and fines up to $25,000, as well as administrative civil money penalties as much as $50,000.
Staying in compliance with the Stark Law can be both complex and confusing. The Stark Law governs physician self-referral for Medicare and Medicaid patients. In general, it prohibits referring a patient to a physician or medical facility in which there is a financial interest. In order to avoid pricy penalties, health providers must self-report in several operative areas, including its office space and equipment leases with physicians.
Some key areas of compliance related specifically to leases include:
- Establishing written agreements between providers and referral sources.
- Prohibiting the use of “per-click” space and equipment leasing arrangements.
- Specifying the precise premise that is included in the lease terms.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) doesn’t impact healthcare landlords to the extent of the regulations noted previously, but it still needs to be addressed.
HIPAA was designed to safeguard an individual’s health information, of which Congress has determined a basic civil right. As tenants typically do not disclose health information to landlords in order for the landlord to perform essential functions within the building, they typically are not identified as an entity under HIPAA’s regulation of third parties.
Because of this, healthcare landlords typically do not have any obligations under HIPAA. However, it’s important to note that the federal government notes that health information, "should be protected with reasonable administrative, technical and physical safeguards to ensure its confidentiality, integrity and availability and to prevent unauthorized or inappropriate access, use or disclosure.”
Healthcare landlords may want to consider noting these safeguards within the lease, such as:
- Creating specific areas that cannot be accessed by vendors that enter the facility.
- Developing a procedure that ensures health records are locked before vendors enter the facility (such as janitorial services after hours).
- Establishing vendor rules, such as the need to be supervised while on the leased premises.