What is the Stark Law?
By Lora Mays, Product Marketing Manager
You have likely heard about the Stark Law, especially since it just graced healthcare news last month with proposed changes set forth by the CMS. No matter your role within a healthcare organization, Stark Law can result in some implications for you.
For healthcare landlords, Stark Law poses some specific rules and regulations that can drastically change your lease terms and how you manage space within the organization.
What is the Stark Law?
The Stark Law includes three separate provisions in order to limit physician referrals and related practices.
The three provisions that comprise the Stark Law primarily address physician self-referral, which occurs when a physician refers a patient to a medical facility where the physician has a financial interest in some way, whether it be an investment or compensation arrangement. This financial interest can refer to cash, as well as something that’s listed as something of value – such as leased space – that’s offered to financially benefit the physician.
Examples of this may include allowing a physician to use a closet at a medical clinic that isn’t outlined in his or her lease. While he or she only uses it to store medical equipment outside of office hours, because it’s not included in the lease, it can be seen as a financial benefit to the physician.
Another example would be allowing a physician to rent medical space for a price lower than fair market value, which is in direct violation of the Stark Law.
There are a number of circumstances that can violate the Stark Law. A clear understanding of what the Stark Law entails can ensure that healthcare landlords remain in compliance.
How does it impact healthcare landlords?
The Stark Law outlines a number of regulations specifically addressing the use of space in hospital and healthcare system facilities. This can be as simple as requiring healthcare landlords to have all lease agreements in writing and that they must last at least one year, or as complex as how lease terminations are handled in the event of death or disability.
Some specific Stark Law mandates specifically related to leasing include:
- Written agreement specifying the specific premises that it covers and signed by both parties
- Term of at least one year
- Space determined reasonable necessary for legitimate business purpose and may include proportional allocation of common area expenses
- Rent set in advance based on fair-market value
- Rent does not vary based on the volume or value of referrals
- Even without referrals, the agreement is commercially reasonable
What can be done to prevent Stark Law fines?
To prevent Stark Law fines, healthcare landlords need strict adherence to requirements set forth in the regulation, in addition to other regulations they may be subject to. In order to meet all the requirements, leveraging a healthcare lease administration solution can streamline the lease management process.
As a result, you can access all data related to your leases in one central location, ensuring that you have the data in front of you to stay current with rent and provide support in future lease negotiations.
Learn more about how you can manage these challenges in our on-demand webinar, “Top Challenges for Healthcare Landlords."