To effectively build and expand your healthcare business you have to find a location that suits your needs. That might sound easy enough, but the process can be complicated by numerous issues, including scarcity, rental rates and ADA compliance. But as a healthcare professional you also have to ensure that you comply with other federal rules and regulations so that you don’t give the impression that you’re facilitating what could be perceived as some sort of kickback scheme.
For example, if you’re not careful in how you rent space from a healthcare system, such as leasing space for your physician’s practice in a building owned by a hospital system, then it could be perceived that you’re receiving a benefit in the form a lower lease rate in exchange for referring patients to that health system. This is problematic because those patients may rely on Medicaid, meaning that the federal government ends up essentially subsidizing the lower rental rate. You don’t want to fall into these situations that could result in further legal entanglements based on alleged kickbacks, so let’s look at what you can do to ensure you abide by federal regulations while protecting yourself as fully as possible.
Achieving federal compliance when renting medical space
You can still rent space from a hospital system, but you have to do so carefully. This means understanding the federal requirements and how to effectively navigate them. Here’s what you should be prepared to do in these circumstances:
- Put the lease agreement in writing.
- Ensure that all parties have signed the agreement.
- Include a detailed description of the premises to be leased.
- Make sure that the leased premises is reasonable in its size and location.
- Include a term that specifies that the property is only to be used by the lessee.
- Confirm that the rental price was set in advance.
- Ensure that the rental price is fair market value.
- Avoid any language that ties rental rates and charges to expected referrals.
- Be able to specify how the lease is commercially reasonable even if it didn’t involve healthcare entities.
On their face, these steps may seem simple enough. But the fact is that there can be challenges here. For example, what would be considered fair market value under the circumstances?
The fair market value determination
Defining fair market value can be tough. Essentially, fair market value is based on the price paid in bona fide transactions of similar type in the area. So, one way to find fair market value is to conduct market research, looking for similar properties that have rented in the recent past for similar purposes. This may be challenging to do depending on your circumstances, though, which is why it might be helpful to secure expert assistance with developing your lease agreement. Otherwise, if you try to determine fair market value on your own, then you could wind up settling on a rental rate that results in the federal government questioning the lease arrangement.
Don’t let non-compliance with federal rules and regulations disrupt your business
There are several rules and regulations to navigate when operating in the medical industry. You have to competently address each of them if you don’t want to land in hot water with the government. We know that dealing with the intricacies of your business can be challenging, but you can work with a legal professional to ensure that your interests are protected and that your business can thrive.