Managing leases in healthcare becomes a little bit more complicated due to the Stark Law. In today’s blog post, we’ll highlight 10 key facts to know about the Stark Law.
1. The Stark Law primarily addresses 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. It can refer to cash or something like leased space that’s offered to financially benefit the physician.
2. Any lease agreement needs to be in writing and signed by all parties.
3. Lease agreements must describe all spaces and should include the main leased space, as well as any other areas that may be used. In one recent settlement, a hospital landlord allowed a physician tenant to use a closet with no rent charge for nearly 30 years.
4. The lease must include charges for common areas and associated maintenance. This should be allocated proportionally to all tenants who are leasing within the building.
5. In addition to space, the lease should include services and equipment. These elements should be charged at fair market value, as should the space.
6. Clear indication of termination rights needs to be included within the lease. If the tenant, for instance, goes out of business, how will the lease terms be met?
7. Timeshare leasing must adhere to Phase IV of the Stark Law, where the CMS no longer allowed “on-demand” leasing arrangement. A visiting physician, for instance, must have a fixed schedule of blocked times that are no less than four hours.
8. The self-referral disclosure protocol (SRDP) allows suppliers and service providers to self-disclose any potential or actual violations of the Stark Law. As a result, the offending organization can resolve the violation and avoid the risk of prosecution to the fullest extent of the law.
9. The Stark Law can result in hefty fines and even prison time. The SRDP helps healthcare landlords minimize the penalties. For example, the first hospital that followed the SRDP was charged $579,000 to resolve its violations, instead of the estimated $14 million that would have been charged under full prosecution.
10. The Stark Law is currently under review. In July, the CMS issued a notice of proposed changes to the Stark Law, as well as to solicit comments about whether Stark Law serves as a barrier to health care reform. Comments will be accepted through September 8.
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