If you become your hospital's landlord

May 5, 2006

I'm thinking of purchasing the office building where I practice in a hospital-owned primary care clinic. If I did that, I'd become the hospital's landlord. Would that arrangement violate the Stark law, because I frequently refer patients to the hospital?

Q: I'm thinking of purchasing the office building where I practice in a hospital-owned primary care clinic. If I did that, I'd become the hospital's landlord. Would that arrangement violate the Stark law, because I frequently refer patients to the hospital?

A: No, you wouldn't violate the Stark law, which prohibits doctors from referring Medicare and Medicaid patients for certain services to entities where they (or members of their immediate families) have a financial interest. Your ownership of the building the hospital's clinic occupies isn't considered a financial interest in the hospital itself.

However, there might be an antikickback issue here. Antikickback laws say you can't refer Medicare and Medicaid patients in exchange for remuneration of any kind. That potentially could include rental payments to you as the landlord. Fortunately, there's a "safe harbor" that will protect you from antikickback rules: Make sure you have a written lease for the term of at least one year, and charge fair market rent. Check with your healthcare attorney to make sure the deal is structured properly.