When you refer patients to your tenant

March 3, 2006

To cut down on rental costs, I sublease my office space to a company that performs echo, ultrasound, and Doppler vascular studies. I charge them by the hour, with a $200 per month minimum. I refer my patients to this company, and they find it very convenient to have the tests done at my office. Does this arrangement break any rules?

Q: To cut down on rental costs, I sublease my office space to a company that performs echo, ultrasound, and Doppler vascular studies. I charge them by the hour, with a $200 per month minimum. I refer my patients to this company, and they find it very convenient to have the tests done at my office. Does this arrangement break any rules?

A:The $200 per month minimum could be a problem. The rental rate should reflect the fair market value of the portion of the space they sublease and the length of time they use it. If that fair market amount is less than $200 per month, your monthly minimum might look like a referral inducement that violates Stark and federal and state antikickback laws. To determine how much you should charge, check the guidelines in the government bulletin, "Rental of space in physician offices by persons or entities to which physicians refer" (oig.hhs.gov/fraud/docs/alertsandbulletins/office%20space.htm).

You should also make sure the terms of your deal are set forth in a written agreement, which should be for at least one year. And your attorney needs to check for any state laws that may apply in this situation, such as a requirement to disclose the financial relationship to your patients.