In my experience healthcare providers often seek new ways to offset overhead expenses, reduce costs and add additional revenue to their practices. This not surprising especially, in a climate of declining reimbursement and increasing costs. In almost every type of small business the gates are wide open to opportunity in this realm and the only limitation is your own creativity.
One common, but unfortunately flawed, idea for healthcare practices is to sublet a portion of their existing office space to another provider to help offset costs. Healthcare providers see that by subletting a portion of their office that is not currently being used or could be used differently they can bring many benefits to their practices. These benefits include defraying existing overhead costs such as rent, staff, marketing and other costs, as well as convenience for their existing patients and increasing exposure to potential new patients. I fam requently approached by clients with this exact scenario in mind.
However, healthcare providers and practices are not like other businesses. There are a vast array of federal and state laws and regulations that severely limit what a healthcare provider can do. In the case of subletting office space to another provider, many scenarios that would be permissible for other types of businesses are simply prohibited for the healthcare provider.
In my experience, the most common scenario my clients and perspective clients approach me with is the straight percentage of collections agreement. Unfortunately, such an agreement is generally prohibited for healthcare providers with possible serious legal consequences for those who engage in this conduct.
Essentially, the scenario is to bring a provider, either from the same or a different discipline, into the the existing practice. The existing practice allows the new provider to use all or a portion of the office space during regular office hours or sometimes during hours when the existing provider is not using the space. Sometimes the existing provider will offer administrative services, billing and collection services, marketing and other services to the new provider. In order to avoid complicated administrative issues the parties agree that the new provider will simply pay the existing provider a percentage of collections for those patients seen or cared for at the office.
Unfortunately, the Federal Anti-Kick statute prohibits such an arrangement in most cases. The basis of the prohibition is that such an arrangement creates an impermissible incentive for the existing provider to refer patients to the new provider. The more patients the existing provider refers to the new provider, the more money they will receive back in their percentage of collections. Thus a “kick-back” is created for each patient referred. The Federal Anti-Kickback statute can have very serious consequences to a provider most notably sentences involving Large Fines and Prison Time.
Fortunately, there are many ways to structure office sharing or subletting arrangements that meet the requirements of the of the Federal Anti-Kickback law. In light of the potentially very serious consequences for failing to comply with the law, it is important that a provider contemplating such an arrangement seek experienced and knowledgeable legal counsel to review details of the arrangement and help craft an arrangement that complies with the Federal Anti-Kickback law.
If you would like more information, have specific questions, or would like assistance with your current or proposed office sharing arrangement, please view my website at Law Office of Philip M. Bluestein or contact me directly at Contact Philip M. Bluestein.
The information provided above is provided as a general overview and does not constitute legal advice. It is not intended to be relied upon as specific legal advice for any individual. No attorney-client relationship is formed by the posting of the information in this blog and anyone seeking a legal opinion or advice should have their specific issues reviewed by an attorney.
