American College of Physicians: Internal Medicine — Doctors for Adults ®

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OIG says physician-landlords should review rental agreements

From the April 2000 ACP-ASIM Observer, copyright 2000 by the American College of Physicians-American Society of Internal Medicine.

Physicians who rent office space to health care suppliers and other Medicare providers must make sure that the rental amounts reflect fair-market value for the space, according to a Feb. 23 special fraud alert issued by the HHS Office of Inspector General (OIG).

The OIG is concerned that physician-landlords may be receiving excessive rental payments from suppliers in exchange for referrals from those physicians. According to the OIG, such a practice would violate the federal antikickback laws. Violations of the law are punishable by up to five years in prison, criminal fines up to $25,000, administrative civil money penalties up to $50,000, and exclusion from participation in federal health care programs.

The OIG is examining three areas in relation to rental agreements between physicians and other providers:

Appropriateness of rental agreements. Payments of rent for space that traditionally has been provided for free or for a nominal charge for the benefit of the physicians' patients—such as consignment closets for durable-medical equipment—may represent a type of kickback, according to the OIG.

Rental amounts. Rental amounts should reflect fair-market value, be fixed in advance and not take into account either directly or indirectly the volume or value of referrals or other business generated between the parties. Such amounts also should not exceed the amount paid for comparable property, according to the OIG.

Time and space considerations. Suppliers should rent only premises that are reasonable and necessary for a commercially reasonable business purpose.

For more information about physician office space rental arrangements, see the OIG Web site at www.hhs.gov/oig/frdalrt/index.htm.

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