Managing Medical Office Buildings

could and leased out every square inch to any physician group willing to pay the most money per square foot. But nowadays the medical office is an integral part of delivering an ever-demanding continuum of care. Healthcare-real-estate facilities are now designed and built to closely tie to how their tenants support patient care. This is forcing care givers to work together to provide healthcare services and real-estate services to each other in order to better service their patients. This changing business model spawns many legal and regulatory risks and challenges that medical-office landlords and property managers must comply with when leasing property to health-care providers. Most real-estate professionals who are not familiar with these complex laws could find themselves subjected to extensive monetary and criminal penalties. This article will summarize two major laws – HIPAA and federal anti-referral statutes.

Hipaa

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), and its related rules and regulations, safeguards personalhealth information from disclosure to third parties. HIPAA violations can be very expensive – fines range from as little as $100 per violation to $50,000 per violation. To understand how HIPAA can impact medical-office landlords and tenants, we must first cover some terminology and background information:

* HIPAA protects what is commonly known as “protected health examine, relocate, or store any PHI in order to fulfill this service, then it will probably be deemed to be a Business Associate and thus responsible for HIPAA compliance.

In such a case, the landlord and tenant would need to enter into a Business Associate agreement. Consider this non-exhaustive list of scenarios that trigger a landlord’s obligation to comply with HIPAA: information” (or “PHI”, for short), that is stored or transmitted by a Covered Entity or its Business Associates. PHI is any information about a person’s health status, provision of health care, or payment for health care. For example, a patient’s name, social security number, address, phone number, email address, and other information that could reasonably identify a patient is PHI.

* If, upon surrender of the premises, the landlord is required to retrieve and remove PHI left on site by the tenant.

* An office-suite or other scenario where landlord provides administrative services such as file storing, a reception area, and any other medical-support services involving PHI.

* a landlord’s audit of tenant’s sales records, which permits landlord to examine PHI.

* A “Covered Entity” is any health-care plan, provider, or service that stores and transmits PHI in an electronic form and receives some type of government-backed reimbursement (Medicaid, Medicare, VA benefits, etc.).

* A “Business Associate” is any party that works with Covered Entities and receives PHI from the Covered Entity. This includes service providers and vendors working with Covered Entities. In order to receive PHI from a Covered Entity, the Business Associate and the Covered Entity need to enter into a business-associate agreement that requires the Business Associate to keep any PHI confidential and to otherwise comply with HIPAA and its various related rules.

There are endless other scenarios where PHI may come into play as between landlords and tenants. In such instances, the parties must ensure that they not only enter into a Business Associate agreement, but that both sides comply with HIPAA’s privacy and safeguard rules. In any such case, your lease should contain a copy of the parties’ Business Associate agreement attached as an exhibit.

Even if the parties are not Business Associates, the lease should acknowledge the existence and confidentiality of PHI, and the restricted access and safeguards in place that prohibit the non-covered entity’s access to the tenant’s PHI. Also make sure that any conflicting boiler-plate lease clauses are revised so as to not conflict with HIPAA, including any provision that permits unrestricted access by landlord to any area containing PHI.

Further, a prudent landlord may require all of its health-care tenants to store hardcopy PHI in a secure cabinet and identify any access points or storage areas where hardcopy PHI is stored. A landlord may also require the tenant to provide a secured/encrypted format for electronic PHI, and to identify a security officer (which is required per HIPAA) who is responsible to maintain PHI.

Stark & Anti-Kickback Laws:

Over the years, as the federal government keeps increasing funds paid out for medical care, it has also ratcheted up the penalties for those who abuse the system. There are several federal laws that come into play, but the most common are the Ethics In Patient Referrals Act (known as the “Stark Law”) and the Anti-Kickback Statute (“AKS”). These laws are intended to eliminate physicians and other players in the health-care system from taking advantage of available government funds. Additionally, several states have enacted similar “anti-referral” and “anti-kickback” laws. All of these laws are fairly complicated, but this article will summarize the salient provisions of the Stark Law and AKS so that those in the medicalreal-estate world can see their impact.

The Stark Law prohibits physicians from referring patients for certain designated health services paid for by federal funds to any entity with a “financial relationship.” Stark Law violations can result in penalties from $20,000 up to $100,000 per violation for each health-care service that is based on a prohibited referral. Additionally, the federal government may also impose a penalty equal to three times the improper payment. Some large health-care provides have made headlines over the years after getting tagged with multi-million dollar fines Stark Law and AKS related fines. The Stark Law is a strict liability statute, so “intent” is a non-factor. Accordingly, even if a physician makes an accidental or unknowing referral, there is still a potential for liability.

A “financial relationship”, as it relates to Stark Law, is very broad and includes any direct or indirect ownership or investment by the referring physician, as well as any financial interests held by the physician’s immediate family members. Stark Law only applies to referrals for designated health services (or “DHS”). There are dozens of applicable DHS, including clinical laboratory services, physical and occupational therapy services, radiology, radiation therapy services and supplies, durable medical equipment and supplies, prosthetics, orthotics and prosthetic devices and supplies, home health services and outpatient prescription drugs