March 12, 2010
Failure to Collect Rent and Enforce Physician Lease Obligations Can be Costly
A recent settlement between the U.S. Department of Justice and Rush University Medical Center ("Medical Center") underscores the need to ensure that hospitals enforce their rights under space lease arrangements with physicians. The parties to such lease arrangements must abide by the lease terms and hospitals should undertake meaningful collection efforts should the physician fail to stay current on rent.
Summary of Settlement
Following a qui tam action initially filed jointly by a former employee and a physician, the DOJ alleged that the Medical Center submitted false claims to Medicare and Medicaid for inpatient services. The services at issue were referred and ordered by certain physicians who had rental or other arrangements with the Medical Center that did not comply the Federal Stark Law. Specifically, the DOJ alleged that these rental arrangements did not meet a Stark Law exception due to "compensation in the form of ... certain concessions concerning the collection of rent and related charges for office space"; the "failure to have written, fully- executed leases..."; and the "failure to collect rent in a timely and consistent manner." In effect, the DOJ alleged that the Medical Center was not enforcing the physicians' lease obligations. The Medical Center denied the allegations, but agreed to resolve the matter by paying $1,547,000 plus interest. The qui tam relators' received $270,760 as their share of the settlement proceeds.
Under the Federal Stark Law, if a hospital has a financial relationship with a physician, the physician may not refer to the hospital for the provision of "designated health services" (including inpatient and outpatient hospital services), and the hospital may not bill for such services, unless an exception is fully met. A "financial relationship" under Stark is construed very broadly, which means all remuneration from a hospital to a physician must be considered, including compensation in the "form of concessions concerning the collection of rent and related charges." The Stark regulations at 42 C.F.R. 411.357 set forth various exceptions, including the Rental of Office Space exception, with each exception having specific and detailed requirements in order to be fully met. Hospitals should take inventory of their lease and other financial arrangements with physicians to confirm they are meeting the Stark Law's requirements. Further, hospitals that have lease arrangements with physicians should enforce the obligations agreed to under these arrangements, including:
The Department of Justice press release can be found here:
http://www.justice.gov/opa/pr/2010/March/10-civ-240.html
Should you have any questions, please contact Brian Betner at bbetner@hallrender.com or 317-977-1466, Jim Hogan at jhogan@hallrender.com or 317-977-1439, or your regular Hall Render attorney at 317-633-4884. |
