On July 14, 2022, the United States Department of Justice (DOJ) announced that OPKO Health, Inc. (“OPKO”) and its subsidiary, BioReference Health LLC (“BioReference”), agreed to pay $9.85 million to resolve claims under the Federal False Claims Act (the “FCA”) that BioReference paid illegal kickbacks to physicians to induce patient referrals from those physicians. The prohibited remuneration took the form of above-market lease payments paid by BioReference to physicians and physician groups for the rental of office space, in violation of the Federal Anti-Kickback Statute (the “AKS”) and the Federal Physician Self-Referral Law (the “Stark Law”).
The AKS prohibits offering or paying, directly or indirectly, any remuneration (money or anything of value) with the intent to induce a health care provider to refer items or services covered by Federal health care programs (e.g., Medicare, Medicaid, and Tricare). Not surprisingly, this prohibition extends to the payment of above-market lease payments in exchange for referrals. Under the Stark Law, a physician may not refer patients to an entity for certain designated health services if there is a financial relationship between the referring physician (or his or her immediate family member[s]) and the entity.
Although they differ, both the AKS and the Stark Law include a Space Rental Safe Harbor, which allow for physicians and medical groups to lease or rent office space to or from other medical groups, physicians, and facilities to which they refer patients. To fall within the safe harbor, the following elements must be present:
- There is a written rental or lease agreement between the parties;
- The agreement describes the specific premises rented or leased;
- The term of the agreement is at least one year in duration;
- The space rented or leased does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease or rental arrangement;
- Rental charges over the term are sent in advance, consistent with fair market value, and do not take into account the volume or value of any referrals or other business generated between the parties.
If you are a physician or healthcare provider who is renting space to or from healthcare facilities or other practitioners, it is important that you understand compliance risks associated with such arrangements, as the government continues to scrutinize these relationships. In addition to criminal prosecutions, physician lease arrangements have been the subject of civil actions under the False Claims Act and qui tam relators. You can limit these risks by retaining qualified counsel to confirm that any such agreements comply with applicable federal and state laws and regulations. Frier Levitt has developed a proprietary Office of Inspector General (OIG)-compliant Fair Market Value evaluation tool to limit our clients’ exposure under the AKS and the Stark Law. Contact us to speak to an attorney.
