February 2000

Health Care E-lert - OIG Special Fraud Alert on Physician Office Space Rental Arrangements, 02/23/00

2 min

The U.S. Department of Health and Human Services Office of Inspector General (OIG) issued a "Special Fraud Alert" today expressing concern that certain arrangements between physician landlords and health care supplier or provider tenants may violate the federal anti-kickback statute. A Special Fraud Alert is a vehicle through which the OIG identifies practices in the health care industry that it deems particularly vulnerable to abuse.

In this case, the OIG has targeted the rental of space in physicians' office by persons or entities that provide health care items or services to patients who are directly or indirectly referred by the physician landlord. The OIG is concerned that such "rental" arrangements may actually be disguised kickbacks to the referring physician to induce patient referrals. Specifically, the Special Fraud Alert cited rental arrangements between physician landlords and the following tenants as examples of "suspect" arrangements:

  • Comprehensive outpatient rehabilitation facilities (CORFS) that provide physical and occupational therapy and speech-language pathology services in physicians' and other practitioners' offices;
  • Mobile diagnostic equipment suppliers that perform diagnostic related tests in physicians' offices; and
  • Suppliers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) that set up "consignment closets" for their supplies in physicians' offices.
  • The OIG identified three aspects of rental arrangements for space in physician offices that should be examined to determine whether an arrangement may violate the anti-kickback statute. The "threshold inquiry" is whether payment for rent is appropriate at all. For instance, rent payment may not be appropriate when space has traditionally been provided free of charge or for a nominal charge for the benefit of the physicians' patients. If rent payments are appropriate, rental amounts should be at fair market value, should be fixed in advance, and must not take into account, directly or indirectly, the volume or value of referrals or other business generated between the parties. Finally, suppliers and providers should only rent space of an amount and for a duration that is commercially reasonable for the supplier's or provider's legitimate business purposes. Rent for exclusive office space, interior office common space, and building common space should be prorated based upon the amount of space used and the duration of use.

    The Special Fraud Alert can be accessed in its entirety via the OIG's website at www.oig.dhhs.gov

    For further information, please contact: Peter Parvis at 410.244.7644 or by e-mail.