Scenario: A private practice physician considers allowing a colleague of a different specialty, who is starting a micropractice, to use an unused office space for occasional use, without any financial exchange. They’re not considering exchanging referrals or money. It’s just a professional favor. The first physician has liability insurance and rents her office space. She wonders if they need a formal agreement — and what are the legal risks if something happens with the other physician’s patients?
In today’s evolving healthcare landscape, flexible practice models like Direct Primary Care (DPC) and part-time specialties are becoming increasingly common.These models often lead to scenarios where healthcare providers consider sharing office spaces to optimize resources and reduce overhead costs. However, even well-intentioned arrangements can have significant legal and compliance implications.
Understanding the Legal Landscape
1. Liability Concerns
Even in informal arrangements, the primary tenant (Licensor) can be held liable for incidents occurring within their leased space. For instance, if a patient of the visiting professional (Licensee) experiences an accident on the premises, the Licensor may be implicated in any resulting legal action.
Actionable Tip: Ensure that both parties maintain appropriate liability insurance. The visiting provider should add the primary tenant as an “additional insured” to their policy to provide an extra layer of protection.
2. Lease Agreement Restrictions
Most commercial leases contain clauses that restrict subleasing or sharing space without the landlord’s consent. Engaging in unauthorized space-sharing can lead to lease violations and potential eviction.
Actionable Tip: Review your lease agreement thoroughly. If space-sharing is anticipated, negotiate terms with the landlord to include provisions that allow for such arrangements.
3. Anti-Kickback Statute (AKS) and Stark Law
The AKS prohibits offering or receiving any remuneration to induce referrals for services covered by federal healthcare programs (such as Medicare or Medicaid). Similarly, the Stark Law restricts physician referrals where there is a financial relationship, unless specific exceptions apply. Even if no money changes hands, providing free office space can be considered “remuneration” under these laws, especially if there’s an expectation of patient referrals.
Actionable Tip: To mitigate risks:
- Avoid any referral arrangements between the parties
- Establish a written agreement detailing the terms of space usage
- Ensure that any compensation (if applicable) reflects fair market value (FMV)
Crafting a Comprehensive Office Use License Agreement
A well-structured Office Use License Agreement is crucial to delineate responsibilities and protect all parties involved. Key components should include:
1. Scope of Use
Define the specific areas of the office that the visiting provider can access, along with the permitted hours and day.
2. Term and Termination
Specify the duration of the agreement and the conditions under which either party can terminate the arrangement.
3. Compensation
Even if no rent is charged, it’s advisable to document this explicitly. If compensation is involved, ensure it aligns with FMV to avoid regulatory issues.
4. Insurance Requirements
Mandate that both parties maintain adequate professional and general liability insurance, with provisions to add each other as additional insured.
5. Compliance with Laws
Include clauses that require adherence to all applicable federal, state, and local laws, including HIPAA, AKS, and Stark Law.
6. Indemnification
Outline the responsibilities of each party to indemnify and hold harmless the other from any claims arising from their respective actions.
Ensuring Compliance with Anti-Kickback Statute and Stark Law
To align with regulatory requirements:
- Written Agreement: Formalize the arrangement in writing, detailing all terms and conditions.
- Fair Market Value: If compensation is involved, ensure it reflects FMV and is not tied to the volume or value of referrals.
- Duration: Set a term of at least one year for the agreement, as shorter terms can raise red flags under Stark Law.
- Exclusivity: Ensure that the shared space is used exclusively by the visiting clinician during their designated time.
Practical Considerations for Shared Office Arrangements
Beyond legal compliance, consider the following to ensure a smooth operational relationship:
1. Staffing and Administrative Support
Determine whether the visiting provider will use existing staff or bring their own. Clearly outline responsibilities and compensation for shared staff servies.
2. Equipment and Supplies
Specify which equipment and supplies are shared and who is responsible for their maintenance and replenishment.
3. Patient Confidentiality
Implement measures to protect patient information, such as separate filing systems and secure access to electronic health records.
4. Signage and Branding
Maintain distinct signage and branding for each provider to avoid patient confusion and potential liability isses.
✅ Key Takeaways
- Formalize Arrangements: Always use a written agreement to define the terms of shared office use.
- Ensure Compliance: Adhere to AKS and Stark Law requirements to avoid legal repercussions.
- Consult Professionals: Engage legal and real estate experts to navigate complex regulatory landscapes.
- Maintain Clear Boundaries: Distinguish between practices in all aspects, from staffing to brandng.
