Legal issues

Understanding Federal Healthcare Laws

Many healthcare providers are facing increasing competition from other providers in their community to attract the best insured patients, while reimbursement rates from third-party payers such as Medicare, Medicaid, and private insurance companies, for their services are shrinking. This requires creative new service lines and joint ventures between hospitals and physician practice groups to attract the best patients. As a result, additional space is generally required to make the projects work.

Commercial real estate professionals who work with medical office development must be aware of the federal healthcare fraud and abuse laws, primarily the Anti-Kickback and Stark laws. These laws are designed to ensure that federal healthcare dollars are spent wisely. The federal government, which spends trillions of dollars on healthcare programs each year, estimates that fraud accounts for up to 10 percent of those expenditures. As a result, federal agencies have made prosecuting healthcare fraud a priority.

A common goal of both laws is to eliminate contractual relationships between healthcare providers that are used to perpetrate fraud. In some cases the federal government has found that healthcare providers enter into contracts that provide financial incentives to one party for referring patients to the other. The federal government wants patient referrals from one healthcare provider to another to be based on the quality of their services and not based on the fact that the hospital or healthcare provider will profit from the referral.

So, what's the consequence of non-compliance with fraud and abuse laws such as the Anti-Kickback and Stark laws? Failure to comply can result in civil penalties up to $100,000, imprisonment and exclusion from federal healthcare programs Medicare and Medicaid. Many hospitals and healthcare would not be able to operate without being able to treat Medicare and Medicaid patients.