Medical Office Leases

Medical office leases are often different than a standard office lease. The Federal Self-Referral Prohibition (42 U.S.C. Sec. 1395nn) or “Stark Law,” will apply to Designated Health Services (DHS) as well as any financial relationship between a physician and entity performing or billing for the DHS. A physician is not allowed to refer DHS, payable by Medicare or Medicaid, to any entity which the physician or an immediate family member, has a financial relationship with, unless an exception under Stark Law is met.

Under Stark Law, a “physician” is any doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor.

Under Stark Law, a medical office lease will often require all of the following conditions to be met:

1. Written lease, signed by both parties;
2. Must clearly specify the premises;
3. Lease term length of at least 1 year;
4. The rented space should be reasonably necessary for legitimate business purpose;
5. Space should be exclusively used by tenant;
6. Rental rates should set in advance, fair market value (FMV), not determined by the volume or value of referrals; and is
7. commercially reasonable.