Will This Be a Good Market for My Practice?

{3:42 minutes to read} One common concern that comes up at the start of any new office Will This Be a Good Market for My Practice? by Ian Lifshutzis the large amount of cost associated with setting up such an office in an untested market or demographic area where you are currently not providing services. In leasing new space for a new venture, a new location or expanding an existing practice in the medical field, a testing of the market might be in order.

One solution that many practitioners undertake is to find an office sublet from an existing medical practice and spend minimal time at that office (a few hours or a day a week) to see what the market and patient base are like. This can help a provider determine if they want to get into that neighborhood or demographic area.

Some considerations in doing so, however, raise concerns such as anti-kickback and stark law issues governing physician referrals, as a lease must meet certain requirements in order to comply with related laws. While entering into any such arrangements could generate immediate referrals, especially if:

  • the practice and physician are of a different specialty than the existing group; and/or
  • it is in a medical building or medical setting with other providers capable of making referrals;

the physician and practice needs to be mindful of any potential problems with existing health care laws related to referral practices and fee splitting issues.

Consideration should also be given to the conduct of the facility. From a strict legal point of view, everything done by the practice renting the space is solely their responsibility. However, the tendency of government agencies and insurance companies is to initially name anyone they can find remotely connected at such a facility. If a medical facility or group in the leased space is investigated, and found to be in violation of:

  • any regulation;
  • anti-kickback statute; or
  • RICO;

everyone in the facility could be included in any action taken against a particular individual, physician or practice renting space, despite having no other connection to the leasing group.

Significant time and financial expense can be spent in removing oneself, so these considerations should be balanced against simply finding a smaller office with a shorter lease term, or a more loosely knit shared arrangement that does not directly connect the providers in such a manner where they will be tied together in an investigation.

Some amount of due diligence also needs to be conducted by the provider into whether the leasing facility and other providers present are complying with the laws.

Other considerations include the length of time, the permanency and where the patients will come from, if the provider’s final plan is to open up in a different area or different location.

These are some general considerations when looking into such arrangements. If you have any questions regarding medical space leasing or temporary practice leasing, please feel free to give us a call.

Ian Lifshutz

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