Rental Space In ALFs Done Right

This is the third in a series of articles about arrangements between assisted living facilities (ALF’s) and home care providers. Both ALF’s and home care providers of all types may conclude that there is value in rental of space in ALF’s, if they receive referrals from ALF’s. How can home care providers who receive referrals rent space without violating the federal anti-kickback statute described in Part 2 of this series?

As previously indicated, the payment of rent to referral sources is a clear violation of the statute. The statute also applies to private duty agencies if they receive funds from any state or federal program; including Medicaid, Medicaid Waiver Programs, managed Medicaid Program, TriCare, VA, etc.

There are, however, a number of safe harbors or exceptions to this statute. If providers meet all of the criteria of applicable exceptions, they may engage in arrangements that otherwise violate the statute. There is, for example, a safe harbor or exception for space rental arrangements. In order to claim the protection of this safe harbor, all of the following criteria must be met:

1) The lease agreement between the parties must be set out in writing and signed by the parties;

2) The lease must specify the space that is leased;

3) If the space is to be leased on a periodic, sporadic, or part-time basis for the term of the lease, the lease must specify exactly the schedule of such intervals, their precise length, and the exact charge;

4) The term of the lease must be for not less than one year;

5) The aggregate rent paid over the term of the lease must be set in advance, consistent with fair market value in arms-length transactions, and cannot be determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties; and

6) The leased premises must be used for commercially reasonable business purposes.

As the number of years in which they have been in business increases, ALF’s are more eager to help their residents “age in place.” ALF’s may view the availability of services from home care providers; including Medicare home health, private duty home care, hospice, and home medical equipment (HME); as essential to allow them to achieve this goal. While ALF’s want to encourage utilization of these types of services by residents, they cannot lose sight of the fact that the healthcare industry is highly regulated. With ever-increasing emphasis on fraud and abuse compliance, ALF’s and home care providers cannot afford to violate the law.

Elizabeth E. Hogue, Esq.

Office: 877-871-4062

Fax: 877-871-9739

E-mail: ElizabethHogue@ElizabethHogue.net

Twitter: @HogueHomecare

©2020 Elizabeth E. Hogue, Esq. All rights reserved.

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