I wrote a series of articles about tips and suggestions on how to lease office space at one of my other legal blogs, The Startup Lawyer. For the most part, these general suggestions about leasing office space will apply for leasing a medical office.

You’ve just entered into a new medical practice partnership and everything seems great. But as the seasons change, differences will likely develop among the medical practice partners regarding both short and long term goals along with management styles.

While there’s no sure-fire way to prevent a bad medical office breakup, you can reduce the pain if you put as many ground rules as possible in writing from the very beginning. It can be time consuming and an otherwise difficult conversation to have with your colleagues, but it’s a conversation that needs to happen. It won’t just help with the break-up, but will also help with the medical practice’s operations. Thus, consider carefully drafting your medical partnership operating agreement and address the following:

-Each partner’s initial investment and percent of ownership
-How salaries will be paid
-How profits & expenses will be handled
-Fringe benefits, vacation time and CMEs
-Call Coverage
-Staff hiring procedures and decisions
-Marketing
-How disputes will be resolved (both large and small)
-Who has check-signing authority
-A termination clause
-If a noncompete is executed, be sure it is thorough and clear
-How the practice will be valued

By implementing a detailed operating agreement, you can avoid problems that come from lack of communication and planning in a busy medical practice.

Entrepreneur.com ran an article about Steve Case, AOL’s founder, and his latest health care venture. He’s sunk $100,000,000 to create Revolution Health, a website that offers free, comprehensive health and medical information to the public. The article includes a Q&A with Case about his “mission” to improve the health care industry.

I’ll admit that, even though I’m the product of two physicians, I have tried to diagnosis minor medical ailments via WebMD. But even WebMD has a large “this site does not provide medical advice” tagline at the top of their Terms & Conditions. Revolutionhealth.com has a similar disclaimer:

We are not providing medical advice, diagnosis or treatment, or advice about what providers to use.

Now as an attorney, I can appreciate the disclaimer…wonderful work by Revolution Heath’s legal team. But as a health care consumer, I can’t help but think Revolution Health is just another WebMD, but with a fancier name and sexier logo.

Revolution Health lists the following on their website concerning revenue generation:

How we make money

You’ll notice that most of our services are free. So, you may be wondering how we make money.

We make money by selling advertising on revolutionhealth.com. We will always clearly identify advertising and commerce on our site. The fact that certain products and services are advertised on our site or sold through our store is not an endorsement of those products or services and does not influence the editorial content on our site. For more information on our approach to advertising and our editorial process, please read our Advertising policy and Editorial policy.

We also make money through selling memberships to people—either directly or through their employers or organizations—and by selling products through the Revolution Health Store.

Finally, we allow consumers to shop around for health insurance if they need it, through our affiliate RHG Insurance Services LLC, which is a licensed insurance agency. We offer individuals and businesses the opportunity to buy health insurance from certain health insurance companies that we work with. We receive a commission for insurance purchased through us, but we are not an insurance company. We will never share any of your information with insurance companies except when you explicitly authorize us to do so.

So to recap, Revolution Health:

(1) Advertises as providing free health care information.
(2) But does not offer medical advice, diagnosis, treatment, or information about which providers to use.
(3) And makes money via advertisements (but does not endorse any of their advertisers), paid memberships (if you want some actual health care advice) and selling insurance (if you want some actual health care).

Don’t get me wrong, I appreciate anyone that tries to improve the quality of and access to health care. But I just don’t see the “Revolution” at Revolution Health.

Every now and then, I think it’s a good idea to take a look at (extremely) bad consequences for health care professionals spawned by unethical behavior. Thus, I share with you the following article that flashed across my desktop recently.

Costa Rica-based online pharmacy charged with racketeering, fraud in U.S.

The Associated Press
Published: August 2, 2007

SAN DIEGO: Physicians and executives are among 18 people accused of selling prescription drugs over the Internet to people without any examinations, according to an indictment unsealed Thursday that charges them with federal racketeering.

The 313-count indictmentmarks the first time organized-crime statutes designed to combat drug cartels and mafia rings have been used to charge anyone with selling prescription drugs over the Internet, said Lauren Mack, a spokeswoman for U.S. Immigration and Customs Enforcement.

AffPower, a Costa Rica-based company, took more than 1 million orders for legal pharmaceuticals including diet pills, birth control pills, Prozac and Viagra between August 2004 and June 2006, according to the indictment. It says the total value of the drugs sold exceeds $126 million (€92 million).

A network of affiliated Web sites received a cut of fees in return for each order forwarded to AffPower.

The indictment names doctors and pharmacies along with AffPower executives and recruiters.

Doctors, who were paid $3 (€2.20) for each order reviewed, approved hundreds or even thousands of orders a day, the indictment says. The prescriptions were then filled through licensed online and brick-and-mortar pharmacies, who received between $5 (€3.66) and $13 (€9.51) for each order.

The indictment, unsealed in federal court in San Diego, names three doctors licensed in Georgia, Kentucky, Ohio and Massachusetts and pharmacists in Colorado and Florida.

The defendants were charged with multiple counts of racketeering, money laundering, mail fraud, drug distribution and conspiracy. The charges carry up to 20 years in prison and millions in fines.

At least 11 of the defendants were arrested earlier this week in five states, Mack said.

Efforts to locate an AffPower Web site or phone number were unsuccessful. Two federal officials said they did not know of a company contact.

Hopefully two things popped up in your head after reading the article: (1) It’s much better to practice ethically and (2) people do have it worse than you.

You can read the original article here.

On The Texas Property Lawyer, I recently published a blog entry titled What to negotiate on your commercial office space lease and listed the following issues:

-Right to renew the lease
-Right to cancel the lease
-Insurance requirements
-Personal guarantees of the lease
-Security deposit
-Option for additional space if needed
-Permitted use of the premises
-Tenant buildout allowance
-Operating costs to be charged to tenant
-Right to assign the lease to another tenant
-Responsibility for repairs and maintenance

While there is no tremendous difference between medical office space and “regular” office space when it comes to negotiating the lease, the nuances of the health care industry might prompt the negotiation of some additional terms, or in the least give some issues listed above higher priority.

An additional term a health care professional should consider negotiating is exclusivity–while your lease is in effect, the landlord can not lease to another health care professional with your same specialty. While the larger the office building (think large MOB) won’t negotiate that term, smaller professional office parks and plazas should be more willing.

Because the buildout expenses required for a medical office tend to run high, negotiating a larger tenant buildout allowance should be a priority. And after you (partially) fund that buildout, the right to renew and option terms become even more important since the improvements stay with the building.

It looks like Pete Stark is at it again. In a newly drafted house bill, Pete Stark (D-CA) has inserted language to eliminate the Stark Law hospital ownership exception. This new bill applies to all physician-owned hospitals, instead of just specialty hospitals.

Summary of Section 651 of the initial draft of the Children’s Health
Insurance Program (SCHIP):

Sec. 651. Limitation on exception to the prohibition on certain physician referrals to hospitals. Eliminates the whole hospital exception so that physicians cannot self refer to hospitals in which they have ownership. Applies to all hospitals - not just specialty hospitals. Grandfathers hospitals that were in operation with Medicare provider agreements as of the date of introduction of the bill. Requires grandfathered hospitals to meet standards within 18 months of enactment that include: preventing growth, requiring disclosure of ownership, limiting physician ownership to an aggregate of no more than 40% of the facility and no more than 2% individually, and disclosing to patients if they fail to have 24 hour physician coverage.

I watched a segment on 60 Minutes last night which said physicians in Cuba make about $20 a month. Sounds like Pete Stark’s dream scenario.

Medical secretary not performing well? You can fire. Don’t like your medical billing company? You can switch with relative ease. Medical office space not working out? You’re pretty much stuck.

Here’s a list of some of the steps you should take before you sign your next medical office lease:

(1) Hire a tenant representative. They know the available space and market rents all at no cost to you (as they are paid by the landlord if a deal is made). Just be sure they have experience leasing medical office space and have no problems working with an attorney.

(2) Hire an attorney. While your tenant rep will help you find a space and let you know how much to pay for it, your attorney will handle the language and negotiation of the medical office lease. What may seem like a good deal in terms of rent could be a disastrous deal down the road if you don’t have an attorney review the medical office lease. All too often I see people focus solely on rent when negotiating a medical office lease to their ultimate disadvantage. Other terms like options, exclusivity, length of lease, common area maintenence charges, personal guarantees and responsibility for repairs must be negotiated.

(3) Make sure the medical office fits your practice. I recently toured a building touted as “medical office space” that had a waiting room the size of a broom closet. Thus, make sure your potential medical office space not only lays out the way you want, but will be able to function as such. Apparently, the medical office space developer thought physicians have only one patient waiting at a time.

(4) Know that the landlord wants you more than you want the medical office. As a physician or other health care professional, you are at the top of any commercial real estate landlord’s wish list. Of course, they won’t let you know that but just keep that in mind when it’s time to negotiate the terms of your medical office space.

Leasing your medical office space is such a huge practice decision that I intend to expand this blog post into a more formal presentation in the near future.

As you can see, I refurbished The Health Care Lawyer blog. I hope you find it both visually pleasing and easier to access content.

There are still a few minor formatting kinks to work out in the next few days, such as the “sidenotes” section and newsletter function. I will also be adding a “Links” page. Thus, if you have a relevant link that you would like me to add, please let me know.

The Departments of Treasury, Health and Human Services, and Labor jointly issued final regulations in hopes of clarifying how employers can set up their wellness program without violating the nondiscrimination requirements of HIPAA. HIPAA prohibits group health plans from singling out participants and beneficiaries based on a “health factor” such as medical status, history, genetics, claims in formation, or insurability. These final regulations take effect July 1, 2007. The Department of Labor has a detailed FAQ section on its website about the HIPAA nondiscrimination requirements.

The phrase “Stark Law” is whispered around medical practices more than it should–and that’s dangerous for your practice. It’s a complex law, and unfortunately for you, it’s probably mentioned without the exceptions and safe harbors that make your ancillary healthcare venture legal.

Thus, when launching a new healthcare venture, consider giving your staff a presentation on Stark Law. Even better, have your attorney give the presentation, as it will give it more authority. (The cost of this presentation will be marginal if you’ve already hired an attorney to ensure Stark Law compliance.) The workshop will serve two purposes:

1. Eliminate chatter in your practice that your new venture is illegal; and
2. Educate your staff to handle questions from patients and other practitioners.

Of course, you probably do not want your staff answering such questions, but wouldn’t you rather have your staff reply “We had a Stark Law workshop” instead of “I don’t know?”