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Practice Management Legal Tips For Lease Agreements With Pathology

Acknowledgement: This article was originally published here at Health Law Solutions.
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An important part of medical practice management is understanding the charging of lease to pathology and imaging providers.

If your health practice leases an area to pathology and radiology providers, you need to be aware of the Australian Government regulations that apply to these arrangements.

These regulations are designed to prevent conflicts of interest, which might cause practitioners to refer patients excessively. Significant penalties apply for any breaches of the regulations and we want you to be protected.

These leasing arrangements usually involve GPs, however, the regulations apply to anyone who can request or provide Medicare-eligible investigations (eg. specialists, dentists, podiatrists, physiotherapists, osteopaths, chiropractors, nurse practitioners).

What does this mean for me?

The legislation that affects the contractual arrangements between you and the pathology/radiology provider is the Health Insurance Act 1973. There are a few key points you need to be aware of:

  • The rent payments cannot be ‘substantially different from the market value’ i.e. not 20% more or less than market value’,
  • The lease cannot include any incentives based on number, kind or value of requests for pathology or imaging services
  • The share of outgoings paid for by the pathology/ imaging service (eg. electricity or gas) must be proportional to the amount used by it
  • Providing staff or equipment for use by the pathology/ imaging service must be included in the rent and not dependent on the number of referrals
  • From 1 July 2018, all new lease agreements between requesters and providers must be submitted through Health Professional Online Services (HPOS) with supporting documents.

Breach of the Act can result in fines of up to $1.26m for a company, $126,000 for an individual and/or criminal imprisonment of up to 5 years and may result in the Medicare Participation Review Committee excluding Practitioners from Medicare.

Where can I go for more information?

The Department of Health “Red Book: Guidance on Laws Relating to Pathology and Diagnostic Imaging” available here provides a lot of detail on the legislation and how Practitioners and Providers can ensure they comply with it.

The Act doesn’t specify how to prove that the rent and other payments are reasonable but documents (eg. valuations) supporting the rent and other lease arrangements must be submitted with the lease to HPOS and should be kept by practice owners and pathology/ imaging service providers in case of an audit.

Resources

Red Book Guidance on Laws Relating to Pathology and Diagnostic Imaging – Prohibited Practices

The Australian Government Department of Health – Pathology Rents

Health Insurance Act 1973

If you need any advice from our specialist health lawyers on this topic, please get in contact here.

DISCLAIMER: THE INFORMATION USED IN THIS ARTICLE IS FOR GENERAL INFORMATION ONLY AND IS NOT LEGAL ADVICE. IF, AFTER READING THIS ARTICLE, YOU NEED CLARIFICATION WE RECOMMEND YOU SEEK ADVICE FROM YOUR PROFESSIONAL ASSOCIATION, INSURER AND/OR INDEPENDENT LEGAL ADVISER.

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