Operational challenges and potential pitfalls can arise when real estate decisions are made in the healthcare environment due to regulations including the Stark Law and the Anti-Kickback Statute.

The Stark Law, also known as the physician self-referral law, governs physician self-referral for Medicare and Medicaid patients. Recent amendments to the law have significant implications for healthcare real estate transactions, according to a Savills white paper. These changes include an updated definition of fair market value (FMV) and general market value to be more specific to healthcare transactions, which impacts how lease and service agreements are structured under the Stark Law exceptions.

“For instance, rental agreements must strictly adhere to FMV, which is not influenced by the volume or value of physician referrals,” said Savills. “This ensures that transactions are purely based on economic value, not potential referral business.”