CAMLAW: Complementary and Alternative Medicine Law Blog

The Mall Model: A Legal Structure to Handle Anti-Kickback Concerns of Integrative Care Centers

Our law office has developed several business structures to address self-referral (Stark), fee-splitting and anti-kickback concerns in the integrative care center.

   In the "Mall Model," the medical doctor owns a professional medical corporation (in some states it may simply be a professional corporation (“PC”) composed solely of physicians), and the Center is an incorporated entity (i.e., corporation or LLC) apart from the PC.

            In the Mall Model, the Center essentially has a series of ‘storefronts’ consisting of the various independent practices. Each practice owns its patient records, and the Center cannot interfere with practitioners’ independent judgment.

            The Center leases space to its storefront, practice tenants, and in turn charges for services typical of a medical services organization (“MSO”), such as front desk and marketing. The flow of payments is as follows:

·         The patient renders payment to the individual practice.

·         The practice pays the Center for MSO services.

·         The practice also pays the Center under the lease.

The Center may collect patient payments on behalf of the practice, deposit these as agent to the practice’s account, and withdraw funds from the account to pay for its MSO services.

            In the typical Mall Model, in addition to the lease arrangement:

·         The patient renders payment to the individual practice.

·         The practice pays the Center for MSO services

(i.e., you both share the cost according to use at fair market value).

            One could argue that with the Mall Model, there is no kickback, because no practitioner (nor the Center) receives compensation (in any form) in exchange for referring patients to either the Center itself and/or to other practitioners in the Center.

            The Mall Model, if structured correctly, does not create any direct or indirect compensation in exchange for such referrals. But even were regulators to find the existence of a kickback, presumably the Rental of Office Space safe harbor would be available. Under this safe harbor, compensation must be reasonable, fair market value, based on arms-length negotiations, usual and customary rates for monthly charges without inflated hourly charges, and commercially reasonable, and not based on volume or value of referrals. However, the safe harbor requires an initial contract period of at least a year.

 

 

 

Michael H CohenMichael H Cohen Founder The Los Angeles / San Francisco / Bay Area-based Michael H Cohen Law Group provides healthcare legal and FDA legal & regulatory counsel to health & wellness practices and ventures, including health technology companies (medical devices to wearable health and nanotech), healthcare facilities (from medical centers to medical spas), and healthcare service providers (from physicians to psychologists).Our legal team offers expertise in corporate & transactional, healthcare regulatory & compliance, and healthcare litigation and dispute resolution, in cutting-edge areas such as anti-aging and functional medicine, telemedicine and m-health, and concierge medicine.Our Founder, attorney Michael H. Cohen, is an author, speaker on healthcare law and FDA law, and internationally-recognized thought leader in the trillion-dollar health & wellness industry.
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