Navigating Hospital in Hospital Leasing Arrangements: LTACH, Skilled Nursing, Rehab, Behavioral Health, and Hospice

As acute care hospitals evaluate how to best utilize aging buildings and unused space, a significant number of hospitals consider entering into an agreement with a third party to occupy space in the hospital. LTACHs located within an acute care hospital are referred to as an HIH.

Healthcare providers and their counsel must address issues pertinent to the leasing of space within an acute care hospital for a variety of uses. These uses typically include LTACHs, skilled nursing, rehab, behavioral health and hospice. Among the issues involved are commercial reasonableness, FMV concerns, Stark and AKS.

Listen as our authoritative panel of healthcare advisers examines HIH leasing arrangements, including fair market value concerns, Stark and AKS issues, commercial reasonableness, and consistency between the space lease and the purchased service agreement. The panel will offer guidance for addressing these issues and ensuring compliance in these transactions.

1. What is an HIH?
   1. Overview of common leases of hospital space
   2. Trends—has there been an increase in these types of arrangements?
2. Defining the space
   1. Measurements in typical commercial real estate
   2. Measurements in the HIH sector
   3. Exclusive and non-exclusive use areas
3. Operating expenses
   1. Accounting for operating expenses in a hospital real estate lease
   2. Real estate vs. non-real estate expense
   3. Monitoring operating expenses and compliance concerns
   4. Understanding other non-traditional real estate services that may be included in a lease arrangement
4. Fair market value—real estate
   1. Evaluating an FMV lease rate within the HIH sector
   2. Tenant improvement considerations: who pays for the finish out?
   3. Lease rate considerations: per bed versus per square foot
   4. Management agreements, purchased service agreements, and real estate leases
   5. Options to lease additional space
   6. Leases involving non-clinical space
5. Non-real estate considerations in HIH arrangements
   1. Covenants not to compete (CNCs)
   2. Bed licenses or de-licensure
   3. Certificates of need (CONs)
   4. Trade name and other intangibles

The panel will review these and other key issues:

• Recent trends to own and occupy space in an acute care setting; equity joint ventures and pure lease arrangements for hospital space
• Valuation issues when a hospital department is sold or contributed to a joint venture in lieu of cash contribution
• Relevant post-transaction contractual arrangements including management or other administrative services, employee lease agreements, and more