Money Management: Q&A

Article excerpt

You must have contract for office space lessee

I have a friend who is a physical therapist and has been leasing space from me for some time. Am I required to collect rent from her?

Not only are you required to collect rent, you also are required to have a contract in place for a term of not less than 1 year, evidencing that the rent you are collecting is fair market value and does not reflect the volume and value of referrals between you and the physical therapist. Failing to have a lease in place opens you up to potential exposure to being part of an improper arrangement whereby remuneration is exchanged for referrals, in other words, you are giving free rent to the therapist in exchange for referrals to your practice. Should your patients be Medicare or other federal health plan beneficiaries, you may be violating the federal anti-kickback statute, and - depending on the state in which you practice - other state laws, rules and/or regulations. So not only are you hurting your bottom line, you also may be opening your practice to potential liability.

Having a written contact with an office tenant is vital for avoiding prosecution under federal and state anti-kickback statutes The lease should be for at least 1 year, and the rent should represent fair market value.

PROBLEMS WITH ACCOUNTS RECEIVABLE CAN AFFECT PRACTICE'S PURCHASE PRICE

Q· I am looking to sell my practice, but I'm getting offers that are much lower than I expected My practice brings in plenty of money, but the buyers are claiming that my accounts receivable do not warrant the purchase price I am requesting. Could there be other reasons?

A: When selling any business, accounts receivable is essential in the calculation of a purchase price. That being said, each practice is different, and your practice's valuation will depend on a variety of other factors (office space, partners, length of time remaining on lease, equipment, type of practice, patient base

etc.) - so you may want to ask yourself whether something else is in play here.

Maximizing the sales price will require you to understand the unique aspects of your practice's accounts receivable. The term "accounts receivable" simply means the amount of money owed to the practice for services performed or items provided, generally computed on a monthly basis. Many times, people implicitly include the collections rate in their calculation of receivables. …