Doctors object to rental hikes in Citizens office buildings

Elena Watts By Elena Watts

April 19, 2014 at 10:01 p.m.
Updated April 19, 2014 at 11:20 p.m.

Doctors who lease office space from Citizens Medical Center say they can't swallow what they call an exorbitant rate hike.

The rent for the office space increased by a range of 30 to 50 percent, according to a letter the physicians presented to the county-owned hospital's board.

"This is the highest increase in rent that tenants of these office buildings have ever experienced," the letter stated.

Steve Thames, Citizens chief operating officer, said he regretted the rate increases but said they were required by federal government regulations. The hospital is required to charge a rent based on market standards, he said.

Citizens leases space to 32 physicians at Citizens Plaza, Citizens Specialty Center and Citizens Professional Building. No doctor contacted by the Advocate would comment on the record, but the letter revealed a deep rift between the physicians and the hospital.

For several years, according to the letter, physicians have dealt with threats including Medicare cuts, the Affordable Care Act, private insurance fee negotiations and an increase in government regulatory demands.

"Also, our local medical community continues to suffer from the consequences of a local lawsuit that has left Citizens Medical Center and its patients with bitterness and segregation," read the letter, signed Community Physicians of Victoria, TX. "The rent increase is an added threat to local physicians' ability to practice medicine."

The lawsuit mentioned in the letter was filed against Citizens Medical Center by three cardiologists - Dr. Dakshesh "Kumar" Parikh, Dr. Harish Chandna and Dr. Ajay Gaalla - for alleged kickbacks to staff physicians.

The same cardiologists reached an $8 million settlement with the hospital in an earlier lawsuit. The physicians accused Citizens of barring them from practicing in the hospital based on economical and racial reasons.

Federal statute and attorneys in Victoria and Houston compel the hospital to charge fair market value, said Donald Day, chairman of the board of Citizens Medical Center.

"Believe me, no one on the board is happy about this," Day said.

Leases for eight of 32 tenants expire this year, and rental rate increases range from 7 to 28 percent, Thames said. The lower rates are available for longer-term leases, he said.

The increases are a result of Victoria's booming economy and a new evaluation methodology, Thames said.

"The negatives of a good economy are that property values increase, rents increase, and the cost of living increases," he said.

Furthermore, the hospital's previous rate evaluation methodology, called usable, was not comparable with the rentable methodology predominately used in the market, Thames said.

"Calculating rental rates including common areas is responsible for 15 percent of the 28 percent increase," Thames said.

The hospital evaluates the rental market every two to three years using a third-party appraisal to determine fair market value, Thames said.

The process began in September, said Victoria County Judge Donald Pozzi, who is also an ex-officio member of the hospital board. The hospital conducted a relatively minor review in 2010 and a major review in 2007, he said.

The Anti-Kickback Statute and Stark law require hospitals to charge physicians fair market value for office space to prevent referrals for services based on financial motives, said Andrew Dick, chairman of theAmerican Health Lawyers Association and attorney with a health care law firm in Indianapolis.

"The regulations make sure that referrals involving Medicare and Medicaid patients are made based on the quality of care and not some kickback scheme," Dick said. "It's good for the patient."

The physicians' letter, however, suggests health care in the community will suffer if doctors are forced to relocate because of the rate increases.

"As community physicians, we agree that the recent rent increases are unreasonable regardless of any consultant reports and Medicare excuses that have been presented," the letter stated. "We are concerned that this financial decision will force us out of our buildings and create another crisis for our community."

The letter authors invited the hospital to help them rebuild trust with patients and the medical community.

"Citizens Medical Center has a history as one of the nation's top 100 hospitals according to Thomson Reuters," the letter stated. "This involves having an excellent physician staff and management team that work together toward common objectives that include patient care."

The letter proposed a 4 percent rental rate increase.

Thames said the hospital's hands were tied about the size of the increase, but officials would request another evaluation next year to make sure that the rates were still competitive and that the market had not cooled.



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