On-Campus vs Off-Campus Medical Office Space

In everyday leasing, on-campus means a medical office building on or attached to a hospital campus, often sharing its driveways, parking, utilities and building systems. Off-campus means anywhere else, which can range from a medical building down the road to a retail center across town.

There is also a narrower regulatory use of the word that you may run into. For Medicare's provider-based rules, 42 CFR 413.65 defines campus as the area immediately adjacent to the provider's main buildings, other areas within 250 yards of those buildings, and other areas the CMS regional office determines to be part of the campus. That definition is written for hospital departments and how they are treated by Medicare. It does not settle a real estate question, but it explains why hospitals care about these distances.

An Otten Johnson client alert explains the basic logic: doctors prefer, and their patients may need, an easy trip between the office and the hospital, so doctors are more likely to join a hospital's staff if they can find suitable office space nearby. That is why hospital operators frequently develop these buildings.

• Rounding and procedures. Less travel time for physicians who regularly admit or operate at the hospital.
• Referrals among neighbors. Landlords on a campus tend to want a range of specialties in a building, which a real estate attorney notes should enhance patient referrals among tenants.
• Patient convenience. Patients who use hospital imaging, labs or surgery may find it simple to combine visits.
• Shared infrastructure. A campus may already provide parking, security and building systems designed for healthcare.

These advantages are real only if your practice uses them. Count how many of your patients and referrals actually depend on that hospital before you pay for proximity to it.

The trade-off is control. Hospitals want these buildings to support the hospital, so they keep rights over them, sometimes even after selling the building to an investor. Those rights may appear in your lease, in a ground lease above your landlord or in a recorded document. Attorneys writing on the subject describe several common forms.

• Who may lease. Space may be limited to physicians with staff privileges at the hospital or to medical-related tenants, or the hospital may have a right to review proposed tenants.
• What you may do. Uses may be limited to those traditionally performed in doctors' offices. Hospitals can restrict competing services such as CT, MRI, ambulatory surgery and other procedures.
• Mission-based limits. Hospitals with a faith-based mission may restrict certain services throughout their buildings.
• Ground leases. Hospitals often ground lease these buildings instead of selling them, which leaves your landlord with obligations to the hospital that can affect you.
• Shared systems. Shared utilities, HVAC and security mean someone other than your landlord may control part of your operating environment.

Think about the services you may add later, not only those you offer now. A restriction that costs you nothing today can block imaging or a procedure suite in a later year of your lease.

A lease with a hospital is more than a business deal. It can be a financial relationship between parties who refer patients to each other. CMS describes the Stark law as limiting a physician's referrals of Medicare patients for certain designated health services to an entity with which the physician has a financial relationship, unless an exception applies. The Office of Inspector General describes the Anti-Kickback Statute as a criminal law against paying remuneration to induce or reward referrals, and gives free rent as an example of remuneration.

Both regimes offer protected paths for office leases, found at 42 CFR 411.357(a) and 42 CFR 1001.952(b). Conditions include a written signed lease of at least one year, rent set in advance and consistent with fair market value, and rent that does not take referrals into account. The safe harbor's definition of fair market value excludes extra value a party would attribute to the property's proximity or convenience to sources of referrals.

That has a practical result. Allowances, free rent and rates in a hospital lease get reviewed differently from the same terms with an unrelated landlord, and being next to the hospital is not simply something to price in. Healthcare counsel should decide how these rules apply to your arrangement. Our separate guide on Stark and Anti-Kickback covers the concepts in more depth.

You may hear that location changes what can be billed. The Medicare rules behind this concern hospital outpatient departments. Under the Bipartisan Budget Act of 2015, as law firm summaries explain, certain new off-campus provider-based departments are paid under a different system than the hospital outpatient system, and on-campus departments are excepted. A 2026 law also adds requirements for off-campus provider-based departments starting in 2028, according to a Dinsmore & Shohl summary.

If you are an independent practice simply renting space, ask counsel whether any of this touches you. If a hospital owns the practice, plans to acquire it or wants to treat your location as one of its departments, the location decision and these rules are tied together, and that conversation should happen before a lease is signed. Billing advice belongs to healthcare counsel and your billing advisor.

Off-campus space usually offers a wider choice of neighborhoods, simpler parking, more freedom on services, and a chance to sit closer to where patients live or work. The cost is more travel for hospital-based physicians, and possibly less of the casual referral traffic a campus building can generate. It can also take more construction if the building was not designed for clinical use.

• ✓What share of our patients and referrals depends on this hospital, based on our own records?
• ✓How often do our physicians actually need to be at the hospital in a working day?
• ✓Do we hold, or need to hold, staff privileges to qualify for this building?
• ✓Could any recorded restriction, ground lease or hospital consent right block a service we may add?
• ✓What happens to our lease if we change hospital affiliation, or if our practice is sold?
• ✓Would a location closer to patients serve more visits than one closer to the hospital?
• ✓Has healthcare counsel reviewed any hospital-affiliated landlord and its concessions?

TAG represents tenants, so we can compare campus and non-campus options on the same footing and raise restriction questions early, leaving regulatory conclusions to your counsel.