Medical Office CAM Charges: Why MOBs Pay $15-20+/SF and Where Overcharges Hide

Medical office tenants pay more in CAM charges than any other property type. CBRE's Healthcare Real Estate Market Report (2024) puts Class A medical office building (MOB) CAM charges at $15–$22 per square foot per year for on-campus facilities and $12–$18/SF for off-campus buildings. For a 4,000-square-foot primary care practice, that's $60,000 to $88,000 per year in CAM alone — before rent.

Some of that premium is legitimate. Medical buildings have specific infrastructure requirements: specialized HVAC filtration for infection control, backup power systems, medical gas infrastructure, and higher cleaning standards than standard office space. These cost more to maintain. But the high-cost environment also creates overcharge opportunities that appear regularly in MOB reconciliations: biohazard handling costs specific to one tenant billed building-wide, HVAC filtration upgrades triggered by one tenant's specialty passed to all tenants, insurance premium increases driven by high-risk occupants spread across lower-risk neighbors, and utility allocation errors that don't reflect actual metered consumption.

This guide explains the benchmark data, the structural cost drivers, and the four overcharge patterns that a forensic audit would check in any medical office building.

Medical Office CAM Benchmarks

CAM charges in medical office buildings reflect both legitimate infrastructure costs and the pass-through practices of MOB landlords, who operate in a specialized market with limited tenant alternatives.

Sources: CBRE Healthcare Real Estate Market Report (2024); JLL Medical Office Outlook (2024).

The gap between a Class A on-campus MOB ($20+/SF) and a typical Class A professional office building ($10–$14/SF) reflects the medical infrastructure premium. But it also reflects a market structure where MOB tenants — particularly small practices — have limited bargaining power and often sign landlord-form leases with broad pass-through provisions.

Why Medical Office CAM Costs More: Legitimate vs. Overcharged

Understanding which costs belong in MOB CAM and which are overcharges requires a framework for what medical buildings actually require.

Legitimate higher-cost items in MOB CAM:

• Enhanced HVAC filtration (HEPA or MERV-13+ filters required for clinical areas)
• Backup generator maintenance and testing
• Medical gas infrastructure (oxygen manifolds, vacuum lines in common corridors)
• Higher-frequency janitorial service with clinical-grade disinfectants
• Biohazard waste staging areas (the staging area itself, not disposal costs for specific tenants)
• Infection control protocols during common area renovations
• Higher property insurance premiums reflecting the building's medical use classification

Items that are overcharged when billed building-wide:

• HVAC filtration upgrades driven by one tenant's specialty (e.g., an oncology practice requiring HEPA filtration throughout its wing, with the cost passed to dermatology tenants three floors away)
• Medical waste disposal costs specific to one tenant's practice type
• Biohazard handling for clinical waste from a specific suite
• Personal protective equipment purchased for a specific tenant's building work
• Insurance premium increases caused specifically by a high-acuity tenant's specialty

The distinction tracks the general rule in commercial real estate: costs for shared infrastructure that benefits all tenants belong in CAM; costs specific to one tenant's operations belong to that tenant.

The Four Overcharge Patterns in Medical Office Buildings

1. Excluded Service Charges: Tenant-Specific Costs in the Shared Pool (Rule 2)

What happens: MOB leases typically list exclusions from the CAM pool — costs the landlord must absorb without pass-through. Standard exclusions include costs "attributable solely to the operations of a single tenant" and capital improvements. Medical office leases frequently include specific exclusions for "medical waste disposal" and "hazardous material handling" for individual tenant operations.

Despite these exclusions, landlords sometimes consolidate all property-related costs from their accounting systems into the CAM pool without filtering tenant-specific items. A biohazard disposal invoice from a surgery center gets distributed across all tenants. An HVAC upgrade for one suite's specialized filtration requirements appears as a common maintenance line item.

Detection logic: Request the underlying vendor invoices for any line items related to HVAC, janitorial services billed at above-normal rates, specialized filtration, or waste handling. Compare each invoice against the lease's exclusion list. Any cost that the invoice identifies as related to a specific tenant's space or operations should not appear in the shared pool.

Dollar impact: A tenant-specific HVAC filtration system upgrade running $35,000–$80,000, passed through the shared pool at a 5% pro-rata share, adds $1,750–$4,000 to one tenant's bill. Multiplied across all non-responsible tenants in a 20-tenant building, the aggregate misbilling may equal the full cost of the upgrade.

Case law: Preston Place, Ltd. v. Ramey King Insurance Group (Texas) addressed the scope of CAM exclusions in a medical office setting. The court examined whether specific line items in the landlord's operating expense compilation fell within the lease's exclusion provisions for costs attributable to specific tenants. The analysis required tracing individual vendor invoices to the services actually performed.

2. Insurance Overcharge: Premium Increases Driven by High-Risk Tenants (Rule 9)

What happens: Medical buildings carry higher property and general liability insurance than standard office buildings, reflecting the higher risk of operations involving medical equipment, medications, and clinical procedures. When a MOB adds a high-acuity specialty tenant — an orthopedic surgery center, a dialysis clinic, a cancer treatment facility — the building's insurance premiums typically increase.

The overcharge occurs when landlords pass that premium increase building-wide without accounting for the fact that it was caused by one tenant's operations. A psychiatric practice, a dermatology office, and a primary care group all pay increased premiums that reflect the risk profile of the surgery center on the first floor.

When it's recoverable: Most MOB leases permit insurance premium pass-throughs but limit them to premiums for coverage types listed in the lease (typically building property insurance, general liability, and sometimes umbrella coverage). Premium increases for coverage types not listed, or for policy riders added because of a specific tenant's operations, may fall outside the permitted pass-through scope.

Detection logic: Obtain the property's insurance declarations page for the base year and current year. Identify any new policy riders, increased coverage limits, or new coverage categories. Cross-reference against the lease's permitted insurance pass-through categories.

Dollar impact: Commercial property insurance premiums increased 16.9% in 2023 (Marsh Global Insurance Market Index, Q4 2023) and an additional 8.2% in 2024. A building where premiums increased above the national trend may have tenant-specific risk factors driving excess increases. On a $200,000 annual premium that increased 25% above baseline (15% driven by a surgery center's risk profile), the surgery center's operations add $30,000 building-wide — or $1,500–$3,000 per year to each smaller tenant's bill.

Case law: Parsons v. Superior Court (California) addressed the allocation of insurance costs among commercial tenants when a specific tenant's operations contributed disproportionately to premium increases. The court found that the pass-through of insurance premiums is governed by the lease provisions defining what insurance costs are recoverable — and that increases attributable to a specific tenant's operations were not recoverable from other tenants under the standard pass-through provision.

3. Tax Overallocation: Assessment Changes Billed Without Adjustment (Rule 10)

What happens: Medical office buildings often sit on parcels that are re-assessed separately from the surrounding market when significant capital investment occurs — a tenant build-out, a facility expansion, or a major equipment installation. When that reassessment results in a higher tax bill, the landlord passes the increase through CAM.

The overallocation occurs in two scenarios:

Scenario A — Assessment driven by one tenant's improvement: A surgery center tenant builds out a specialized facility worth $2 million in tenant improvements. The assessor notes the improvement and increases the parcel's assessed value. The resulting tax increase is passed building-wide. Other tenants pay for the surgery center's improvement.

Scenario B — Tax appeal credit not passed through: If the landlord successfully appeals the property's tax assessment and receives a refund or credit, that benefit should flow back to tenants who paid the higher amount. When landlords receive refunds without crediting tenant reconciliations, tenants pay the original over-assessed amount permanently.

Detection logic: Obtain the property tax bills and any assessment change notices. For Scenario A, determine whether the assessment change was triggered by a specific tenant's improvement. For Scenario B, check whether assessment appeal outcomes were disclosed in reconciliation statements and whether credits were applied.

Dollar impact: Property tax appeals in medical markets frequently produce 10–20% reductions in assessed value. On a $400,000 annual tax bill, a 15% reduction represents $60,000 — divided among 15 tenants, roughly $4,000 each. If that $60,000 credit was not passed through to tenants, each tenant has a recoverable credit claim for each uncredited year.

4. Utility Overcharge: Unmetered Allocation vs. Actual Consumption (Rule 11)

What happens: Medical tenants use significantly more utilities than standard office tenants. A radiology suite with MRI and CT equipment running continuously, an oncology infusion center with temperature-controlled medication storage, or a clinical laboratory with specialized equipment all consume electricity at rates far above a general medical practice.

The overcharge occurs when landlords allocate utility costs by square footage (pro-rata) rather than by metered consumption. A 3,000 SF general practice pays the same utility rate per square foot as a 3,000 SF MRI suite — even though the MRI suite consumes five to ten times more electricity.

If your lease specifies pro-rata utility allocation, square-footage-based billing is contractually authorized even if it results in cross-subsidy. The claim arises when the lease requires metered or consumption-based allocation but the landlord applies pro-rata instead.

Detection logic: Review the utility allocation provision in your lease. If it requires metering or consumption-based allocation, compare the landlord's method against that requirement. If submeters exist in the building, the landlord should be using submeter data. If the lease requires submetering but the landlord applies pro-rata allocation, that's a Rule 11 overcharge.

Dollar impact: For a 3,000 SF general practice in a building where utilities run $4/SF annually under pro-rata allocation, the annual utility portion of CAM is $12,000. If the practice's actual consumption is $3/SF (below average, due to no specialized equipment), the overcharge is $3,000/year — or $15,000 over a 5-year lookback.

Worked Example: 4,000 SF Primary Care Practice

Assume a primary care practice in a 60,000 SF Class A off-campus MOB. Lease terms: NNN structure, 6.67% pro-rata share, annual CAM cap of 7% on controllable expenses. Building has: a surgery center (8,000 SF), five general medical practices, two dental offices, and a physical therapy suite.

Reconciliation review for 2025:

At a 5-year lookback, that's $54,045 in recoverable overcharges — before interest.

Run a free scan on your medical office CAM charges — the analysis identifies each overcharge type and quantifies the dollar impact automatically.

CamAudit vs. Traditional Medical Office Audit

For a 4,000 SF primary care practice:

For smaller medical practices, traditional audit economics often don't make sense — the audit cost approaches the expected recovery. CamAudit's flat fee changes that calculus: the analysis costs $199 regardless of whether the overcharge is $5,000 or $50,000.

Relevant Case Law

Preston Place, Ltd. v. Ramey King Insurance Group (Texas)

This case involved a medical office tenant challenging CAM pass-throughs that included costs the lease's exclusion schedule attributed to specific tenant operations. The court's line-item analysis required tracing each vendor invoice to the services performed and evaluating whether those services were covered by the exclusion language. The case is an instructive example of how courts evaluate expense-level exclusion claims in MOB settings.

Parsons v. Superior Court (California)

The Parsons case addressed insurance premium allocation among commercial tenants when one tenant's operations drove disproportionate premium increases. The court examined the lease's permitted insurance pass-through provisions and concluded that increases attributable to a specific occupant's risk profile were not recoverable from other tenants under a standard pass-through clause. The case is frequently cited in California MOB disputes involving specialty anchor tenants.

Tin Tin Court v. Pacific Rim Park (Washington)

This case involved utility allocation methodology in a multi-tenant medical building. The landlord applied square-footage pro-rata allocation for utilities even though the lease specified consumption-based metering. The court found the pro-rata allocation breached the lease's utility provision and ordered recalculation using actual meter readings for all open reconciliation years.

Lease Language Risks in Medical Office Buildings

Risk 1: Broad HVAC Pass-Through Without Use Restriction

Many MOB leases pass through "HVAC system maintenance and repair" without specifying whether that covers only shared system components or also tenant-specific mechanical equipment. A landlord who replaces filtration systems in one tenant's wing can argue the cost is "HVAC maintenance" rather than a tenant-specific improvement.

What to look for: Any HVAC pass-through provision that does not distinguish between shared infrastructure (air handlers serving multiple suites) and dedicated equipment (standalone units serving one tenant). The more specific the lease is about what constitutes "common area" HVAC, the less interpretive room the landlord has.

Risk 2: Insurance Pass-Through Without Coverage-Type List

Standard office leases list the specific types of insurance whose premiums can be passed through. Generic language like "all property insurance" or "building insurance" is broad enough to include riders and coverage categories added for specialized tenants. If the lease doesn't limit the pass-through to named coverage types, the landlord has significant room to pass through specialized coverage costs.

What to look for: Compare the insurance pass-through provision against the actual policy declarations page. Identify any policy riders that were not in the building's coverage at lease execution. Challenge pass-throughs for coverage types not listed in the lease.

Risk 3: Undefined "Medical Waste" in Exclusion Schedule

The exclusion schedule's medical waste provision should clearly define what constitutes tenant-specific waste handling versus shared facility waste costs. "Biohazard disposal" is ambiguous — it could refer to the staging area for all tenants (a shared cost) or the disposal cost for a specific tenant's regulated medical waste (a tenant cost). If the distinction isn't drawn in the lease, expect disputes.

Frequently Asked Questions

Why do medical office buildings charge so much more in CAM than regular office buildings?

Legitimate reasons include higher-grade HVAC filtration, backup power infrastructure, enhanced janitorial standards, and higher insurance premiums reflecting medical use classification. The premium over standard office CAM is real and documented. The question for any individual tenant is whether the specific costs in their reconciliation reflect genuine medical-infrastructure overhead or whether tenant-specific expenses are being spread building-wide.

Is HVAC filtration always a shared expense in a MOB?

Not necessarily. If the enhanced filtration serves only one tenant's space, it's a tenant-specific cost. If it serves shared corridors, lobbies, or mechanical rooms that all tenants use, it may be a legitimate shared expense. The location of the filtration system — which air handlers it connects to, which zones it serves — is the factual question. A vendor invoice identifying the installation location is the key document.

Can I request the building's insurance declarations page?

Yes. Most commercial audit rights clauses entitle tenants to examine the records supporting CAM charges, which includes insurance policies and premium documentation. Send a written audit request citing the specific provision in your lease. The landlord must produce the declarations page for any year whose premiums appear in the reconciliation.

What happens if a radiology tenant's equipment causes structural damage affecting CAM costs?

Costs to repair damage caused by a specific tenant's operations are typically that tenant's responsibility under their lease and the landlord's insurance claim process, not a shared CAM cost. If such costs appear in a CAM reconciliation, they should be challenged as a Rule 2 exclusion violation — costs attributable solely to one tenant's operations.

Are utility costs a major overcharge source for medical practices without specialized equipment?

Yes, particularly for practices in buildings with high-consumption specialty tenants. Square-footage pro-rata allocation systematically undercharges high-consumption tenants and overcharges low-consumption practices when electricity usage is highly uneven. If your lease requires consumption-based allocation or if submeters exist, insist on metered billing. If your lease only permits pro-rata, the cross-subsidy is contractually authorized even if economically unfair.

How does the SOL work for medical office CAM disputes?

The statute of limitations depends on state. For major medical markets: California — 4 years (CCP § 337); Texas — 4 years; New York — 6 years; Illinois — 10 years. States following the discovery rule may toll the SOL from the date you first discover the overcharge rather than from the reconciliation date — meaning a practice that has never audited may still have claims going back to lease inception. See CAM reconciliation deadlines for the full state-by-state analysis.

Related Resources

• Medical Office NNN Lease Traps: HVAC, Biohazard, and Insurance Overcharges
• Insurance CAM Passthrough: What's Recoverable and What Isn't
• Utility Double-Billing in CAM: How Tenants Get Charged Twice
• Excluded Services in CAM Charges
• Property Tax CAM Passthrough: What Tenants Should Audit
• CAM Dispute Guide
• CAM Overcharge Detection Playbook

CamAudit is a document analysis and automation tool. The analysis described on this page does not constitute legal advice. Consult a licensed attorney before sending any legal correspondence to your landlord.