The Lucky Seven

Editors Note: This is the conclusion of a two-part series. See Part I in the March 2012 issue at homecaremag.com

Over the years, I have offered HomeCare readers many tips and rules of thumb on the topic of federal and state anti-fraud rules. I have applied these tips and rules to a variety of activities such as billing, collections, marketing, audits, networks, joint ventures and collaborations, to name a few.

While compiling these articles, I have identified seven myths that influence supplier behavior—myths that can spell trouble for HME providers. I have also developed seven ways an HME company can minimize its risk of government challenge while still pursuing growth opportunities.

Dispelling the myths
First, the seven myths. Items one through four apply to collaborative opportunities, while the final three apply to billing and other activities.

1. Only greedy con men get in trouble. False. HME companies can be inadvertently engaged in illegal activities despite honorable goals. Most of the anti-kickback rules focus on instances of value gained in exchange for referrals or recommendations. Although the purpose of such actions may be for improved clinical care, that doesn’t prevent regulatory scrutiny. Even if the value received is simply an opportunity to perform a legitimate service for a legitimate fee, it may be viewed as a kickback.

2. Joint ventures are dangerous, but other financial arrangements are safe. False. Other risky agreements are those concerning managed care, rentals and space, management or professional service relationships, discount arrangements or almost any other financial relationship that involves the provision of health care services. Even though HME providers don’t intend for such services to be tied together, such a relationship raises the possibility of scrutiny under the law.

3. Only the entrepreneur behind the arrangement is at risk; I’m not at risk if I simply “sign on” to someone else’s plan. No. The law makes equally culpable all who offer or receive anything of value in exchange for a referral or recommendation. Arguably, HME companies may be obligated to report those who make such an offer.

4. If the people offering this arrangement went to all the trouble to put it together, they must have looked into all of these issues, and I don’t need to check out the details. No. This is a difficult and shifting area of the law, and many people are insensitive to or ignorant of the issues. In addition, some people are willing to take more risks than others. The mastermind behind a plan may be willing to take on far more risk than a fully informed HME provider would be.

5. Everybody does it this way, so I will not get into trouble. False. That an activity is common is irrelevant. Also, an arrangement or protocol may appear to be the same as that in other companies, but often the fine details make the difference between a plan that passes scrutiny and one that doesn’t.

6. If an HME company’s personnel submit a raise claim or otherwise violate the law without the CEO’s personal knowledge, the CEO is safe. False. In most contexts, management personnel are personally responsible for staff supervision and must be informed about staff members’ activities. They are responsible for all that goes out with their signature or stamp.

7. If I don’t know it’s against the law, I’m not in trouble. Sorry, but no. An HME provider cannot plead that it was ignorant that a financial arrangement or a billing practice violated the law, and that the provider therefore deserves another chance. These laws usually hold that an HME company’s knowledge of the details of its financial arrangements or billing activities constitutes knowledge of the underlying legal issues. A pure heart and clean living will not suffice.

Avoiding the pitfalls
Here are seven ways to navigate the fraud and abuse waters, for all financial or collaborative relationships with people or entities in a position to refer, arrange for or otherwise influence the provisions of equipment or services:

1. All financial arrangements must be commercially reasonable, for reasons totally unrelated to referrals. Each detail in an arrangement must be independently justifiable and fully consistent with appropriate business decision-making. Reward should follow risk, and payments should reflect fair value to the HME company.

2. All financial arrangements should benefit the patient and/or the third-party payer (Medicare, Medicaid, or commercial insurers). Even though most of the anti-fraud laws indicate that the violations can occur regardless of whether the arrangement increases costs or utilization, such excesses usually fuel the government’s zeal to pursue. The arrangement, therefore, should benefit the community in some way—improved care, cheaper care, better “value,” etc.

3. KISS (Keep It Simple, Silly). The “trickier” the arrangement appears, the more suspicion it will generate. Remember that the government uses special arithmetic in its investigations. If you have one “questionable” element in your deal, an adequate explanation may well suffice. If you have a second “questionable” element, a second explanation may help. But by the time you must explain the third or fourth ambiguous item, the government will apply its own arithmetic: 1 + 1 + 1 +1 = 10.

4. Documentation. The most honorable motives, the most careful evaluation of commercial reasonableness, the clearest assessment of risk/reward will not help much if documentation is sloppy. By the time government representatives are looking at your arrangements, they are unlikely to trust undocumented assertions that your motives were appropriate when the deals were formed. Be sure all financial arrangements are clearly documented and have been reviewed by legal counsel. Subsequent changes must be documented as well. What you do and what your documents say you do must match.

5. Monitoring. HME companies must monitor arrangements after they begin. Many activities that start off “safe” subsequently morph into improper reward mechanisms for referrals. For example, a space lease with a physician practice or a sleep lab may commence with an amount of space which is initially appropriate for the parties’ true needs, but which becomes too much or too little space over time. This space lease will raise anti-kickback concerns when it is not appropriate for the legitimate needs of the parties. I have seen an HME company sublease thousands of square feet from a physician-owned medical office building for its “future” needs. This sort of “warehoused space” can create a fraud concern, because the original justification (reserving space for an upcoming need) does not reflect reality (the space sits unused for an inappropriate length of time). The point is that the government cares about improper activities. It evaluates whether an arrangement is proper based on what the provider is in fact doing, regardless of what the supplier claims it intended to do originally. Monitor arrangements carefully.

6. Don’t overreact. I have seen HME companies allow the plethora of rules and constraints to paralyze them into inaction. An HME provider that automatically avoids any alliance involving financial benefit, so as to avoid even having to deal with the anti-fraud and self-referral laws, will miss out on many valuable market opportunities. At worst, the HME company will be unable to survive in today’s competitive health care climate.

7. Watch the “traffic light.” I sometimes view the anti-fraud laws as a traffic light. Don’t pretend the light is green and forge full steam ahead, blind to the dangers of the laws. That course will surely lead to trouble—civil fines, criminal sanctions, and possibly more. On the other hand, don’t view the traffic light as being red, urging you to stop all activity. The reach of these laws is substantial. They cover virtually every financial arrangement. If an HME company stops all activity that triggers the need to work within and around these rules, then the company will stop all forward progress—and it will die.

I recommend that you view the traffic light as yellow: “Proceed with caution.” Identify weaknesses and ambiguities, fix questionable aspects and document motives for everything, and pay attention!
These “Lucky Seven Ways to Navigate” illuminate the road to rule-compliant behavior. Ignorance is not bliss—it a disease that sooner or later will consume any careless HME company. This is not just hyperbole on my part—I have attended to the closure of a number of clients who were unaware of the practical dangers of indifference or carelessness of embracing these rules.

If Big Brother is not watching already, chances are he will be soon. Learn to fight back, but with diligence and common sense.

Materials in this article have been prepared by the Health Law Center for general informational purposes only. This information does not constitute legal advice. You should not act, or refrain from acting, based upon any information in this presentation. Neither our presentation of such information nor your receipt of it creates nor will create an attorney-client relationship.