Playing Favorites

I am surprised at the constancy with which clients ask for help with hospital discharge problems. Often I am asked to set up a “preferred provider” relationship that favors one home care company as a default supplier for all patients without a referral preference.

Other times I am asked to help with the opposite problem: to help HME companies get a fair deal when a local hospital decides to become a greedy bully and direct all business to a supplier from which it derives a financial benefit.

Here are some tips for separating the good ideas from the dumb ones: On the one hand, most home care companies do not realize that hospitals are not required to alert discharged patients about every home medical equipment option. This important “loophole” in CMS policy eases the way for hospitals and HME companies to establish “preferred provider agreements” and other special contractual arrangements.

Section 4321(a) of the Balanced Budget Act of 1997 requires a hospital’s discharge planners to provide patients with a complete list of providers of “home health services.” However, a 1997 internal CMS memorandum confirms that CMS currently interprets the BBA’s reference to “home health services” to apply only to home health agencies. This narrow interpretation of Section 4321(a) is generally not understood by hospitals and home care companies.

A preferred provider agreement is a formal contract arrangement that allows an HME company to promise a hospital that it will guarantee the availability of specific services, as well as (if desired) information on accessibility, education services, etc., whenever patients are referred to the company.

The HME company hopes for an increase in the hospital’s awareness of (and comfort with) the preferred provider, but this need not be contractually required. The safer route is to make this optional, even though it will happen most of the time. Many PPAs, however, do make it mandatory.

One the other hand, too many hospitals these days ignore the many rules that apply to these relationships. First, any preferred provider agreement should be administered carefully and with diligent attention to guidelines ensuring patient choice. Patient freedom of choice does continue to be a mandatory part of the hospital’s continued compliance with the Medicare Conditions of Participation. It is also an important safeguard against kickback allegations when the hospital benefits financially from the relationship.

Second, I prefer setting up these hospital-home care preferred arrangements so that there is no financial element included in the relationship. After all, the hospital gains accessibility and availability from a quality service provider for its discharged patients. Sometimes the home care provider offers other enhanced services as well, so there is a real benefit to the hospital even without the financial aspect. This also avoids some of the structural and operational problems that can arise under the anti-kickback laws and other relevant self-referral laws.

Third, the BBA does not prohibit hospitals from giving patients factual information or opinions about agencies only as long as they don’t steer people inappropriately or deny their choice. Hospitals may refer discharged patients to a preferred agency only if the patient has no preference. Further, if a preferred provider offers additional services to referred patients, this may be communicated to the patient. But be careful. CMS will be quite wary of these arrangements if they include financial benefit to the hospital.

Fourth, the BBA does require patient disclosure of any relationships which include a financial benefit to the hospital, even for HME companies. Section 4321(b) of the BBA makes this financial disclosure mandatory. Yet many hospital ignore this key provision.

Certain relationships will still pass legal muster even if they include a financial arrangement between the parties. If the relationship does not tie utilization to payment, these arrangements can satisfy the requirements of the anti-kickback laws. But the devil is in the details. The parties must also check state law requirements.

To create the simplest and safest preferred provider system:

• Hospitals should favor relationships where they don’t benefit financially from the arrangement.
• Discharge planners should not persuade a patient to choose a particular company.
• Hospitals cannot steer people based on financial incentive, or deny their choice.

Hospitals and home care companies should work together to prepare an oral text for discharge planners to use to inform patients that they may choose any provider they wish, while still giving them information about the preferred provider’s availability if there is no alternate choice, as well as information about any additional services offered by the preferred provider.

These guidelines will help you identify when a preferred provider opportunity may present itself. They will also help you know when a hospital is not playing fair — and when you should fight back.

Neil Caesar is president of the Health Law Center (Neil B. Caesar Law Associates, PA), a national health law practice in Greenville, S.C. He also is a principal with Caesar Cohen Ltd., which offers compliance training, outsourcing and consulting and the author of the Home Care Compliance Answer Book. He can be reached by e-mail at [email protected] or by telephone at 864/676-9075.