Neil Caesar is president of the Health Law Center (Neil B. Caesar Law Associates, PA), a national practice in Greenville, S.C. He also is a principal with Caesar Cohen Ltd., which offers compliance training and consulting, and the author of the Home Care Compliance Answer Book. He can be reached at firstname.lastname@example.org or at 864/676-9075.
Patients discharged from hospitals remain one of the most important customer bases for home care companies, so it is vital that providers be given a fair opportunity to compete for them.
Discharge planning activities have begun to come under Department of Justice scrutiny. There are many areas for potential abuse, and most can affect home care companies. For HMEs considering a greater presence within hospitals, let's go over some ideas both for expanding the company role within a hospital and for challenging inappropriate relationships by competitors.
Compliance dangers can arise from a variety of discharge activities. Some examples include referrals to a hospital-owned or -affiliated home care company; discharge planners who favor one company over all others, regardless of options or patient choice; home care company personnel who are given special treatment within the hospital, such as access to patient rooms or office space; special assistance given to discharge planning personnel by “helpful” home care companies, such as paperwork relief or patient screening; and charity care programs.
Improper discharge planning procedures can leave a home care company vulnerable to violations of the federal anti-kickback statute, federal and state antitrust law, various other state laws and accreditation requirements. Consequently, proper compliance with the rules relating to discharge planning is extremely important for hospitals and home care companies alike.
Vulnerabilities of the Discharge Planning Process
Under the law, hospitals must operate a discharge planning process that includes an evaluation of whether the patient will need post-hospital services and of the availability of such services.
The process includes the following components: a determination of the Diagnosis Related Group for the specific case; an evaluation of the patient's post-hospital requirements; whether home care is appropriate or whether hospice or nursing home placement is necessary; steps to place the patient in a nursing home, if necessary, or preparation for a home care directive; and a discussion with the patient or patient's representative about the results of the evaluation.
As part of the process, an RPN, social worker or other qualified individual may not limit the patient's options for post-hospital home health services, and must disclose any financial interest in any entity to which the patient may be referred.
One typical way for the discharge planner to address these obligations is to provide patients with a list of local service providers. If the patient doesn't select one, the hospital may suggest that the patient use the hospital's own preferred provider(s). When hospitals do use referral lists, providers are sometimes rotated on the list in order to avoid favoritism.
The hospital may even enter into a “preferred provider” arrangement, under which it agrees in writing to make referrals on a preferential basis to a specific provider when no choice is indicated by the patient. Such an arrangement allows hospitals to choose partners with whom they are familiar, and who provide the best quality of care.
The Balanced Budget Act of 1997 requires Medicare-participating hospitals to give beneficiaries who require post-discharge nursing services a list of Medicare-certified home health agencies that serve a patient's geographic area. The hospital may not specify or limit access to qualified HHAs that ask to be on the list, although many hospitals wrongly believe that it does. Note that this provision does not apply to medical equipment suppliers.
The BBA also requires the hospital to disclose whether it has a financial interest in any provider or supplier if the patient is referred to that entity. This provision does apply to equipment suppliers, as well as to HHAs, hospices and respiratory or infusion therapy suppliers. However, the BBA does not prohibit hospitals from giving patients factual information or opinions about such companies as long as they don't steer people inappropriately or deny choice.
Once hospitals have discussed discharge options with patients, they are free to refer patients to a “preferred provider” if the patient has no preference.
What Could Land You In Hot Water?
Watch for the following activities that can create compliance trouble.
- Failing to Provide Patient Choice
Hindering patient choice could invite scrutiny from the HHS Office of the Inspector General. The OIG has stated that one factor in the determination to impose sanctions under the Civil Monetary Penalty Act and the anti-kickback statute is the preservation of a patient's freedom of choice. Arrangements where referrals are steered to a preferred home care company, without clear policies to protect the patient's decision-making authority, will be viewed as suspect.
- Violating Antitrust Laws
Starting in the late 1980s, the federal courts addressed the antitrust risks arising from hospital durable medical equipment policies. In Key Enterprises of Delaware v. Venice Hospital, the hospital's policies allegedly permitted only one DME vendor access to hospital patients and required non-affiliated HHAs and their nurses to recommend the DME vendor. After years of appeals, the court ultimately held that the joint venture between the hospital and its DME vendor constituted illegal reciprocal dealing and monopoly leveraging under the Sherman Antitrust Act.
The court found that the patient's freedom to choose a DME vendor was “illusory” due to the patient's susceptibility to authoritative suggestions and to pressure imposed on hospital personnel to use the hospital's home care company. The court reinstated the jury verdict and treble damages award against the defendants of approximately $7 million.
This case demonstrates the importance of analyzing antitrust risks, and also how important it is to analyze any change in hospital policies after a hospital implements a new arrangement with a home care company. Providers should pay close attention to significant hospital policy changes, and assess whether the policy was altered to steer patient choice by limiting exposure to the competition.
- A Helping Hand
Home care company representatives typically visit local hospitals to establish relationships that will ultimately generate more patient referrals. The home care staff builds a relationship with the discharge planners based on accessibility, reliability and their proven track record. Hospital discharge planning departments are often understaffed, so to help with the workload, some planners may ask, or allow, home care company personnel to perform duties they would normally handle by themselves.
It is proper for an HME provider to qualify the patient who has already been referred to the company but who is still in the hospital, and to begin the education process and/or the delivery of services, equipment or supplies. However, when a home care company helps perform the hospital's discharge duties, the government might take the position that the company is offering free services in exchange for referrals. This would violate the Medicare/Medicaid anti-kickback statute.
Indeed, in an August 1995 Special Fraud Alert, the OIG expressed a concern regarding the restriction of choice to Medicare beneficiaries. The OIG opined that a home care company's provision of discharge planners, home care coordinators or liaisons to the hospital in order to induce referrals is a form of a kickback.
Such “helpfulness” is also a problem because hospitals must provide discharge planning to participate in the Medicare program — and are indirectly reimbursed for doing so as part of the administrative component of DRG/OPPS payments. Thus, when a hospital seeks Medicare or Medicaid payment, including discharge services not actually provided by the hospital because the home care company “helped,” the government may challenge the activity.
The solution is to exercise care and caution. Relationships with home care companies must be structured carefully, justified, documented well and implemented appropriately. A home care company may work with a discharge planner to facilitate a patient's transition to the home after the referral occurs. But company personnel may not replace the discharge planner by, for example, initiating the first pre-discharge discussions with the patient, assessing a patient's needs, developing discharge plans or documenting the plan in the patient's file.
- Joint Ventures
An April 2003 OIG Special Bulletin expressed concern that joint ventures between hospitals and home care companies may sometimes be disguised kickback arrangements.
In one of the OIG's examples, a hospital formed its own DME company that subcontracted with an existing DME supplier to help it serve home care patients. The subcontracted supplier then not only managed the new line of business but also supplied inventory, employees, space, billing and other services. Essentially, the hospital's DME company had contracted out almost its entire operation to the outside supplier — otherwise a potential competitor.
The OIG said that this “turnkey” relationship was in fact a disguised kickback, giving the hospital “profits of the new business” in exchange for referrals to the subcontracted home care company.
- Violating State Law
Hospitals and affiliated home care companies could find themselves in trouble with the state in which they reside if they do not ensure a patient's ability to choose a home care provider. As an example, the Indiana Department of Health determined in March 2003 that one of its hospitals violated patient freedom-of-choice requirements when (among other things) the hospital referred a patient to its own HHA without giving the patient a list from which to choose. The state ultimately required the hospital to submit a plan of corrective action.
- Charity Care
Many hospitals employ creative techniques to deal with increasing indigent patient populations. One tactic includes requiring HME providers to accept indigent patients in exchange for unassigned business from the hospital. In theory, such an obligation might subject the hospital to scrutiny under the anti-kickback statute because each party stands to benefit substantially from this arrangement.
The hospital will not be obligated to provide uncompensated inpatient care to indigent patients who need home services, but whom no home care company will serve for free. The home care company would generate more reimbursed business by agreeing to accept the indigent patients.
Yet with appropriate checks and balances, the provider may accept a hospital's indigent patient population and receive preferred status for referrals when the patient has not indicated another choice. A hospital may even mention that it will use its preferred provider if the patient does not otherwise have a preference. This type of arrangement should also be motivated by a charitable purpose, reduced to writing.
- Unsafe Patient Communications
Although the discharge planning process may create compliance cautions for a hospital that wishes to use the exclusive services of a preferred home care company, this type of relationship can have great benefits to everyone. The preferred provider is more likely to provide a high standard of care in order to maintain its relationship with the hospital. The hospital can rely on the continuity and consistency of the preferred home care company.
Ultimately, the patient will enjoy the benefits of an appropriate preferred-provider relationship.
One key to ensuring compliance with the choice rules and to rebutting the suggestion of improper referrals is for hospitals to prepare oral and written text for discharge planners to inform patients that they may use any provider they wish. Since hospitals have a general duty to facilitate transitions for patients who require any post-discharge care including DME, respiratory or infusion therapy, hospitals may suggest home care suppliers based on their ability to provide reliable, efficient care.
Home care companies often resist this suggestion. “Why tell patients about competitors?”
Well, a carefully worded text about patient choice and options will still result in the hospital's preferred provider getting most of the referrals when the patient has no preference. As for the remaining referrals, call them “insurance against legal action.” Regardless, following a proper set of procedures for handling referrals is essential in an increasingly competitive market.
Getting a Fair Shake
HME owners often ask whether it is possible to fight back against abuses by hospitals or competitors in the discharge planning process. The answer is “Yes — probably.” Many home care companies have neither the money nor the stamina to engage in a full-blown lawsuit to be treated fairly. But there are other tactics that involve far less “saber-rattling” — and far less money.
Specifically, communication is key. Most discharge supervisors are open to calm discussions of whether their activities raise concerns under federal law, Medicare rules, accreditation standards and so forth. When they are resistant to the discussion, or when they suggest that everything is fine because someone higher up allegedly approved the activities, speaking with those higher-ups often is quite effective.
Another approach is to communicate with the compliance officer of the hospital or competitor. While many home care companies do not have a formal compliance officer, most hospitals do.
This approach obligates the compliance officer to address the issue, and to do so in a manner that will clearly be subject to scrutiny. If the hospital then fails to look into the situation, it would be vulnerable to charges that it failed to address a known problem to the fraud-busters. This is just about the worst possible offense any health care provider can commit.
At this point, it's fairly likely that an accommodation will be made to fix the problem, or at least tone it down. This is especially true because much of the time these problems are caused by specific individuals being too aggressive, rather than because official hospital policy is illegal. Conversely, if your company is affiliated with a hospital, remember that your competitors are watching closely. Some of them will contact my colleagues and me if you are not doing things correctly.
Be sure to follow up any oral discussion with a written letter, or even e-mail, confirming what was discussed and agreed. (“You indicated that you would discuss my concerns with Mary Smith, the director of admissions, and get back to me within two weeks.”)
If you are worried about retaliation if it is known that you are the company complaining about perceived unfair treatment, you can engage a health care attorney to have the conversation for you. But you should assess honestly whether you can guarantee anonymity by hiding behind a health lawyer. Will the hospital or the favored competitor be able to figure out it is you anyway?
The discharge planning process can subject hospitals and home care companies to scrutiny under a number of ways, but opportunities abound for careful HME providers. Review your hospital relationships to ensure your company operates consistently and in a compliant way. Most compliance problems do not come from poor program structure — but from sloppy operation.
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.