Market services carefully to avoid legal pitfalls

By Elizabeth E. Hogue, Esq.
Burtonsville, MD

Home-care providers face a variety of significant legal issues. During initial implementation of the Medicare prospective payment system (PPS), many agencies faced a number of challenges that made it difficult to devote resources to key legal issues. Since many providers are functioning effectively under existing reimbursement systems, now is the time for agencies to focus on legal issues of particular importance at this juncture in the continuing development of the home care industry.

One key area upon which agencies should focus is marketing. Specific issues include:

  • marketing home care services without violating applicable fraud and abuse prohibitions and Stark rules;
  • assuring a steady stream of referrals without violating patients’ right to freedom of choice of providers and without engaging in impermissible kickbacks and rebates in the form of free services;
  • establishing relationships with physicians who will advocate on behalf of agencies with other physicians.

First, it is important to note that these issues should be of concern to almost all home care providers, even those that do not provide services to Medicare patients and/or are not Medicare-certified. Many so-called private-duty agencies care for patients under state Medicaid programs and/or Medicaid waiver programs. This means that applicable statutes and regulations described in this article also apply to private-duty agencies.

Under cost-based Medicare reimbursement, many Medicare-certified agencies could not afford to engage in marketing activities. Such activities were unallowable costs; and when community awareness activities were re-characterized as marketing activities by auditors, agencies often incurred large overpayments.

Under PPS, the allowable cost rules have not changed and still are in effect. But since payments under the PPS system to agencies are considered to be payment in full, unallowable costs do not result in overpayments to agencies. To the extent that unallowable costs are included on agencies’ cost reports, however, they may result in reductions of rates. So, many agencies concluded that the road now was clear for them to engage in marketing activities. Since agency staff members were unaccustomed to engaging in these activities, they likely were unfamiliar with applicable prohibitions, especially those involving possible violations of the federal statute governing illegal remuneration and Stark rules.

Questions to ask

Here are some questions about marketing activities that agencies may ask:

Can staff take food to physicians’ offices? Yes, generally speaking, agency staff members can take food to physicians’ offices so long as the value of these items does not exceed $300 per year consistent with applicable Stark rules.

Can staff leave mugs, notepads, pens, etc., with referral sources of all types on a routine basis? Yes, staff can leave items of nominal value with referral sources without engaging in kickbacks and rebates.

Can agency staff members walk the halls of referral sources looking for patients who may be appropriate for home care services? No, agency staff members must first receive a referral of a patient. Referrals do not have to come from physicians. They may come from patients, patients’ family members, and discharge planners/case managers. Agency staff must document the date and time of the referral, and the name of the person who made the referral.

Can agency staff members take referral sources to sports and entertainment events? If physicians are involved, the limit of $300 per year cannot be exceeded consistent with Stark rules. If other referral sources are involved, the amount of money spent cannot be significant enough to induce referrals. From a practical point of view, it may, therefore, be wise to apply the limits included in Stark to all referral sources.

Since patients generally now receive fewer services, a steady stream of referrals is crucial to success in home care. But providers must be wary of potential violations of patients’ rights to freedom of choice of providers and a federal statute that prohibits illegal remuneration.

Some general guidelines that agencies should follow with regard to these potential violations are as follows:

• All patients, regardless of payer source, have the right to freedom of choice of providers. Agency staff members must be careful not to create barriers to the exercise of choice by patients such as knowingly or unknowingly misrepresenting the types of services that agencies provide or refusing to provide physicians’ orders for home care services if particular agencies will be caring for patients.

• Physicians have the right to designate the agency that will provide home care services so long as their designation is based upon quality of care only.

• Agencies should not provide free visits or other services to patients, including services provided after hours by visiting staff on their own time.

• According to the Balanced Budget Act of 1997, hospitals must create a list of Medicare-certified home-care services that provide care in the area where patients reside and who ask to be on the list. Hospital discharge planners and case managers must scrupulously avoid applying other criteria to agencies that ask to be on the list. Hospitals may include agencies on the list in which the hospitals have financial interests, but this fact must be included on the list. This list must be presented to patients as part of the discharge planning process.

• Agencies may provide coordination and liaison of home-care services only after they have received a referral of patients as described above. Therefore, it generally is inappropriate, for agency staff to attend discharge planning meetings at which patients are discussed for whom agencies have not received referrals. Otherwise, agencies may be providing free discharge planning services in exchange for referrals.

Establish relationships carefully

Agencies need physicians who they know can advocate on behalf of agencies to perform the following types of functions:

  • consult with agency staff members regarding patients with complex clinical conditions and the development and maintenance of specialty care programs;
  • attend meetings of the professional advisory board and similar boards and committees;
  • work with referring physicians to resolve issues such as inappropriate orders, failure to return needed signed plans of care and other orders on a timely basis, and lack or responses on a timely basis to reports from staff members about significant changes in patients’ signs and symptoms.

Provider agreements

Since physicians who already make referrals to agencies most likely are able to fulfill these functions, agencies must comply with applicable requirements of exceptions or safe harbors of both the illegal remuneration statute and the Stark rules. These criteria generally require agencies and physicians to enter into written agreements for a term of at least one year that meet the following criteria:

  • Compensation is set in advance at fair market value and is not tied to either the volume or value of referrals made by consulting physicians.
  • Consulting physicians who also refer patients to agencies provide services that are reasonable and necessary.
  • Regulators can verify that physicians actually provided the services for which they were paid.

Agencies also may wish to enter into preferred provider agreements with physicians in which they agree to order home care services from a particular agency. So long as such orders are based on quality of care concerns only and no payments or free services are provided by agencies to physicians, it is likely that they will pass muster with regulators.

It must seem like there is always something to worry about in home care. Try as they may, agency managers cannot eliminate all risks. However, they can minimize the risks associated with marketing by being aware of the rules and making sure that staff members and physicians adhere to them.

[A complete list of Elizabeth Hogue’s publications is available by contacting: Elizabeth E. Hogue, Esq., 15118 Liberty Grove, Burtonsville, MD 20866. Telephone: (301) 421-0143. Fax: (301) 421-1699. E-mail:]