Columbia probe has lessons for others

By Elizabeth Hogue, JD

Health Care Attorney

Elizabeth Hogue Chartered

Burtonsville, MD

Hospital-based home care agencies are understandably concerned about the allegations of fraud and abuse that have recently surfaced in the Columbia/HCA Healthcare investigation. After all, the key question that ultimately will be answered is whether hospitals can effectively operate home care agencies in the current regulatory and legal climate.

Government enforcers, such as the Department of Health and Human Services’ Office of Inspector General, as well as the Justice Department, seem convinced that part of the problem is that home health providers owned by Columbia were encouraged to maximize utilization of their services to increase the amount of allocations to parent hospitals.

Reports that such allocations were directly accountable for the total profits of several Columbia hospitals only enhance the credibility of these allegations.

Although the outcome of the Columbia investigation remains in question, government and shareholder actions should support a determination by hospital-based agencies to review their own practices for compliance with applicable statutory and regulatory requirements.

The Medicare program allows hospitals to receive allocations from hospital-based agencies for services that the hospitals provide to the agencies. For example, hospitals may provide management, financial, MIS, and other services. Thus, the greater the number of visits performed by the agency, the more money available to allocate to hospitals. Does this constitute an incentive for self-referral?

It is argued that Columbia hospitals that owned home care units clearly had an incentive to make referrals exclusively to agencies that they owned and to increase utilization of such services as much as possible. According to the Medicare Conditions of Participation, the key question will be whether the services provided by agencies owned by Columbia were in fact reasonable and necessary.

As part of the review of the operations of hospital-based agencies owned by Columbia, investigators also will undoubtedly focus on whether the allocations made to the parent hospitals were appropriately documented. Medicare’s Provider Reimbursement Manual clearly states that the burden of documentation to justify the costs claimed on cost reports rests with the provider. Fiscal Intermediaries (FIs) have a solid history of disallowing entire amounts when the documentation is cloudy or insufficient. Thus, without sufficient documentation to justify allocation to hospitals, the FIs may disallow the entire allocation, which could be disastrous for many hospital-based agencies.

In view of the regulatory compliance issues involved in the Columbia probe, hospital-based agencies should take the following actions immediately:

• Institute a vigorous program of concurrent review of home care services, with a particularly sensitive eye to the issue of whether services are reasonable and necessary or whether they amount to overutilization. Through their continuous quality improvement programs, agencies have historically reviewed various risk indicators retrospectively. Agencies must now enhance their programs to include concurrent review of this crucial issue.

• Hospital staff members who provide services to home care agencies should carefully document these services. The FIs are often demanding time logs that are kept continuously on a contemporaneous basis. Although many staff may view the documentation as especially burdensome, the FIs are increasingly demanding it.

Shareholder lawsuit also noteworthy

Providers also should take note of the recent lawsuit filed against Columbia by some of its shareholders. The suit claims that the hospital and home care giant has violated antitrust laws through its referral practices.

Richard Scott, the former CEO of Columbia, who received a $10 million severance package after resigning, has been widely quoted in the past as saying he was determined to control 100% of health care in the United States. It is easy to imagine the pressure this philosophy created within the Columbia hospital and home care system.

Determining whether Columbia’s referrals to its own home health agencies violated antitrust laws will require technical analysis, but the fact is that hospitals can no longer afford to engage in "piggy behavior" regarding referrals. As a practical matter, the best way to defeat a claim of antitrust violations is to make certain that competitors receive a share of the referrals.

Such referrals could be made on a rotating basis, or based upon the patient’s diagnosis or geographic location. For example, it may be that another provider in the area has a more comprehensive cardiac care program, or offers better pediatric care than the hospital’s agency can.

However, it is becoming increasingly clear that referrals should not be based upon payment source or lack of a payment source.

The extensive investigation of Columbia will provide new insights into how successfully hospitals can own and operate their own home care units in today’s health care environment. And the lesson from this probe must be reflected in the long-term relationships between agencies and the hospitals that own them.