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By John C. Gilliland II
Health care/employment attorney
Earlier this year, two courts held that home health agencies that discharged patients due to the cost of their care may violate the federal Rehabilitation Act of 1973, a federal law prohibiting disability discrimination in federally assisted programs such as Medicare.
In the first case, a federal district court in Tennessee held that if the home health agency terminated patient services because the severity of a patient’s disability and heavy use of home health, the Rehabilitation Act had been violated. [Winkler v. Interim Services Inc., 36 F. Supp. 2d 1,026 (M.D. TN 1999)]
In the second case, a federal district court in Hawaii stated that if a quadriplegic patient was discharged by a home health agency due to his disability and its concomitant loss of profits, the Rehabilitation Act also had been violated. [Morris v. North Hawaii Community Hospital, 37 F. Supp. 2d 1,181 (HI 1999)]
Under the interim payment system (IPS), a home health agency’s ability to manage its mix of patients in terms of the cost of their treatment can be critical to the agency’s survival. IPS is based on the rationale that an agency can balance the cost of caring for any one patient against the cost of caring for all patients. In other words, if the cost of caring for one patient exceeds the per beneficiary limit for that agency, it is offset by the lower costs of caring for another patient. That rationale may or may not be true for very large agencies but, for most, too many high cost patients threaten the agency with economic ruin.
Nor does it appear that the need to manage patient mix will necessary end with the prospective payment system (PPS), which still involves fixed payments irrespective of the amount of service actually provided. There will still be patients whose needs exceed those covered by the PPS payment. Thus, the issue of what have come to be called "economic discharges" will continue after IPS expires.
In dealing with the high-cost patient, most home health agencies have taken comfort in the requirement of the Medicare conditions of participation that patients be accepted ". . . on the basis of a reasonable expectation that the patient’s medical, nursing, and social needs can be met adequately by the agency. . ."( 42 CFR §484.18) The Health Care Financing Administration (HCFA) has consistently agreed that it is the responsibility of an agency to reject a patient when it does not have the resources, including financial resources, to provide the needed care. Similarly, the understanding has been that if the patient has already been admitted and his or her needs increase, an agency has the responsibility to discharge the patient if it does not have the resources, including financial resources, to provide the increased level of care.
Whether this prevailing view will continue is open to question. In the Health and Human Services’ Office of Inspector General’s (OIG) work plan for fiscal year 2000, the OIG has stated: "[Our] review will evaluate whether home health agencies are discouraging admission of very ill beneficiaries. The home health interim payment system created by the Balanced Budget Act of 1997 imposed a new per-beneficiary limit based on historical visit rates, and the prospective payment system, to be implemented in the FY 2000, provides a simple payment per episode of care under either it or the interim payment system. As a result, home health agencies now have an incentive to keep visits and associated expenditures down. We will determine whether the agencies are dumping’ their sicker beneficiaries or are cutting off care before it is medically warranted."
Irrespective of HCFA’s and the OIG’s position, however, the two court decisions earlier this year show that agencies cannot simply consider Medicare rules as they structure their admission and discharge policies. Other laws can apply as well, especially the Rehabilitation Act of 1973.
In the Winkler decision, Medicare patients of the defendant home health agency alleged they were essentially being dumped and abandoned by the agency as a result of changes in Medicare reimbursement, i.e., due to IPS. They contended the agency wanted to discharge them because they were all "heavy service users and economically undesirable patients." The patients argued this violated the Rehabilitation Act as well as various legal duties of the agency under Tennessee law.
The home health agency moved to dismiss the lawsuit. The court refused to do so. As for the Rehabilitation Act, the court stated what was necessary to state a claim under that law: "The parties agree that to state a claim under Section 504 of the [Rehabilitation] Act, Plaintiffs must show (1) that they are "handicapped persons" under the Act; (2) that they are "otherwise qualified" for participation in the program; (3) that they were excluded from participation in, denied the benefits of, or subjected to discrimination under the program solely by reason of their handicaps; and (4) the program in question received federal financial assistance. . ."
The court did not address each of these requirements specifically. Rather, it considered the home health agency’s argument that the Rehabilitation Act does not apply to discrimination based on the severity of a person’s disabilities rather than discrimination between disabled and nondisabled persons. The court rejected this argument, noting that many courts have held that discrimination based on severity of disability is the same as discrimination based on the disability itself.
In its preliminary injunction enjoining the agency from discontinuing services to the plaintiffs because of their status as "heavy users" of home care services, the court stated: "The Court finds that the core of this case is Plaintiffs’ claim that Defendant decided to terminate Plaintiffs’ home health services based upon a change in the reimbursement of Medicare payments, not based upon a change in Plaintiff’s [homebound] status. The Court finds that this case is primarily a challenge to the termination of home health care services based on an improper or discriminatory criterion — i.e., heavy utilization of services — not a case about whether Plaintiffs are entitled to benefits."
The Morris decision from Hawaii is similar. There the court held that a quadriplegic patient was entitled to a preliminary injunction preventing the termination of home health care benefits. Regarding the Rehabilitation Act, the court stated: "In this case, Plaintiff has alleged, and [the home health agency] does not deny, that his quadriplegia constitutes a disability. Both parties also agree that [the home health agency] is subject to §504 [of the Rehabilitation Act] as the recipient of federal Medicare funds. The parties disagree, however, as to whether Plaintiff is "otherwise qualified" and if so, whether he was denied services due to his disability. . . . Because Plaintiff has adequately alleged both that he is "homebound" within the meaning of Medicare’s regulations and that [the home health agency] terminated his services due to his disability and its concomitant loss of profits, the court has jurisdiction to resolve the disputes."
In granting the injunction, the court also balanced the hardship to the patient and to the agency: "The balance of hardships weighs in Plaintiff’s favor. The risk to [the home health agency], if any, is financial. [The home health agency] contends that it risks exposure to Medi-care fraud if it provides services to Plaintiff for which it knows him to be ineligible. However, Medicare has not declared Plaintiff ineligible. In fact, at no time has Medicare refused to pay for services rendered to Plaintiff. Moreover, the court’s determination of Plaintiff’s eligibility insulates [the home health agency] from fraud exposure. That is, if Plaintiff is eligible for services, [the home health agency] will not be providing him with services for which he is ineligible. Finally, any financial risk to [the home health agency] is outweighed by the serious health risks to Plaintiff."
Although both the Winkler decision and the Morris decision were based on the particular facts before each court, they do show how a home health agency’s admission and discharge policies must take into account all applicable laws — not just Medicare criteria and regulations.
Nor is this limited to just the Rehabilitation Act. Both cases also involved various state law claims. The Winkler case involved allegations of breach of contract, abandonment, outrageous conduct, and violations of the Tennessee Consumer Protection Act. The Morris case included allegations of breach of contract and unfair or deceptive trade practices.
As you structure the admission and discharge policies for your agency, you must take into account all the various laws that can limit your right to admit and discharge patients. This is especially true if you are attempting to achieve a certain mix of patients based on your cost of providing services to them.
Ask your attorney for copies of the Winkler and Morris decisions and read them. Given the significance of those decisions and the OIG’s interest in reviewing agencies admission and discharge practices, you should then have your policies and practices reviewed by your attorney.