LegalEase: Fraud and abuse in free discharge planning

By Elizabeth E. Hogue, Esq.
Burtonsville, MD

Hospitals are required to provide discharge planning services. Case managers who provide these types of services and agencies that receive referrals from hospitals must be aware of a possible type of fraud and abuse in the form of free discharge planning services.

Anti-kickback and rebate statute

Specifically, there is a federal statute that governs illegal remuneration in the Medicare, Medicaid, and other federal and state health care programs. The statute is often called the "anti-kickback and rebate statute." It basically says that anyone who either offers to give or actually gives anything to anyone to induce a referral has engaged in criminal conduct.

Possible penalties for violation of this statute include imprisonment, fines, suspension and exclusion from participation in the Medicare, Medicaid, and other state and federal health care programs and civil money penalties. So the stakes are extremely high.

The Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services is the primary enforcer of fraud and abuse prohibitions. The OIG stated in a Special Fraud Alert published in June 1995, that the activities of coordinators and liaisons supplied by providers who want referrals cannot supplant the services of discharge planners.

When coordinators and liaisons perform services that discharge planners are supposed to perform, it is a kickback or rebate to referral sources in the form of free discharge planning services. Recently, discharge planners/case managers at hospitals and long-term care facilities seem to have increased interest in entering into written agreements with post-acute providers such as home care agencies, home medical equipment, and hospices to provide coordinators and liaisons.

Although written agreements for the provision of coordinators/liaisons are not required, they may be acceptable if appropriately drafted. Specifically, these agreements must be drafted very carefully to avoid possible kickbacks and rebates.

Here are some of the potential pitfalls of such agreements that should be avoided:

1. Agreements should not require administrators to keep a coordinator/liaison in the facility on a full-time basis unless the number of referrals clearly justifies the commitment of an employee for this amount of time. Otherwise, this requirement may reinforce the likelihood that this arrangement will be viewed by the OIG as an impermissible kickback or rebate. If the liaisons/ coordinators are not providing discharge planning services, there is no need for them to be on the premises on a full-time basis. Rather, an agreement for legitimate coordinator/liaison activities would require them to be available to receive referrals on an as-needed basis only. If providers supply liaisons and coordinators under the proposed agreements on a full-time basis, but do not receive enough referrals to justify assignment of personnel on a full-time basis, it reinforces a conclusion that liaisons and coordinators actually are supplying discharge planning services in exchange for referrals.

2. Agreement for the provision of coordinators/ liaisons should not require them to develop and/or implement an appropriate discharge plan or to document these activities in patients’ charts. Medicare Conditions of Participation for hospitals make it quite clear that it is the job of discharge planners to develop and implement appropriate discharge plans.

3. Agreement for liaisons and coordinators should not include a requirement that they must be RNs. It is common practice in post-acute care industries to utilize coordinators and liaisons who are not licensed professionals who perform very effectively in these positions. A reasonable interpretation of this requirement is, therefore, that liaisons and coordinators must be RNs because they will, in essence, be providing discharge planning services.

4. Discharge planners/case managers should not propose agreements for use of coordinators and liaisons that include indemnification provisions. If no free discharge planning services are being provided, there is no need for indemnification.

5. Hospitals that elect to have written agreements with providers who supply coordinators and liaisons also must be careful to handle compliance with Health Insurance Portability and Accountability Act privacy requirements appropriately. Specifically, providers who supply coordinators and liaisons should not be required to sign business associate agreements. The Standards of Privacy of Individually Identifiable Health Information generally define a business associate as an entity that performs a services on behalf of a covered entity. The OIG is likely to conclude that the services performed by providers as business associates on behalf of hospitals are discharge planning services.

The standards and related materials also make it clear that providers who receive referrals from other providers are not business associates of referring providers. Such referrals, including information shared to make referrals, is part of treatment, payment, and health care operations of covered entities that does not require consent of patients to disclose. Agencies are in the proverbial hot seat as the marketing activities of post-acute providers and enforcement activities by the OIG heat up. They must be careful to keep up to date on these issues.

For a complete list of publications, contact:

  • Elizabeth E. Hogue, Esq., 15118 Liberty Grove, Burtonsville, MD 20866. Phone: (301) 421-0143. Fax (301) 421-1699. E-mail:
  • To obtain more information about negligence and risk management related to wound care in a book — Legal Liability — send a check for $30 (includes shipping and handling) to Elizabeth E. Hogue at the address above.
  • To obtain a copy of Wound Care: Legal Issues, send a check for $35 (includes shipping and handling) to Elizabeth E. Hogue.