Management Service Agreement: Is Orange the Fashion Statement You Want to Make?

Management Principles, Inc., or MPI, managed two Medicare-certified home health agencies. The agencies received a significant number of referrals from the Healthcare Consortium of Illinois. The Consortium contracted with the Department of Aging to help coordinate healthcare services for low-income seniors. The Consortium identified seniors who needed home health services and referred them to local providers. It maintained a list of approved agencies to which it made referrals on a rotating basis. The agencies managed by MPI were on the list.

As a part of its arrangement with the Consortium, MPI signed a Management Services Agreement. In the Agreement, MPI agreed to pay the Consortium $5,000 per month in exchange for what the Agreement called “management services” and “administrative advice and counsel.” After the Agreement was signed, the Consortium gave MPI full access to its clients’ healthcare data. Employees of MPI went to the office of the Consortium several times a week, where they reviewed clients’ records, and recorded clients’ contact and medical information.

Are You Seeing Orange Yet?

In 2010, MPI devised a scheme to use this information to bypass the Consortium’s rotational system of referrals by directly soliciting Medicare beneficiaries who might need home health services. If services were provided, the agencies provided services, billed the Medicare Program, and then split the fee with MPI.

MPI paid the Consortium a total of $90,000 over a period of eighteen months. The payments stopped in 2012, but MPI continued to mine the Consortium’s records for potential patients. Between December of 2010 and June of 2015, the agencies billed the federal government approximately $700,000 for services provided to patients referred by the Consortium.

By Now, Definitely Orange!

A watchdog organization filed a whistleblower lawsuit against MPI and the agencies it managed. The lawsuit resulted in a judgment against MPI and the agencies of approximately $6 million.

Here is what providers need to know about what happened in this case on appeal:

• The Court said that the definition of referrals under the federal anti-kickback statute is very broad, including both direct and indirect means of connecting patients with providers. MPI’s activities qualified as a form of indirect referral based on kickbacks.
• Providers that bill the federal government for services performed on patients referred in violation of the federal anti-kickback statute may also be liable under the federal False Claims Act.
• Every claim that is the basis of liability under the False Claims Act must be false by virtue of the fact that the claims are for services that were referred in violation of the anti-kickback statute. Claims for services provided to patients who were not referred in violation of the anti-kickback statute are not false claims.  In this case, patients referred to MPI in the Consortium’s normal rotation system were not false claims.

To read the entire decision of the Court, see Stop Ill. Health Care Fraud, LLC v. Sayeed [Nos. 22-3295 and 23-1943 (7^th Cir. May 2, 2024)] at https://caselaw.findlaw.com/court/us-7th-circuit/116127399.html.

Copyright © 2024 Elizabeth E. Hogue, Esq. All rights reserved. No portion of this material may be reproduced in any form without the advance written permission of the author.