Legal: Recent Case Demonstrates Pitfalls of Getting Referrals from Assisted Living and Independent Living Facilities

Article Highlights

A legal case between referrals: assisted living, independent living facilities, and home health
Details of the case ruling
What to consider in referral relationship agreements

Getting more referrals from assisted living facilities (ALFs) and independent living facilities (ILFs) seems to be a crucial piece of the puzzle for many types of post-acute providers, including home health agencies, hospices, private duty agencies, and HME companies. As the number of years in which they have been in business increases, ALFs and retirement communities are more eager to assist their residents to “age in place.” This means that they often view availability of services from post-acute providers as essential to allow them to achieve this goal.

While providers compete aggressively in the marketplace, they cannot lose sight of the fact that the healthcare industry is highly regulated. With ever-increasing emphasis on fraud and abuse compliance, providers cannot afford to violate the law. A recent case involving Watermark Retirement Communities illustrates this point.

This suit was initiated by a former director of strategic growth for the home health company who filed a qui tam, or whistleblower, case under the False Claims Act.

Watermark, which manages 79 retirement communities nationwide, has agreed to pay $4.25 million to resolve claims that it violated the False Claims Act by soliciting and receiving a kickback from a national home health company in order to facilitate referrals from Watermark facilities. Regulators alleged that the home health company purchased two of Watermark’s home health agencies in Arizona in order to induce referrals of Medicare beneficiaries living in Watermark residential communities. The arrangement included eight Watermark facilities in five states, including Arizona, Connecticut, Delaware, Florida, and Pennsylvania, where the two companies had overlapping operations.

Enforcers alleged that Watermark caused the home health company to submit false claims for payments to the Medicare program for services provided to Medicare beneficiaries referred as a result of the kickback transaction from January 1, 2014, through October 31, 2020. The home health company previously paid $17 million to resolve allegations of violations of the False Claims Act for paying a kickback to Watermark.

This suit was initiated by a former director of strategic growth for the home health company who filed a qui tam, or whistleblower, case under the False Claims Act. The former employee or relator will receive a total of $3,765,000 from the settlements with Watermark and the national home health company.

Important Conversations With ALFs and ILFs

Part of the difficulty that post-acute providers may face in establishing relationship with ALFs and ILFs is that owners and managers of these types of facilities may be uneducated about fraud and abuse. They may have erroneously concluded that fraud and abuse prohibitions apply only to providers enrolled in the Medicare Program. They may not realize that the prohibitions apply to all state and federal health care programs, including Medicaid and Medicaid waiver programs, the VA, and TriCare, which may include payments for the types of services they provide.

Executives at ALFs/ILFs may also have lost sight of the fact that, as this case illustrates, both those who offer kickbacks and recipients of kickbacks may be held responsible. In a press release about this case on August 31, 2023, U.S. Attorney Philip Sellinger said, “Today’s resolution demonstrates that the Department is committed to holding accountable not only those who offer kickbacks but also those who receive them.”

Therefore, when post-acute providers establish relationships with ALFs and ILFs they must be prepared to provide more than a little education about fraud and abuse prohibitions in order to help ensure compliant arrangements.

Elizabeth Hogue

Elizabeth Hogue is an attorney in private practice with extensive experience in health care. She represents clients across the U.S., including professional associations, managed care providers, hospitals, long-term care facilities, home health agencies, durable medical equipment companies, and hospices.