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The Three Things Organizations Should Do
Marketing strategies utilized by post-acute providers are generating fierce competition for referrals! As a result, providers are appropriately committing more and more resources to developing their services. Providers, for example, are entering into agreements with referring physicians to provide consulting services to their organizations. These legitimate relationships may be misunderstood by referral sources, such as case managers/discharge planners, who may be uncertain about whether it is legal or ethical to refer patients to providers who have these types of arrangements.
First, it is important to acknowledge that post-acute providers need consulting physicians’ services. Examples of services that are genuinely needed from a business perspective may include the following:
Consultation Regarding Clinically Complex Cases
Assistance with the development and maintenance of specialty programs.
Communication with physicians who provide inappropriate orders for care, do not return signed orders on time, or are unresponsive to staff members who are seeking modifications to treatment plans.
It is certainly appropriate for providers to establish consulting relationships with physicians who also make referrals to the providers with whom they have these types of arrangements. Of course, these types of arrangements raise important legal issues related to potential violations of the federal anti-kickback statute (AKS), the federal so-called Stark laws, and state statutes that are likely to be similar to these federal statutes.
Providers are likely to avoid violations if they meet the requirements of the personal services “safe harbor” under the AKS and the contractual exception under the Stark laws. The safe harbor and exception generally require providers to pay consulting physicians who also make referrals to them based upon written agreements that require payments at fair market value for services actually rendered without regard to the volume or value of referrals received.
Three Things Providers Should Do
The Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS) continues to scrutinize these types of relationships carefully. From a practical point of view, therefore, providers should do the following in addition to meeting the requirements described above:
- Providers should develop standardized agreements and use them consistently with all referring physicians who receive consulting fees from them. Providers cannot afford to use a variety of different agreements that may not meet the requirements described above. Staff must understand that they can use only the standard approved agreement and cannot modify it without advance written approval from a designated, knowledgeable individual.
- Documentation of services rendered, and the amount of time spent in these activities is absolutely crucial. Providers should develop and implement policies and procedures that permit payments to physicians only after appropriate documentation to support payments has been received and reviewed, including dates of which services were performed, descriptions of activities and the amount of time spent on each activity.
- Providers should not have agreements for consulting services with physicians whose services they do not actually use, even if they make no payments to them. Providers should terminate the agreements if they do not need the services covered by the agreements. Otherwise, it may appear that the only purpose for the agreements is to induce referrals, as opposed to a documented need for services.
Although there are usually no limits on the number of consulting physicians/medical directors that providers can have at any given time, a very large number is likely to invite scrutiny by regulators and should be avoided. How many is too many? The number should certainly bear some relationship to the size of the provider organization and the geographic area served.
Beyond this general guideline, common sense must prevail. The bottom line is: does the Agency have legitimate work for every consulting physician?
The commercially reasonable services consulting physicians are asked by providers to perform cannot be related to the volume and value of referrals made. Providers cannot, for example, ask referring physicians to assist with quality assurance activities that entail review by consulting physicians of the charts of patients they referred to the pro vid er so that the more referrals made, the more money consulting physicians make. Providers are more likely to avoid enforcement activities when they follow these practical guidelines. Violations hurt providers and referral sources alike. Expenditures of financial and other resources to get it right are certainly justified in view of the possible adverse consequences.
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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.