Posted by: Robert Markette
March 12, 2008
Topic: Fraud and Abuse, Self Referral, False Claims

I read an interesting article in this weeks home health line. It was a follow up to a recent pre-conference HHL sponsored. The subject of the article was renting space from ALFs. Because ALFs are an excellent source of referrals, rental arrangements are definitely an area that can be abused. (Of course renting space from any potential referral source can be a source for abuse.) I thought the article made some good points, but it failed to address some other potential risk areas for fraud and abuse with assisted living facilities.

One arrangement I have seen is the ALF that has a related therapy company (perhaps an outpatient therapy company conveniently located to the facility). The ALF will suggest the agency contract with its therapy company for therapists to provide services to patients in the ALF. Contracting for therapists in and of itself is not a problem, in fact, many agencies need to, because they are unable to find enough therapists to hire. However, contracting for therapists with a company that is part of or owned by the ALF can create problems.

The question I always ask clients is, do you need therapists? In other words, could you staff the patients in the facility without the contract? If you can, you will have a hard time justifying your relationship with the ALF's "sister company." Contracting for unnecessary staff almost guarantees the arrangement is not fair market value. If it is not fair market value, you are outside of the safe harbor and may end up being asked a lot of uncomfortable questions.

Another question I have asked when a "therapy contract" is offered is, can you use these therapists to staff your patients outside the facility? Often, the answer to that question is no. In these cases, the government is likely to consider the "staffing contract" simply a quid pro quo to the facility. You get the home health business, but they get a piece of the action for their therapists.

This can become even more complicated if you add in the facility's offer to make the HHA a "preferred provider." Now, a preferred provider agreement, if done properly can be acceptable. (Disclaimer: You should always discuss this kind of arrangement with knowledgeable legal counsel.) But when a lease or therapy contract is involved along with a preferred provider agreement, it may appear that the contract was a quid pro quo for the designation, because everyone knows being the preferred provider is usually good for business.

Home health is very competitive and providers are willing to try many angles to increase business. However, when looking at ways to increase referrals from ALFs, providers should be wary of offers to rent space or staff. Rewarding a referral source with an unnecessary or inflated contract may improve business, but it is also likely to land you in jail. Remember the anti-kickback statute is a felony.

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