Agencies Unnecessarily Violated False Claims Act By Providing Kickbacks to ALF's

By Elizabeth Hogue, Esq.

Three home health agencies and their parent company in Cincinnati, Ohio, must pay $4,496,330 to resolve alleged violations of the federal False Claims Act by providing kickbacks to assisted living facilities in exchange for referrals of Medicare patients. The settlement resolves allegations that, between 2013 and 2022, the companies provided lease payments and other valuable benefits; including wellness health services, sports tickets, and meals; to numerous ALFs and their residents. The companies then billed Medicare for the services provided to patients referred by the ALFs. 

Getting more referrals from ALF’s and retirement communities seems to be a crucial piece of the puzzle for all types of providers. As the number of years in which they have been in business increases, ALF’s 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, however, 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. 

How can providers get more referrals from ALF’S and retirement communities? What are the potential legal pitfalls that providers must avoid? 

The most effective way to maximize referrals from these sources may be to take a multi-pronged approach that includes: 

Assigning at least one coordinator/liaison to each referral source on at least a part-time basis 

Use of coordinators/liaisons at ALF’s and retirement communities raises issues related to violation of the federal anti-kickback statute. This statute generally prohibits providers from either offering to give or actually giving anything to referral sources in order to induce referrals. Consequently, liaisons and coordinators must be scrupulous about avoiding the provision of free services to ALF’s and retirement communities and/or their residents. Possible violations include “staffing” an office with an RN who responds to requests from residents in their apartments or has “office hours” to address health conditions of residents. 

Renting space for coordinators/liaisons to occupy so that providers have a frequent or continuous presence on the premises of referral sources to better serve patients 

Renting space from referral sources also involves potential kickbacks, so providers must meet the requirements of the space rental exception or safe harbor. In order to do so, providers must enter into a written lease with the facility/community for a term of least one year. The lease must include the number of square feet providers are renting. Rent must be set in advance at fair market value and cannot take into account either the volume or value of referrals received. Finally, providers may rent only the amount of space that is commercially reasonable or that they actually need. 

The OIG has provided significant guidance about these requirements, which providers must master before they establish these types of relationships. Common pitfalls for providers is insistence by ALFs that providers must rent an entire apartment, whether or not they need it, and must pay an amount equal to the residents’ monthly rent, which includes food and other services. 

Entering into Preferred Provider Agreements 

Preferred Provider Agreements may be verbal or in writing. There may be significant value in reducing these preferred provider relationships to writing. These types of relationships raise issues related to patients’ right to freedom of choice of providers. The common law or court decisions require providers of all types to honor patients’ right to freedom of choice. There are also federal statutes that guarantee this right to Medicare and Medicaid patients. In addition, states sometimes address these issues in applicable statutes and regulations. For this reason, providers should not attempt to use standard or “sample” Agreements, but must adhere to requirements in all of the states in which they use these types of Agreements. 

Providing a full range of screenings and educational events for and about common chronic illnesses or community awareness activities 

ALF’s and retirement communities often ask providers to conduct educational events and basic screenings for common chronic conditions. Generally, providers may do so if they walk a relatively fine line between engaging in community awareness activities and providing free skilled services to residents that exceed $15.00 in value at a time. At a minimum, such activities must be conducted consistent with a detailed policy and procedure that governs the provision of such services, so that providers do not violate the anti-kickback statute. 

Establishing relationships with ALF’s and retirement communities may result in numerous referrals to post-acute providers. Such relationships should be based on standard documents and comprehensive policies, as described above, in order to ensure compliance. Legal representation is essential for the development and implementation of these documents due to the complexity of the issues involved. 

Enforcement actions like those described above are avoidable.