HCFA clarifications restrict physician referrals to hospital HHAs

HCFA has clarified in two recent letters that hospital-based home health agencies who accept plans of care, and thus referrals, from physicians employed by it's hospital parent are likely breaking the law (...hhl 418196).

Below is the full verbatim text of two recent clarification letters signed by Thomas Hoyer, director of HCFA's Office of Chronic Care and Insurance Policy. The first, to attorney James Pyles of Powers, Pyles, Sutter & Verville, Washington, D.C., was issued by HCFA in mid December. The second, to CPA William Cuppett of Doak, Cuppett, & Poling, Charleston, WV, was issued in late February.

The letters clarify HCFAs present interpretation of existing regulations, however, they do not carry the weight of an advisory opinion, statute or regulation.


Letter 1:

Department of Health & Human Services
Health Care Financing Administration
6325 Security Boulevard
Baltimore, MD 21207

[Date stamped Dec. 15, 1995]

James C. Pyles
Powers, Pyles, Sutter & Verville PC
Third Floor
1275 Pennsylvania Avenue, NW
Washington, DC 20004-2404

Dear Mr. Pyles:

I am responding to your request for clarification of the prohibition of physicians to certify and recertify home health plans of care when they have a significant ownership or contractual relationship with the home health agency as defined in 42 CFR 424.22.

If a home health agency is owned by a hospital and that hospital purchases a physician practice and those physicians are then compensated in excess of the indicated thresholds to certify and recertify plans of care, the home health agency is in violation of the provisions located at 42 CFR 424.22.

The regulations indicate that a physician with a direct or indirect business transaction with the home health agency in excess of $25,000 or 5% of the operating expenses, whichever is less, may not certify or recertify plans of care for that home health agency. Business transactions include salaried employment.

In addition, in accordance with 42 CFR 413.17, payment of compensation to a physician by a home health agency's parent organization or related organization where the home health agency is based, would very likely be considered to be paid by the home health agency.

I hope you find this information to be clarifying.

Sincerely,

Thomas E. Hoyer
Director
Office of Chronic Care
and Insurance Policy


Letter 2:

DEPARTMENT OF HEALTH & HUMAN SERVICES
Health Care Financing Administration

William T. Cuppett, CPA
Doak, Cuppett, & Poling, ac
P.O. Box 212
Charleston, WV 25321

Dear Mr. Cuppett:

I am responding to your request for clarification of the home health agency physician certification regulations at 42 CFR 424.22 and section 1877 of the Social Security Act. As you may know, there has been strong interest in the congress in enacting legislative changes in this area, and we deferred responding to this and other letters in anticipation of those changes. We are responding now because we do not know when additional legislation may be considered.

Let me first clarify that the Department of Health and Human Services does not issue advisory opinions of any kind pertaining to the Medicare and Medicaid anti-kickback statute 42 USC 1320a-7b(b) or section 1877, and our declining to do so should not be interpreted as acquiescence by the Government to the arrangements in question. Furthermore, while I am not able to issue an advisory opinion related to a specific financial arrangement, I would be pleased to share the general Medicare policy relating to each of the situations you describe and their relevance to 42 CFR 424.22.

The home health regulations at 42 CFR 424.22 interpret sections 1814(a)(2) and 1835(a) of the Social Security Act (Act). These provisions state that, with respect to physician certification required by the statute for home health services furnished by a home health agency (HHA), and with respect to the establishment and review of a plan for such services, the Secretary shall prescribe regulations which prohibit a physician who has a significant ownership interest in, or significant financial or contractual relationship with the agency, from performing the certification and from establishing or reviewing the plan of care.

Your letter describes various situations involving HHA physician referrals. I will address each situation in the order they were presented.

Situation I

A hospital owns a home health agency. The hospital also employs physicians that work at various hospital clinics and outpatient settings where they provide direct patient care. The hospital is compensated for services rendered in excess of $25,000 per year.

Q1. Can the hospital-employed physicians refer patients to the hospital's owned home health agency?

A1. If the home health agency is owned by the hospital and the hospital-employed physicians are compensated in excess of the thresholds indicated in 42 CFR 424.22, then the physicians may not refer patients to that home health agency.

Q2. Can the hospital-employed physicians establish/review the plan of treatment, or certify/recertify the need for home health care?

A2. If the home health agency is owned by the hospital and the hospital-employed physicians are compensated in excess of the indicated thresholds, then the physicians may not establish/review the plan of treatment, or certify/recertify the need for home health care for that home health agency.

Q3. Would there be a difference if the home health agency were separately incorporated as opposed to being an operating department of the hospital?

A3. If the home health agency is separately incorporated and its costs are not identified on the hospital's cost report, then the hospital-employed physicians may refer patients, establish/review the plan of treatment, or certify/recertify the need for home health care as long as there is no other arrangement between the physicians and the home health agency that violates the restrictions indicated in 42 CFR 424.22.

Situation 2

A home health agency establishes a primary care clinic. The home health agency employs a physician who works at the clinic providing patient care services. The compensation to the physician for the services rendered exceeds $25,000. The employment relationship represents a bona fide personal service arrangement between the home health agency and the physician.

Q1. Can the home health agency-employed physician refer patients to the home health agency, establish/review the plan of treatment, or certify/recertify the need for home health care?

A1. No. The physician is compensated for his services by the home agency in excess of the regulatory thresholds and is, therefore, prohibited from referring patients, establishing/reviewing the plan of treatment, or certifying/recertifying the need for home health services for that home health agency.

Q2. Does it matter whether the clinic is separately incorporated from the home health agency? Would this result in an answer different than provided in 1?

A2. It does not matter that the clinic is separately incorporated from the home health agency. As long as the physician is compensated in excess of the regulatory thresholds by the home health agency for his services, he may not refer patients, establish/review the plan of treatment, or certify/recertify the need for home health services for that home health agency.

Situation 3

A home health agency is a part owner of a separately incorporated rural health clinic. The other owner of the clinic is a physician. The physician-owner is employed by the clinic under a personal services contract to provide patient care services in the clinic, for which he received more than $25,000 per year.

Q1. Can the physician refer patients to the home health agency, establish/review the plan of treatment, or certify/recertify the need for home health care?

A1. If the home health agency's share of the physician's compensation exceed the thresholds as indicated in 42 CFR 424.22, then the physician is prohibited from referring patients, establishing/reviewing the plan of treatment, or certifying/recertifying the need for home health care for that home health agency.

Q2. Will the physician be considered to have an indirect ownership interest in the home health agency that owns a portion of the clinic.

A2. Based on the information provided in this example, since we do not know what percentage of the rural health clinic is owned by either the HHA or the physician, it is difficult to determine whether the physician has a significant interest in the HHA. However, according to section 424.22(d)(2)(ii) of the regulations, if the physician has an ownership interest of 5 percent or more in the mortgage, deed, trust, note or other obligation that is secured by the HHA, if that interest equals 5 percent or more of the HHA's assets, the physician is prohibited from certifying and recertifying plans of care for that HHA.

I hope you find this information to be of assistance.

Thomas E. Hoyer
Director
Office of Chronic Care and Insurance Policy

cc: Senator Rockefeller

 

 

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