Preferred Provider Arrangements Between Home Health, Hospice and Private Duty Agencies, and Assisted Living Facilities and Retirement Communities

Managers at assisted living facilities (ALF's) and retirement communities are often committed to keeping residents in their facilities for as long as possible. There are, of course, costs associated with filling vacancies. In addition, if residences remain empty for any length of time, then the profitability can be severely adversely affected.

Consequently, to the extent that agencies can assist residents to remain in their homes, ALF's and retirement communities may be extremely interested in establishing ongoing relationships with these types of providers. ALF's and retirement communities can be valuable referral sources for companies, both in terms of the volume of patients and the types of patients referred.

Relationships with ALFs and retirement communities may be especially helpful to private duty or home care agencies in order to “fill the gaps” in care provided by other types of providers of services in patients’ homes.

Management at ALF's and retirement communities may wish to make referrals to a single company or limit referrals to a few providers. The perception among managers of these types of facilities, whether true or not, seems to be that providers are more likely to assist them in meeting the goal of limiting resident turnover if they have preferred provider relationships with them. 

The COVID-19 pandemic may have enhanced the desire to deal with a limited number of providers in order to gain some control over the number of caregivers in communities.

Providers may wish, therefore, to approach ALF's and retirement communities to see if they are interested in these types of arrangements. If they are, management of ALF's and retirement communities may be interested in signing a Preferred Provider Agreement in order to cement relationships with providers.

Preferred Provider Agreements must generally comply with requirements of the federal anti-kickback statute (AKS).

Providers may not understand that this statute is applicable to them even though they are not Medicare-certified and do not receive payments from the Medicare Program. If providers, ALF's, or retirement communities involved in referral arrangements receive any type of federal or state funds, including, but not limited to, payment for services provided from Medicaid waiver programs, managed Medicaid programs, the Tri-Care Program, VA or any other state or federal programs, then the anti-kickback statute may apply. 

The anti-kickback statute generally says that anyone who either offers to give or actually gives anyone anything in order to induce referrals has engaged in criminal conduct. There are, however, several exceptions to this statute that may be applicable. 

Providers must ask two crucial questions regarding the application of the anti-kickback statute to referral arrangements:

1. Is there a kickback?
2. If so, is there an exception or "safe harbor" that permits the arrangement, even though it would otherwise violate the statute?

A kickback or rebate occurs when a provider receives referrals from another provider and something flows back from the provider who received referrals to the referral source. If there is a kickback or rebate, providers must automatically ask the second question listed above. If they fail to utilize applicable exceptions, they could miss out on useful marketing strategies that are likely to result in numerous referrals.

Regarding Preferred Provider Agreements, however, it is important to note that no money or anything of value should change hands between providers and the other party involved in these types of agreements. Thus, there is no kickback.  

Providers can, therefore, enter into Preferred Provider Agreements and avoid violations of the anti-kickback statute so long as no money or anything else of value is given to ALF's and retirement communities in exchange for referrals.

This prohibition includes free services. ALF's may, for example, have to provide inservice education programs or conduct quality assurance (QA) programs in order to maintain licensure. If providers make these services available free of charge, they may have rendered free services in exchange for referrals. 

From a practical point of view, a good rule of thumb to use when evaluating whether activities may constitute free services is to ask whether ALF's or retirement communities would have to expend their own resources to provide these services if they were not provided by companies who receive referrals. If the answer to this question is "yes," then they may constitute impermissible kickbacks.

The parties to Preferred Provider Agreements must also make certain that they honor patients’ choices of providers.

Additional key provisions of Preferred Provider Agreements may include:

• A list of services that providers can render to residents of ALF's and retirement communities
• Representations and warranties of both parties that they have all required licenses, certifications, etc. to conduct business and have not been suspended or excluded from participation in federal and state health care programs, if applicable
• Requirements for both parties to maintain certain types and amounts of liability insurances
• Agreements regarding indemnification of each party for the acts and omissions of the other, if appropriate

The market for home care services is rapidly expanding, but the competition for referrals among providers remains extremely fierce. Providers are well-advised to utilize Preferred Provider Agreements to assist them to increase and/or maintain referrals in order to help ensure profitability.

©2023 Elizabeth E. Hogue, Esq. All rights reserved.

No portion of this material may be reproduced in any form without the advance written permission of the author.