Post-Acute Providers That Pay to Participate in Discharge Planning Systems Likely Violate the Anti-Kickback Statute

By Elizabeth E. Hogue, Esq.
Office:  877-871-4062
Fax:  877-871-9739

On May 20, 2011, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services, the primary enforcer of fraud and abuse prohibitions, posted Advisory Opinion 11-06.  This Opinion makes it clear that post-acute providers that pay hospitals to participate in e-discharge planning systems likely violate the federal anti-kickback statute.  Hospitals utilizing such systems that require post-acute providers to “pay to play” also likely violate the federal anti-kickback statute.

Specifically, the OIG considered use of e-discharge planning systems by hospitals that are often encountered by post-acute providers.  In many instances, post acute providers are required to pay fees in order to receive referrals electronically through systems implemented by hospitals.  Providers who do not pay required fees receive notice of possible referrals via fax.  Consequently, post-acute providers who elect not to pay to participate in electronic discharge planning systems are significantly disadvantaged and may be effectively eliminated from any chance of receiving referrals because they are unable to communicate in a timely manner with hospital discharge planners regarding referrals.

Based upon the above, the OIG concluded that such arrangements likely violate the federal anti-kickback statute.  The OIG said that companies that provide e-discharge systems to hospitals would be soliciting and accepting, and post-acute providers would be paying remuneration in return for, the arranging for the furnishing of post-acute care services by e-discharge planning companies of post-acute services for which payments would be made by federal health care programs.

The OIG went on to say that such arrangements do not qualify for protection under applicable safe harbors, including the safe harbor for referral services. 

The OIG then considered whether such arrangements constitute minimal risk under the anti-kickback statute. 

First, the OIG noted that hospitals often discharge patients to post-acute providers on a first-come, first-served basis, which means that post-acute providers with the ability to electronically receive and respond to referral requests through e-discharge systems have a significant competitive advantage over non-payment providers.  In fact, according to the OIG, non-paying providers may effectively be eliminated from any chance of receiving patients when hospitals use e-discharge systems.  Providers that pay fees to companies that provide e-discharge systems would, therefore, be more likely to get patients because they paid for the opportunity; not because they provide superior care.

The OIG also emphasized that the costs incurred to fax referrals to post-acute providers that elect not to pay fees to participate in e-discharge planning systems would exceed the costs to transmit referrals electronically.  Hospitals that fax referrals to non-paying post-acute providers provide paying providers with a competitive advantage in obtaining referrals or, conversely, penalize providers that do not pay.

Finally, the OIG acknowledged that some post-acute providers cannot afford to pay to participate in e-discharge systems in order to remain competitive.  Such providers, therefore, risk substantial loss of business.  Providers that pay to participate in e-discharge systems probably face pressure to recoup the costs associated with participation.  These pressures could create incentives to, among other things, prolong patient stays; provide separately billable, unnecessary services; or upcode.  All of these activities could result in increased costs to federal health care programs. 

For all of the above reasons, the OIG said that the use of e-discharge planning systems by hospitals that require post-acute providers to pay to participate are not protected from enforcement action under the federal anti-kickback statute.  Hospitals and post-acute providers are now clearly on notice regarding continued use and participation in such systems.  Hospitals may, of course, continue to use e-discharge systems so long as post-acute providers participate without paying to do so.  Post-acute providers currently participating in e-discharge planning systems for which they have paid or are paying fees to participate should discontinue payments immediately. 

© 2011 Elizabeth E. Hogue, Esq.  All rights reserved.