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OIG Prohibits Arrangements for Therapy Services in Long-Term Care Communities

The following article is about arrangements between long-term communities and therapy companies to provide therapy services to residents.

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Elizabeth
 
Elizabeth E. Hogue, Esq.
(877) 871-4062
On November 17, 2021, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS) issued OIG Advisory Opinion No. 21-18 that addresses the provision of therapy services in various types of long-term care communities, including skilled nursing facilities (SNFs), assisted living facilities (ALFs) and full-service continuing care retirement communities. The OIG concluded that joint ventures between therapy companies and long-term care communities violate the federal anti-kickback statute.
 
Home health providers have often expressed concern about so-called “therapy rooms” in long-term care facilities. From the point of view of home health providers, including marketers, the use of “therapy rooms” for outpatient therapy services, as opposed to home health services, may be problematic. Patients who may benefit from other services provided by home health agencies, such as nursing and home health aides, may not receive these services when referred to outpatient therapy. In addition, patients may be required to pay co-payments for outpatient therapy services billed to Part B when they could, in many instances, receive therapies from home health agencies with no co-payments.
 
The recent Advisory Opinion from the OIG may put a damper on some arrangements between therapy companies and long-term care communities. The facts upon which the Advisory Opinion is based are that a contract therapy services company that provides management of day-to-day operations and therapy staffing for rehabilitation programs would enter into joint ventures with companies that directly or indirectly own long-term care communities. Joint venture entities would provide contract therapy services to rehabilitation programs in the communities.
 
The therapy company would enter into management services agreements (MSAs) with joint ventures to provide clinical and back-office employees, space and equipment necessary for the operation of the joint ventures in exchange for a fee that is consistent with fair market value (FMV). In addition, long-term care communities would purchase a 40% interest in the joint ventures and the therapy company would own the remaining 60% of the joint ventures. The purchase price paid by the communities would be at FMV. Distributions to the owners of the joint ventures would be proportional to their respective ownership interests.
 
Communities' investments would be based, in part, on expected referrals from the communities to the joint ventures. Although the communities would not be required to make referrals to the joint ventures, the expectation is that they would do so. Communities would likely terminate current contracts for the same therapy services as a result of their ownership in the joint ventures.
 
The joint ventures would not bill federal and/or state health care programs and other payors directly for its services. Rather, joint ventures would bill communities that would be responsible for billing and collecting from payors.
 
In considering these arrangements, the OIG first acknowledged that the small entity investment safe harbor may be applicable if all of the requirements of this safe harbor are met. The key to this safe harbor is that no more than 40% of an entity's investment interests may be held by investors in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity. In addition, no more than 40% of an entity's gross revenues may come from referrals or business generated from investors. Investors that provide items and services are classified together with investors who make or influence referrals to the entity.
 
The OIG concluded that the proposed joint ventures did not meet the requirements of the safe harbor described above. The primary basis for this conclusion was that more than 40% of joint ventures would be owned by investors in a position to make or influence referrals, furnish items or services, or otherwise generate business for the joint ventures. Likewise, joint ventures would derive more than 40% of their revenues from referrals from communities, at least initially.
 
The OIG also rejected these arrangements because communities may generate profits based on the difference between fees they pay the joint ventures and reimbursement received from various payors.
 
Consequently, the OIG concluded that the proposed joint ventures present a host of concerns, including patient steering, unfair competition, inappropriate utilization and increased costs to federal health care programs. In fact, said the OIG, the proposed joint ventures exhibit many of the same attributes that are problematic contractual joint ventures identified by the OIG in its 2003 Special Advisory Bulletin on Contractual Joint Ventures. In other words, the proposed joint ventures would clearly violate the federal anti-kickback statute.
 
This Advisory Opinion should cause therapy companies to avoid these types of joint ventures and should also cause them to carefully review current contractual arrangements to determine whether they violate the OIG's prohibition on contractual joint ventures.
 
©2021 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.

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