When hospitalized patients no longer require ongoing diagnostic or therapeutic interventions or close monitoring for their acute health conditions, they are ready for discharge from the hospital setting. But not all hospitalized patients are ready to return home at discharge and require further care. The hospital’s team must determine the most appropriate setting for the patient, so the patient can continue to recover and reduce the likelihood of re-injury or readmission to the hospital. This post-acute care (PAC) is often provided PAC providers, including long-term care hospitals (LTCHs), inpatient rehabilitation facilities (IRFs), skilled nursing facilities (SNFs), hospices, and home health agencies (HHAs).
PAC providers and hospitals must, out of necessity, work together to coordinate care of hospital patients ready for discharge. Beyond these required day-to-day interactions for treatment and care coordination-type activities, hospitals and PAC providers may also explore other ways to work together to improve care coordination, achieve value-based payment metrics, or further other shared objectives. While collaborations between hospitals and PAC providers can positively impact the quality of care provided to their respective patients, such collaborations can also create an environment that increases certain compliance risks for the PAC providers and hospitals.
The purpose of this article is to highlight “patient steering” and “patient charting”—two practices that have been identified by the U.S. Department of Health & Human Services, Centers for Medicare & Medicaid Services (CMS), and Office of Inspector General (OIG) as compliance risk areas under one or more federal laws. This article does not intend to identify all practices or arrangements between hospitals and PAC providers that could implicate federal law. In addition, laws of the state where the PAC provider and hospital operate should also be considered, including any state fraud and abuse and patient privacy laws. This article also offers practical tips to help identify and mitigate the risks associated with these practices for hospitals and PAC providers.
Patient steering
Congress codified in Section 1802(a) of the Social Security Act the “basic freedom of choice” of Medicare beneficiaries to obtain health services “from any institution, agency, or person qualified to participate” in the Medicare program.[1] CMS emphasized the importance of freedom of choice for patients discharged from a hospital who need PAC by including in the hospital conditions of participation a specific condition pertaining to the hospital discharge planning process. Patient steering can inappropriately interfere with patient freedom of choice and present a compliance risk for hospitals.
Before discussing the compliance considerations raised by patient steering, we will explain what activities or practices could constitute patient steering.
What is patient steering?
While no uniform or regulatory definition of “patient steering” exists, CMS has informally defined patient steering as “directing patients and/or their caregivers to PAC providers that do not align with the patient’s goals of care and treatment preferences.”[2] Patient steering can also be described as otherwise inappropriately influencing patients’ and/or their caregivers’ choice of provider. Inappropriate steering would include, among other things, a hospital referring a Medicare patient to a particular hospice or SNF based on financial motivations of the hospital, instead of making the referral based on what is in the patient’s best medical interests.
What are the compliance risks associated with patient steering?
The OIG has identified patient steering and protecting patient freedom of choice as a risk area for hospitals, especially for hospital discharge planners who are in a position to refer patients to PAC providers such as HHAs and SNF and IRF providers.[3] Beyond possible compliance concerns specific to discharge planning and patient freedom of choice, patient steering in the hospital-PAC provider context can also raise concerns relative to possible violations of the federal Anti-Kickback Statute (AKS) to the extent that patients are steered to particular PAC providers in exchange for remuneration.
Patient steering may jeopardize a hospital’s ability to comply with Medicare hospital discharge planning and patient freedom of choice requirements
CMS has developed Conditions of Participation (CoPs) that hospitals must meet to begin and continue participating in Medicare and Medicaid programs. If a hospital is out of compliance with CoPs, sanctions could include a mandated plan of correction or even possible termination from participation in the Medicare program.
Referring patients to PAC providers with whom hospitals have business relationships or collaborations might, at first blush, seem to make sense since hospitals may feel like they know more about the PAC providers they already work with, or they may even feel like it’s the right thing to do to maintain good relations with the PAC provider. However, these types of referrals may impede a hospital’s ability to comply with Medicare CoPs for hospitals—specifically the Medicare CoP for discharge planning. The discharge planning CoP requires hospitals to assist patients and their families in selecting a PAC provider by using and sharing certain data about available PAC providers; it also requires that hospitals give patients their choice of PAC provider and generally prohibits hospitals from “steering” patients to any particular PAC provider. Specifically, the discharge planning CoP requires hospitals—as a condition of participating in the Medicare program—to have an “effective discharge planning process that focuses on the patient’s goals and treatment preferences and includes the patient and his or her caregivers/support person(s) as active partners in the discharge planning for post-discharge care.”[4]
The discharge planning CoP requires, among other things, that hospitals “inform the patient or the patient’s representative of their freedom to choose among participating Medicare providers and suppliers of post-discharge services and must, when possible, respect the patient's or the patient’s representative's goals of care and treatment preferences, as well as other preferences they express. The hospital must not specify or otherwise limit the qualified providers or suppliers that are available to the patient.”[5] Additionally, the discharge planning CoP requires, for patients for whom the hospital has determined through the discharge planning evaluation that home health or post-hospital extended care services are indicated, that the hospital includes in the patient’s discharge plan a list of HHAs, SNFs, IRFs, or LTCHs (as applicable) that are available to the patient, that is participating in the Medicare program, and that serve the geographic area in which the patient resides (or, for SNFs, IRFs, or LTCHs, the geographic area requested by the patient).[6] CMS acknowledged the potential conflict of interest that hospitals may encounter in this area, noting that while hospitals may have “working relationships with some PAC providers,” hospitals are still expected to present patients with the list of PAC providers consistent with the discharge planning CoP.[7]
At its core, the discharge planning CoP requires hospitals to provide accurate, unbiased information about available PAC providers that provide the post-acute services discharging patients need to assist patients in selecting a PAC provider that can meet the patient’s needs without interfering with the patient’s freedom to choose any Medicare-participating PAC provider. Hospitals that fail to comply with the discharge planning CoP by providing the required list of available PAC providers or by otherwise interfering with the patient’s freedom to choose a PAC provider face possible CMS sanctions up to and including termination of the hospital’s Medicare provider agreement.
Patient steering could raise AKS concerns
Efforts to steer patients to a particular PAC provider can lead to potential liability under the AKS if the steering results from remuneration are given in exchange for the referrals. For purposes of the AKS, the term “remuneration” is broadly interpreted based on the language in the statute to mean anything of value. Thus, PAC providers should be cautious in giving anything of value to hospital personnel, as the government could view that remuneration as having been provided with the intent to influence the hospital to refer (i.e., steer) patients to the PAC provider.
Because remuneration is interpreted so broadly under the AKS, hospitals, and PAC providers that refer to each other must be careful not to provide anything of value to each other for free or less than fair market value. This includes paying for items or services, including personnel, for which the other party would otherwise be responsible. For example, PAC providers should not provide hospitals with free nursing staff or pay for social workers or other personnel to assist the hospitals with discharge planning or other functions, as this would constitute remuneration from the PAC providers to the hospitals and could be construed as an effort to influence the hospital to steer patients to the PAC provider. The compliance risk of improper steering in the discharge planning arena is not new; in June 1995, OIG issued a Special Fraud Alert on Home Health Fraud that included as an example of a possible kickback the practice of some HHAs “providing hospitals with discharge planners, home care coordinators, or home care liaisons in order to induce referrals.”[8]
This type of activity has also been the subject of U.S. Department of Justice (DOJ) prosecutions for violation of the AKS. For example, in April 2021, the owner of a California HHA and hospice pleaded guilty and was sentenced to 18 months in prison in connection with kickbacks paid to discharge planners and case managers of hospitals and SNFs in exchange for Medicare beneficiary referrals. The hospital and SNF employees who received the kickbacks also pled guilty to their roles in the kickback scheme.[9]
In a 2017 case, four California nursing homes agreed to pay up to $6.9 million to resolve allegations that nursing home employees used their corporate credit cards to pay for gift cards, massages, tickets to sporting events, and a cruise given to discharge planners at an area hospital to induce patient referrals to the nursing homes. The nursing homes entered into deferred prosecution agreements in which they admitted that nursing home employees conspired to pay the kickbacks and also entered into a civil settlement that included the $6.9 million penalty and corporate integrity agreements for the nursing homes.[10]
And in 2016, the Lahey Clinic in Massachusetts entered a $1.923 million settlement with the OIG resulting from a self-disclosure the Lahey Clinic made in which it disclosed having “received remuneration” from HHAs “in the form of free administrative services related to discharge planning provided by the [HHAs] staff serving as liaisons for their respective [HHA] employers.” According to the OIG’s announcement of the settlement, there was no written agreement between the Lahey Clinic and the HHAs, and “some of the functions performed by the [HHA] employees were functions that ordinarily would have been performed by [Lahey Clinic] discharge planners or other [Lahey Clinic] staff, and those services constituted improper remuneration.”[11]
As highlighted by the previous examples, the OIG and DOJ will pursue enforcement actions against hospitals and PAC providers who allow financial considerations to impact the care of federal healthcare program beneficiaries (e.g., Medicare/Medicaid beneficiaries).
When outside influences are permitted to interfere with the discharge planning process or influence hospital discharge planners, or, even worse, when PAC provider personnel are actually working in the hospital and performing discharge planning activities for hospital patients, it is easy to see how the discharge planning process can be corrupted and patient freedom of choice compromised.
Patient charting
Before discussing the compliance considerations raised by patient charting, we first explain what activities or practices may constitute “patient charting,” since this may not be a term whose meaning is widely known.
What is patient charting?
As with patient steering, there is not one universal definition of “patient charting.” Generally speaking, patient charting is a form of improper patient solicitation or “trolling” in which one healthcare provider allows another healthcare provider access to the first provider’s patient medical records to “mine” for patient data and/or identify and solicit potential patients for referral.
What are the compliance risks associated with patient charting?
In the context of hospital-PAC provider relationships, patient charting can raise concerns relative to (1) compliance with patient privacy laws and (2) possible violations of the AKS.
Patient charting could raise HIPAA concerns
HIPAA and its implementing regulations must be considered when hospitals and PAC providers are sharing patient identifiable information,[12] what HIPAA refers to as protected health information (PHI).[13] Sharing PHI between hospitals and PAC providers when necessary for treatment of shared patients will generally not raise concerns under HIPAA, such as sharing necessary PHI regarding an individual to transfer such individual to a PAC provider at the time of hospital discharge. In contrast, HIPAA violations and reportable breaches can occur if a hospital grants the staff member of a PAC provider (such as an SNF, hospice, or HHA) access to the medical records of hospital patients to identify patients who might be appropriate for discharge to the PAC provider. This granting of access to view medical records of patients who have not yet been referred or who have not yet expressed a preference to be discharged to the particular PAC provider would likely be an improper disclosure of PHI under HIPAA that could subject the hospital to monetary penalties.
Patient charting could raise AKS concerns
OIG has identified improper patient solicitation activities, including patient charting, as a risk area for PAC providers. In OIG’s Compliance Program Guidance for Hospices, OIG provides the following example of improper patient charting activities: “when a hospice arranges with the administration of a nursing facility to review patient records without the patient’s permission, solely to determine if the patient is eligible for hospice care and to solicit hospice referrals.”[14] OIG warns that hospices should not review medical records of nursing home patients in an attempt to recruit patients for hospice services based on their diagnoses.[15] While OIG’s specific caution in that guidance document is aimed at hospices and their relationships with nursing facilities, the practice of patient charting and the associated risks are not limited to hospices and nursing facilities; any PAC provider or hospital could potentially engage in such inappropriate activities to solicit patient referrals.
Patient charting may form the basis for potential liability under the AKS. In a 2021 court decision from the Northern District of Illinois, that court held that a group of defendants violated the AKS by paying a community care organization that coordinated services for low-income senior citizens to access its client files to market Medicare reimbursable services to them.[16] In Stop Illinois Health Care Fraud, LLC v. Sayeed et al., the parties entered into a management services agreement pursuant to which the defendants paid the community organization $5,000 per month, purportedly for administrative advice and counsel. But according to the testimony of one of the defendants, the payments were for access to the community organization’s files so they could perform data mining—the payments were for access to the community organization’s raw data about its clients and staff to answer questions. The defendants used the data to contact the organization’s clients; if a client the defendants called indicated they “did not have a doctor or could not travel to one,” defendants would send a physician from their sister organization to the person. They also did this for in-home nursing services. The plaintiff argued that defendants’ payments under a management services agreement were really intended to secure access to the client information in the organization’s files that it then used to place solicitation calls, which the court called the “file-access theory” of referral. The court concluded that the “file access theory was legitimate” and that giving the defendants “access to client contact information that was used to solicit clients constitutes a referral.” Thus, because one of the defendants testified at trial that the fees were partly for access to data—i.e., a referral under the file-access theory—the court concluded that the defendants’ inducement was knowing and willful and that they had violated the AKS. The defendants initially prevailed in a bench trial after a motion for a directed verdict. However, the plaintiff appealed to the Seventh Circuit Court of Appeals and the Seventh Circuit reversed the trial court’s decision and remanded the case for further proceedings, specifically to revisit whether the “file-access theory” constitutes a referral. On remand, the trial court found that the defendants violated the AKS.[17]
Practical compliance tips
So how can hospitals and PAC providers successfully work together without running afoul of the laws implicated by patient steering and patient charting activities? We have created a list of dos and don’ts to help PAC providers and hospitals develop compliant practices and avoid violations under the federal laws discussed in this article.
Dos:
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Do make sure all arrangements with referral sources (or to which your organization makes referrals) are in writing and that they are reviewed and approved by compliance and/or legal prior to entering the arrangement—even those without any monetary compensation.
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Do pay fair market value for items and services received from providers for which you are a referral source.
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Do ensure that your organization and its staff perform the responsibilities as required by Medicare CoPs, including discharge planning activities.
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Do assist patients in selecting a PAC provider as required by the discharge planning CoP.
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Do present patients and/or their caregivers with objective data about all available PAC providers on quality and resource use measures specifically applicable to the patient’s goals of care and treatment preferences.
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Do inform patients and/or their caregivers of their freedom to select a PAC provider of their choice.
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Do document all interactions with patients and their caregivers regarding the information about available PAC providers in the patient’s medical record.
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Do look for innovative ways to collaborate to improve care and achieve shared objectives without engaging in improper patient steering or patient charting activities.
Don’ts:
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Don’t offer gifts to actual or potential sources of patient referrals.
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Gifts include, but are not limited to, food, flowers, special event tickets, and gift cards.
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Don’t accept gifts from actual or potential sources of patient referrals.
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Don’t accept free or reduced-cost staff or services from any healthcare provider that is in a position to receive referrals from your organization. If an arrangement seems too good to be true, it probably is.
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Don’t grant access to your patients’ medical records to individuals from other healthcare providers without confirming that such access is consistent with HIPAA and other applicable patient privacy laws.
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Don’t specify or otherwise limit the qualified PAC providers that are available to patients.
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Don’t assume that a “preferred provider”-type designation of a PAC provider will change or otherwise eliminate a hospital’s need to comply with the discharge planning CoP and respect a patient’s freedom to choose a PAC provider.
Conclusion
Hospital–PAC provider relationships create both opportunity and risk. CMS addressed the tension between the need to coordinate care and the risks under the AKS when it issued the final rule modifying the discharge planning CoP:
We understand the commenter’s concerns regarding patient steering. However, we believe compliance with the revised CoP and the fraud and abuse laws, including the physician self-referral law and Federal anti-kickback statute, is achievable.[18]
Both hospitals and PAC providers must ensure they have appropriate policies, procedures, and monitoring in place to ensure their relationships do not inadvertently run afoul of the law and subject them to monetary penalties or other sanctions or enforcement actions.
Takeaways
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Patient steering involves inappropriately influencing patients and/or their caregiver’s choice of provider.
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Inappropriate patient steering can result when a post-acute care (PAC) provider gives hospital discharge planners anything of value to influence or reward referrals.
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Presenting patients with objective data on PAC providers in the community helps ensure compliance with the hospital discharge planning requirements.
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Inappropriate patient charting happens when healthcare providers allow third-party access to patient medical records to identify potential patients for referral or solicitation.
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Disclosure of protected health information by a hospital for prospective identification of patients by a PAC provider will raise HIPAA and possibly Anti-Kickback Statute concerns.
This article is for informational purposes only. It is not intended to be legal advice and does not create or imply an attorney–client relationship.