Penny Wise and Pound Foolish

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The following article is about entering into new business relationships.
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Elizabeth E. Hogue, Esq.

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Fax: (877) 871-9739

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Penny Wise and Pound Foolish

The healthcare industry has been highly profitable for some owners.
Providers welcome this profitability and the resulting viability that it has
brought to the industry. Private equity groups have become frequent
purchasers of healthcare providers, a sure sign of profitability! At the
same time, the environment for the provision of services of all types has
become difficult and perhaps even dangerous for providers. The increasing
emphasis on fraud and abuse enforcement puts providers at greater risk than
ever before for enforcement actions.

Business/referral arrangements have been a key focus of recent enforcement
actions. It is fair to say that providers dare not enter into business
arrangements without knowledgeable advice concerning applicable requirements
that must be met regarding them. Such advice should not just be an
explanation of what providers cannot do. Rather, the goal should be to
assist providers to meet their goals in business relationships without
violating the law. In other words, there is almost always more than one way
to skin the proverbial cat! In many, if not all, instances, the cost of
appropriate advice will be less than the value of the relationships formed
that generate more business for providers.

So, what's the problem? Why do providers continue to enter into
business/referral relationships without meeting applicable requirements,
thereby violating the law and putting themselves and their businesses at
risk? Is it greed, pride, carelessness, a lack of sophistication in
business matters? Why aren't providers willing to spend money on compliant
agreements that will clearly produce more profit than the amount of legal
fees incurred? Whatever the cause, it hurts the entire healthcare industry.

Here are some key areas which require review before engaging in these types
of business relationships:

- Agreements for Care Transition Services

- Agreements to pay physicians for consulting services, if they also
make referrals

- Provision of free items or services to patients

- Provision of items or gifts to staff of referring providers, such
as discharge planners/case managers

- Renting space from referral sources or to providers to whom
referrals are made

- Providing services prior to surgery or so-called "pre-op visits"

- Placement of coordinators/liaisons in the offices/on the premises
of referral sources

- Use of Preferred Provider Agreements

The terms of Preferred Provider Agreements, for example, may vary depending
on the types of providers involved, the states in which they do business,
the benchmarks by which the performance of preferred providers will be
evaluated, etc. In other words, Preferred Provider Agreements must be
carefully drafted. If providers expect to receive more referrals as
Preferred Providers, the investment in effective, compliant Agreements is
clearly justified from a cost-benefit perspective, not to mention compliance

So, don't be penny wise and pound foolish! There is plenty of money to be
made in the healthcare industry, if that is providers' goal, without
violating the law and getting themselves and others in a heap of trouble.

C2017 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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