Home Health & Hospice Week

TLC settles marketing kickback charges from government for $130,000.

You'd better make sure your marketing compensation passes muster, if you don't want to shell out big bucks to the government.

Tender Loving Care Health Care Services Inc. has learned that lesson the hard way. Lake Success, NY-based TLC entered into a settlement agreement with the HHS Office of Inspector General over marketing compensation, according to a recent post to the OIG's Web site.

The national chain "agreed to pay $130,000 to resolve its liability under the [civil monetary penalty] provisions applicable to false claims and kickbacks," the OIG says. TLC's Miami Lakes, FL franchise allegedly made commission payments for each patient referred by an independent contractor sales representative, according to the watchdog agency.

Further, the commission payments to outside marketers were allegedly based on the type of services utilized by the referred patients, the OIG says.

TLC, which was recently purchased out of bankruptcy by Crescent Capital Investments Inc., disclosed the conduct as required by a corporate integrity agreement (CIA) it's been under since 2000.

As part of the settlement agreement, the company denies the allegations. "Tender Loving Care is totally committed to abiding by our corporate governance agreement, and 'doing things right,'" newly appointed CEO Wes Perry tells Eli in a prepared statement. "One of our core values is to have unwavering corporate integrity and ethics in all we do."

Accordingly, even though the company's CIA with the OIG expires this August, TLC will continue a self-disclosure and corporate compliance practice going forward, Perry says.

I Scratch Your Back, You ... Get Me Fined

While the OIG didn't release details of what TLC did wrong, paying outside marketers on a commission basis for referrals is almost always a bad idea, notes attorney Mark Langdon with Arent Fox in Washington, DC. "This type of quid pro quo arrangement is generally frowned upon by the government," Langdon warns.

"Paying commissions invites governmental scrutiny," cautions attorney John Gilliland II with Gilliland & Caudill in Indianapolis.

And the OIG indicates TLC may have compounded the situation by paying more for patients with higher acuity, and thus higher payments under the prospective payment system. That compensation arrangement "is something that the government disfavors" as well, Langdon says.

Appeals Court Decision Not a Safety Blanket

In February 2004, the U.S. Fifth Circuit Court of Appeals gave its stamp of approval to a scenario where a now-closed home health agency, Affiliated Professional Home Health, paid an outside marketing firm $300 per referral (see Eli's HCW, Vol. XIII, No. 9, p. 69).

But agencies shouldn't take that court decision as a go-ahead for paying commissions to outside marketers, legal experts warn. For one, the case applies only in the Fifth Circuit. And the approval applies only to a very specific set of facts, Gilliland points out.

OIG settlements under the CMP rules don't have to adhere to all the requirements of a federal criminal trial, adds attorney Bob Ramsey with Buchanan Ingersoll in Pittsburgh. And one reason the court overturned the decision was that the prosecutors sought convictions under the first part of the Anti-Kickback Statute instead of the broader second section.