Home Health & Hospice Week

PRRB upholds $40,000 disallowance in medical director compensation.

Would your medical director documentation pass muster under close scrutiny? If not, you could land in hot water.

That's what a Louisiana home health agency owned by LHC Group Inc. found out when Palmetto GBA disallowed more than $42,000 in medical director compensation for fiscal year 1999, according to a Provider Reimbursement Review Board decision issued Feb. 3 (No. 2006-D15).

Acadian HomeCare in Lafayette, LA claimed more than $72,000 on its 1999 cost report for fees for 13 medical directors covering seven branches, the decision says. "The Intermediary's disallowance was based upon a collective lack of documentation, duplication of services, undocumented on-call services and non-allowable lobbying activities," the PRRB notes.

Acadian concurred with the $1,700 disallowance of lobbying activities, but disputed the remaining $40,470.

The HHA needed that many medical directors because it served a large rural area with several culturally diverse populations. And Acadian paid its main medical director $18,000 and alternate medical director $12,400 because they were on call 24 hours per day on a rotating schedule, as supported by contracts and documentation, the HHA maintained.

Palmetto argued that the on-call directors' duties duplicated those of the nursing director and that the alternate medical director's compensation wasn't supported by a contract or by sufficiently specific invoices.

The Board upheld the more-than-$40,000 disallowance, saying it wasn't persuaded "of the need for 24 hour on-call service by multiple medical directors who were paid a flat monthly fee for the service." The patient's attending physician is responsible for emergency medical services for the patient, not the medical director, the PRRB argued.

The flipside: However, the Board did offer a rare dissenting opinion in the case. While the Board majority upheld the disallowance, two Board members expressed their view that the disallowance should have been reversed.

Having a medical director for each branch was justified by Acadian's remote and rural service area, they said. And in reality, HHA staff can't always contact a patient's attending physician for consultation around the clock. "There is nothing in the Medicare regulations or manual instructions that precludes home health agencies from compensating their Medical Directors as Acadian has done," the members said.

Medical Director Kickbacks Widespread Problem

Gene Tischer of the trade group Associated Home Health Industries of Florida cheers the decision as cracking down on a significant industry problem--sham medical director arrangements that are actually ways to pay physicians for referrals. "It's a great opinion," Tischer tells Eli.

Palmetto and the Board allowed the medical director costs for administrative duties such as reviewing patient charts and attending meetings. The Board "allowed costs for services actually rendered that provided a tangible benefit to the HHA," Tischer notes. "It disallowed costs for services that were not necessary."

Experts agree that securing approval of 24-hour on call services is unlikely. "Medical directors don't need to be on call, nurses do," notes consultant Pat Laff with Laff Associates in Hilton Head Island, SC.
 LHC Group didn't respond to inquiries for this story.

7 Tips To Craft Kosher Physician Arrangements

One problem that agencies encounter with medical director relationships is that "today physicians want to get paid for everything, and paid well for their time," notes consultant Tom Boyd with Rohnert Park, CA-based Boyd & Nicholas. In the past, physicians often would serve as HHA medical directors for no charge or a nominal stipend.

"Intermediaries and [the Centers for Medicare & Medicaid Services] tend to look at history and are slow to realize things change," Boyd laments.

Now that HHAs are under the prospective payment system rather than cost-based reimbursement, medical director compensation has shifted from a cost focus to a legal one, Boyd notes.

It's important to keep your arrangements on the up-and-up, warns attorney Joel Hamme with Powers Pyles Sutter & Verville in Washington, DC. "A provider would still want to be sure that any contract is lawful," Hamme notes. And providers must make sure the contract and any documentation "would withstand scrutiny if there were an audit or if the year in question became a PPS base year."

Heed this advice with your medical director relationships to avoid legal and regulatory pitfalls:

• Spell out services in a written contract. In a written contract between you and the physician, determine the specific services the doc will perform as medical director, Hamme advises. The duties should relate to the physician's job title, Laff adds.

That doesn't mean you can't have the physician perform other types of valid duties, Laff points out. For example, some agencies employ medical directors as medical advisors on boards they have for certain diseases such as CHF, COPD, cancer, etc. The duties have to be necessary and reasonable.

• Set out the compensation rate. The written contract should also specify in advance the physician's compensation rate and how it will be paid--a flat monthly fee, hourly, or something else. Either a flat or hourly rate must be reasonable, Boyd cautions.

"For a flat rate, be certain that the anticipated time to perform these duties is a legitimate estimate and results in reasonable compensation," Hamme adds.

• Don't base payment on referrals. The key to staying out of legal trouble is avoiding kickback allegations. "Ensure that compensation is not based or predicated in any way on patient referrals from that physician," Hamme stresses.

Your medical director arrangements shouldn't be aimed exclusively at building referrals, Laff warns.

• Have the physician keep a time record. Authorities expect to see a time record documenting the services your medical director provides, experts agree. The record should include "some specification of exactly what he or she did," Hamme counsels. "Onerous detail is not required, but there should be something that is concrete and not too vague."

Such a record is required even if you pay the director a flat fee, he reminds.

• Have the physician bill you. In addition to a written contract, authorities want to see invoices from the physician for the services he is providing, Boyd advises. The invoices should include the time spent on the duties, he suggests.

• Avoid duplication of services. Even if certain services are reasonable and necessary, there is a limit to how many people are needed to perform them. Don't have two or more people responsible for an identical job, Hamme urges.

 • Segregate non-allowable costs. As the PRRB decision shows, lobbying is one cost Medicare doesn't pay for, Laff notes.

The physician may also perform other services that are non-allowable or that are professional services she bills Medicare or another payor for directly, Hamme notes. "Segregate the time and any provider compensation to the physician for the non-allowable services so it is not claimed as reimbursable."