Medicare Compliance & Reimbursement

When reports of pharma kickbacks involving nursing homes hit the media, you know it's time for your facility to review how it's doing business with pharmacy and other ancillary providers.

Background: Omnicare forked over $98 million to the government to resolve allegations that the company engaged in numerous kickback schemes. These included accusations that the  ompany solicited and accepted kickbacks from Johnson & Johnson for recommending doctors prescribe Risperdal to nursing home patients. The feds also alleged that Omnicare "regularly paid kickbacks to nursing homes" in the form of consultant pharmacist services that were less than the provider's costs and fair market value, according to a DOJ release. Omnicare's goal, claims the DOJ was to "induce nursing homes to refer their patients to Omnicare for pharmacy services" (The complete report is posted online at:

 http://www.justice.gov/opa/pr/2009/November/09-civ-186.html).

A separate federal complaint alleges Omnicare gave two nursing home chains a $50 million kickback in exchange for allowing it to continue to provide pharmacy-consulting services to the chains' nursing homes, the DOJ reports. The kickback involved a property transaction that the DOJ claims was "worth far less than $50 million."

Nursing facilities can take these steps to keep their transactions with ancillary providers, including pharmacy consultants, out of the fraud-andabuse zone.

1. Specify the Duties of Consulting Pharmacists. The best way to prevent kickback allegations is for the facility to spell out these duties either in the main institutional pharmacy agreement or in a separate agreement, says attorney Howard Sollins with Ober/Kaler in Baltimore, Md. "Some states require a separate agreement for consulting pharmacy services," he notes. The American Society of Consultant Pharmacists (ASCP)'s policy statement on the issue doesn't support legislation requiring pharmacy dispensing and consultant pharmacists to be separate entities. But it does say the organization supports separate contracts, notes Carla Saxton McSpadden, RPh, CGP, with ASCP.

Don't miss: The Office of Inspector General (OIG) supplemental compliance guidance for nursing homes spells out the consultant pharmacist's regulatory duties on pages 56837 and 56838 (Read these pages at: http://oig.hhs.gov/fraud/docs/complianceguidance/nhg_fr.pdf).

The bottom line: The OIG compliance document notes that, "whatever the arrangement or method used, the nursing facility and consultant pharmacist should work together to achieve proper medication management in the facility," says McSpadden.

In addition, the facility must follow federal requirements to ensure that antipsychotic or other psychotropic medications aren't a chemical restraint or an "unnecessary medication," advises the OIG guidance.

2. Strive for Fair Market Value (FMV). The FMV analysis can involve evaluation of a number of factors, says Sollins. But most importantly, the payment shouldn't fall below the "applicable costs incurred in providing the consultant pharmacist services," he says. Make sure the invoice reflects any discount, even if it's not below costs, he urges.

3. Steer Clear of a "Swapping" Arrangement. That occurs when a facility pays a pharmacy provider a discounted rate below FMV for bundled Part A services in exchange for the opportunity to provide Part D or Part B services which the pharmacy bills directly to Medicare.

The same concept applies to any relationship the SNF has with an ancillary provider that provides products or services to the facility under Part A and Part B. "Discounts are not inherently illegal," Sollins advises. "The amount and documentation of the discount are relevant in determining whether prohibited 'swapping' is involved."

Suspicious signs: Suspect arrangements are ones that, according to the OIG supplemental compliance guidance, "include below-cost arrangements" or deals where the provider offers better pricing to a customer with federal healthcare program referrals than it does to customers without such referrals. "Other suspect practices include, but are not limited to, discounts ... coupled with exclusive provider agreements and discounts or other pricing schemes made in conjunction with explicit or implicit agreements to refer other facility business."

Key concept: Beware "giving an entity a sweeter deal [than you would someone else] due to the expectation of getting a return in the future," counsels attorney Robert Markette Jr., with Gilliland & Markette LLP in Indianapolis.

Agreements. Suppose a nursing facility has some extra space and wants to rent it to a home health agency or hospice that's a referral source. You can get "a pretty solid estimate [of FMV] by consulting with a commercial real estate agent," Markette says. The agent "can tell you the going rate or range for that type of real estate based on square footage," he adds.

"If a nursing home wants to rent to a transmission company or a business totally unrelated to nursing home care, then it doesn't matter," Markette notes. But make sure the renter isn't a potential referral source. An example might be an attorney who subsequently refers clients to the facility as part of an elder care law practice, etc., cautions Markette.