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Should you practice in a doc's office?

Rehab Regs, January 4, 2000

If you're like most providers, you've spent a lot of time this past year thinking about your clinic's finances, and thinking of ways to increase revenue.

Many therapists consider entering into a leasing arrangement with a physician to compensate for declining Medicare reimbursement. But here's something else to think about: Without great caution, you may be setting yourself up for compliance violations that carry stiff penalties. Therapists who rent space in doctors' offices are being scrutinized for Medicare anti-kickback violations.

Most therapists know that they cannot provide direct kickbacks to physicians for referring patients. But many therapists do not realize that showing their thanks for referrals by giving physicians rental rebates is considered a kickback and can land therapists in trouble. These days a therapist must check out all possible compliance exposures and oftentimes check with his or her attorney to ensure that business relationships are legitimate.

The pros

For physicians, the advantages are tempting:

The practice can earn extra income by leasing space to therapists
Therapists might attract new patients to the physician practice
The location would be convenient for those patients who need therapy

For therapists, such an arrangement could mean more access to patients.

Some contracts call for therapists to have full-time use of one or more offices or exam rooms, but most contracts are for part-time use. These contracts typically allow the therapy hours to be expanded should business volume warrant. Decide whether the physician's receptionists and front-office staff will perform services for your practice.

"In this health care environment, therapists and doctors are looking for new, creative ways to develop relationships so that patients get the services they need and are supposed to have," says Judy Thomas, director of Reimbursement and Regulatory Policy for the American Occupational Therapy Association.

Pay now or pay later

The legalities can be a little murky, however.

In some instances there may be an implied business relationship-for instance that physicians will automatically refer therapy patients to you. This sort of relationship comes dangerously close to resembling an illegal kickback arrangement that carries fines up to $25,000 and possible imprisonment of up to five years. Violation of the law can also result in exclusion from Medicare, Medicaid, and other government programs.

"And managed care plans might not want to continue with you," said Nancy Beckley, MS, MBA, president of the Brandon, FL-based Bloomingdale Consulting Group. "They may think there's an incentive to over refer."

Under the anti-kickback statute, it is a crime to pay or receive anything of value in return for Medicare patient referrals.

So it you intend to open shop in a doctor's office what should you do?

1. Demonstrate compliance. First of all, before you enter into a lease arrangement with physicians, structure the relationship in such a way that you demonstrate your compliance, advises Bob Saner, Esq., counsel for the Medical Group Management Association.

You have the duty to ensure that the rent is set at a fixed, fair-market value. Furthermore, you have to document the relationship so that you can prove to government agents that you're not violating the anti-kickback statute or Stark II, the physician self-referral law.

2. Document the rental arrangement. Be aware that Medicare carriers and fiscal intermediaries may suspect illegal referrals if they see services being provided by two separate providers in the same location.

"That's why it's important to document," says Jonathan Kweller, Esq., a compliance consultant with QuadraMed Corp., in Bethlehem, PA. "The fact that the providers are operating in the same facility is going to raise a red flag just because they have the same billing address. It makes it very important that they do all the prep work in putting together the contract information."

3. Hire a health care attorney. Have a health care attorney-not just any attorney-look at your leasing agreement. "You want someone who understands fraud and abuse and the Stark laws," Beckley says. Make sure he or she is aware of your state's "mini Stark laws," in addition to the federal Stark laws. Some states have their own anti-referral laws.

And Saner suggests consulting a health care lawyer to structure some sort of employment or contractor agreement. In most states, a therapist can work for a physician practice, he says.

"From a fraud and abuse standpoint, the employment model is best and simplest," he says. "If the therapist is a physician's employee, and all the services are provided by your practice, you can refer to them without worrying about Stark and anti-kickback."

While the employment relationship certainly will not get physicians or therapists around declining Medicare reimbursement, it will ensure that the referring relationship is legitimate.