Updated on: November 29, -0001

Caution Urged for Contractual Obligations

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Original story posted on: April 13, 2016

Many hospitals have utilized the services of a third party to provide medical services to hospital patients. A word to the wise is to be careful in your decision-making regarding this type of contractual obligation. The receipt of payment by the provider for the services discharges the liability of the beneficiary or any other responsible person to pay for the service.

In permitting providers to furnish services under arrangements, it was not intended by the Centers for Medicare & Medicaid Services (CMS) that the provider merely serve as a billing mechanism for the other party. Accordingly, for services provided under arrangements to be covered, the provider must exercise professional responsibility over the arranged-for services. The provider's professional supervision over arranged-for services requires application of many of the same quality controls as are applied to services furnished by salaried employees. The provider must accept the patient for treatment in accordance with its admission policies and maintain a complete and timely clinical record on the patient, including diagnoses, medical history, physicians’ orders, and progress notes relating to all services received. In addition, the hospital must maintain liaison with the attending physician regarding the progress of the patient and the need for revised orders. Finally, the provider must ensure that the medical necessity of “under arrangement” services will be reviewed on a sample basis by the utilization review (UR) committee, the facility's health professional staff, or an outside UR group.  If this is cost-effective, then proceed, but be mindful of the clinical requirements. 

Joint ventures have specific regulatory guidance as spelled out in 42 C.F.R. Section 413.65 (f). The facility or organization that operates as the joint venture must be partially owned by at least one provider and must be located on the main campus of a provider that is a partial owner. CMS does not allow joint ventures involving off-campus, provider-based medical activities. In addition, the joint venture must be provider-based, associated with that one provider whose campus on which the facility or organization is located.

I have discussed CMS checklist documentation requirements in previous articles. You are required to submit a copy of your joint venture agreement and a copy of the map of the main campus so a Medicare Administrative Contractor (MAC) reviewer can identify the location on the map where the facility or organization is housed. Finally, you must meet all of the requirements applicable to all provider-based entities, which include licensure, clinical service integration, financial integration, and public awareness. 

Management contracts are cited in the regulations at 42 C.F.R. 413.65 (h), and CMS requires that they must meet the requirements in subsection (d) and (e) as well – if not located on the main campus, there is not to be an allowed arrangement. Provider-based departments (PBDs) operating under a management contract must document that the main provider employs the staff of the facility or organization that is directly involved in the delivery of patient care, except for management staff and staff who furnish patient care services of a type that would be paid by CMS under a fee schedule established by regulations under 42 C.F.R. Section 414. No “leased” employees (i.e. personnel employed by the management company) can be involved in the delivery of patient care. There is also a requirement that administrative functions be integrated with those of the main provider and the facility or organization. Finally, the main provider must have control over the operations of the facility under management and must hold the management contract; it cannot be held by a parent entity.

As I have done in previous articles, I will present a valuable Provider Reimbursement Review Board (PRRB) appeal tip for you to consider should you find yourself in a controversy regarding a provider-based determination.

Providers and MACs can resolve their disputes informally through the use of a form of alternate dispute resolution, i.e., mediation. The PRRB’s mediation program is a flexible, confidential process designed to facilitate voluntary resolution. Trained mediators from the Office of Hearings conduct mediation sessions. Mediators help improve communication, assist the parties in articulating their positions, and ensure that each party understands those positions of its opponent. The mediators facilitate resolution but do not render a decision or dictate a settlement. The mediation process typically resolves 90-95 percent of cases that are referred to this process without a hearing.

The parties are required to have in attendance at the session someone with the authority to settle the matters at issue and sign the mediation agreement. The parties may be represented by counsel or a consultant. All proceedings at the mediation are confidential, including all settlement negotiations.  

At the mediation session, the mediators will typically ask the provider, as the moving party, to summarize its position first, after which the MAC states its position. Following these presentations, the mediators also may meet privately with each party to discuss the issues. If the parties voluntarily reach a resolution on some or all issues, they draft and sign a mediation agreement.

Take advantage of this mechanism and you will resolve issues such as these in a most efficient and cost-effective manner.

About the Author 

Stanley J Sokolove, CPA, is a former CFO technical compliance monitor for CMS. In that role, Mr. Sokolove provided oversight of the banking, finance and internal controls for CMS relating to NHIC, Corp., the DME MAC for Jurisdiction A. Prior to this position, Mr. Sokolove was an Administrative Law Judge, serving as a member of the Provider Reimbursement Review Board in Baltimore, Md. Mr. Sokolove is a member of the RACmonitor editorial board and makes frequent appearances on Monitor Mondays.

Contact the Author

ssokolove@comcast.net

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