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Paying Incentive Compensation to Employees in Home Health & Hospice

By Elizabeth E. Hogue, Esq.Pay Performance

Office: (877) 871-4062

Fax: (877) 871-9739

Twitter: @HogueHomecare

ElizabethHogue@ElizabethHogue.net

Incentive Compensation: What’s New?

A hospice that provides services in Oklahoma, Missouri, Kansas and Texas recently agreed to pay $4 million to settle allegations that it submitted false claims under the federal False Claims Act.  The U.S. Department of Justice alleged that the hospice knowingly submitted or caused submission of false claims for hospice care for patients who were not terminally ill.  Specifically, the Justice Department claimed that the hospice engaged in certain business practices that contributed to submission of claims for patients who did not have a prognosis of six months of less.  These business practices included pressuring staff to meet admissions and census targets; and paying bonuses to staff, including hospice marketers, admissions nurses and executive directors based on the number of patients admitted.

Payment of incentive compensation is standard practice in the home care, private duty, home medical equipment (HME) and hospice industries.  The federal statute prohibiting illegal remuneration seems to permit payment of incentive compensation to employees, such as those described above.  Specifically, the statute states, in part, as follows:

(1)          Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind—

  • in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under this subchapter, or
  • in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing or ordering any good, facility, service, or item for which  payment may be made in whole or in part under this subchapter,

shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.

(2)          Whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person

  • to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under this subchapter, or
  • to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under this subchapter,

shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.

There are, however, several exceptions included in the illegal remuneration statute, including the following:

(3)          Paragraphs (1) and (2) shall not apply to—

….(B)  any amount paid by an employer to an employee (who has a bona fide employment relationship with such employer) for employment in the provision of covered items or services…

Consequently, it seems clear that, as long members of the staff are bona fide employees, providers may pay incentive compensation without violating applicable prohibitions regarding payment for referrals.

In addition, on July 29, 1991, the Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services published exceptions to the kickback and rebate statute in the form of safe harbors.  These exceptions or safe harbors include the following:

…(i)  Employees.  As used in section 1128B of the Act, “remuneration” does not include any amount paid by an employer to an employee, who has a bona fide employment relationship with the employer, for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare or a State health care program…

It is, of course, important to note that the hospice in this case settled the allegations without formally contesting them.  This enforcement action, however, is one of several such actions against providers that involve allegations related to apparently impermissible payments of incentive compensation to employees, despite the above language.

These enforcement actions should cause providers to pay attention to such actions and any clarification regarding payments of incentive compensation to employees that they may supply.

© 2015 Elizabeth E. Hogue, Esq.  All rights reserved.

Reprinted with Permission.

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