CORF agreements: Is the revenue worth the risk?
June 7, 1999 4 minutes read
CORF agreements: Is the revenue worth the risk?
What you need to know to avoid running afoul of federal anti-kickback and self-referral laws
If you’re looking to generate a fresh revenue stream by leasing office space for a comprehensive outpatient rehabilitation facility (CORF), make sure you go into the arrangement with your eyes open and your backside covered, experts say. That’s because some federal investigators and even Rep. Pete Stark (D-CA) have begun scrutinizing such agreements for possible violations of the anti-kickback statute and Stark self-referral laws.
CORF rental agreements have become more common largely in response to recent Congressional action that placed caps on physician reimbursement for physical therapy and other rehab services. "Federal laws are limiting rehab payments per provider to $1,500 per case," says Craig Cuden, JD, a health care attorney and CEO of Tomorrow Care Interactive, a Greenville, SC-based practice management company. Now, Cuden says, providers who used to get $2,000 to $3,000 per case are asking themselves, "Where else do I look for revenue sources, because my business has been literally cut in half?" For many, the only solution seems to be increasing the patient load to make up for the revenue shortfall.
But others are accepting offers from private companies proposing to rent space in the physician’s office to set up a separate CORF. Under such an agreement, the CORF is the provider of record and the physicians receive no direct per-patient payments. Even so, investigators remain wary of this type of rental agreement, arguing that by their very nature they imply a kickback-type relationship.
Indeed, in a public statement, Stark says, "Implicit in the deal is the message, Doctor, you can make a lot of money by renting spare office space to me, but I will have to keep busy — through referrals of your patients for rehab and physical therapy."
Stewart Kurlander, JD, a health care attorney with Latham and Watkins in Washington, DC, advises physicians to be wary of the motives of the companies that approach them.
"If they wanted to rent space and have no connection to the doctor, that would be one thing," Kurlander says. "But I don’t think that’s why they’re doing it. They do it to have the connection to the doctor. And the doctor needs to make sure that his compensation is not connected to the volume or value of the referrals for [rehabilitation] services."
Robert Schwartz, MD, a physiatrist at Piedmont Physical Medicine and Rehabilitation in Greenville, SC, says it’s always important to check out any company that approaches you for rental space because of the possible risks involved.
"Make sure you know somebody that knows them, and check with the local medical association to see if they know about them," Schwartz says. "You might not want to call up the FBI, but at least you can talk to someone who’s familiar with the law and ask them to tell you what’s going on."
If you’re still thinking of engaging in this type of relationship with a CORF, make sure that any agreement you sign employs the following "legal instruments," Cuden recommends:
1. Whenever you lease space in your office, make sure you’re receiving fair market value consistent with existing safe harbors under the anti-kickback statute, and with the exemptions contained in the Stark self-referral laws.
2. The same thing goes for renting out equipment. In both cases, the space and equipment are provided for a flat rate every month and aren’t based on the volume or value of activity at the CORF. Negotiate that rate up front and include it in a contract that can’t be altered for one calendar year.
3. While it’s permissible to have one physician in the group serve as a medical director to oversee the activities of CORF patients, be very careful if you choose to go this route. "This is the one people have tended to abuse by just throwing dollars at a doctor holding a medical directorship," Cuden says. "And that’s not permissible."
As with space and equipment rental, any medical directorship agreement must be established using fair market rates. And the medical director must provide appropriate and "true" services to earn the money being paid. Services might include utilization review, quality assurance, or undertaking monthly record review to make sure the proper clinical indicators are in place at the CORF.
4. The only area in which payment needn’t be based on a flat rate per month is management services. The physician group can charge to provide a host of nonmedical services, such as scheduling patients and providing security and janitorial services for the location. In exchange for those services, the CORF pays fair market rates, usually on a "cost-plus" basis. "So the more [the practice] does, the more it can make," Cuden says. He stresses, however, that "cost-plus" isn’t code for "per patient." The payment is tied to the needs of the CORF for the services provided.
"This is not simply a way to convert some of your patient load into payments by flowing patients to the CORF," Cuden says. "It’s a true working relationship where you have to provide services and space and equipment. It’s an additional burden on your staff, but it’s also an additional revenue stream."
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