Referrals In The SUD Treatment Industry (Part 2 of 3)

Roadmap to safe referral haven

This roadmap is a compilation of solutions to actual situations. It is not a one-fits-all and final document of reference, nor a piece of legal advice. It is aimed at initiating an in- depth approach to the issue of referrals in the SUD treatment industry.

We suggest that providers’ management consult with their attorney prior to finalizing their policies and procedures covering this highly sensitive issue.

1. Policies and procedures:

It is good governance to have a set of policies and procedures integrated into the existing policies and procedures to help staff and management handle situations where SB 349 and similar regulations may apply. JC and CARF already include this subject matter in their standard requirements.

2. Basic principles:

a. Any form of compensation for referring clients is STRICTLY prohibited. This prohibition must be clear and without exception. The law clearly focuses on any compensation in kind (e.g. paying someone or on behalf of someone’s healthcare insurance, paying for someone’s education programs in connection with clients referrals)

b. If there is a doubt as to what might be considered a kick back, the following 2 principles apply:

i. Do not brush the matter under the rug, share it with a compliance officer,

ii. Do not hesitate to contact your attorney (the cost for a consultation is always cheaper than any department of justice inquiry, and perhaps stiff penalties, including not being able to claim monies for services that were rendered to wrongfully referred clients)

c. Providers who have contracted with Federal agencies (Medi-Cal / Medicare) have greater exposure, and therefore this matter is of the utmost importance.

d. Using a third party entity (e.g. a non-profit corporation to pay certain expenses on behalf of one or more referrers) to mask any kickback scheme does not shield perpetrators: it simply hides the conduct and increases the risk for stiffer penalties.

3. Employees – contractors:

a. Focus:most of the time, the issue will come about for marketing / outreach / intake employees and independent contractors.

b. It is not advisable to have employees and/or independent contractors paid based on the number of clients or the amount of services billed, or have their compensation linked to their clients’ economic value for the provider.

c. Bonuses that are not stating the calculation basis¹ but that, over time, match a commission plan are tantamount to kickbacks².

d. It is however possible to compensate employees and contractors for the entirety of their performance and/or the entire business performance (a good metric is the number of aggregated days of sobriety “produced” for a given period).

4. Contractors – marketing:

a. Often referral fees are disguised marketing fees: this is strictly prohibited.

b. Marketing expenses are not prohibited as long as they are in line with what is established.

c. Marketing campaigns and related expenses should be well documented and substantiated (e.g. monies paid for ads on Facebook and other social channels are allowable as long as they are documented. Conversely, one invoice that states that ads creation fee is $ 5,000.00 per month is likely to be suspicious).

d. It is good business practice to request from “marketers” a detailed plan of action before entering into any contract.

5. Provider collaboration:

This is an informal system that has been developed over time out of necessity (See Part 1) .

While there was no need to substantiate inter-provider collaboration until now, a prudent course of action consists in documenting and recording referrals. Providers will usually refer clients to each other because:

While there was no need to substantiate inter-provider collaboration until now, a prudent course of action consists in documenting and recording referrals. Providers will usually refer clients to each other because:

a. One provider is providing a level of care the referring provider does not provide,

b. One provider is full and cannot accept additional clients,

c. One provider is providing specific treatments that are best for the clients,

d. One provider is in network with an insurance that is not carrying the referring provider,

e. Urgency,

f. Common history: over time, the referring provider and provider clients are referred to have developed a fruitful and well coordinated relationship that benefits clients

g. Providers have common interests as long as the referral is handled in a manner that is consistent with applicable practices, does not impede with clients’ rights, and is disclosed to clients prior to being implemented

6. Suggested Documentation:

Once a business relationship is memorialized in a document, and that document supports the parties’ conduct (and is in line with applicable laws and regulations), risks for potential inquiries, investigations, and prosecutions are greatly reduced, if not nonexistent.

Putting in place a system that covers referral policies and procedures is not costly. Not having a system in place can be quite costly!

Let’s not forget that all businesses in the healthcare industry have 2 major unique identification numbers: Federal tax id, and NPI number. If the kickback practices continue, governmental agencies and healthcare insurance could very well require annual reports covering referrals to seek and investigate suspicious patterns (system identical to VAT).

At this stage, the following documentation will cover what the laws require and better protect providers and management from unfounded labor and/or whistleblower claims.

a. Mutual and/or unilateral referral agreements: These agreements can help in identifying where and how providers can help each other better. In the long term, it can even help in establishing a regional strategy to more efficiently serve clients. Such agreements’ content shall be included in Part 3.

b. Referral logs:

A simple spreadsheet with the following data will suffice for now:

- Referred client

- Referral date

- Referring part’s name

- Underlying rationale (See above (3) (a) to (g) for the referral

To be continued..

¹ Examples: (1) bonuses paid quarterly match a specific percentile of Provider’s business (2) bonuses paid match consistently a percentile of the amount of business generated by a given employee, (3) bonuses consistently match the number of clients handled by a given employee.

² Employers have to be aware that whistleblower laws, and unfriendly relationships with employees are the source of most enforcement agencies' inquiries, investigations and prosecutions.