Home Health Referrals Dispute Leads to Supreme Court Petition

A hospital’s refusal to “nudge” patients to a particular home health agency sparked a long-running legal battle that could end at the U.S. Supreme Court, if the justices accept a recently entered petition for them to take the case.

The dispute arose after the Visiting Nurse Association (VNA) of Florida, a home health provider, purchased the home health agency being run by Jupiter Medical Center, a hospital. Under the terms of that 2005 sale, Jupiter agreed to inform patients that it had a “special relationship” with VNA, if the patients had not expressed any preference for a home health provider after being presented with a list of choices. VNA also moved into a workspace in the hospital’s discharge planning area.

The hospital failed to direct referrals in this way and ultimately kicked the home health agency out of the hospital workspace, VNA alleged after initiating an arbitration, pursuant to a clause in its contract with Jupiter to resolve disputes in this manner. The arbitration panel then found in VNA’s favor and entered the $1.6 million interim award.

In asking a U.S. District Court to vacate the arbitration panel’s decision, the hospital began arguing that the original contract with VNA had been illegal because it was tantamount to VNA purchasing referrals, violating state and federal anti-kickback laws. This argument reportedly had not been made during the arbitration proceedings.

The matter made its way through the court system, and in July the Florida Supreme Court ruled in favor of VNA. However, the ruling did not give a green light to the referral process that VNA wanted the hospital to follow. The court ruled only that the Federal Arbitration Act does not explicitly allow arbitration decisions to be modified or overturned due to the fact that the original contract in question might have been illegal. Circuit courts have issued conflicting rulings on this question, the Florida Supreme Court acknowledged in its decision.

On Feb. 4, Jupiter filed a petition for the U.S. Supreme Court to take up the case.

While this case might have more implications for the enforceability of arbitration agreements than anti-kickback laws, the doubts around the VNA plan highlight that home health providers are navigating increasingly uncertain territory when it comes to referrals.

On the one hand, providers need to avoid improper ties, but on the other hand they are being increasingly incentivized to partner closely with hospitals and doctors. For example, Affordable Care Act programs call for greater coordination among hospitals and post-acute providers to prevent rehospitalizations and improve patient outcomes. VNA explicitly was trying to accomplish these types of goals by forging a special partnership with Jupiter.

“The purpose of establishing a working relationship with the VNA is to facilitate the smooth transfer of patients into post-hospital care and thereby reduce the average length of stay for hospitalization,” the Jupiter/VNA agreement stated, according to court papers.

In another recent case, a U.S. Appeals Court broadened the definition of “referral.” Doctors who receive money from a home health agency could be violating anti-kickback laws even if they do not explicitly recommend that agency to patients, the ruling stated.

Written by Tim Mullaney