Paying Your Marketers Properly – Revisiting the Rabbit Hole … Part 2: Health Care Laws – Anti-kickback: Employees

© 2013 Paul Hirsch

A brief note to the Readers: First, I would like to thank all of the people who have taken time to comment on this article series, and those who have taken time to email me expressing interest in this subject. I know it has been longer than I ever anticipated, but FINALLY I am posting the next part of this “series.” I appreciate everyone’s patience, we are a small office (3 people), and when we had 4 different cases in various phases of litigation simultaneous blog posting and website updates took a far backseat!

marketingPart 2: Health Care Laws – Anti-kickback: Employees

We (here at the firm) have almost always approached the issue of paying marketers form the standpoint of: “in most situations the best approach will be to treat them as an employee, rather than as an independent contractor.” Our original article articulated this in a very basic manner.

So why is this the best approach?

Please note that the term “best” is subjective, this might not be the best approach in certain instances, but we believe that more often than not it will be the simplest approach and minimize an employer’s exposure to liability.

Understanding the “why” necessarily requires looking into the history behind the federal Anti-kickback laws, the impact they had on the healthcare industry, and how the law (and accompanying regulations) adapted through the years.

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  •  The Back Story: Some readers might wonder why this is even a discussion. For those readers, and for those who have not thought about the Anti-kickback laws in some time, here is a greatly condensed explanation:

ALL healthcare providers who participate in the Medicare, Medicaid, or any other healthcare program that is funded by federal dollars are subject to the federal anti-kickback laws. In 1972 Congress responded to abusive practices by healthcare providers participating in the federal healthcare programs by enacting a law which is commonly known as the anti-kickback statute. Initially, this law simply prohibited soliciting or offering a “kick-back, bribe, or rebate.” Each violation of this law was punished as a misdemeanor, a relatively minor offense.

In 1977 Congress elevated the possible punishment for violations of the statute to a felony, and they expanded the scope of what actions were prohibited. Congress realized that the implications of continuing abusive practices of the publicly funded healthcare programs must be stopped in order to ensure effective delivery of healthcare to a growing population of participants. They expanded the reach of this statute by making its punishments apply to “any remuneration.”

In 1977 the statute essentially said the following:


◊   offers to pay, pays, receives, or asks for;
◊   ANY remuneration (including any kick-back, bribe or rebate)
◊   directly or indirectly; overtly or covertly; in cash or in any other form;
◊   in return / exchange for furnishing, purchasing, leasing, arranging for, or referral related to;
  ANY healthcare item or service which might be paid for partially or fully by the federal government
  … can be found guilty of a felony punishable by a fine of $25,000, 5 years in prison, or both for each violation.

Gavel 240 x 180

At this point, the anti-kickback statute substantially became what it is still today, and because it is SO broadly worded, it applies to an overwhelming variety of healthcare related transactions. Congress realized this when they implemented it in 1977. Congress sought to ensure that otherwise legitimate transactions would receive an ‘exception’ by  stating that this statue would not apply to a few specific transactions.

Even though this 1977 revision included specific protections for “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.” This and a few other exceptions were included in the text of the statute to help ensure that the statue was only applicable against the abusive practices it was aimed at stopping.

Only 3 years passed before Congress recognized that their revised language was so broad that it was causing a large amount of uncertainty in the healthcare industry. Healthcare providers were unsure of what transactions or relationships were a violation of the statue. Congress responded by revising the statute in 1980, inserting a “mens rea” requirement (a requirement present in most criminal statutes which means only people who have the specified level of intent may be found guilty of violating the statue). The law now requires that violations be “knowing and willful” in order to be punishable.

Congress took the time to specify that it was “concerned that criminal penalties may be imposed under current law to an individual whose conduct, while improper, was inadvertent.” Also, the 1980 changes are “to assure that only persons who knowingly and willfully engage in the proscribed conduct are to be subject to criminal sanctions.”

Best Intentions Road 240 x 160As is often the case, Congress’s best intention-ed actions did not provide the desired results (we all know what road was paved by best intentions).
By 1987 the complaints of over breadth of the wording in the statute and rising concerns about fraud and abuse in the federal healthcare industry rose to the point that Congress had to act. Congress’ response was to issue a comprehensive set of amendments to the federal healthcare system and the anti-kickback statute.

These amendments added that violators of the anti-kickback statute could also be subject to exclusion from participation in the healthcare programs if they were convicted of a criminal offense in connection with healthcare items or services. Simultaneously, Congress allowed the Department of Health and Human Services (HHS) to issue guidance and rules concerning healthcare transactions and relationships. This delegation of power is a notable point in the HHS’s history, because Congress instructed the HHS to issue “safe harbors” for certain transactions, financial relationships, and interactions. HHS was empowered to “promulgate regulations specifying payment practices that will not be subject to criminal prosecution” or otherwise be the “basis for exclusion from participation” in the federal healthcare programs.

The OIG chose to issue their guidance on the anti-kickback safe harbors through its OIG department. The OIG issued its first “Final Rule” listing certain safe harbors in 1991. Since then, these “safe harbors” have become some of the most essential guidelines for healthcare providers whenever financial transactions are concerned. Since their inception and presently these safe harbors can be found at § 1001.952 in the Code of Federal Regulations (C.F.R.).

  • The Current Rule:Please follow the Arrows

Big or small, non-profit or for profit, privately owned or publicly traded, ALL healthcare providers who participate in Medicare, Medicaid, or any other federal healthcare program MUST abide by the safe harbors in order to successfully ensure compliance with the applicable laws and regulations.

Many states have implemented their own anti-kickback laws and almost all of them have modeled their state laws off of the federal statute. Some states not only model their prohibitions after the federal law, they even adopt the federal simply by mere reference to them.

The previous description and brief history of the anti-kickback statute provides a solid frame of reference to begin looking in detail at these safe harbors, including the “Employee” safe harbor, which is in essential parts as follows:

C.F.R. § 1001.952 (“Exceptions”): “The following payment practices shall not be treated as a criminal offense … and shall not serve as the basis for an exclusion

C.F.R. § 1001.952(i) (Employees): Prohibited “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, Medicaid or other Federal health care programs. For purposes of… this section, the term employee [shall be defined by the IRS’ definition].

  •  Employee vs. Independent Contractor ( a Marketer as an Employee – examined)

 Now, we can finally gain some ‘traction’ understanding why marketers should be paid as employees rather than as independent contractors, beginning with an analysis of the employee safe harbor.

At the outset, the safe harbor clearly protects payments from an employer to an employee… then it goes on to specify “for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs.” …

for employment in the furnishing of”: This language is simply unclear. What is employment “in the furnishing of…”?

    • INTERPRETATION A: What is the simple answer? What is most obvious?

Couldn’t this phrase “in the furnishing of…” simply apply to the actual delivery of healthcare? Wouldn’t it be a very simple and obvious explanation to say: “this safe harbor clearly protects payments made by a healthcare company to a therapist (or nurse, aide, etc.)? Yes, the safe harbor would clearly apply to this “furnishing of” healthcare items or services.

If you are a healthcare provider entity participating in Medicare/Medicaid your business is to provide healthcare items or services and obviously payments made to employees who actually provide the hands on care should be exempt from prosecution. We would generally say OF COURSE! This particular application is not a hotly contested issue, because the answer is quite obvious.


What if we try to apply the logic from Interpretation A to a common marketer scenario? Now we are asking to apply that same wording, which so obviously applies to say… a nurse, to a person who is not licensed to provide medical services, and also whose services can NOT be paid in whole or in part by the federal healthcare program!

Now the issue can become so much more uncertain and less obvious. However, to many employers who are healthcare providers the answer should still be fairly evident…

If your business revolves around and essentially IS the provision of healthcare items or service (which may in part or in whole be paid by a federal healthcare program) how can you exist if you don’t have clients? Isn’t finding clients a necessary and integral part of furnishing those services? If clients, potential clients, or referral sources do not know that your business exists then how could you possibly ever furnish any item or services?

Of course, to a healthcare provider this seems axiomatic and the answer is obvious. Healthcare, like any other business must be marketed in order to furnish whatever items or services it offers! Therefore, employing a marketer to properly market your business is employment “in the furnishing of…”

  • OIG “GUIDANCE”… How does the OIG help “guide” the industry with regards to this issue? DO they support our general conclusions in Interpretation B?

OIG HHS badge The OIG has numerous ways of providing guidance: official ‘Advisory Opinions,’ comments posted in the Federal Register, special advisory bulletins, and their ‘Fraud and Abuse Alerts.’ All of these things are sources of explanation and guidance for healthcare providers about the safe harbors. They are extremely significant. Both state and federal courts frequently turn to these sources in order to apply or interpret what the various safe harbors mean.

Unfortunately, there is relatively little that is commonly known about specific guidance explaining how the employee safe harbor should be applied. In fact, the best piece of information is frequently overlooked. Some courts have picked up on it and seemingly understood its implications, others have chosen to bypass it for reasons unknown… what is it?

The proposed exception for employees permitted an employer to pay an employee in whatever manner he or she chose for having that employee assist in the solicitation of program business.…

To anyone looking at the anti-kickback employee safe harbor, as it might apply to paying marketers, this simple sentence should be a profound clarification!
Because, it justifies what should otherwise be obvious… that employing a marketer IS employment “in the furnishing of” applicable healthcare items or services! Thus, this is the most important sentence to explain why paying your marketer properly starts with paying them as an employee.


The explanation continues: Employee vs. Independent Contractor… Contd. (Independent Contractor as a Marketer – examined) & Employee vs. Independent Contractor… Contd. (“Bona Fide” – Who is an Employee?)

Photo Credits:

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CMS Announces New Application Fee for Providers 855A

DEPARTMENT OF HEALTH AND HUMAN SERVICES – NEW Provider Enrollment Application Fee Amount for Calendar Year 2013CMS – Medicare, Medicaid, and Children’s Health Insurance Programs;

cms-logo-to-use-300x270CMS has announced a $532.00 calendar year (CY) 2013 application fee for institutional providers that are initially enrolling in the Medicare or Medicaid program or the Children’s Health Insurance Program (CHIP); revalidating their Medicare, Medicaid or CHIP enrollment; or adding a new Medicare practice location.

This fee is required with any enrollment application submitted on or after January 1, 2013 and on or before December 31, 2013.

This is a slight increase from the previous fee, but none-the-less providers should be aware of the fee increase. Fortunately, no advanced fee has been attached to “basic” changes of information submitted via an 855A.

Please remember CMS must be notified promptly (usually within 30 days) of almost ALL changes in the structure, administration, and “upper-level” personnel within any provider organization!

We regularly file 855A forms for providers and have a great working relationship with CMS contractors. If you think you might need to submit an 855A or if this little note makes you wonder if you should have, but didn’t, please contact us. We can almost always give you a quick answer regarding what you need to do regarding an 855A.

Paying Your Marketers Properly – Revisiting the Rabbit Hole

© 2012 Paul Hirsch

Update: 12-06-2012 – This Article Series is not forgotten, it is still “in-the-works!” In our desire to compile an authoritative basis for our opinion on this matter we are still reviewing a massive amount of documents, from Legislative History of Congress all the way to state court litigation documents which address this topic. We have read most of it and have “digested” what we have read. However the creation process is taking a backseat to ongoing litigation. We are simply waiting for things to slow down a bit before we delve into writing this article series – after all client needs come first!

Of course, if you have specific questions about a current situation or questions about what you want to do in terms of your marketing approaches, we are more than willing to advise you on a particular circumstance! If in doubt – ASK US!-

Paying Your Marketers Properly – Revisiting the Rabbit Hole

Introduction – Part 1 (of 5)

marketingAfter updating our website recently we have noticed that our article “Paying Your Marketers – Properly” and the issues covered within it have spurned many questions and comments both here on our site and from some of our clients. The health care industry is an ever-changing world, subject to ebb and flow of legislation, agency rules / regulations, court decisions and an ever-changing labor pool. Notably, Liz wrote this article almost ten years ago!

Many changes have occurred throughout the health care industry since the original article was written. Government agencies charged with oversight of the industry and its participants work differently then they did ten years ago. In fact, almost every facet of the industry has been affected by continual changes in the laws, rules, and regulations governing how agencies do business in this marketplace. It follows that the issue of paying marketers has changed also. Ultimately the crux of the original article remains in place, but none-the-less it deserves a fresh analysis.

One illustration of this change can be seen in the government’s focus (both on the state and federal levels) on strengthening and enforcing the prohibitions on fraud and abuse within the industry. The government’s new resolve in combating fraud and abuse has developed throughout many areas. One of the most visible examples of this new focus and resolve is the DOJ-HHS’s HEAT strike-teams, which actively combines and focuses the intelligence and resources of federal and state agencies towards the single inexorable goal of prosecuting businesses and people involved in Medicaid and Medicare fraud and abuse.

Moreover, beyond the health care industry itself, almost every industry (including health care) and every business, across the country, faces the perils and pitfalls of the changing environment of employer / employee relationships and employment laws. Federal and state agencies have promulgated new rules and regulations, and have adapted their methods and strategies in dealing with employment law. The “old-hat” areas of discrimination, retaliation, and harassment are as much of a concern as ever. However as technology advances and permeates the fabric of our society new questions are being raised such as: When can you run a criminal background check on a prospective employee? Can you ask a potential employee for their password to social media websites so you can better evaluate them? What are the limits you can place on employees’ use of social media both on the clock and off the clock (there is a surprising amount of controversy in this area particularly!)?

So how does all of this effect marketing strategies and payment structures for marketers in the health care industry?

In some ways many things are unchanged, but unfortunately that is not the whole story. Certain recent developments in the health care industry and employment law should give pause to health care providers when they decide to start or continue with marketing strategies and payment structures.

We have decided to start a multi-part series of articles which will shed new light on some old concepts, highlight certain techniques and approaches to structuring marketer training and payment, identify emerging issues and areas of concern, and suggest “functional adaptation methods” which can help health care businesses avoid potential pitfalls.

Please note: Many of the emerging issues about social media and employment law could be entire articles in and of themselves. So, this series will touch on some points of these emerging issues, but if there is interest in a more in-depth look we will consider putting together an article on these issues themselves.

Here are the planned segments:

Part 1: Introduction

Part 2: Health Care Laws (Anti-kickback and other federal rules & – Employee vs. Independent Contractor considerations)

Part 3: Employment Laws ( Fair Labor and Standards Act (FLSA) – wages paid and hours worked – payment structures – necessary documentation)

Part 4: Emerging Concerns

Part 5: “Functional Adaptation Methods” ®

(Please note regarding the phrase “functional adaptation methods:” some people might be looking for “best practices,” however we detest this catch phrase and purposefully choose to avoid it. As many successful business people can attest this phrase is one of the general corporate ear candy catch phrases which are in vogue. At the outset, this phrase in particular tends to over-simplify complex issues, because what might be best a best practice in one instance might not be what is best for every situation.)

Paying Your Marketers – Properly

© 2003 Elizabeth Zink-Pearson

marketingSince the advent of PPS in late 2001, home health agencies have moved to openly marketing their businesses to referral sources and to the public. No longer are marketing activities taboo and necessarily buried in the duties of patient coordinators or educators. As the marketing practices become more popular and likely more necessary, salesmen unfamiliar with health care are being attracted and or recruited into the health arena. These square peg employees from the unregulated business environment require education on the rules and requirements that govern health care providers.

The change from cost reimbursement to the PPS episode payment did not change the restrictions that exist on marketing health care services. As home health owners know, many marketing tricks used in the outside business world can land a health care provider in jail. In addition, the employment law requirements for minimum wage and overtime set specific rules for outside salespeople, which must be completely satisfied. Violations of any of these laws can be very costly. This article will address both the health law and employment law issues that must be addressed in your marketing pay practices.

The Problem with Paying for Referrals

Salespeople and marketers in non-healthcare business fields traditionally receive their wages in the form of a commission or draw against commissions. In other words, they are paid on the basis of the sales they produce. In the health care business, sales are generated through referrals from other health care providers or direct solicitation of patients. In either case, there exists a strict prohibition against any payment, solicitation of payment, or receipt of payment for a referral of Medicare or Medicaid business.

The Medicare and Medicaid Anti-Kickback Act, 42 U.S.C. § 1320A-7b(b), specifically prohibits “whoever (from) knowingly and willingly soliciting or receiving any remuneration…if one purpose” of the payment is “to induce a referral of business reimbursed under the Medicare and Medicaid programs.” This law therefore impacts how you pay your marketers for the referrals generated and also raises concerns about any traditional business perks your marketers may choose to offer referral sources. Similarly, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) included a prohibition against the use of gifts and other benefits to directly solicit patients for services. Both of these laws include criminal penalties in the form of jail sentences, huge penalties or fines, and mandatory exclusion from government program participation.

Clearly, the payment of a commission or even a sizeable bonus to your marketers has the express and exclusive purpose of inducing a referral of home health business, much of which is reimbursed by the Medicare program. As such, commission payments to your marketers violates the plain words of the Anti-Kickback Act. In addition, in the business world, salesmen often market to their prospective clients over lunches, golf games, or other perks. These are traditional business practices that in the health care field are prohibited “in kind” payments with at least one (1) purpose to induce referrals.

Several criminal prosecutions have arisen under the Anti-Kickback Act and the courts in those cases have found the law to be both constitutional and literal – that any payment, direct or indirect, in cash or in kind – is a violation if one purpose, and just one purpose, of the payment is to induce a referral of Medicare or Medicaid business. Soon after the law took effect, the OIG noted the concerns of health care providers that “many relatively innocuous or even beneficial commercial arrangements were technically covered by the statute” and were, therefore, subject to criminal prosecutions. Because of the overreaching breadth of the law, the government published rules for a few exceptions to the prohibited payment, which are intended to protect what are considered legitimate business relationships.

One of the recognized exceptions, or “safe harbors,” extends to employees. As stated in the rule, a payment to a “bona fide” employee will not be considered illegal remuneration for a referral as outlawed under the Anti-Kickback Act. 42 C.F.R. §1001.952(i). A “bona fide” employee is one for whom employment withholding and employment taxes are paid, technically an employee as defined under 26 U.S.C. §3121(d) (2) of the Internal Revenue Code. He or she does not have to be a full-time employee, but cannot be a 1099-type independent contractor. To simplify the definition, the employee must be what is called a W-2 employee. He or she must be subject to hiring and firing, supervision and other disciplinary action.

In the comments to the proposed Safe Harbor Employee rule, the OIG noted that the employer may pay the employee in any manner to “assist in the solicitation of Medicare or State health care program business.” The manner of payment may include a payment based on “the amount of business generated” as long as “these salespersons employees” are subject to “appropriate supervision. Thus, under the Employee Safe Harbor, home health agencies may pay their employee marketers on a commission, or draw against commission basis, or include wages based on productivity. Payment of this type does cross the line on the literal language of the Anti-Kickback law, but it falls squarely into the Safe Harbor and is therefore protected.

Although commission payments are protected, employers should be concerned about, and, alerted to their marketer’s sales practices on a day-to-day basis. At the time of hiring, each employee should be instructed on the prohibitions of the Anti-Kickback Act, and required to review and sign a code of conduct agreeing to not offer kickbacks or other indirect payments or benefits to referral sources. At a minimum, this requirement establishes a pattern of supervision that should be supplemented with regular performance reviews and ongoing supervision of activities. Although it is unlikely that the OIG would prosecute for a single lunch or box of donuts, the literal language of the Anti-kickback Act prohibits such conduct.

Finally, it is important to note that agencies should always scrutinize and identify any and all marketing costs, including the wages paid to marketers, to assure that no such costs are claimed on the annual cost report. Marketing costs are still unallowable on the cost report, and any claim for such costs could be construed to be a false claim.

Practical Problems with Commission Payments

There are, though, some practical problems that arise with commission payments, unrelated to fraud and abuse that must be considered and addressed before an agency enters into this type of compensation plan. First, in the realm of the PPS system, shear volume of referrals is not necessarily a good thing. Rather, it is the quality of the referral that is important. Paying a commission on an episode, which runs in the red financially, has no business advantage. Thus, any commission payment should be tied to the profitability of the actual home health episode. Creating the commission scheme therefore requires some time and considerable thought.

Although commission payments are protected, employers should be concerned about, and, alerted to their marketer’s sales practices on a day-to-day basis. At the time of hiring, each employee should be instructed on the prohibitions of the Anti-Kickback Act, and required to review and sign a code of conduct agreeing to not offer kickbacks or other indirect payments or benefits to referral sources. At a minimum, this requirement establishes a pattern of supervision that should be supplemented with regular performance reviews and ongoing supervision of activities. Although it is unlikely that the OIG would prosecute for a single lunch or box of donuts, the literal language of the Anti-kickback Act prohibits such conduct.

Finally, it is important to note that agencies should always scrutinize and identify any and all marketing costs, including the wages paid to marketers, to assure that no such costs are claimed on the annual cost report. Marketing costs are still unallowable on the cost report, and any claim for such costs could be construed to be a false claim.

As an example, the commissions could be paid quarterly or every 62 days at the close of an episode depending on the speed of your billing procedures. At this point, there should be a realm of assurance as to the value of the episode. Tracking the referral to the marketer could be managed through some internal coding process or other recordkeeping system which identifies the marketer. Another possible commission payment basis is a pure productivity bonus that scales the business generated again on a quarterly or other time period basis to the overall productivity of the agency. This type of commission compensation encourages quality referrals which overall benefits the agency most.

Under the PPS payment model and with the aggressive claims review posture of the Medicare and Medicaid programs, it is necessary to create a commission payment plan that does more than generate just referrals, but also works to enhance real profit. Such a plan should take some time and consideration in implementation. In addition, use of a commission structure must be tempered with appropriate supervision and fraud and abuse controls to assure that inexperienced marketers perform in accordance with fraud and abuse laws and your agency’s ethical standards.

The Risk of Overtime Pay Liability

The other major hurdle in structuring a marketing payment plan is consideration of the requirements for minimum wage and overtime liability. For several years the home health and other health care industries have been prime targets on the Department of Labor hit lists for overtime violations. As the home health industry moves into the business world of marketing, agencies must review any payment plan to assure compliance with the overtime pay requirements.

Traditionally, home health marketers have been nurses or other professionals who were paid a salary and wore several hats. Most of these employees could qualify for an exemption from overtime pay under the professional or management exemptions due to their status and job duties. In the current time, with the use of actual business “marketers” rather than professionals, other exemptions must be considered to avoid payment of overtime.

As a brief review, employers must pay overtime to employees for all hours worked in a workweek in excess of forty (40) hours, unless the employee is a properly classified exempt employee. Overtime pay is to be calculated and one and one half times the employees’ regular rate of pay. Hours worked include all time an employee is suffered or permitted to work, including paper work and travel time other than to and from the worksite. The use of an “approved only” overtime policy is pointless and without effect if the employee’s job duties requires him or her to work in excess of forty (40) hours a workweek. A commission-payment system encourages marketers to be out in the field, pounding on doors many hours a day. Thus, there exists a risk of overtime pay unless the marketer is properly assigned and classified into an exempt job duty status.

The Fair Labor Standards Act, which imposes the overtime pay duty, includes an exemption for “outside sales employees.” As long as a home health marketer’s job is dedicated to “making sales, or to “obtaining orders or contracts for services,” and is performed “customarily” away from the agency’s office(s), the marketer can be considered an outside salesperson and exempt from overtime pay. As noted, the job duties must be dedicated to sales, with no more than twenty percent (20%) non-sales duties in any one (1) workweek. The non-sales work does NOT include clerical or other work that would be considered “incidental to or in conjunction with the employee’s own outside sales or solicitations.” Such incidental “sales” work would include telephone follow-up or paperwork associated with the actual sales duties.

Use of the Outside Salesperson exemption is foreign to home health agencies, but should be considered to avoid overtime pay exposure. It is important for any exemption to use the actual wording of the exemption s it is the employer’s duty always to prove that the employee is properly exempt from overtime. Therefore, a marketer’s job description and actual duties should replicate the exemption language and note that the employee will be considered an exempt outside sales employee. This helps to avoid any misunderstanding or disgruntled complaints from an employee after-the-fact.

Unlike other exemptions, an outside salesperson is not required to be paid in accordance with the salary or fee requirements of the Fair Labor Standards Act. Thus, a commission payment plan is permissible, if administratively functional for an agency. There is a basement level of wages that must be paid to qualify for the exemption. Of course, salary or fee payments are not otherwise precluded for outside salespersons and can still be used along with a performance bonus as long as the employee performs the outlined job duties for the exemption. Under the current rule, the minimum wage amount for the exemption is set at $155 a week, but the regulations for all exemptions are proposed to be changed.1

A Recommended Marketer’s Compensation Plan

With years of negative rhetoric about fraud in the home health industry and the overall climate against “inducement” of referrals, any compensation plan that is designed to induce referrals may still raise the hair on some agency owner’s head. Although a commission or other traditional “sales” compensation model is clearly protected for “bona fide” employees under the employee safe harbor, there are significant practical business problems in implementation. An alternative model is to pay a base salary that allows employees some wage security along with performance and productivity bonuses that are tied to their actual sales and the profitability of the company. Any salary model must comply with the salary rules and Marketers should be identified as outside sales people to assure the exemption for overtime pay. Yet it is possible to provide the sales incentive through a well-designed bonus program tied to growth and profitable referrals.

As a final note, it is necessary to train marketers intensely both on their specific duties and the PPS payment system so that they understand the profit potential of referrals. Moreover, each and every marketing employee should be educated on Anti-Kickback prohibition and other fraud and abuse laws to assure compliant conduct. Remember it is your job to supervise and oversee their activities. Your marketers will be your public face and must present themselves as knowledgeable of your business and, even more importantly, of your ethical standards for your business.

1. The proposed changes are extensive and as now written will reduce the overtime exposure greatly. The most important change to note is that LPN’s may be properly exempted as a learned professional employee. However, there is considerable debate and opposition to the proposals that make any substantive discussion too prospective. Agencies should stay alert during the upcoming year and consult legal counsel as legislation and regulations proceed.

Dealing With Investigations

© Lucian Bernard

spyglass on mapHome care is once again the target of government efforts to reduce health care expenditures. The array of programs being used to financially and operationally confront agencies is extensive and daunting: focused medical reviews, compliance reviews, recoupments, denials, offsets, payment suspensions, ORT, program exclusion, civil monetary penalties, Wedge audits and criminal prosecutions, to name just a few. What can an agency do before, during and after an investigation?


Agencies must be prepared for unannounced investigations and audits at any time. The consequences of these investigations can be extreme, both financially and criminally. There are steps an agency can take now to minimize the potential damage of being the target in a government investigation:

Prepare for possible delays in payment or suspension of payment – review your lines of credit or other sources of cash flow to be sure they are adequate if you are caught up in the storm.

Begin to review your system of internal audit of claims to determine that there is adequate documentation of compliance with medical necessity and homebound criteria.

Maintain a separate file for your communications with legal counsel, since those documents can be protected from seizure by government agents under attorney-client privilege.

Contact your health law and criminal law attorneys now to ensure their availability to represent you when needed.

Only the reckless, daring or naive will not have a Fraud and Abuse Compliance Plan in place. A comprehensive plan may include all of the above.


If you are notified by a surveyor or a fiscal intermediary that your agency is being subjected to an audit, do not expected to be treated fairly, or with meaningful due process:

Make certain that you have copies of all documents that you provide to the surveyor so that you can conduct your own detailed audit of that case file;

Be certain that the intermediary has all of your documentation before the government renders an initial decision; and,

Contact legal counsel at the outset to achieve the greatest protection of attorney-client privilege and perhaps extend that protection to the activities of your accountant, consultant, etc.

If, however, government agents present subpoenas or search warrants, time is of the essence and you should remember to do the following:

Find out who is the agent in charge and ask to see the document. A subpoena requires the production of material, but the officer(s) presenting the documents may not search the premises and seize the material. A search warrant allows agents access to the premises and the authority to seize material described in the warrant, or accompanying affidavit.

Immediately contact your attorney and advise him or her of the situation. At this point, the call is probably being monitored and there are guards at all of the entrances to your agency. Ask the agent in charge to seal the area and delay the search until your attorney arrives. Have trusted supervisors or managers accompany agents to the areas covered by the search warrant to observe, not to interfere.

Advise your employees that they are under no obligation to answer any questions by the agents – Do not tell them that they cannot speak to agents, because that could be construed as obstruction of justice. It is the employee’s choice to answer questions or remain silent. Usually, government agents will not tell your employees that. Then send all non-essential personnel home and otherwise close the agency until the search is completed.


An agency must be very careful about agreeing to a settlement with the government without first reviewing all of the legal ramifications with its legal counsel.

Accepting an extrapolated damages claim by the government based on an audit, for example, can have many unforseen consequences. An agency that accepts a monetary settlement of an audit could still be subjected to any of the following:

Mandatory or permissive exclusion from the program;
Criminal prosecution;

Inclusion in the national database authorized by the Portability Act as an “abuser” (the so-called scarlet letter provision); and/or, Imposition of civil monetary penalties.

Remember, too, that positions your agency accepts as part of any settlement with the government can have collateral consequences under other federal laws, such as the Fair Labor Standards Act (FLSA), the False Claims Act (FCA), etc.

The government has maintained its position that Medicare/Medicaid fraud is public enemy #3, just behind drugs and violent crime, and is directing much of its efforts at home care.

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