December 2002

Deborah Green’s LEGAL Q&A

Q I’m planning to expand my practice next year. I want to enlarge my physical facility, employ more personnel and provide more services. I’d like to get a loan but I’m not sure the best way to go about it.

A The best way to obtain a loan is by forming a personal relationship with your banker before you need the loan. Personally, I prefer dealing with smaller banks rather than the monoliths that are currently taking over the country. The reason for my preference is that you become very important to the bank instead of being merely another account number.

Meet your banker for lunch and offer to pay. (The banker should not permit you to pick up the check but he or she will appreciate your offer.) Ask for guidance with respect to your practice. If your banker deals with a lot of health care practices (and that’s the type of bank that you’re looking for) you will get a lot of helpful information.

When the time comes, prepare a solid business plan. Devote a lot of time and effort to this plan. Get expert help if need be. A sloppy plan will do nothing but make the bank think that you run your practice in an equally sloppy fashion.

Commercial lenders must bring your proposal to a bank’s “loan committee” where the final decision concerning your loan will be made. Use your banker as your advocate. Generally, commercial loan officers will start looking upon your loan as “their loan” if they like you and your proposal. They are required to answer a lot of difficult questions at these meetings.

Help your banker. Provide a list of best-case scenarios, worst-case scenarios and middle-of-the-road situations. Describe how you plan to handle the worst-case scenarios. The banker will need this information when arguing your case in front of the loan committee.

In most instances, the bank will require your personal guarantee. it may also require additional guarantors such as your spouse or parents. If your credit should be sufficient to support the loan, tell your banker very nicely, but firmly, that Regulation B says that if your credit is sufficient, the bank cannot insist on additional guarantors. (Although most bankers should know this, many do not.) Do not offer your home or retirement savings as collateral. Offer to give the bank more business instead, such as your checking, payroll accounts and credit card processing.

If that is insufficient, obtain a life insurance policy on yourself, payable to the bank in the event of your death or disability. If you have a spouse and children, make sure that you have another policy in place for them also.

If your loan is based on a fixed interest rate, keep your eye on rates. If they start to fall you may want to re-negotiate the terms of your loan to reflect such a lower rate. Just a point or two can result in a loss to you of hundreds of thousands of dollars.

QI have entered into an agreement with a company that supplies a radiologist to do reads of tests that I perform on the patient. I pay this company a set amount for each “read” that the radiologist performs. Is this payment a violation of the anti-kickback statute?

A The commentary to the Stark II Final Rule issued in January 2001 by CMS (formerly HCFA) stated that compensation may be based on a per-use or per-service basis if the payment per use or service is set in advance and is fair market value.

The safe harbor rule requires that the payment to the physician not take into account the volume or value of referrals, the idea being that the paying party cannot compensate the referring party. In your case, you are both the paying and the referring party, that is, you are sending both the patient and the money to the radiologist. The anti-kickback statute would only be violated if the radiologist sent you referrals or remuneration of some other type in return for you sending him business.

Unfortunately, what frequently happens with these types of arrangements is that the company that provides the radiologist who does the read will pay the chiropractor “rent” for the use of his premises or “salary” for overseeing the tech. In most cases, this will convert what was a legitimate referral into a kickback and place the chiropractor at risk.

Q May I offer a discount for prompt payment to my private-pay patients?

A The same regulations that bar waiving the co-pay and accepting insurance-only from patients also apply to offering discounts to patients for any reason other than indigence. To utilize the indigence exception, most practices develop and follow financial assistance policies based on the Federal Poverty Guidelines.

If the patient is not indigent, you must offer the same discount to the insurance company as you offer to the patient. For instance, if you discounted the patient balance by 20 percent, you must give the insurance company a 20 percent discount on the portion it owes you.

Another issue to bear in mind is that by offering the discount, you may be in effect lowering your “usual, customary and reasonable” profile. As a result, the insurance company may determine that your actual fee is your discounted fee and pay you accordingly. Many payers have standard “most favored nations” clauses built into their provider agreements which ensure that the payers are not charged an amount lower than is usual, customary and reasonable.

You must also examine your basic intent in offering the discount and what evidence is there to establish the intent. If the discount is an isolated situation, if there is no pattern tying it to referrals, if there is no documentation of unlawful intent and if it satisfies a legitimate business purpose, there may be no problem as far as violating the anti-kickback statute, which is intent-based. Bear in mind that if even one purpose of the discount is to induce referrals, you are in violation of the statute. In addition, instead of being in violation of the federal anti-kickback statute you may also be in violation of your state’s anti-kickback statute.

Be very careful in issuing policies relating to “prompt payment” and/or “self-pay” discounts. They may lower your practice’s profile and may subject you to federal civil false claims law suits (or your state’s equivalent) on the grounds of using the “prompt payment discounts” as illegal compensation to attract and reward Medicare referrals.

Ms. Green has been a practicing attorney since 1977. She is admitted to the practice of law in New York and Florida.

LEGAL DISCLAIMER
This column is governed expressly by the terms of this disclaimer and provided for educational purposes only. The accuracy of the information is not warranted, nor is it intended to be advice as to a specific fact pattern. The information contained herein is not presented as legal advice with respect to any matter, and no attorney-client relationship is hereby established.