Over the past several years, HME companies have become increasingly knowledgeable about the various types of appropriate relationships they can establish with sleep laboratories. Given the boom of CPAP utilization, combined with increasing demand for sleep diagnostic services, the push for HME companies to form relationships with sleep labs has continued to increase.

Despite this increase in awareness and education about joint ventures, many providers continue to fall prey to common pitfalls. Education, by itself, is not enough. HME suppliers must remain alert and constantly review their joint ventures and cooperative relationships to avoid common pitfalls.

FOLLOWING THE HERD

When asked why they enter into problematic relationships, providers often say: "This is the way my competitor structured this relationship, so I assumed it was legal." Following a competitor's example is never a safe way to do business, because:

• Each and every factual situation is different. You can never be certain that some minor difference between the competitor's structure and yours will lead to a violation in federal or state law.
• You might have bad information. No matter how reliable you believe your inside information might be, there are always parts of your competitor's plan that you have not uncovered. The details often play a large role when determining compliance with applicable state and federal laws.
• Different companies have different risk tolerances. It is rare that a health law question is answered with a rubber stamp of "legal" or "illegal." Companies often have to make decisions based on their individual risk tolerance. You never know when a competitor might be a high-roller (willing to take big risks) instead of a company that plays it safe.
• Perhaps your competitor just plain got it wrong. Whether they misinterpret the law, fail to understand the facts, or get bad advice—sometimes companies just get it wrong. Deciding to follow a competitor merely because they are large or sophisticated is no safe bet.

In any situation, the only safe move is to do your own research, develop proposals, and analyze all proposed arrangements based on your own risk tolerance.

A MOVING TARGET

Assessing the risk associated with a particular venture is a one-place/one-time kind of analysis. The law associated with an area might change. Even without the law changing, the interpretation of an existing provision might change. It is important for suppliers to develop tools to stay on top of such changes.

Staying on top of these legal changes is only a small part of the overall concern. HME suppliers must recognize that subtle changes to a relationship can significantly impact legal risk. Changing locations, hiring new personnel, and adjusting the compensation paid can all have a significant impact on the applicability of numerous laws and regulations.

One of the best tools to monitor changes in the law, or in contractual relationships, is a compliance program. By appointing a compliance officer and educating employees concerning their duties and obligations, you can take a large step along the path to compliance.

AN ACCEPTABLE PREMISE

When discussing possible relationships between HME suppliers and sleep labs, a great deal of my time is spent explaining that HME providers may not pay the sleep lab for referrals. The federal anti-kickback statute prohibits paying for Medicare, Medicaid, or other federal health care program referrals. One of its basic premises is this: if one purpose of the payment is to induce referrals, then the payment is considered a kickback. No amount of legal counseling or guidance can overcome this fundamental underlying problem.

HME suppliers are taking a significant risk if they structure payments to other providers merely for the purpose of "legitimizing" their intent to compensate the providers for referrals. Contracting for legitimate, necessary services is possible in some situations, but it is not a tool to "sterilize" a kickback relationship and provide cover for a supplier's desire to pay for referrals.

SWEAT THE SMALL STUFF

Clay Stribling

Joint venture relationships are a great place to dust off the old adage, "the devil is in the details." Many of the most minute and insignificant details can have a significant impact on the appropriateness of a joint venture. The following are some important issues to watch for:

• For sleep services, the place of service is crucial. If an HME company invests in a sleep lab, it is vitally important to understand the difference between a physician-based lab and an independent diagnostic testing facility (IDTF). Many sleep labs fail to understand this distinction, and run a significant risk of enforcement.
• Know where the money goes. In a joint venture formed through written agreements, know where all the money is flowing, and be certain the agreement describes all the payments to be made.
• Know your partner and its employees. If you contract with an outside company, check that the company and its employees are not excluded from the Medicare program, or any applicable state Medicaid program.

In the final analysis, it can seem like a daunting task to establish and maintain sleep lab relationships that do not pose significant legal risks. Although there are significant challenges in structuring such relationships, suppliers who do their best to stay the course can avoid these common pitfalls.

Clay Stribling, JD, is an attorney with the Health Care Group at Brown & Fortunato PC, a law firm based in Amarillo, Tex. He represents pharmacies, infusion companies, HME companies, and other health care providers throughout the United States. Stribling is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached via e-mail: .