United States: Consolidated Billing Requirements For Service Arrangements Between Skilled Nursing Facilities And Outside Service Entities

The Centers for Medicare and Medicaid Services ("CMS") recently issued Transmittal 183, effective July 1, 2004, to clarify the consolidated billing requirements that apply to skilled nursing facilities ("SNF") and the outside service entities ("OSE"), such as hospitals and rehabilitation providers, that serve SNF residents.

With the passage of the Balanced Budget Act of 1997 and the implementation of the global prospective payment system ("PPS") for SNFs, "consolidated billing" entered the vocabulary of skilled nursing facilities. Consolidated billing requires that a SNF bill Medicare directly for most Part A services, unless otherwise excluded from the SNF's PPS rate, and for some Part B services received by a resident. Services excluded from PPS include, for example, the services of physicians and other practitioners who may bill Medicare Part B directly for the services. Part B services subject to consolidated billing include any physical, occupational or speech-language therapy services that a resident receives during a non-covered stay. For any Part A or Part B service that is subject to SNF consolidated billing, the SNF must provide the service either directly or through a valid "arrangement" with an OSE.

Under an arrangement, Medicare's payment to the SNF represents payment in full for arranged-for services, and OSEs must look to the SNF for their payment rather than to Medicare. To be deemed a valid "arrangement," the SNF must execute a written agreement with the OSE furnishing the services to residents. Further, the agreement must specify the payment terms for the OSE's services. Payment terms, which include the specific amount or timing of payment, are subject to negotiation between the two parties.

Federal OBRA regulations also require a SNF participating in Medicare to specify in a written agreement for any arranged-for services that the SNF will be responsible for (a) obtaining services that meet professional standards and principles applicable to professionals providing services in the SNF and (b) for the timeliness of the services. The CMS Medicare General Information, Eligibility and Entitlement Manual further specifies that the SNF must exercise professional responsibility and control over the arranged-for services; the SNF cannot act solely as a "billing conduit."

If a SNF obtains services from an OSE that are subject to consolidated billing, but does not execute a written agreement with the OSE, then the requisite "valid arrangement" does not exist. Without a valid arrangement, the SNF and/or the OSE may be sub ject to any of the following consequences:

1. Non-coverage of Services

If an OSE provides services to a SNF resident that are subject to consolidated billing and then inappropriately bills Medicare Part B directly for the services, the OSE will not be entitled to reimbursement for the services from Medicare and may not receive the desired reimbursement from the SNF.

2.Civil Money Penalties

Both the OSE and the SNF may be subject to civil money penalties for knowingly and willfully presenting, or causing to be presented, a bill or request for payment inconsistent with an arrangement or in violation of the requirement of such an arrangement.

3. Violation of Provider Agreement

The SNF may be found in violation of its Medicare provider agreement, which requires compliance with the consolidated billing requirements. In the extreme, violation of the provider agreement can result in termination of participation in the Medicare program.

4. Violation of Federal OBRA Requirements for Long Term Care Facilities

The SNF may be found in violation of federal OBRA requirements for long-term care facilities. As discussed above, OBRA requires that arrangements pertaining to services furnished by outside resources specify in writing that the SNF is responsible (a) for obtaining services that meet professional standards and principles that apply to professionals providing services in the SNF and (b) for the timeliness of the services.

1. Assess all formal and, perhaps more importantly, informal arrangements with all persons and/or entities that provide services to your residents. Determine which service arrangements are subject to the consolidated billing requirements.

2. Ensure that each agreement subject to the consolidated billing requirements includes language that:

1. Specifies the process for billing the SNF and the OSE's compensation for the services.
2. Clarifies that the SNF retains overall responsibility for obtaining services that meet professional standards and principles that apply to professionals providing services in the SNF and for the timeliness of the arranged-for services.
3. Describes a mechanism for resolving disputes that arise over the arranged-for services.
4. Describes the parties' obligations to confirm the beneficiary's status as a resident of the SNF and includes a process for obtaining and communicating the SNF's approval of services.

3. Prepare written agreements for any informal arrangements. Include the above-referenced language and address other important regulatory and contractual issues.

4. Consider requesting legal review of proposed written agreements, as necessary, to ensure compliance with "consolidated billing" and other requirements.

1. The SNF should:

1. Maintain valid arrangements by executing written agreements with all OSEs that supply services subject to the consolidated billing requirements. Follow steps described above with respect to valid arrangements.
2. Provide OSEs with accurate and timely information about the status of the resident's Medicare-covered stay, including, for example, whether the OSE's services are subject to consolidated billing.
3. Routinely advise any resident (and, if applicable, the resident's representative) who leaves the SNF temporarily on a brief leave of absence of the need to consult with the SNF before obtaining any services off-site in order to ensure appropriate Medicare payment for services provided to the resident.
4. Include language in the resident admission agreement requiring the resident (and, if applicable, the resident's representative) to consult with the SNF before obtaining services from another provider in order to ensure appropriate Medicare payment for the services provided to the resident.
5. Continue to follow basic compliance strategies. For example, designate personnel to maintain an understanding of consolidated billing requirements and to facilitate implementation of the operational aspects of the consolidated billing requirements.

2. The outside supplier should:

1. For each Medicare beneficiary receiving services potentially subject to the SNF consolidated billing requirements, determine if the beneficiary is currently a SNF resident.
2. If the beneficiary is a SNF resident, contact the SNF before furnishing services to the beneficiary. Execute a valid service agreement with the SNF if one is not currently in place.
3. Inventory the SNFs that you currently service or plan to service within your service area and ensure service agreements are in place. Determine whether the SNF has a standard service agreement to work from or develop a model agreement to present to the SNF. Consider requesting legal review of all proposed agreements.
4. Continue to follow basic compliance strategies. For example, designate personnel to maintain an understanding of consolidated billing requirements and to facilitate implementation of the operational aspects of the consolidated billing requirements.