Marketing Hospice Services to ALFs: Preferred Provider Agreements

New research published in Health Affairs shows that utilization of hospice services among Medicare beneficiaries is greater in assisted living facilities (ALFs) than in other settings, including private homes. Hospices should, therefore, market their services intensively to ALFs.


This finding is not surprising because management at assisted living facilities (ALFs) are often committed to keeping residents in their facilities for as long as possible.  There are, of course, costs associated with filling vacancies.  In addition, if residences remain empty for any length of time, profitability can be severely adversely affected. Consequently, to the extent that hospices can assist residents to remain in their apartments, ALFs may be extremely interested in establishing ongoing relationships with them.


In addition, management at ALFs may wish to make referrals to a single hospice or to limit referrals to a few hospices.  The perception among managers of ALFs, whether true or not, seems to be that providers are more likely to help them to meet the goal of limited resident turnover if they have preferred provider relationships with them.


Providers may wish to approach ALFs to see if they are interested in preferred provider relationships.  If they are, then management of ALFs may want to sign Preferred Provider Agreements in order to cement these relationships with hospices.


The anti-kickback statute may apply if providers or ALFs involved in referral arrangements receive any type of federal or state funds, including, but not limited to, payments for services provided from Medicaid waiver programs, managed Medicaid programs, the Tri-Care Program, the VA or any other state or federal programs. The anti-kickback statute certainly applies to most hospices since they are often certified by the Medicare Program


The anti-kickback statute generally says that anyone who either offers to give or actually gives anyone anything in order to induce referrals has engaged in criminal conduct. There are, however, a number of exceptions to this statute that may be applicable.


Hospices should ask two crucial questions about the application of the anti-kickback statute to referral arrangements:

  1. Is there a kickback or rebate?


  1. If so, is there an exception or “safe harbor” that permits the arrangement even though it would otherwise violate the statute?

A kickback or rebate occurs when a provider receives referrals from another provider and something flows back to the referral source from the provider who received referrals. If there is a kickback or rebate, providers must automatically ask the second question listed above.  If they fail to utilize applicable exceptions, they may miss out on useful marketing strategies that are likely to result in numerous referrals.


With regard to Preferred Provider Agreements, however, it is important to note that no money or anything of value changes hands between providers and the other party involved.  Consequently, there is no kickback or rebate.  Hospices can, therefore, enter into Preferred Provider Agreements and avoid violations of the anti-kickback and rebate statute so long as no money or anything else of value is given to ALFs in exchange for referrals.


The parties to Preferred Provider Agreements must also make certain that they honor patients’ choices of providers. There are a number of sources of patients’ right to freedom of choice of providers applicable to arrangements between hospices and ALFs:

  1. Court decisions or the common law says that all patients – regardless of payor source, type of care rendered, or types of providers involved – have the right to control the care they receive and who provides it.
  2. A federal statute that guarantees all Medicaid patients the right to freedom of choice of providers. This statute may be applicable if either party receives reimbursement from the Medicaid Program.

Unless state statutes or regulations require otherwise, there is no requirement that ALFs must present lists of providers from which residents may choose in order to comply with the above. When patients express preferences for certain providers, however, their choices must be honored despite the existence of Preferred Provider Agreements. The agreement of the parties to a Preferred Provider Agreement to honor patients’ choices should be included in such Agreements.


The market for hospice services is expanding, but the competition for referrals among providers seems to be extremely fierce.  Providers would be well advised to utilize Preferred Provider Agreements to assist them with increasing and/or maintaining referrals in order to help ensure profitability.



©2020 Elizabeth E. Hogue, Esq.  All rights reserved.

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Hospice Coding Complexities & Now ICD-10!

CMS has issued instructions related to coding for hospice agencies, reflecting the complexity of care required for terminally-ill patients. One diagnosis alone will not accurately express all of the complications associated with the end of life disease process. The primary diagnosis is the one contributing the most to the terminal condition.

Assigning the additional codes related to the terminal diagnosis can be time-consuming – often taking even more time than coding for a home health patient. Multiple medical conditions must be reviewed and coded if appropriate to describe the patient’s condition. If a diagnosis is considered nonspecific, unspecified or symptomatic, it can no longer be used as a principal diagnosis. “Debility”, “failure to thrive”, and “dementia” are not specific enough to be used as a principal diagnosis, but may be used as a secondary. They are considered as “etiology/manifestations”. When sequencing the codes, the manifestation would follow the code for the underlying condition. 

Additional information is located at

On October 1, 2015, all healthcare providers are mandated to use ICD-10 codes, after 30 years of ICD-9. ICD-9 has become outdated and contains obsolete terms, and is inconsistent with many current medical practices. ICD-10 allows for greater specificity describing a patient’s diagnosis and assure more accurate billing. ICD-9 has 14,315 codes, while ICD-10 has 69,099 – a nearly 5 times increase! Clinicians and coders will have to have detailed knowledge of physiology and anatomy.


Some of the differences between the two methods:

ICD-9 ICD-10
 3 – 5 characters in length  3 – 7 characters in length
First character is numeric or alpha (E or V) First character is alpha (all letters except U)
Characters 2 – 5 are numeric Character 2 is numeric: characters 3 – 7 are alpha or numeric.
No placeholders  Use of dummy placeholder “X”
 Use of dummy placeholder “X”Alpha characters are case-sensitive Alpha characters are NOT case-sensitive 


As in ICD-9, signs and symptoms will be coded in ICD-10 when: (1) no underlying diagnosis is given by the physician, (2) signs and symptoms most accurately reflect the patient’s condition, and (3) then patient is experiencing signs and symptoms that are not integral parts of a specific disease process. ICD-10 symptom codes provide significantly greater specificity, which will require more-detailed documentation. For example, ICD-9 has one code for abnormality of gait; ICD-10 has six.ICD-10 will be particularly challenging for hospice agencies, because of the need for information from 
the referring physician. Specific information will be gleaned from referrals, history and physicals, and discharge summaries. The days of: “end stage heart disease” are long gone.

Agencies will have to work with referral sources, attending physician, and hospice medical director to define the terminal diagnosis for the patient prior to the start-of-care assessment visit to ensure that the diagnosis is within the coding conventions and not on the “do not use” list.

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