• Elizabeth Hogue, Esq

Home Health Agency Fights Back Against Hospital Based Patient Steering

American Home Healthcare System, Inc.; a free standing home health agency in Indiana; has sued Floyd Memorial Hospital and Baptist Healthcare System for violations of antitrust laws related to patients’ right to freedom of choice. In a recent Memorandum Opinion and Order, the U.S. District Court refused to dismiss the case [American Home Healthcare Servs, Inc. v. Floyd Mem’l Hosp. and Health Servs, No. 4-17-cv-00089-TWP-DML, (S.D. on Mar. 5, 2018)]. In this case, American Home Healthcare claims that the Hospital engaged in tortious and anti-competitive conduct specifically intended to monopolize home health agency referrals from the Hospital to Floyd Home Health and to interfere with patients’ relationships with their existing home health providers. Floyd Hospital in New Albany, Indiana, owns Floyd Home Health. American is also a home health agency and is located in Jeffersonville, Indiana. Both agencies operate in six identical counties.

According to the Court, when home health services are necessary, Medicare regulations require the Hospital to provide patients with a list of home health agencies that are Medicare-certified, available and that serve the geographic area in which patients reside. According to the Court, home health agencies must request to be listed by the Hospital as available. As part of the discharge planning process, the Hospital may not specify or limit the qualified providers that are available to patients and must inform patients of their freedom to choose among participating Medicare-certified home health agencies.

American claims that, although it is included on the list presented to patients, the hospital has built mechanisms into the discharge planning process that increase the likelihood that Floyd Home Health will receive the most patient referrals. Specifically, American claims that physicians who make home health referrals must go through an extra step to select any home health agency other than Floyd due to the fact that the only two choices on the computer drop-down menu are “Floyd” and “other.” If patients want to use the “other” category, physicians have to go through an extra step to write down which agency patients chose.

American also claims that 64% of the Medicare patients discharged from the Hospital to home health agencies were referred to Floyd Home Health, while the remaining 30.2% of referrals were spread among six other home health agencies. American says that in 2015 it received eleven referrals from the Hospital or 1.3% of Medicare patients discharged from the Hospital. American also says that many referrals received from the Hospital included patients with undesirable payor sources, such as the Medicaid Program or patients that resided far away.

Based on reports from patients and their families, American also says that the Hospital denied patient choice by referring patients to Floyd Home Health without offering any choices, by advocating exclusively for Floyd Home Health and/or assigning patients to Floyd Home Health despite patients’ choices to use American’s services.

Section 2 of the Sherman Act recognizes claims based on attempted monopolization, i.e., when “the employment of methods, means and practices which would, if successful, accomplish monopolization, and which, through falling short, nevertheless approach so close as to create a dangerous probability of it.” Proof of claims of attempted monopolization requires: (1) a specific intent to monopolize, i.e., to gain the power to control prices or to exclude competition in a line of commerce; (2) predatory or anticompetitive acts to further the purpose of monopolize; and (3) a dangerous probability of success in the relevant market which requires evidence that the defendant had sufficient market power to reasonably create a monopoly.

American contends that the relevant product market is home health services following discharge from hospitals since Medicare regulations provide for a distinct product by imposing unique requirements for discharge planning from hospitals. The Hospital maintains that the product market is defined as home healthcare services without regard to referral sources since statutes in Indiana do not limit home health services to services following discharge from hospitals.

The Court decided that the Hospital’s exclusion of patients from competing home health agencies weighs in favor of a dangerous probability of success that Floyd Home Health could achieve monopoly power in the home health market. Likewise, American’s allegation that the Hospital has steered and disregarded patients’ choice, a violation of Medicare rules, may also serve to satisfy the requirement of predatory or anti-competitive conduct. Based on these findings, the Court concluded that American has alleged facts in stating a plausible claim for attempted monopolization in violation of Section 2 of the Sherman Act.

Honoring patients’ right to freedom of choice continues to be a source of great concern for agencies that are not hospital-based. Although MedPAC and others continue to talk about changes in patients’ rights, such changes would require repeal of sections of a federal statute, the Balanced Budget Act of 1997, and withdrawal or modification of conditions of participation (CoPs) governing hospital discharge planning. Hospitals should expect more lawsuits based on violations of patients’ right to freedom of choice.

Elizabeth E. Hogue, Esq.

Office: 877-871-4062

Fax: 877-871-9739

E-mail: ElizabethHogue@ElizabethHogue.net

Twitter: @HogueHomecare

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