Monday, September 30, 2002

Beware the 'related party rules'
Q: I read that a Louisiana rehab hospital and health care management company are under federal scrutiny for violating Medicare-related party rules. What do these "related party rules" mean for me?

A: The Medicare "related party rules" apply when a healthcare provider is reimbursed according to its costs. If the provider purchases items or services from another entity owned by the provider (directly or indirectly), it is only permitted to seek reimbursement for the costs of the other entity (the "related party") in providing the items or services. In other words, the related party's Medicare fee schedule does not apply. So, for example, if a hospital owns a LTC facility and a DME company, the LTC facility will only be reimbursed by Medicare for purchased DME services at the DME supplier's cost. The DME supplier's usual Medicare/Medicaid charges will not apply.

This issue is important for any homecare provider that is owned by a hospital or health system that also owns a long-term care facility, home health agency or any other entity that purchases HME services. This issue also matters to any homecare provider that has a joint venture in place with a hospital or health system that provides HME services.

Neil Caesar is president of the Health Law Center (Neil B. Caesar Law Associates, PA), a national health law practice in Greenville, SC. Reach him at or