Legal: Don’t violate payer contracts

Q. I am not in network with a certain third-party payer. Can I enter into a subcontract agreement with another DME supplier that is in network with that payer?
Tuesday, February 27, 2018

A.  This is probably not a good idea.

First, it is important to note that the other supplier’s payer contract likely has provisions related to subcontracting that either prohibit the supplier from subcontracting out functions under the contract or requiring the supplier to get permission from the payer before subcontracting. So the arrangement could violate the terms of the payer contract.

Second, even if the payer contract is silent about subcontracting, if the arrangement consists of the non-contracted supplier doing all of the work with the contracted supplier merely submitting claims as a representation that the contracted supplier furnished the items or services, it is possible the arrangement could amount to insurance fraud under state law.

And third, the arrangement could violate both federal and state anti-kickback statutes, which generally prohibit a person from soliciting, receiving, offering, or paying anything of value in return for, or in order to induce referrals or the arrangement of referrals of certain individuals. The insurer or another enforcement authority could argue that the contracted supplier is arranging for the non-contracted supplier to receive referrals or patronage, or vice versa, in exchange for a portion of the collections resulting from the referrals or patronage.