Ins and outs of subcontracting

AMARILLO, Texas - Healthcare attorney Jeff Baird says no provider likes subcontracting agreements; nevertheless, there are a large number of them out there.

“Because reimbursement is so low, to take that reimbursement and split it between two companies doesn't add up,” he said. “It's a lose-lose.”

But contract suppliers want to make up for that low reimbursement with additional volume, and subcontractors want to hold on to their referral sources, so here we are.

Here's what Baird had to say about how these agreements should be set up.

In a perfect world

“We have the contractor ABC and the subcontractor XYZ. ABC talks with the doctor; they get the order in; they make the decision as to whether or not the patient meets the medical necessity criteria. So ABC is the one that goes through the mental process. Then they call XYZ and say, 'OK, you need to take care of Mrs. Smith,' and XYZ does the heavy lifting. They deliver equipment; they educate Mrs. Smith and set her up; they handle repair and maintenance. ABC then bills Medicare, gets paid and pays XYZ.”

In reality

“XYZ doesn't want to lose their referral sources for bid products and non-bid products, and doctors want one-stop shops. So the XYZs look at the CBIC website, see who the winners are and call them and say, 'We see that you have a contract for this CBA; I want to be your subcontractor.' Here's the hook: They also say, 'I'll send you all kinds of patients.' Doctors are loyal to XYZ, so they're going to continue to refer to XYZ, and XYZ is going to send patients to ABC.”

Here's where it gets dicey

“The CBIC wants the referrals to go through ABC, not XYZ. Well, the subcontractors fudge that a little bit and often referrals do flow through subcontractors to contract suppliers. If the CBIC determines that, they might come in and say, don't do that.”

“The other area that's a problem is if XYZ says to ABC, 'Here's everything; just bill for it.' You can't do that. If XYZ is doing everything, including the intake, and all ABC is doing is submitting a claim, that's a sham. It's critical that ABC has skin in the game.”

Gold standard

“The gold standard would be for ABC to pay a fixed annual fee to XYZ, say $4,000 a month or $48,000 a year, to perform subcontract services. The silver standard is to actually have a fee schedule, a set dollar amount for each service rendered. It's not high risk, but it's not as clean as the gold standard.”