Creating Preferred Provider Agreements with Hospitals to Generate Referrals

Stephen Tweed | July 14, 2016 | News and Views
How can you get more referrals from hospitals?  How can you work more closely with hospitals to transition patients to home?  How can you help hospitals reduce avoidable readmissions and save them money?  One of the most effective ways to do that is to develop close working relationships with hospitals administrators, build trust, and demonstrate…

How can you get more referrals from hospitals?  How can you work more closely with hospitals to transition patients to home?  How can you help hospitals reduce avoidable readmissions and save them money? Preferred Provider

One of the most effective ways to do that is to develop close working relationships with hospitals administrators, build trust, and demonstrate the outcomes of the care you provide.  Then you earn the right to sit at the table and have a meaningful conversation .  One of the topics in that meaningful conversation can be about setting up a PPA – Preferred Provider Agreement.  Basically, this agreement sets up your agency exclusively, or you and several other agencies, as a preferred provider.

Our friend and colleague, Elizabeth Hogue, Esq. just sent us this article.  Take a look and then let’s discuss how you too can set up a PPA.  If you need assistance in drafting a Preferred Provider Agreement, contact Elizabeth.


Use Preferred Provider Agreements with Hospitals

Many hospitals refer patients on a regular basis to post-acute providers, including home health agencies, private duty home care agencies, hospices, and home medical equipment (HME) companies.  Relationships with post-acute providers assist hospitals to control costs and avoid penalties, an essential component of financial viability. Consequently, positive relationships with post-acute providers are increasingly important to the success of hospitals.

Hospitals may wish to use Preferred Provider Agreements in order to enhance their relationships with post-acute providers.  That is, hospitals may agree to make referrals exclusively or on a preferential basis to specified post-acute providers in order to help ensure quality of care. Hospitals may be eager to sign Preferred Provider Agreements for a number of reasons.

Hospitals may decide, for example, to limit the number of post-acute providers to which they are willing to refer on the basis that dealing with many post-acute providers may compromise their ability to implement appropriate plans of care effectively.  From the point of view of hospitals, referrals to a number of post-acute providers may complicate communications, which may have the potential to compromise implementation of appropriate discharge plans.

Preferred Provider Agreements may obligate hospitals to refer patients to specified post-acute providers.  These Agreements should not, however, include a specific number of patients that hospitals are expected or required to refer.  In fact, they should explicitly indicate that hospitals make no promises about the number or types of patients who will be referred.

Patient’s have a Right to Choose

Preferred Provider Agreements must also take into account requirements related to patients’ right to freedom of choice of providers.  Both the Balanced Budget Act of 1997 and Conditions of Participation (COP’s) for hospitals, among other sources, guarantee patients the right to freedom of choice.

Many patients, however, do not yet know enough about post-acute services and providers to be able to make choices.  When attending physicians indicate that they prefer certain post-acute providers and patients do not wish to choose other providers instead, physicians’ preferences/orders must be honored.  Unless patients or physicians choose post-acute providers, it is permissible for discharge planners/case managers to suggest that patients may wish to choose post-acute providers with which hospitals have preferred provider relationships.

Hospitals are not required to survey post-acute providers in their geographic area to find every entity that provides care of a quality that is satisfactory to them.  Consequently, when patients cannot choose and their attending physicians have not indicated preferences for particular post-acute providers, discharge planners/case managers may wish to encourage patients to choose preferred providers.

CMS Accepts Preferred Providers

Hospitals certainly cannot restrict patient choice.  In the final rule on the Comprehensive Care for Joint Replacement (CJR) Payment Model for Acute Care Hospitals; published in the Federal Register on November 24, 2015; however, the Centers for Medicare and Medicaid Services (CMS) stated at follows:

“Hospitals, if desired, may recommend ‘preferred providers,’ that is, high quality PAC (post-acute) providers/suppliers with whom they have relationships (either financial and/or clinical) for the purpose of improving quality, efficiency, or continuity of care.” 

Based upon this language, it seems clear that Preferred Provider Agreements are acceptable so long as the requirements described above are met.


Elizabeth E. Hogue, Esq.

Office: (877) 871-4062

Fax: (877) 871-9739

Twitter: @HogueHomecare

Stephen Tweed
Stephen Tweed, CSP, began his journey as a business strategist in home health care in 1982. Today, Stephen is among the top thought leaders in Home Care strategy and management. He has worked with top 5% companies from across the US. He is a sought after speaker at from national and state association events.

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