Volume 10, Number 5 September–October 2008...Designing and Implementing Ethics into the Fabric of...

Volume 10, Number 5September–October 2008

Columns3 From the Editor—Roy Snell

New Opportunities for Social Networking Are on the Horizon for Compliance Professionals

31 Compliance Offi cer—Deann M. BakerDesigning and Implementing Ethics into the Fabric of Your Compliance Program

33 Electronic Resources—Catherine M. BoernerAging Population Means More Focus on Nursing Home Compliance Programs

35 HIPAA—Bob BrownResearch and the Privacy Rule: The Chill Is On

37 Best Practice—Julene BrownEstablishing a Contract Upfront Can Help Further a New Initiative

39 QIO—Harry M. Feder and Linda Sion Medicare Benefi ciaries Respond to Quality of Care Complaint Outreach

41 Health Information Management—Beth Hjort Quality Health Care: Can Health Information Be Both Available and Private?

43 Compliance and Quality—D. Scott Jones and Lt. Col. Paul N. Bird, Jr.

Are Compliance Offi cers Leading the Way When It Comes to Quality?

49 Risk Management—Reba L. Kieke Overcoming Global Compliance Management

Challenges

51 Anti-Kickback Statute—Richard KusserowUnderstanding the Complexities of Subsidy Payments for Hospitals

53 Corporate Culture—Frank Sheeder Compliance and Country Music Help Organizations Dance the Compliance Two Step

55 Coding and Billing—Melinda S. StegmanSource of Admission: An Often Overlooked but Important Billing Field

57 Settlements—Gadi Weinreich and Ramy FayedThe Memorial Health Settlement: Good Law or Bad Lore?

59 Lab—Christopher Young Retired LCDs: A New Problem for Clinical Laboratories

Features5 Jennifer M. O’Brien, Andrew B. Wachler and

Jessica L. Gustafson Recovery Audit Contractors and Medicare Audits: Successful Strategies for Preparing for and Defending Audits

13 Sara Kay Wheeler and Tizgel HighUnderstanding the Golden Carrot: Voluntary Disclosure Strategies after the April 15, 2008, OIG Open Letter

21 Paul R. DeMuro and Andrea Jaeger-Lenz How to Conduct Clinical Trials in the EU and Eastern Europe: Overview and Comparison with the U.S. System

For the Record27 Roy Snell

A Nurse’s Perspective on Long-Term Care Compliance

EDITOR-IN-CHIEF

Roy Snell

PORTFOLIO MANAGING EDITOR

Pamela Carron, J.D.

MANAGING EDITOR

Reba Kieke

COORDINATING EDITORS

Susan Smith, J.D., M.A.Eileen P. Hughes, J.D.

Trinidad G. Legaspi, J.D., LLM

COVER DESIGN

Patrick Gallagher

INTERIOR DESIGN

Jason Wommack

PRODUCTION

Don Torres

This magazine is designed to provide ac cu rate and authorita-tive in for ma tion in re gard to the subject matter covered. It is sold with the un der stand ing that the pub lish er is not engaged in ren-dering legal, ac count ing or other professional service and that the authors are not offering such advice in this publication. If legal advice or other expert assistance is required, the services of a com-petent professional per son should be sought. All views expressed in the articles and columns are those of the author and not necessarily those of CCH, a Wolters Kluwer business, or any other person.

Photocopying or reproducing in any form in whole or in part is a violation of federal copyright law and is strictly forbidden without the publisher’s con-sent. No claim is made to original gov-ernmental works; however, within this product or publication, the following are subject to CCH’s copyright: (1) the gathering, compilation and arrange-ment of such government materials; (2) the magnetic translation and digi-tal conversion of data, if applicable; (3) the historical, statutory and other notes and references; and (4) the com-mentary and other materials.

Editorial Board

© 2008 CCH. All Rights Reserved. This material may not be used, published, broadcast, rewritten, copied, redistributed, or used to create any derivative works without prior written permission from the publisher.

Journal of Health Care Compliance (ISSN: 15208) is published bimonthly by CCH.

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CATHERINE M. BOERNER, J.D.PresidentBoerner Consulting, LLCMilwaukee, WI

RICHARD P. KUSSEROWCEOStrategic Management Systems, Inc.Alexandria, VA

VICKIE L. MCCORMICKChief Compliance Offi cer St. Jude Medical, Inc.St. Paul, MN

FRANK SHEEDERPartner Jones Day Dallas, TX

DION P. SHEIDY, CPAPartnerPricewaterhouseCoopers, LLPPittsburgh, PA

THOMAS H. SUDDATH JR., ESQ.AttorneyMontgomery, McCracken, Walker & Rhoads, LLPPhiladelphia, PA

DEBBIE TROKLUS, CHCAssistant Vice PresidentHealth Affairs/Compliance/HIPAAUniversity of LouisvilleSchool of MedicineLouisville, KY

SHERYL VACCADirectorWest Coast Compliance PracticeDeloitte & ToucheSacramento, CA

ALAN YUSPEHSenior Vice PresidentEthics Compliance & Corporate ResponsibilityHCANashville, TN

FROM THE EDITORRoy Snell

Roy Snell is the Chief Executive

Offi cer/Executive Director of the Health

Care Compliance Association. Roy is also Co-Founder

of the Health Care Compliance Association. Prior to being named HCCA’s CEO, Roy

was a Director with PriceWaterhouseCoopers

in Minneapolis, Minnesota. He began

working in the compliance arena

when he was named Corporate Compliance

Offi cer for the University of Wisconsin

Hospital and Clinics and the University of

Wisconsin Medical Foundation in Madison.

New Opportunities for Social Networking Are on the Horizon for Compliance Professionals When Set Up Correctly, Networking Can Be a Powerful and Benefi cial Tool

Many compliance professionals are frustrated by compliance industry articles, conferences, and books that speak in general terms because they do not apply to their specifi c segment of health care compli-

ance. One of the most common complaints I receive is, “All I hear about is hospital compliance.” Many people want to network with people who are dealing with issues specifi c to their segment of health care compliance.

There are many segments of health care compliance with unique issues, such as long-term care, hospitals, group practice, research, behavioral health, pharma, medical device, quality of care, et cetera. There are special interest groups that cut across all segments such as ethics, social responsibility, priva-cy, security, et cetera. Compliance professionals are clamoring to get together in special interest groups. What we need is an easy and affordable way to get that done. We now have it.

The Web is still in its infancy. Many benefi ts of the Web have yet to be re-alized. Buried in the morass of “features” or benefi ts of the Web are many emerging trends. One such trend is social networking. Children have already exploded on the scene of social networking. Facebook often can be unprofes-sional and tawdry, but it is a sign of things to come for professionals. We have a great need to network more effi ciently and effectively than we have in the past. Social networking software is about to explode on the scene for compli-ance professionals, and the benefi ts are greater than you might expect.

We all use some form of social networking now. There are blogs, wiki tech-nology, list serves, document sharing, and much more. Social networking is uncoordinated, ineffi cient, limited, and not always easy to use. Solutions, however, now exist that incorporate all of these social networking features into one package.

Set up correctly, social networking software can have many benefi ts, which allow special interest groups to communicate regularly and effi ciently. Ben-efi ts include:

improve communications,keep people connected,network to answer member questions and solve problems,save time by sharing documents,promote collaboration and community,professionally done social networking,signifi cant control of who you want to have access to you,give members the tools and let them run the tools, andunlimited number of ways to subdivide large groups of people in the compliance and ethics profession into “special interest groups.”The Health Care Compliance Association

is implementing a social networking package that accomplishes all those benefi ts. There are seven integrated components. Within each component are multiple features. All of this is designed to solve the age-old desire for compliance professionals to network in spe-cial interest groups.

Member Directory:name, address, photo, bio, communities of interest to which you belong;certifi cation(s) you have achieved;create your own personal networks;fi nd people with similar certifi cation, in-terests or classes you jointly attended, job history, education;similar to but more capable and profes-sional than Facebook or LinkedIn;brings business networking online;members promote themselves online;members can start their own blog.

Forums:threaded discussion,permanent storage of previous discus-sions,searchable content.

List Serves: user defi nable,

can attach and “tag” documents (attach searchable key words),more readable emails,real-time email or daily summary.

Document Library:videos, photos, presentations, documents, pod casts, handouts, session recordings;can be “tagged” with keywords by any-one;link to contributor profi le to assess cred-ibility.

Glossary of terms with wiki technology.Microsites:

user defi nable Web sites,can be used for special interest groups,easy to set up, although they have some-what limited fl exibility.

Event Calendar: highlight by event type,fi lter events by location,search the calendar by keyword.

This is one of the biggest advantages to compliance professionals to come along in many years. Our profession will be more ef-fective and successful. Many other profes-sions have yet to adopt this technology. The key to its success is simply a numbers game, particularly for small special interest groups. If small groups do not get enough people to participate, questions will go unanswered, documents will not be shared as effectively, et cetera.

Do whatever you can to support the com-pliance community and become involved. Each group will benefi t only if there is an ad-equate number of people to participate. I have been getting complaints for years from people who say all I hear about is the hospital per-spective. I agree more must be done. In some ways the ball is in their court. This is a penul-timate case of, “If you don’t give, you will not receive.” This will be a great step in the right direction.

Journal of Health Care Compliance — September – October 2008 5

Jennifer M. O’Brien, Esq, is a shareholder with Halleland Lewis Nilan

& Johnson, PA. She can be reached at 612/573-2968.

Medicare Providers and Suppliers Should be Ready for Increased Auditing Activity

Jennifer M. O’Brien / Andrew B. Wachler / Jessica L. Gustafson

Attention Medicare providers and suppliers nation-wide: Get ready for increased Medicare auditing activity! The Centers for Medicare & Medicaid

Services (CMS) Recovery Audit Contractor (RAC) pro-gram has been made permanent and is expanding na-tionwide, beginning this year.

To prepare for increased Medicare scrutiny, Medicare providers and suppliers should act now to ensure they have adopted and implemented appropriate compliance programs. Providers and suppliers also should make ef-forts to understand the Medicare appeals process and should know that many strategies exist that can be em-ployed successfully in the appeals process to defend Medicare audits.

RECOVERY AUDIT CONTRACTORS

Section 306 of the Medicare Prescription Drug, Improve-ment and Modernization Act of 2003 (MMA) directed the Department of Health and Human Services (HHS) to conduct a three-year demonstration program using RACs. The demonstration began in 2005 in the three states with the highest Medicare expenditures: Califor-nia, Florida, and New York.

The RACs were tasked to identify and correct Medi-care overpayments and underpayments and were com-pensated on a contingency fee basis. The purpose of the RAC demonstration program was to determine whether the use of RACs would be a cost-effective way to identify and correct improper Medicare payments.

Recovery Audit Contractors and Medicare Audits: Successful

Strategies for Preparing for and Defending Audits

Andrew B. Wachler, Esq, is the principal of Wachler & Associates, PC. He can be reached at 248/544-0888.

Jessica L. Gustafson, Esq, is an associate with Wachler & Associates, PC.

She can be reached at 248/544-0888.

Journal of Health Care Compliance — September – October 20086

Recovery Audit Contractors and Medicare Audits

The demonstration program proved high-ly “cost effective” from the point of view of CMS. Over the course of the three-year dem-onstration, the RACs identifi ed and collected $992.7 million in overpayments and repaid $37.8 million in underpayments to Medicare providers and suppliers. The costs and fees associated with the RAC demonstration pro-gram totaled $201.3 million, which consti-tutes approximately 20 cents for each dollar returned to the Medicare Trust Fund.1

Section 302 of the Tax Relief and Health Care Act of 2006 makes the RAC program permanent and requires the expansion of the RAC program nationwide by no later than 2010. CMS is actively moving forward with this expansion right now. During the fi nal months of the demonstration pro-gram, RACs expanded into South Carolina, Massachusetts, and Arizona. CMS plans to expand to a total of 19 states by summer 2008, four more states by fall 2008, and the remaining states by January 2009 or later.2 Figure 1 is the most current “Expansion Schedule,” published as part of the CMS RAC Demonstration Evaluation Report.3

CMS plans to announce the names of the permanent RAC vendors very soon, some-time after July 31, 2008. Medicare pro-viders and suppliers can expect the com-mencement of RAC auditing activity soon after the announcement of the permanent RAC vendors.

Although RACs are responsible for cor-recting underpayments as well as overpay-ments, it is the process of identifying and recouping alleged overpayments that is of particular signifi cance to Medicare provid-ers and suppliers. Over the course of the three-year demonstration, the RACs iden-tifi ed and collected $992.7 million in over-payments and repaid just $37.8 million in underpayments to Medicare providers and suppliers.4 Thus, approximately 96 percent of the alleged improper payments identi-fi ed were overpayments, as opposed to un-derpayments. The RACs are permitted to attempt to identify improper payments re-sulting from any of the following:

incorrect payments;noncovered services (including services that are not reasonable and necessary);incorrectly coded services (including di-agnosis-related group (DRG) miscoding); andduplicate services.5

During the course of the three-year dem-onstration, Medicare providers and suppli-ers raised concerns with certain aspects of the RAC program. CMS has made efforts to address these concerns and has adopt-ed numerous changes to be implemented in the permanent program. Some of these changes include the following:

Under the RAC demonstration program, RACs were permitted to reopen claims up to four years following the date of ini-tial payment. Amid arguments that this four-year look-back period violated the “provider without fault” provisions of the Social Security Act, under the perma-nent RAC program, RAC reviewers have a maximum three-year look-back peri-od. In all states (regardless of expansion date), the permanent program will begin with a review of claims paid on or after October 1, 2007. As time passes, how-ever, the RACs will be prohibited from reviewing claims more than three years past the date of initial payment.6

Under the RAC demonstration program, the RACs were not required to employ a physician medical director or coding ex-perts. Under the permanent program, however, when performing coverage or coding reviews of medical records re-quested from a Medicare provider or sup-plier, nurses (RNs) or therapists are re-quired to make determinations regarding medical necessity, and certifi ed coders are required to make coding determina-tions. The RACs are not required to in-volve physicians in the medical record re-view process; however, the RACs are re-quired to employ a minimum of one full-time equivalent (FTE) contractor medical director (CMD), who is a doctor of medi-cine or doctor of osteopathy, and arrange



for an alternate CMD in the event that the CMD is unavailable for an extended peri-od. The CMD will provide services such as providing guidance to RAC staff regard-ing interpretation of Medicare policy.7

As noted above, CMS compensates RACs on a contingency fee basis, based upon the principal amount of collection or the amount paid back to a provider. Under the demonstration program, the RACs were entitled to keep their contingency fees if a denial was upheld at the fi rst stage of appeal, regardless of whether a provider prevailed at a later stage of the appeals process. This fee arrangement provided incentive to the RACs to aggressively re-view and deny claims, including claims al-leged to not be “medically necessary,” an area containing much subjectivity, and a category of denial often highly disputed by the provider (40 percent of the alleged overpayments identifi ed during the dem-onstration program were denied for rea-sons of medical necessity). For their ef-forts, the RACs earned $187.2 million in contingency payments over the course of the demonstration (or approximately 14.4 percent of all alleged improper pay-ments identifi ed). In a signifi cant change from the demonstration program, under the permanent RAC program, if a provider fi les an appeal disputing an overpayment determination and wins this appeal at any level, the RAC is not entitled to keep its contingency fee and must repay CMS the amount it received for the recovery.8

In a recent speaking engagement, Kim-berly Brandt, director of the Program Integ-rity Group of CMS, summarized some of the main differences between the demonstration and permanent programs. (See Figure 2)

Medicare providers and suppliers na-tionwide are well advised to begin prepar-ing for the RACs and increased Medicare auditing activity now. Although providers and suppliers cannot stop RAC audits from happening, they can implement appropri-ate compliance programs and make efforts to understand available audit defenses.

COMPLIANCE

Medicare providers and suppliers, and the compliance professionals assisting these en-tities in the RAC demonstration states of Cal-ifornia, Florida, and New York, have shared valuable lessons and offered advice regard-ing ways to prepare for the nationwide RAC rollout. The overall consensus and advice from these professionals “in the trenches” is to meet the challenge of the RACs head-on, sooner rather than later, by (1) putting to-gether a RAC response team; (2) monitoring target areas; and (3) developing an effective process to respond to record requests.

Creating a RAC Response TeamMedicare providers and suppliers should develop a “RAC response team,” comprised of a group of individuals/department rep-resentatives capable of addressing the many challenges associated with RAC re-views and audits. Development of a RAC response team is an important fi rst step for Medicare providers and suppliers to assess their compliance risks and develop and im-plement effective compliance strategies.

Challenges for entities forming a RAC re-sponse team commonly include determining which department should be responsible for the entity’s RAC response efforts and identi-fying specifi c individuals to lead the initia-tive. More individuals prefer to ride shotgun on this project rather than step up and say, “I’ll take it!” Responding to the challenges posed by RACs can best be accomplished when many departments and individuals are accountable, rather than one department or individual having sole responsibility. By the time a RAC audit is complete, several indi-viduals with different areas of expertise will be called upon to serve on the team.

Rather than getting bogged down decid-ing who should lead the RAC response team, entities should focus on who needs to par-ticipate on the team. Instead of a “lead,” it may be effective for the RAC response team to have a “facilitator,” whose role is to move the process along. The facilitator could ro-tate every six months (or other time period



as deemed appropriate) to ensure various departments/individuals share the respon-sibility for this role. Every member of the RAC response team most likely will have a full plate and is probably wearing a number of hats for an organization. Sharing the re-sponsibility for the role of facilitator evens out the playing fi eld and helps makes the added responsibility manageable.

Each entity will determine how many individuals are needed to serve on the RAC response team. At a minimum, however, the following areas should be represented:

compliance,utilization review,health information management,patient fi nancial services,coding,care management, andmedical staff.One strategy that has worked well for

some entities is to fi nd a “physician cham-pion” to participate on the RAC response team. The physician champion is key to ensuring other physicians are engaged in the RAC response effort. As a RAC audit moves forward and the entity’s response evolves, other areas of expertise also may be needed to assist the RAC response team with strategy and planning.

Monitoring Target AreasReviewing the denials made during the RAC demonstration program is a helpful tool for Medicare providers and suppliers to use to identify potential RAC target areas for the permanent program.

During the RAC demonstration program: the vast majority (85 percent) of claim de-nials involved inpatient hospital claims;six percent involved inpatient rehabilita-tion facilities;four percent involved outpatient hospi-tals; andthe remaining denials involved the claims of physicians, skilled nursing fa-cilities, durable medical equipment sup-pliers and ambulance, laboratory, or oth-er providers.9

Of the denials: thirty-fi ve percent of the improper pay-ments identifi ed were the result of incor-rect coding;forty percent were denied because the claims did not meet Medicare’s medical necessity criteria;eight percent were denied for the reason “no/insuffi cient documentation” (mean-ing the RAC requested the information but the entity did not respond timely or completely); andthe remaining 17 percent were denied for other reasons, which could include sub-mitting duplicate claims, billing separately for services included in other payments, and incorrectly following fee schedules.10

The entity’s RAC response team also should monitor the Offi ce of Inspector General (OIG) work plan (which supports the above fi ndings, as the work plan ad-dresses the target areas of DRG validation, discharge disposition, medical necessity, and one-day stays, all of which were areas of scrutiny for the RACs during the demon-stration). PEPPER data (Program for Evalu-ating Patment Patterns Electronic Report) or information from the local quality im-provement organization also is valuable to determine potential areas of vulnerability for an entity.

Utilizing a combination of these re-sources, together with internal auditing, is a great starting point for prioritizing target areas to monitor fi rst. Medicare providers and suppliers are well advised to avoid selecting too many compliance areas on which to focus at one time. In-stead, they should begin monitoring just a few risk areas and then slowly expand the project to ensure quality of the review (rather than simply increasing the quan-tity of the entity’s identifi ed risks).

Developing an Effective Record Request ProcessMedicare providers and suppliers must be prepared to respond to record requests from the RACs in an effective, effi cient manner.



A signifi cant portion of denials made dur-ing the RAC demonstration (8 percent of the total denials) involved entities’ failure to respond timely or completely to the RAC’s request for records. Under the permanent program, Medicare providers and suppli-ers must provide requested medical records within 45 days, or the RAC may fi nd the claim to be an overpayment. One caveat to this requirement is that the RAC must initi-ate one additional contact prior to denying a claim for failure to submit documentation. The Medicare provider or supplier may re-quest an extension to the 45-day limit.11

The RAC response team should have a de-tailed process in place for responding to RAC requests for records. This process should in-clude: (1) logging the RAC’s request, (2) copy-ing the patient’s complete medical record, (3) submitting the documentation in a timely manner, (4) tracking the documentation to ensure the RAC received it, and (5) tracking the outcome of the RAC’s review. The RAC is obligated to complete review of the medical record within 60 days from receipt. The Medi-care provider or supplier will be notifi ed of the results and will have the right to appeal if the outcome is disputed. The appeal process will be discussed later in this article.

Ready…Get Set…Go!The time is ripe for all Medicare provid-ers and suppliers to prepare for the nation-wide RAC rollout. In addition to the strate-gies listed above, Medicare providers and suppliers should consider networking with health care providers in their communities to see what creative ideas and strategies others are utilizing. The sooner an entity dedicates resources to reviewing data, tar-geting risk areas, and educating its provid-ers, the better off it will be when the fi rst RAC request lands on its doorstep, and a 45-day response time is triggered.

MEDICARE AUDITS — THE MEDICARE APPEALS PROCESSAs noted above, if a Medicare provider or supplier receives a claim denial or a fi nding

of overpayment is made as a result of a RAC review, the denial will be subject to the uni-form Medicare Part A and Part B appeals pro-cess. The regulations governing this process are contained at 42 C.F.R. § 405.900 et seq.

Stage 1: RedeterminationThe fi rst level in the appeals process is re-determination. Providers must submit re-determination requests in writing within 120 calendar days of receiving notice of ini-tial determination. There is no amount in controversy requirement.

Stage 2: ReconsiderationProviders dissatisfi ed with a carrier or in-termediary’s redetermination decision may fi le a request for reconsideration to be con-ducted by a qualifi ed independent contrac-tor (QIC). This second level of appeal must be fi led within 180 calendar days of receiv-ing notice of the redetermination decision. There is no amount in controversy require-ment for this stage of appeal.

Of particular note, providers must sub-mit a full and early presentation of evi-dence in the reconsideration stage. When fi ling a reconsideration request, a provider must present evidence and allegations re-lated to the dispute and explain the reasons for the disagreement with the initial de-termination and redetermination. Absent good cause, failure of a provider to submit evidence prior to the issuance of the notice of reconsideration precludes subsequent consideration of the evidence. According-ly, providers may not be permitted to intro-duce evidence in later stages of the appeals process if such evidence was not presented at the reconsideration stage.

Stage 3: Administrative Law Judge HearingThe third level of appeal is the administra-tive law judge (ALJ) hearing. A provider dissatisfi ed with a reconsideration decision may request an ALJ hearing. The request must be fi led within 60 days following re-ceipt of the QIC’s reconsideration decision



and must meet an amount in controversy re-quirement. ALJ hearings can be conducted by video-teleconference (VTC), in-person, or by telephone. The regulations require the hearing to be conducted by VTC if the tech-nology is available; however, if VTC is un-available, or in other circumstances, the ALJ may hold an in-person hearing. Additional-ly, the ALJ may offer a telephone hearing.

Stage 4: Medicare Appeals Council ReviewThe fourth level of appeal is the Medicare Appeals Council (MAC) review. The MAC is part of the Departmental Appeals Board of the Department of Health and Human Services. A MAC review request must be fi led within 60 days following receipt of the ALJ’s decision. Among other requirements, a request for MAC review must identify and explain the parts of the ALJ action with which the party disagrees. Unless the re-quest is from an unrepresented benefi ciary, the MAC will limit its review to the issues raised in the written request for review.

Stage 5: Federal District CourtThe fi nal step in the appeals process is ju-dicial review in federal district court. A re-quest for review in district court must be fi led within 60 days of receipt of the MAC’s decision. In a federal district court action, the fi ndings of fact by the HHS Secretary are deemed conclusive if supported by sub-stantial evidence.

STRATEGIES FOR DEFENDING MEDICARE AUDITSMedicare providers and suppliers subject to RAC or other Medicare audits and claim de-nials should understand that many strategies exist that can be employed successfully in the appeals process to effectuate meaningful results. These strategies involve effectively advocating the merits of the underlying ser-vices as well as employing legal defenses.

Advocating the MeritsWhen advocating the merits of a claim, it is useful to draft a position paper outlining

the factual and legal arguments in support of payment for a disputed claim. Addition-ally, in many cases it is advantageous to engage the services of a qualifi ed expert, particularly when an audit or claim denial involves issues of medical necessity. Oth-er strategies that can prove successful in-clude the use of medical summaries, illus-trations, and color-coded charts or graphs depicting the claims at issue that are user friendly for the decision maker.

Audit DefensesIn addition to advocating the merits of a claim through various techniques, certain legal defenses are available. Defenses that have proven valuable for providers and sup-pliers challenging Medicare audit determi-nations include: (1) invoking the treating physician rule, (2) arguing the “waiver of liability” defense, (3) arguing the provider is without fault, (4) challenging the timeli-ness of the audit and claim denial, and (5) and challenging the statistical extrapola-tion (if one was involved).

Treating Physician RuleIt may be appropriate in many audit set-tings to assert the “treating physician rule.” The treating physician rule involves the legal principle that the treating physician, who has examined the patient and is most familiar with the patient’s condition, is in the best position to make medical neces-sity determinations. The treating physician rule, as adopted by some courts, refl ects that the treating physician’s determina-tion that a service is medically necessary is binding unless contradicted by substan-tial evidence and is entitled to some extra weight, even if contradicted by substantial evidence, because the treating physician is inherently more familiar with the patient’s medical condition. Thus, providers should reference the treating physician rule to dem-onstrate that the treating physician’s medi-cal judgment as to the medical necessity of the services provided should prevail absent substantial contradictory evidence.



Waiver of LiabilityPursuant to the Medicare “waiver of liability” defense, providers may be entitled to pay-ment for claims deemed not reasonable and necessary by CMS or its contractors during an audit. The statutory authority for waiver of liability is set forth in §1879(a) of the So-cial Security Act.12 Under waiver of liabili-ty, even if a service is determined to be not reasonable and necessary, payment may be rendered if the provider did not know and could not reasonably have been expected to know payment would not be made.

The relevant inquiry focuses on wheth-er the provider “knew or could have rea-sonably been expected to know” payment would not be made. Therefore, in defending an audit, a physician must have access to all relevant carrier or intermediary commu-nications with the provider community and with the particular provider. Waiver of liabil-ity generally only applies to determinations that a service was not medically necessary.

Provider without FaultAdditionally, the “provider without fault” de-fense may be employed in the case of post-payment review denials. The Medicare pro-vider without fault provisions, §1870 of the Social Security Act, state that payment will be made to a provider if the provider was without “fault” with regard to billing for and accepting payment for disputed services.13

As a general rule, a provider will be con-sidered without fault if it exercised reason-able care in billing for and accepting pay-ment, i.e., the provider complied with all pertinent regulations, made full disclosure of all material facts, and on the basis of the information available had a reasonable basis for assuming the payment was correct.14

“Fault,” for purposes of the provider with-out fault provision, is defi ned as follows: a. An incorrect statement made by the in-

dividual that he or she knew or should have known to be incorrect; or

b. Failure to furnish information that he or she knew or should have known to be material; or

c. With respect to the overpaid individual only, acceptance of a payment, that he or she knew or could have been expect-ed to know, was incorrect.15

In addition, providers also will be deemed to be without fault in the absence of evi-dence to the contrary if the overpayment was discovered subsequent to the third cal-endar year after the year of payment.16

Reopening RegulationsMedicare regulations recognize that, in the in-terest of equity, providers and suppliers must be able to rely on coverage determinations. Thus, Medicare regulations place restrictions upon the permissible timeframe for reopen-ing initial determinations. Pursuant to 42 C.F.R. §405.980 (b), a contractor may reopen and revise its initial determination:1. Within one year from the date of the ini-

tial determination for any reason;2. Within four years of the date of the ini-

tial determination for good cause as de-fi ned in §405.986;

3. At any time if there exists reliable evi-dence as defi ned in §405.902 that the ini-tial determination was procured by fraud or similar fault as defi ned in §405.902.

4. At any time if the initial determination is unfavorable, in whole or in part, to the party thereto, but only for the purpose of correcting a clerical error on which that determination was based.Pursuant to 42 C.F.R. §405.986, “good

cause” may be established when:1. There is new and material evidence that —

a. Was not available or known at the time of the determination or decision; and

b. May result in a different conclusion; or2. The evidence that was considered in

making the determination or decision clearly shows on its face that an obvious error was made at the time of the deter-mination or decision.17

Further, according to the Medicare Financial Management Manual, “If an overpayment is de-termined based on a reopening outside of the above parameters, the fi scaI intermediary or carrier will not recover the overpayment.”18



Challenges to StatisticsIn many post-payment audits, CMS will audit a small sample of a provider’s or

Figure 2: Key Differences between the Demonstration and Permanent ProgramsDemonstration

RACsPermanent RACs

Look back period (from claim payment date – date of medical record request) 4 years 3 years

Maximum look back date None 10/1/2007

Allowed to review claims in current fi scal year? No Yes

RAC medical director Not required Mandatory

Coding experts Optional Mandatory

Discussion with RAC medical director regarding claim denials if requested Not required Mandatory

Credentials of reviewers provided upon request Not required Mandatory

Vulnerability reporting Limited Mandatory

RAC must pay back the contingency fee if the claim overturned at… …fi rst level of appeal

…all levels of appeal

Web-based application that allows providers to customize address and contact

None Mandatory by January 1, 2010

External validation process Not required Mandatory

CONTINUED ON PAGE 63

Figure 1: RAC Expansion Schedule

supplier’s records, and if it finds an over-payment, CMS will extrapolate the over-


Sara Kay Wheeler practices exclusively in the area of health law. She has

extensive experience in the creation and implementation of corporate compliance

programs, including the negotiation of corporate integrity agreements (CIAs) with the U.S. Department of

Health and Human Services, Offi ce of Inspector General. Ms. Wheeler’s other

areas of expertise include fraud and abuse concerns, internal investigations, voluntary disclosure strategies, clinical research compliance, privacy matters,

managed care arrangements, and health care litigation. She also works closely with retail and specialty pharmacy providers.

Entities May Want to Explore Viable Options for Resolving Potential Liability

Sara Kay Wheeler / Tizgel High

Since the launch of the U.S. Department of Health and Human Services, Offi ce of Inspector General’s (OIG’s) Provider Self-Disclosure Protocol in Octo-

ber 1998,1 the OIG has provided several guidance state-ments in the form of open letters. Since 1998, four open letters have been published to clarify the use of the pro-tocol and offer incentives with respect to participation in the voluntary disclosure program. Accordingly, the most recent open letter, published on April 15, 2008,2 provides the most powerful incentive for participation in the pro-gram issued to date — namely that when the OIG negoti-ates the resolution of a matter properly disclosed and re-solved through the program, the OIG generally will not require a corporate integrity agreement (CIA) or certifi -cation of compliance agreement (CCA).

While the April 2008 open letter provides valuable in-centives, however, some uncertainties about the process persist while the enforcement landscape continues to grow more complicated. In particular, providers remain concerned about the burden of the internal investigation that must be conducted, the length of time it may take to reach a resolution with the OIG, and whether resolution with the OIG provides adequate fi nality with other agen-cies charged with enforcing health care fraud and abuse laws. Moreover, although the open letter provides a path to disclose issues that are obvious violations of law3 with-in the traditional Medicare program, health care entities more frequently grapple with scenarios in which it is not clear whether a violation of law has occurred.

Another challenging issue involves the existence of other potential avenues for resolving particular issues depending on the nature of the underlying conduct and

Understanding the Golden Carrot: Voluntary Disclosure Strategies after the April 15,

2008, OIG Open Letter

Tizgel High also practices exclusively in the area of health law. Ms. High represents

various health care providers including hospital systems and retail and specialty

pharmacy providers with their federal and state regulatory concerns. Ms. High has

experience assisting providers with their responses to state and federal inquiries and investigations. In addition, Ms. High regularly works with health care entities to implement and enhance corporate compliance structures and strategies.


Understanding the Golden Carrot

the federal health care program(s) impact-ed by such conduct. For example, with re-spect to Medicaid reimbursement issues, some states have begun to issue state-spe-cifi c voluntary disclosure procedures for resolving such issues.

Consequently, health care entities that identify conduct that may warrant disclo-sure should explore available options to determine the most effective means of re-solving potential liability based on the in-dividual facts and circumstances at issue. The goal of this article, therefore, is to: (1) provide background on the protocol; (2) ex-plain the evolution of the protocol through the OIG’s issuance of various open letters; (3) survey important state regulatory and enforcement developments; and (4) formu-late practical disclosure strategies.

OVERVIEW AND GENESIS OF OIG SELF-DISCLOSURE PROTOCOLOriginally released on October 21, 1998, the OIG Provider Self-Disclosure Protocol sets forth specifi c steps regarding a process by which health care organizations may work openly and cooperatively with the OIG to resolve potential fraud and abuse involving federal health care programs. The protocol may be used for disclosing violations of fed-eral criminal, civil, or administrative laws.

The OIG cautions, however, that mat-ters exclusively involving overpayments and billing errors should be brought direct-ly to the entity that processes claims and issues payment on behalf of the federal health care programs (i.e., the carrier or intermediary).4 Presumably, such matters may be resolved in a less formal manner than required under the protocol.

The OIG developed the protocol to fur-ther encourage providers to self police by adopting effective compliance programs that include processes by which potential-ly abusive practices may be discovered and resolved. The advantages of disclosing a potential compliance problem pursuant to the protocol, however, were not initially ev-ident to the health care community.

Consequently, health care organizations contemplating disclosure were not confi -dent that issues voluntarily disclosed ac-cording to the protocol would not be simul-taneously investigated by the OIG or re-ferred immediately to the U.S. Department of Justice (DOJ) for further investigation. To soothe certain misgivings about the pro-tocol and expand the universe of scenari-os to which the protocol applies, the OIG has issued four “open letters” to health care providers since the release of the protocol in 1998.

MARCH 2000 OIG OPEN LETTER

The March 2000 OIG open letter5 revealed that during the 17 months in which the protocol had been in operation, providers often received expedited review and, in ap-propriate circumstances, favorable treat-ment to resolve liability. In addition, the OIG expressly acknowledged that a self-dis-closing health care organization may not be required to enter into a CIA if the organiza-tion could demonstrate that its compliance program was “effective.”

Further, even if the entity ultimately was required to enter into a CIA, the OIG sug-gested that disclosing organizations may not be required to retain an independent review organization (IRO) or have any oth-er external evaluation of the disclosing pro-vider’s compliance program as a condition of settlement. While the possibility of avoid-ing these monitoring methods was signifi -cant in terms of savings regarding external legal, auditing, and consulting fees, appre-hension about this relatively unknown pro-gram persisted.

NOVEMBER 2001 OIG OPEN LETTER

The November 2001 OIG open letter6 built on the initiatives announced in the March 2000 open letter. In this issuance, the OIG reviewed several signifi cant OIG voluntary compliance initiatives including the an-nouncement of compliance program guid-ance tailored to the operations of specifi c categories of health care providers,7 special



fraud alerts,8 and advisory opinions.9 The OIG also explored in the 2001 open letter the list of eight criteria on which the agen-cy would rely when determining whether a CIA should be a condition of settlement.10

Signifi cantly, the fi rst factor listed by the OIG in this discussion is “whether the provider self-disclosed the alleged miscon-duct.” This discussion also provides ad-ditional specifi city with respect to factors considered by the OIG when the agency is negotiating potential penalties and correc-tive action plans.

APRIL 2006 OIG OPEN LETTER

In the April 2006 OIG open letter,11 the OIG offi cially broadened the protocol’s applica-tion by expanding it to include the resolu-tion of civil monetary penalties (CMPs) un-der the federal Physician Self-Referral prohi-bition (see law), §1877 of the Social Security Act (“Stark law”),12 and the federal Medicare and Medicaid Patient and Program Protec-tion Act of 1987 (commonly referred to as the anti-kickback statute, or AKS), §1128B(b) of the Social Security Act,13 potentially due as a result of imperfect arrangements be-tween physicians and hospitals. This an-nouncement was signifi cant as it coincided with a substantial increase in OIG and DOJ enforcement activity surrounding hospital-physician relationships. Such enforcement actions also had yielded a new strain of CIA with mandatory procedures designed to more rigorously regulate hospital-physician contractual arrangements.14

In the 2006 open letter, the OIG also an-nounced its approach to resolving poten-tial arrangements-based liability under the protocol. The OIG explained that in such cases it would confer with the DOJ to en-sure that the DOJ had knowledge of such disclosures and had an opportunity to of-fer its opinion before the OIG accepted a provider into the protocol. Additionally, the results of the OIG’s review would be presented to the DOJ before any fi nal reso-lution of the matter. The OIG, specifi cally emphasized however, that the OIG’s agree-

ment to resolve a disclosed matter would not be binding on the DOJ.

Importantly, the OIG recognized in the 2006 open letter that a provider’s liabil-ity in Stark and AKS cases typically falls “along a continuum” with the CMP dam-ages calculation for Stark violations based on the “number and dollar value of im-proper claims” and the CMP damages cal-culation for kickbacks based on the “num-ber and dollar value of improper payments or remuneration.” The OIG further offered that the agency “will generally settle [self-disclosed] matters for an amount near the lower end of this continuum, i.e., a mul-tiplier of the value of the fi nancial bene-fi t conferred by the hospital upon the phy-sician.” This distinction can be extremely signifi cant depending on the facts and cir-cumstances of the underlying case.

The OIG expressed that the agency would waive its exclusion authority if a provider demonstrated trustworthiness and the ability to develop or maintain an effective compliance program as appropri-ate. Further, the OIG reminded health care entities of its demonstrated willingness to reduce burdens on providers by settling self-disclosed matters under CCAs (with-out requirements for IRO review or exter-nal audits) as opposed to more demanding CIAs. The OIG reiterated that a provider’s willingness to self-disclose would continue to be a critical factor it will consider when determining whether a CIA or the less bur-densome CCA would be appropriate to re-solve potential liability.15

APRIL 15, 2008 OIG OPEN LETTER

On April 15, 2008, the OIG announced ad-ditional incentives aimed to advance the health care community’s use of the pro-tocol. In an effort to streamline the dis-closure process and provide quicker re-sponses to self-disclosures, the OIG issued further details expected of initial submis-sions, which include the following: (1) a complete description of the conduct being disclosed, (2) a description of the provid-



er’s internal investigation (or a commit-ment regarding when the investigation will be completed), (3) an estimate of po-tential damages to the federal health care programs and the methodology used to calculate that fi gure (or a commitment re-garding when the provider will complete such estimate), and (4) a statement of the laws potentially violated by the conduct. This additional detail must be disclosed along with the basic information16 previ-ously required under the protocol.

Once the initial disclosure is submit-ted, the disclosing organization is expected to complete its investigation and damag-es assessment within approximately three months after being accepted into the proto-col. In return, the OIG pledges to stream-line its internal review process for resolv-ing cases. A continuing theme in this lat-est open letter is the need for providers to make a good faith determination that the activity being disclosed rises to the level of potential fraud involving a federal health care program. Mere overpayments should be referred to the contractor responsible for processing claims and making payment.

In addition, a provider’s submission of a complete and informative disclosure, prompt responses to the OIG’s requests for addition-al information, and the ability to conduct ac-curate audits are evidence that a provider has indeed implemented an effective com-pliance program. As a result, the OIG will presume that a provider meeting the OIG’s expectations for disclosure has an effective compliance program and, therefore, will not require a CIA or CCA as a condition of settle-ment. With this presumption, the OIG hopes to further expedite the disclosure process and encourage more providers to disclose potential fraud under the protocol.17

In sum, with the April 15, 2008, letter, the OIG provides signifi cant incentive for providers to bring forth activity that may rise to the level of fraud and abuse involv-ing federal health care programs:

clearer requirements for the initial dis-closure to the OIG;

a more streamlined process for advanc-ing through the protocol; anda presumption that if the provider meets the OIG’s expectations, the provider maintains an effective compliance pro-gram it will not be required to enter into a CIA or CCA.

POTENTIAL COMPLICATIONS WITHIN THE CURRENT FEDERAL AND STATE ENFORCEMENT LANDSCAPE

Although there have been signifi cant ad-vancements with respect to the use of the protocol, including the April 15, 2008, open letter, certain unresolved questions and con-cerns remain. Certain providers may need to reconcile the protocol with other poten-tially applicable regulatory constructs. First, states are increasingly developing their own mechanisms for detecting, investigat-ing, and preventing Medicaid fraud waste and abuse in light of provisions articulated in the Defi cit Reduction Act (DRA) signed into law February 2006.18 In response, some states have developed self-disclosure pro-tocols to facilitate their monetary recovery efforts.19 Currently, there is little guidance discussing whether these programs compli-ment or supersede the OIG protocol.

Second, providers that are currently obli-gated under CIAs or CCAs must be cognizant of their contractual obligation to disclose cer-tain reportable events to the OIG under the terms of the agreement. Moreover, when re-porting such events according to the terms of such agreements, CIA and CCA-obligated providers are not assured of any of the ad-vantages available under the protocol.

Lastly, Medicare Part D and Medicare Advantage providers have recently re-ceived direction from the Centers for Medi-care & Medicaid Services (CMS) regarding self-disclosure. It is not clear how this OIG guidance should be viewed by network par-ticipants in light of these rules and com-mentary, particularly with respect to the entity(s) that should receive a provider’s self-disclosure.



INCREASED STATE ENFORCEMENT The DRA included several provisions that di-rectly impact state enforcement initiatives. Three of the most infl uential provisions in-clude: (1) an inducement for states to enact state false claims acts that mirror the feder-al False Claims Act (FCA);20 (2) a require-ment for entities making or receiving at least $5 million in payments from a state Medic-aid program to develop written policies (and educate their employees, contractors, and agents on these policies) detailing the feder-al FCA and any state laws that impose civil and criminal penalties for submitting false claims; and (3) the development of the Med-icaid Integrity Program.

In addition, the DRA mandates addi-tional signifi cant resources to states for the purpose of combating fraud and abuse in the various state Medicaid programs. States that enact state false claims acts meeting OIG’s approval also will receive a larger percentage of the recovery from successful actions initiated under such state laws.

Given Congress’s clear message to in-crease state Medicaid enforcement capabil-ities and the increased resources that have been made available, states are responding. Currently, 25 states have enacted state false claims acts with twelve states (California, Georgia, Hawaii, Illinois, Indiana, Massa-chusetts, Nevada, New York, Rhode Island, Tennessee, Texas, and Virginia) 21 meeting the criteria for certifi cation by the OIG.

Several states have developed sophisticat-ed enforcement programs modeled after the federal programs. For example, New York, Texas, and Georgia have established offi ces of inspector general that are modeled after the federal OIG and are tasked with investigating and preventing fraud and abuse involving the Medicaid program. Any self-disclosure proto-cols offered at the state level should be viewed as a potential option available to entities con-templating a Medicaid compliance issue.

FEDERAL ENFORCEMENT

The federal government has multiple weapons to combat fraud, waste, and abuse

involving federal health care programs. The most signifi cant laws are the Stark law, AKS, and federal FCA. The Stark law makes certain physician compensation and investment arrangements improper. Poten-tial consequences of Stark law violations include refund of overpayments, civil mon-ey penalties (up to $15,000 for each health service provided under the arrangement), and exclusion from the federal health care programs. The Stark law is a strict liability statute; therefore, lack of intent to defraud the government is not a defense.

The AKS is a criminal law that prohib-its paying or receiving any remuneration in exchange for referrals. A health care or-ganization violating the AKS may be liable for criminal penalties (fi ne of up to $25,000 and up to fi ve years in jail), civil monetary penalties (up to $50,000 for each act and damages of up to three times the amount of remuneration), and exclusion. The fed-eral FCA provides for civil penalties (fi ne between $5,500 and $11,000 per false claim and up to treble the amount of damages sustained by the federal health care pro-gram) and administrative penalties (in-cluding suspension, termination, and ex-clusion). Violations of the FCA occur when an entity knowingly submits false claims to the government for payment.

Providers violating the law, in addi-tion to penalties, also face the potential of entering into a CIA with the OIG. In the April 2006 open letter, the OIG very briefl y mentions a willingness to work with providers currently under integri-ty agreements. The OIG, however, then focuses on providers that fail to demon-strate a commitment to compliance even while under a CIA and threatens that such providers may face exclusion. It is not certain what presumptions the OIG will make for a provider that acts fraudu-lently or abuses the federal health care programs while under a CIA.

Under integrity agreements, providers generally have a contractual obligation to notify the OIG of certain “reportable



events.” A reportable event is often de-fi ned in CIAs as “a matter that a reason-able person would consider a probable vi-olation of criminal, civil, or administra-tive laws applicable to any federal health care program for which penalties or ex-clusions may be authorized.”22 It is un-clear whether a provider disclosing a re-portable event as defi ned in its CIA will receive the same favorable treatment put forth by the OIG in the open letter or un-der what circumstances the matter may be referred to the DOJ or result in addi-tional penalties or exclusion.

PRACTICAL TIPS

The issuance of the April 15, 2008, open let-ter refl ects the OIG’s recognition that provid-ers needed stronger incentives to voluntari-ly come forward with potential compliance issues in light of the heavy fi nancial penal-ties and administrative burdens that often accompany the resolution of perceived vio-lations.23 A self-disclosure, although saddled with benefi ts, also may have signifi cant consequences to the disclosing entity. The decision to self-disclose should not end the analysis. It is equally important to consider who to disclose to, under what regulatory framework, and what will be the lasting im-plications of these decisions.

While the April open letter provides a new incentive for self-disclosure, law-yers and compliance officers (especially those who represent hospitals and other providers that concurrently participate in several federal health care programs)

need to be aware that disclosure is far from a simple equation that allows pro-viders to foreshadow the ultimate out-come. Myriads of laws are in play24 in this sensitive process as well as count-less iterations of factual scenarios. As counsel to health care organizations, there exists a responsibility to educate organizations about the process and po-tential complications. Certain providers have additional layers of regulation and enforcement that also should be consid-ered, in particular state enforcement. Without agency guidance regarding the interplay of these regulations, a self-dis-closure may be a necessary but tenuous experience for a provider.

The following tips may be helpful for health care organizations in circumstances that may warrant a disclosure:

Review the table of relevant law provid-ed in this article. (See Figure 1)Consult experienced counsel. Having someone in your corner that knows how to navigate the fi eld and who may have useful contacts is important.Consider the potential exposure careful-ly. Be familiar with the jurisdiction of all agencies involved.Be prepared. Thoroughly understand the underlying conduct and potential fi nan-cial exposure prior to disclosing.Explore the options for disclosure and pursue appropriate steps to determine the best option for your organization based on the facts and circumstances at issue.

Figure 1: Authority and Resources Relevant to Voluntary Disclosures25

Title Citation

Physician Self-Referral Law (Stark Law) 42 U.S.C. § 1395nn(g)(2)

Stark Regulations 42 C.F.R. § 411.353(d)

Stark Civil Monetary Penalty 42 U.S.C. § 1395nn(g)(3)

Stark Civil Monetary Penalty Regulation 42 C.F.R. § 1003.102(b)(9)

Determinations Regarding the Amount of Penalty and Assessment

42 C.F.R. § 1003.106(a)(v)

Federal False Claims Act 31 U.S.C. §§ 3729-3732



Title Citation

Civil Monetary Penalties 42 C.F.R. § 402.1(c)(13)

Defi nition of Timely Refund 42 C.F.R. § 402.3

Refunds for Medically Unnecessary Physician Services 42 C.F.R. §414.65(e)(2)

Payment for Telehealth Services 42 C.F.R. § 414.65(e)(2)

Agreements Between CMS and Federally Qualifi ed HMOs 42 C.F.R. § §417.801(b)(3)

Federally Qualifi ed HMOs, Refunds to Medicare Enrollees 42 C.F.R. § 417.456(a),(b), (f )

Incorrect Collections in the Medicare Advantage Program 42 C.F.R. § 422.270(b), (d)

Medicare Advantage Program General Provisions (effective 1/1/09)

42 C.F.R. § 422.503(b)(4)(vi)(G)(3)

Medicare Part D General Provisions (effective until 1/1/09) 42 C.F.R. § 423.504(b)(4)(vi)(H)

Medicare Part D General Provisions (effective 1/1/09) 42 C.F.R. § 423.504(b)(4)(vi)(G)

Requirements for Establishing and Maintaining Medicare Billing Privileges

42 C.F.R. § 424.555(b)

Provider Agreements 42 C.F.R. § 489.20(h)42 C.F.R. § 489.41(a), (b)42 C.F.R. § 489.42(a)

Criminal Penalties for Acts Involving Federal Health Care Programs

42 U.S.C. § 1320a-7b(a)(3)

Frauds and Swindles 18 U.S.C. § 1341

Health Care Fraud 18 U.S.C. § 1347

Theft or Embezzlement in Connection with Health Care 18 U.S.C. § 669(a)

OIG Open Letters to Health Care Providers www.oig.hhs.gov/fraud/openletters.html

OIG Self-Disclosure Protocol Notice, 63 FR 58399, October 30, 1998

OIG Compliance Guidance www.oig.hhs.gov/fraud/complianceguidance.html

Medicare Program; Revisions to the Medicare Advantage and Part D Prescription Drug Contract Determinations, Appeals and Intermediate Sanctions Process

Final rule, 72 FR 68700, December 5, 2007

Endnotes:1. Notice, 63 FR 58399, Oct. 30, 1998. Can be viewed at

www.oig.hhs.gov/authorities/docs/selfdisclosure.pdf.2. Offi ce of Inspector General, (hereinafter OIG), An

Open Letter to Health Care Providers, April 15, 2008, www.oig.hhs.gov/fraud/docs/openletters/OpenLetter4-15-08.pdf.

3. Notice, supra note 1, at 58400. The Protocol is “intended to facilitate the resolution of only matters that, in the provider’s reasonable assessment, are potentially violative of federal criminal, civil or administrative laws.”

4. . “[M]atters exclusively involving overpayments or errors that do not suggest that violations of law have occurred should be brought directly to the attention of the entity…that processes claims and issues payment.”

5. OIG, An Open Letter to Health Care Providers, March 9, 2000, available at www.oig.hhs.gov/fraud/docs/openletters/openletter.htm.

6. OIG, An Open Letter to Health Care Providers, Nov. 20, 2001, at www.oig.hhs.gov/fraud/docs/openletters/

openletter111901.htm.7. OIG, Compliance Guidance, available at www.oig.

hhs.gov/fraud/complianceguidance.html. Includes compliance program guidance for hospitals, individual and small group practices, nursing facilities, hospices, home health facilities, clinical laboratories, and others.

8. OIG, Fraud Alerts, Bulletins and Other Guidance, at www.oig.hhs.gov/fraud/fraudalerts.html.

9. OIG, Advisory Opinions, at www.oig.hhs.gov/fraud/advisoryopinions.html.

10. (1) Whether the provider self-disclosed; (2) the monetary damage to the federal health care programs; (3) whether the case involves successor liability; (4) whether the provider is currently participating in the federal health care programs or in the line of business that gave rise to the fraudulent conduct; (5) whether the alleged conduct is capable of repetition; (6) the age of the conduct; (7) whether the provider has an effective compliance program and would agree to limited compliance or



integrity measures and would annually certify such compliance to the OIG; and (8) other circumstances as appropriate.

11. OIG, An Open Letter to Health Care Providers, April 24, 2006, at www.oig.hhs.gov/fraud/docs/openletters/Open%20Letter%20to%20Providers%202006.pdf.

12. 42 U.S.C. §1395nn.13. 42 U.S.C. §1320a-7b.14. See e.g., Corporate Integrity Agreement for

Chattanooga-Hamilton County Hospital Authority D/B/A Erlanger Medical Center and Erlanger Health Systems, OIG, at www.oig.hhs.gov/fraud/cia/index.html; Corporate Integrity Agreement for University Hospitals Health System, Inc, OIG, available at www.oig.hhs.gov/fraud/cia/index.html.

15. The OIG reported in 2006 that when providers had disclosed compliance issues according to the protocol at that time, the OIG required a CIA as a condition of settlement in less than 20 percent of the cases.

16. The OIG Self-Disclosure Protocol provides that certain “basic information” must be included in the self-disclosure submission. Notice, supra note 1.

17. A survey conducted by the American Health Lawyers Association (hereinafter AHLA) provides interesting insight into self-disclosures made by health care organizations to government agencies, including the OIG. Although fi rm conclusions about the use of the protocol cannot be drawn from this survey, the results of the survey appear to contradict the common belief that resolution under the protocol is a very drawn-out process with limited benefi t to the disclosing entity. Most entities participating in the survey appeared to receive relatively prompt resolution and favorable outcomes. American Health Lawyers Association, (hereinafter (AHLA), 2007-2008 Voluntary Disclosure Survey (June 17, 2008), available at www.healthlawyers.org//Template.cfm?Section=Voluntary_Disclosure_Survey&Template=/MembersOnly.cfm&Nav

MenuID=1641&ContentID=56270&DirectListComboInd=D.

18. DRA of 2005 (Pub L No 109-171), §§6031, 6032, and 6034.

19. See, Texas Offi ce of Inspector General, Provider Self-Reporting Guidance, March 19, 2007, available at oig.hhsc.state.tx.us/ProviderSelfReporting/Self_Reporting.aspx; Georgia Department of Community Health, Part I Policies and Procedures for Medicaid/PeachCare for Kids, Sec. 402.10 Self-Disclosure, available at www.ghp.georgia.gov/wps/output/en_US/public/Provider/MedicaidManuals/Part_I_v2_2008-07.pdf.

20. 31 U.S.C. §§3729-3733.21. OIG, State False Claims Act Reviews, available at

www.oig.hhs.gov/fraud/falseclaimsact.html#1.22. See e.g., Corporate Integrity Agreement for

Chattanooga-Hamilton County Hospital Authority, supra note 14. D/B/A Erlanger Medical Center and Erlanger Health.

23. Penalties are numerous and severe including civil and administrative penalties under the Stark law, anti-kickback statute, federal FCA, and state false claims acts.

24. For example, on December 5, 2007, CMS promulgated final rules for the Medicare Part D and Medicare Advantage Program. These rules included provisions for voluntary self-disclosure. The previous draft of the rules included mandatory self-reporting provisions, and CMS appears likely in the future to revisit whether the reporting measures should be mandatory. Final rule, 72 FR 68700, Dec. 5, 2007. Consider the impact of these rules and the potential for additional rules like these in other programs.

25. Compilation of laws taken in part from AHLA, Fraud and Abuse, Self-Referrals, and False Claims Practice Group, Voluntary Disclosure: Statutory and Regulatory References and Other Guidance, 2008.


Paul R. DeMuro, JD, MBA, is a partner in the Los Angeles and San Francisco offi ces of Latham & Watkins LLP. He is a CPA with a MBA in fi nance who has practiced corporate and health care law since 1979. Mr. DeMuro has practiced extensively in the areas of

corporate transactions, joint ventures, mergers and acquisitions, corporate organization, governance, fi nance,

and regulatory compliance. He can be contacted at [email protected].

It Is Important to Know How to Conduct Clinical Trials at Home and Abroad

Paul R. DeMuro / Andrea Jaeger-Lenz

The global clinical trials industry currently is esti-mated to be worth more than $10 billion. Consid-ering the ever- increasing demand for treatments

of more illnesses and more sophisticated medicines, it is bound to grow considerably in the future. Yet, escalat-ing domestic costs and diffi culties in recruiting patients for certain types of studies have led U.S. pharmaceuti-cal companies to look abroad more and more to conduct clinical trials. Thus, globalization of clinical trials is one of the most notable trends in current clinical research.

As the Western European countries have no consider-able cost or patient enrollment advantages with respect to the United States, over the past decade or so pharma-ceutical companies have been attracted increasingly to the countries of Central and Eastern Europe (CEE). The advantages to placing clinical trials in this area are:

availability of patients from largely treatment naïve populations, due to lack of money and limited reim-bursement;large population: CEE has a population of over 300 million; Russia and Ukraine have an additional 200 million inhabitants;centralized health care system with large, highly spe-cialized hospitals;high quality investigational sites for many teaching hospitals; andlow cost per completed case.CEE, however, is not one homogeneous area. It consists

of countries belonging to the European Union (EU) and former East Block countries (non-EU). With respect to the legal regime for clinical trials, the differentiation between

How to Conduct Clinical Trials in the EU and Eastern Europe:

Overview and Comparison with the U.S. System*

Dr. Andrea Jaeger-Lenz, JD, is a partner and chair of the IP/IT Group

in the Hamburg offi ce of Latham & Watkins LLP. She represents

clients engaged in the health care, life sciences, food, and cosmetics

industries, as well as fi nancial services and the Internet, new media, and telecommunication sectors. She represents clients in litigations

involving intellectual property rights, unfair competition, and regulatory

disputes with administrative bodies. Dr. Jaeger-Lenz can be contacted at

[email protected].


How to Conduct Clinical Trials in the EU and Eastern Europe

EU and non-EU CEE countries is crucial be-cause the EU Clinical Trials Directive1 is in effect. The countries beyond the scope of the EU Clinical Trials Directive follow their own individual legal regimes.

The CEE countries whose legislation and administration regarding clinical trials are modeled according to the EU Clinical Tri-al Directive are: Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Hungary, Romania, Bulgaria, and Slovenia. The CEE countries to which the directive does not ap-ply are: Croatia, Bosnia Herzegovina, Serbia and Montenegro, Macedonia, Albania, Belo-russia, Ukraine, Moldova, and Russia.

OVERVIEW OF THE EU CLINICAL TRIALS SYSTEMAll interventional clinical trials are cov-ered by the EU Clinical Trials Directive and require authorization by each member state’s regulatory body, such as the BfArM (Germany’s Federal Institute for Drugs and Medical Devices). This authorization is re-quired regardless of the medicinal prod-uct covered and regardless of the sponsor, whether industry, government, research council, charity, or university.

Key points of the EU clinical trials direc-tive are:

Protection of clinical trial subjects: The directive pays special attention to the protection of clinical trial subjects and informed consent. There is a require-ment to ensure that minors participating in the trial have received adequate infor-mation according to their capability and understanding.Procedures for ethics committees: The directive defi nes the procedures for eth-ics committees, including a time limit for decisions. Responsibilities of the ethics committees are very broad and include providing an opinion on the relevance of the clinical trial and its design and pro-tocol, the suitability of the investigator and supporting staff, et cetera. The eth-ics committees play a key role early on in the trial. A single opinion must be giv-

en from the ethics committee for both single and multicentric clinical trials to streamline the process.Absolute deadlines for the assessment of clinical trial applications: Both the reg-ulatory body and the ethics committee have to approve of the clinical trial. The timeline for the assessment by both enti-ties is 60 days. The 60-day timeline can be extended only if the trial involves cer-tain medicinal products, such as gene therapy or somatic cell therapy (an ad-ditional 30 days), products that require external consultation (an additional 90 days) and xenogenic cell therapy (no time limit). If, during that timeframe, the regulatory body, ethics committee, or both require the sponsor to make changes to the design and protocol of the clinical trial or provide additional infor-mation, the sponsor has only one chance to get it right.Exchange of information between the regulatory body, the sponsor, and the European Agency for the Evaluation of Medicinal Products (EMEA): EMEA hosts a safety and information database on clinical trials, called EudraCT. Any clinical trial taking place in the EU, as of its application early on, has to be re-corded with all details in this database. This allows an exchange of information between all member states, covering in particular safety alerts and refusals of authorization. It is not public and is only accessible to the regulatory authorities of the EU member states.Standards for Good Clinical Practices (GCP) and good manufacturing practic-es (GMP): All manufacturers of investi-gational medicinal products (IMPs), in-cluding placebos and active comparator products, require a manufacturing li-cense. All IMPs must be manufactured according to GMP. If the IMP is manu-factured outside of the EU, it is the re-sponsibility of the sponsor or its legal representative in the EU to ensure that the product has been manufactured ac-



cording to GMP. To enable the regulatory body and the ethics committee to verify GCP and GMP compliance, the directive allows for onsite inspections.Pharmacovigilance: Unexpected serious adverse events (SAEs), if fatal or life-threatening, are to be reported within seven days after knowledge by the spon-sor. All other suspected SAEs must be re-ported within 15 days of fi rst knowledge by the sponsor. Sponsors are to keep de-tailed records of all SAEs, which have to be submitted to regulatory bodies and ethics committees.

FOCUS: EASTERN EUROPE

The EU Clinical Trials Directive presents important upsides, such as a foreseeable and more or less uniform standard of the rules applying to clinical trials and their approval process and conduct. Yet, due to varying interpretations of certain terms in the directive (such as sponsorship, le-gal representative, approval guidelines, or drug safety reporting guidelines), the im-plementation of the EU Clinical Trials Di-rective was not universally considered a success according to some reports.

Increasing Costs for Clinical Trials in the EUIn the short term, costs for clinical trials have increased up to 85 percent in certain countries, leading to a decrease in clinical trial activities in a number of EU member states, in particular certain member states belonging to the CEE territory. For exam-ple, prior to 2004, Poland was reported to be a market leader within the CEE for clini-cal trials. This has changed. Lured by pros-pects of higher savings, clinical research has been moving further eastward and out of the EU territory.

Loss of Competitive Advantage for EU Clinical TrialsOn the timeline, a number of newly admit-ted EU member states belonging to the CEE region have lost their competitive advan-

tage of speedy clinical trial approval. Thus, it is no surprise that Russia and Ukraine, with their substantial populations and not falling under the EU regime, are among the fastest growing clinical research areas of the world. What draws sponsors to those countries are:

Rapid study initiation (typically 10 to 15 weeks from document submission to en-rollment of the fi rst patient);Academic centers and specialized hospi-tals for all therapeutic areas;Western medical technique processes; andHigh enrollment rates and drug naive patients in many therapeutic areas.

Risk ManagementWhere there is light, there is bound to be shadow. Close risk management is crucial for the success of clinical trials in these countries. At the planning stage, assessing site suitability is crucial. It is wise to stay clear of inexperienced sites, sites experi-enced but overloaded with other studies, or sites that have English language problems.

Equipment and TrainingEquipment is also an important consid-eration. It is not uncommon to fi nd sites without basics such as computers, email, fax machines, freezers, or other usual ame-nities. Sponsors, therefore, should allocate additional expenses for equipment and study-specifi c training.

Standards and DocumentationIn the set-up phase, sponsors should make sure that they have a good knowledge of local requirements and timelines to submit docu-ments in accordance with the laws of the var-ious countries. While investigators may be good doctors, for the most part they will lack education in this respect. During the monitor-ing stage, data quality, adherence to protocol, adverse event reporting, adequate laboratory test evaluation, and fi ling appropriate drug accountability need to be supervised closely.

During the close-out phase, sponsors should make sure that standards do not slip



and that documents are archived correctly. According to certain reports, trials conduct-ed in Eastern Europe had about double the number of inadequately completed clini-cal records compared to trials conducted in Western Europe. Thus, it may be advisable to employ specialized clinical research or-ganizations for clinical trials taking place in Eastern Europe.

BASIC DIFFERENCES TO U.S. SYSTEM

There are a number of differences in regu-latory requirements for clinical trials in the EU and the United States, the most impor-tant of which relate to:

regulatory document submission;rrotection of clinical trial subjects;IMP issues; andretention of essential clinical trial docu-ments.

Regulatory Document SubmissionWith respect to the application procedure, for a multicentric trial taking place in sev-eral U.S. states, there is one competent regulatory authority, namely the Food and Drug Administration (FDA), with a sin-gle submission and a single authorization granted. A multicentric clinical trial in a number of EU member states requires one submission of application to competent au-thority per member state.

Submission of New ProtocolIn the United States, a new protocol can be submitted as an amendment to the investi-gational new drug (IND) application of the investigational product. The FDA reviews the initial IND within 30 days, but there is no offi cial review time for subsequent amendments to the IND.

In the EU, there must be a standalone submission to the competent authority for each protocol. The review timeframe gen-erally is 60 days, with one opportunity for the competent authority to request further information, during which time the clock stops. If the competent authority does not fi nd the response satisfactory, however, the

application is considered rejected. So there is only one chance to get it right.

Amendments to the ProtocolIn the United States, no offi cial approval is required for an amendment to the protocol. In the EU, substantial amendments require approval by the competent authority prior to implementation. The timeframe for ap-proval is 35 days.

Notifi cation of Study ClosureAt the end of a U.S. trial, a notifi cation of study closure must be submitted to the FDA in an IND update, but no particular time-frame for submission of the notifi cation is specifi ed. In the EU, each competent au-thority must be notifi ed of the closure of the trial in its territory, and ultimately clo-sure of the trial overall. The closure noti-fi cation is to be issued within 90 days of a termination.

Human Subjects ProtectionTurning to the protection of clinical trial subjects in the EU, there is a detailed list of informed consent document (ICD) require-ments, as follows. Any payments to clinical trial subjects must be disclosed. No incen-tives or fi nancial inducements for participa-tion of minors or incapacitated subjects in a trial are allowed. There are no provisions outlined for emergency consent. Addition-ally, some countries require insurance in-formation to be included in the ICD. In the United States, there are no requirements for insurance information in the ICD.

The European data protection directive applies to clinical trials in the EU. In the United States, local sites are required to in-corporate Health Insurance Portability and Accountability (HIPAA) regulations for pri-vacy protection into consent clauses.

IMP IssuesIn the United States, the IMP must satis-fy U.S. GMP. In the EU, the IMP must be manufactured to a standard at least equiva-lent to EU GMP. An import authorization is



required via application to the competent authority. In the United States, labels on an IMP do not require an expiration date, which is not the case in the EU. Also, in the United States, label samples are not re-quired by the investigational review boards (IRBs), whereas the ethics committees in the EU may require such samples.

Retention of Essential Clinical Trial DocumentsIn the United States, essential clinical trial documents must be stored for two years af-ter the last approval or formal discontinua-tion of development of the product. In the EU, the sponsor and investigator shall re-tain the essential documents relating to a clinical trial for at least fi ve years after its completion.

OTHER PRINCIPLES OF GCP GUIDANCE

Clinical trials should be conducted in accor-dance with ethical principles originating with the Declaration of Helsinki. GCP should be a consistent theme, and clinical trials should adhere to all regulatory requirements. Le-gal counsel and compliance departments should be involved in certain aspects of the planning and oversight of the clinical trials to ensure regulatory compliance.

Ethical principles that should govern the conduct of clinical trials include:

Prior to the commencement of a trial, the foreseeable risks and inconvenienc-es should be weighed against the antici-pated benefi t for the individual trial sub-ject and society. The safety and welfare of the trial subject must be considered. The anticipated benefi ts of the trial must justify the risk if the trial is to be initi-ated and continued.Special attention should be paid to na-ive trial subjects, and there should be a valid scientifi c rationale for the use of such subjects. The rights, safety, and well-being of the trial subjects should be the most important considerations, and these considerations should prevail over science and society.

There should be a genuine research question, and the available nonclinical and clinical information on an investi-gational product should be adequate to support the proposed clinical trial.Clinical trials should be scientifi cally sound and described in a clear, detailed, rigorous protocol. The protocol should be consistent with safety and effi ciency.IRB or Independent Ethics Committee (IEC) approval or a favorable opinion must be obtained prior to initiating the trial, and the trial should be conducted in compliance with the protocol approved by the IRB or IEC. The IRB or IEC should take into consideration the payments that may be made to the trial subjects to en-sure that the trial subjects are not unduly infl uenced to participate in the trial.The medical care given to, and medi-cal decisions made on behalf of, the trial subjects always should be under the su-pervision of a qualifi ed physician or, if appropriate, a qualifi ed dentist. All non-physician clinical personnel should be adequately supervised.Each individual involved in conducting a trial should be qualifi ed by education, training, and experience to perform his or her assigned task. Adequate training in the protocol-related activities should be provided. The staff on the protocol should be trained appropriately, and that training should be documented. The study staff should be familiar with the clinical trial standards and regulatory re-quirements.Every trial subject should give his or her informed consent freely prior to partici-pation in the clinical trial. That consent, as well as the process and procedure lead-ing up to obtaining the consent, should be documented appropriately. The sub-jects’ education level and language skills should be taken into consideration and documented appropriately, should there be a question later.All clinical trial information should be documented appropriately, including re-



cording, handling, and storing such in-formation in a manner that allows its accurate reporting, interpretation, and verifi cation. Particular attention should be paid to the electronic storage and en-cryption of such information.The confi dentiality of trial subject re-cords is of paramount importance. Re-cords that could identify the trial subject must be protected. Adherence to privacy and confi dentiality rules and regulations for the particular jurisdictions involved also is crucial.Investigational products should be man-ufactured, handled, and stored in accor-dance with GMP and used in accordance with the approved protocol. All systems with procedures should assure the qual-ity of every aspect of the clinical trial.

NEW STANDARDS FOR FOREIGN CLINICAL TRIALS2 The FDA issued new regulations on April 28, 2008, revising the standards under which the agency will accept data from foreign clinical trials in support of domestic appli-cations and submissions.3 Under the revised regulations, foreign clinical trials to be used as support for an IND, new drug approval (NDA), or abbreviated new drug approval (ANDA) application must be conducted pur-suant to the oversight of an IEC and in com-pliance with the FDA’s GCP regulations.

The revisions to the regulations for for-eign, non-IND clinical trials require spon-sors to (1) demonstrate that the studies are conducted in accordance with GCP; and (2) permit the FDA to validate the data through onsite inspection. Compliance with GCP requires, among other things, patient in-formed consent, investigator statements, and adverse event and periodic reporting to the FDA.4

The GCP regulations also require that the study be conducted under the over-sight of an IEC —“a review panel that is responsible for ensuring the protection of the rights, safety, and well-being of human subjects involved in a clinical investigation

and is adequately constituted to provide as-surance of that protection.”5 The GCP stan-dards require IEC review and approval of the study protocol before initiation of a study, continuing IEC review of an ongo-ing study, and IEC approval for obtaining and documenting informed consent.

The revised regulations describe the in-formation that must be provided when a clinical trial sponsor submits foreign clini-cal data to the FDA in support of an IND, NDA, or ANDA.6 These data submission re-quirements include a description of investi-gator qualifi cations, research facilities, drug product, study protocols, and results. To en-hance FDA oversight and facilitate FDA re-view, sponsors also must document compli-ance with GCP and IEC procedures. Specifi -cally, when submitting foreign clinical data to the FDA, sponsors must identify the IEC, document the IEC decision to approve or modify the study, describe the methods for obtaining informed consent and any incen-tives provided to subjects, describe study monitoring procedures, and describe the training provided to ensure compliance with GCP and the approved protocol.

The FDA also has added a record retention requirement,7 which lasts for two years after the agency’s decision on an application for marketing approval or, if a study is submit-ted in support of an IND but not an applica-tion for marketing approval, for two years af-ter the submission of the IND. The purpose of this record retention requirement is to en-able FDA onsite inspection, if necessary.

The new regulation becomes effective October 27, 2008, and will be applicable to all foreign clinical studies regardless of the status of subject enrollment, whether on-going, completed, or not yet initiated. To decrease the potential for confusion about which version of the regulations governs a particular foreign trial, the new regulations do not grandfather trials in progress. The new requirements for the design, conduct, and reporting of foreign clinical trials will apply equally to studies that result in NDA



FOR THE RECORDROY SNELL

A Nurse’s Perspective on Long-Term Care Compliance

Cheri Battee Discusses Some of the Most Challenging Aspects of the Job

Cheri Battee is the compliance offi cer at Funda-mental Administrative Services in Maryland. She can be reached at [email protected]

Snell: Tell us a little about your background. How did you get into compliance?

Battee: I am currently a senior vice president and com-pliance offi cer for Fundamental Administrative Servic-es, LLC. My background is nursing, but I have been in-volved in compliance directly or indirectly since 1986. At that time I joined the Medical Review Department of a Medicare fi scal intermediary (FI) and carrier, where I managed the Medical Review, Provider Relations, and Fraud Units.

Until the early 1990s, the Offi ce of Inspector Gen-eral’s (OIG’s) focus was largely on Medicare Part B pro-viders, but the emphasis was turning more to Medi-care Part A. This coincided with the Federal Bureau of Investigation’s (FBI’s) new interest in health care fraud, and I had the good fortune of training both the FBI and OIG fi eld offi ces on Medicare coverage and billing. During this time, I also collaborated with the OIG on multiple investigations and upon my depar-ture from the company was awarded a USDHHS OIG OI Baltimore Special Agent Patch that is now hanging in my offi ce along with a letter from the then regional Inspector General, Jack Hartwig.

I was hired by Integrated Health Services (IHS), a sub-acute care/long-term care provider, to organize a Medi-cal Review Department with responsibility for denials management, Medicare training, et cetera. The transi-tion to compliance was logical, and in 1996 I was asked


For the Record

to organize a compliance department for the company.

Snell: How has your nursing background helped you in the compliance profession?

Battee: My clinical experience enabled me to secure the position of medical re-view specialist for the FI/carrier. Prior to that position, I was virtually unaware of the payment end of health care. That is re-ally more true of my hospital experience, which predated the inpatient prospective payment system (IPPS). During my ten-ure in home health, I was more aware of the impact of my documentation on reim-bursement, and quite honestly, I became more aware of potential compliance issues with regard to services provided.

My experience with the FI/carrier had the most impact on my compliance career as in addition to my clinical knowledge, I achieved expertise in Medicare coverage and billing.

With the current emphasis on quality of care, my background has been invaluable in terms of medical record review.

Snell: Long-term care (LTC) has been un-der a great deal of criticism. Personally, I don’t think there has been enough report-ed on the challenges and efforts of the LTC industry. What is your perspective on the criticism?

Battee: The challenges are many. On one hand, the facilities deal with higher acu-ity patients and on the other, custodial care for the frail elderly. All of this is in an environment of limited reimbursement, staffi ng challenges, and constant turnover. There are markets in which it is virtual-ly impossible to staff without the use of agency staff, which is not ideal in terms of continuity of care.

The public hears the horror stories but does not hear the good things that are going on in LTC. They do not see the staff members that love and care for the

residents as family nor the director of nursing that spends 16+ hours per day to ensure that needs are met. They don’t see the success stories. The residents are our parents, grandparents, and perhaps some of us at one point, and there are so many committed people dedicated to providing the best care they can. Quality as the priority is consistently the mes-sage from our chief executive officer and senior management of the company.

We have participated along with the LTC industry in the focus on improving quali-ty of care despite the challenges. We and others have voluntarily committed to ini-tiatives such as Quality First, which was es-tablished in 2002, and more recently, Ad-vancing Excellence.

Snell: You network with many compliance professionals in the LTC industry. Tell us a little about how much effort they and their organizations have put into compliance.

Battee: Actually, the collaboration on com-pliance has been relatively recent. The Long Term Care Consortium (LTCC) was organized through the American Health Care Association (AHCA) in response to the Health Insurance Portability and Ac-countability Act (HIPAA) to collaborate on implementation of the privacy components of the legislation. The focus has expand-ed gradually and multiple providers have come together to brainstorm and share in-formation to improve operations.

Although we may be competitors in some locations, ideas and documents are freely shared to ensure the success of all. We all share the same concerns and are striving to enhance compliance efforts. I’m not sure this has been duplicated in other areas of health care, but has thus far been invalu-able to me and my organization. There is in addition another group, the Senior Nurse Executive Council, which was formed in 1999 to address overall quality in LTC; this group similarly shares information and ideas and has been a valuable resource.


For the Record

Snell: You have had the opportunity to work on the enforcement and the provider side. How has this helped you? How do the two jobs differ?

Battee: Tough question. Initially, on the provider side as a hospital nurse, I was ig-norant of the payment mechanism and po-tential for abuse. As a medical reviewer for an FI/carrier, I was well aware of fraud and abuse. Again, back on the provider side, al-beit not as a practitioner, I still apply the principles of medical necessity of servic-es and payment, but in seeing patients/residents, my understanding of the need for services has changed. Reviewing a re-cord is one thing, but seeing the patient/resident and his or her need for services is another. I remember the days at the FI when the contract could be in jeopardy if we didn’t achieve at least a 5:1 savings ra-tio. That position has changed, but there is still an incentive toward savings.

Snell: How has the Offi ce of Inspector Gen-eral’s offi ce changed since you fi rst worked with them?

Battee: Totally different, but let me quali-fy that. My initial experience was with the OIG Offi ce of Investigations (OI), and I’m grateful that my recent experience with that branch has been limited. Most of my recent experience has been with the Offi ce of Counsel to the Inspector General (OCIG) in terms of corporate integrity agreement (CIA) reporting.

Generally, the OIG is much more in-volved in proactive measures than in the early days. Back then it was just investi-gations, and now it regularly issues advi-sory opinions, compliance program guid-ance, et cetera. When I fi rst interacted with the OIG, compliance was not an or-ganized function, and Medicare contrac-tor fraud initiatives were just being taken to a higher level. Lew Morris, the current chief counsel to the Inspector General, was on the panel with me when I provid-

ed training to the Baltimore fi eld offi ces of the OIG and FBI.

Snell: Tell us a little about the OIG’s upcom-ing LTC compliance guidance update.

Battee: The original guidance was primar-ily focused on the seven elements of an effective compliance program with some guidance on risk areas. The current draft is much more descriptive on quality of care and other risks including anti-kickback vio-lations, Stark violations, HIPAA, and Medi-care Part D.

Snell: What types of comments have they received?

Battee: The only comments of which I am aware were submitted with input from the LTCC through AHCA and include the fol-lowing:

“We are concerned; however, that de-spite the OIG’s insistence that the Draft Supplemental Guidance ‘will provide voluntary guidelines to assist nursing fa-cilities in identifying signifi cant risk ar-eas and in evaluating and….refi ning on-going compliance efforts’, it actually ex-pands the current survey, certifi cation and enforcement standards outlined in the Omnibus Budget Reconciliation Act of 1987 (OBRA ‘87) and CMS’ respective State Operations Manuals (SOMs) absent rulemaking, and allows the OIG to en-force these new standards, not through the CMS survey process, but through OIG investigation.“The OIG continues to rely on the com-prehensive survey, certifi cation and en-forcement scheme mandated by OBRA ’87 that, for the most part, everyone agrees is fl awed, to identify instances of poor quality of care in nursing facilities.“AHCA believes that the OIG must work with CMS, other federal agencies and LTC providers…to adopt or seek legislation to establish a national registry of certifi ed nurse aides…(and) a nationwide back-


For the Record


ground check system for health care workers and provide funding for and re-imbursement for use of that system.”

Snell: What is the most signifi cant change to the LTC guidance, and how would you recommend that your colleagues respond to the change?

Battee: I believe that the most signifi cant changes are in the area of quality of care, specifi cally in the realm of staffi ng, care plans, use of psychotropic medication, and medication management. These are areas that are very specifi c and questionable in terms of regulation.

Snell: The Health Care Compliance Asso-ciation (HCCA) held a round table with the OIG on developing quality of care dash-boards for LTC boards. What is your per-spective on this, and what is your perspec-tive on using dashboards for the board’s re-view of quality of care monitoring?

Battee: I believe the roundtable includ-ed few, if any, individuals with a “quali-ty” background. A few compliance offi cers happen to be nurses, but in speaking with Karen McDonald, our senior vice president of clinical services, she stated that “does not give them a glimmer about being a director of nursing” in a LTC facility.” I think it is great that the government is willing to col-laborate with the providers with regard to monitoring quality of care, but I think this needs to be a supportive approach rather than a punitive one.

Snell: What is the most challenging aspect of compliance in the LTC community?

Battee: Clearly, it is related to the consid-eration of quality of care as a compliance issue. Prior to 2003 or so, quality was un-der the purview of clinicians within our or-ganizations. Today, we have false claims li-ability related to quality of care, and those penalties would be better spent on improv-

ing the quality of services than returning money to the Medicare Trust Fund. I think there are many who disagree that issues re-lated to quality of care are considered false claims; however, the cost of litigation and the risks are simply too high for providers to fi ght. Therefore, to my knowledge, it has not been tested in court.

Snell: What compliance projects have you undertaken recently that you are most proud of?

Battee: In accordance with other depart-ments in the company, we are developing a “compliance scorecard.” This will allow us to apply consistent criteria in evaluat-ing all locations and will include all com-pliance requirements (training, screening, et cetera) as well as verifi cation of medi-cal necessity of services provided, billing, HIPAA, and internal quality data.

Snell: What has been the most challenging part of your job?

Battee: For the past fi ve years it has been managing the requirements of the CIA that we entered into as part of the IHS Bank-ruptcy Global Settlement. Even though the requirements were consistent with our pre-existing compliance program, the report-ing requirements were time consuming, as were the required audits, which focused on the skilled nursing facilities (SNFs). Be-yond that, balancing the various business lines was a challenge; these include not only SNFs but also long-term care hospi-tals, outpatient rehabilitation clinics, dial-ysis facilities, hospices, and assisted living facilities.

Snell: What background is the most valu-able for compliance professionals to have?

Battee: I think it is a matter of balance. Compliance offi cers may be nurses, at-torneys, accountants, internal auditors,


Deann M. Baker, CHC, CCEP, is the compliance and privacy offi cer for

Alaska Native Tribal Health Consortium. She can be reached at 907/729-1992.

More Than One Method Can Be Used to Communicate Ethical Standards to the Workforce

The United States Sentencing Guidelines (“Sentenc-ing Guidelines”) advise organizations to establish effective compliance and ethics programs. The

guidelines state multiple times that organizations must promote a culture that encourages ethical conduct, ed-ucate their workforce regarding such ethical standards, and reasonably design and implement compliance pro-grams. The reason the Sentencing Guidelines require or-ganizations to establish ethical standards is to infl uence the decisions of its workforce and business partners in a way that is consistent with laws and regulations.

It is important, prior to developing the methods to communicate and implement ethics and compliance in your organization, fi rst to address how you will de-scribe what ethics means. Ethics, morals, and values are all closely related and often are interchanged when the topic of a person’s behavior is addressed; however, they are somewhat different.

Values tend to be more rules based, and morals are based on ideas of right and wrong or good and bad. Eth-ics are thought of as governing standards over the con-duct of a professional or an individual. There are those who refer to ethical standards in organizations as busi-ness ethics. Business ethics are described as the actions of individuals or the organization as a whole that are either written or unwritten codes of conduct or princi-ples that help govern decisions and actions of a compa-ny’s workforce members and business partners. I agree with the well-known author John C. Maxwell’s (Injoy Stewardship Services) thoughts regarding business eth-ics discussed in his book titled “There Is No Such Thing As Business Ethics.” Ethics are always about individuals and the choices they make.

COMPLIANCE OFFICERDEANN M. BAKER

Designing and Implementing Ethics into the Fabric of Your Compliance Program


Compliance Offi cer

There are many methods we can use to communicate the ethical standards to the workforce. The code of conduct or code of ethics is a helpful instrument to communi-cate the fundamental principles of an orga-nization, but it is essential for an organiza-tion to develop written policies and proce-dures that further communicate what the organization’s stance is on a particular mat-ter and how to apply those in the opera-tions of workforce daily functions.

Policies and procedures, when designed well, can assist in communicating an ethi-cal tone and help the workforce members make correct and consistent decisions in alignment with the organization’s prin-ciples and relevant laws and regulations. Another method to communicate ethics is through well designed scenarios in the edu-cation provided to the workforce.

Compliance offi cers should think about marketing strategies and opportunities. A slogan is a simple method to help keep eth-ics and compliance memorable and visible. My organization uses two slogans: “Do the right thing, follow the code of conduct, and report concerns” and “Do the right thing, at the right time, for the right reason.” Take the opportunity to develop or participate in special events, such as the annual eth-ics and compliance week, to highlight your ethics and compliance program. Many or-ganizations have included ethics and com-pliance language in all job descriptions and have attestations signed annually. All of these are great ideas that organizations have used to promote ethics and empha-size behavior and good decision making.

All of these activities — the education, slogans, and other efforts — as helpful as they are, will not create an ethical cul-ture if the ethical behavior does not start with leadership. We can have the best laid plans and processes in place to infl u-ence and communicate ethics, but the in-fl uence of those efforts is limited if the workforce does not see leadership as ethi-cal. It is apparent that the federal govern-ment recognizes the value of the tone at

the top by including language in the Sen-tencing Guidelines that advise organiza-tions to have governance and high leader-ship emphasizing ethics and compliance; it further indicates that they (leadership) are responsible for being knowledgeable about all such activities.

Consistently applying disciplinary ac-tions so that everyone is held accountable to the same standards also will infl uence the ethical culture of the entire organiza-tion. The guidelines advise that the organi-zation promote and enforce its compliance and ethics program consistently through-out the organization through appropriate incentives to perform in accordance with the compliance and ethics program.

A method to consider that may assist in creating an ethical culture at the leader-ship levels is to design specialized training for leadership. It can be helpful to contract with an organization that conducts this ac-tivity. Not only is leadership training a very specialized area that compliance offi cers may not have the skill or knowledge to con-duct, it also can be helpful to have the mes-sage come from an external source. Accord-ing to author Maxwell, “It is impossible to be trusted by others if you are unethical to them.” If the board of directors and senior leaders of an organization communicate an unethical tone, it can be expected that it will impact the rest of the workforce.

Maxwell says, “Trust is the foundation of leadership, and that trust is a result of char-acter and competence.” He goes on to say, “People will tolerate honest mistakes, but if you violate their trust you will fi nd it very diffi cult to ever regain their confi dence. That is the one reason you need to treat trust as your most precious asset.” Maxwell ex-plains that “It takes change in your pocket to make effective changes in your organiza-tion,“ adding that "losing character change is worse than losing competence change.“ Both could mean hurting the organization and losing your job, but loss of character change has a longer negative cloud.



Catherine M. Boerner, JD, CHC, is the president of Boerner Consulting, LLC. She can be reached at 414/427-

8263 or by email at [email protected].

Pending Bill in Congress Requires More of Corporations, Operators, and Financers

As the population ages, unprecedented growth in the nursing home industry is expected. It is not a surprise that regulators and reporters are turning

their focus to nursing homes’ compliance and quality. My local paper, the Milwaukee, Wisconsin Journal Senti-nel, ran a two-part front-page story about nursing homes on July 27 and July 28, 2008, titled “Serious violations at homes spike” and “Nursing homes’ quality, safety can be hard to gauge.”

To access the articles online go to www.jsonline.com/story/index.aspx?id=776730. You can view both Part 1 and Part 2 along with a “Special Section” link to a check-list with tips for choosing a nursing home and how the reporters gathered their data. This, of course, coincides with the Department of Health and Human Services (HHS) Offi ce of Inspector General’s Draft Supplemen-tal Compliance Guidance for Nursing Facilities released April 16, 2008, that you can access at oig.hhs.gov/fraud/complianceguidance.html.

The Journal Sentinel article highlights that the feder-al Web site, called Nursing Home Compare, www.medi-care.gov/NHCompare, only “provides basic data about nursing home staffi ng, past violations and whether they are on the federal list of homes with repeated care prob-lems. The website does not provide detailed information about inspections, fi nes or ownership. It is only a place to start.”

The compliance programs in the nursing home in-dustry have more unique cultural challenges than hos-pitals. The articles point out that one of the key links to the quality of care provided at the nursing homes seems to be the number of nurses and aides on staff to help residents. There is also an emphasis on high rates

ELECTRONIC RESOURCESCATHERINE M. BOERNER

Aging Population Means More Focus on Nursing Home Compliance Programs


Electronic Resources

of staff turnover due to the nature of the care provided.

A bill pending in Congress called “Nurs-ing Home Transparency and Improvement Act of 2008” would require corporations to disclose the owners, operators, and fi nanc-ers of nursing homes and have the infor-mation posted on the Nursing Home Com-pare Web site. The new bill also would re-quire nursing homes to provide up-to-date information on staffi ng levels to the federal government. To see the text of this bill or to track it, you can go to GovTrack.us.1

The summary of the bill states that it:outlines accountability requirements for such institutions;requires specifi ed additional information to appear on the HHS Nursing Home Compare Web site;requires skilled nursing facilities (SNFs) to separately report expenditures for wages and benefi ts for different levels of nursing staff;directs the Secretary to develop a stan-dardized form for use by a resident (or a person acting on the resident’s behalf) in fi ling a complaint about a SNF with a state survey and certifi cation agency or long-term care ombudsman program; requires a state to establish a complaint resolution process;directs the Secretary to establish a pro-gram for SNFs to report staffi ng informa-tion based on payroll data;increases certain civil monetary penal-ties for SNF violations;requires the comptroller general to study and report to Congress on (1) the fi nan-

cial status, resident care, and perfor-mance of SNFs and nursing facilities in the special focus facility (or a successor) program of the Centers for Medicare & Medicaid Services relative to a compara-ble sample of facilities outside such pro-gram; and (2) best practices for, and bar-riers to, the appointment of temporary management for SNFs with a record of poor care;directs the Secretary to provide for a na-tional independent monitoring program to oversee interstate and large intrastate chains of SNFs;requires a SNF administrator to notify the Secretary and other responsible par-ties of an impending closure of the facil-ity;directs the Secretary to conduct demon-stration projects on culture change and use of information technology in SNFs and nursing facilities;provides for dementia management training and patient abuse prevention training; and directs the Secretary to study and re-port to Congress on training for certifi ed nurse aides and supervisory staff of SNFs and nursing facilities.As nursing homes become more of a fo-

cus, the compliance programs will need to be tailored to meet the unique challenges that caring for the aging population pres-ents.

Endnotes:1. Nursing Home Transparency and Improvement Act

of 2008, S. 2641, 110th Cong. (2008)


Bob Brown, PhD, is the director of Health Informatics, Michigan State

University Kalamazoo Center for Medical Studies.

Researchers Are Finding that the Privacy Rule Is Making It More Diffi cult to Plan Studies, Recruit Subjects, and Collect Data

Since the publication of the fi nal privacy rule in De-cember 2000, researchers have worried that the re-search provisions of the rule would have a “chill-

ing” effect on research. In June 2008 the Association of Academic Health Centers (AAHC), a nonprofi t organi-zation made up of the major medical education and re-search institutions in the United States, released a report titled “HIPAA Creating Barriers to Research and Discov-ery” that concluded, “The HIPAA Privacy Rule has a neg-ative impact on research by:

Generating confusion and misinterpretations due to the rule’s ambiguityImposing a heavy administrative burden [and] Hampering research participant recruitment”1

For many research purposes, such as clinical trials and other research that includes treatment interven-tions, the rule is pretty unambiguous and probably not overly burdensome. The uses and disclosures of protect-ed health information (PHI) for research purposes of the type covered under the 45 C.F.R. §164.508 “Uses and dis-closures for which an authorization is required” require a signed authorization.

The authorization must contain the required core elements, including “an expiration date or an expira-tion event that relates to the individual or the purpose of the use or disclosure. The statement ‘end of the re-search study,’ ‘none,’ or similar language is suffi cient if the authorization is for a use or disclosure of protected health information for research, including for the cre-ation and maintenance of a research database or re-search repository.”2 The authorization can be combined with the informed consent form required by other fed-

HIPAABOB BROWN

Research and the Privacy Rule: The Chill Is On


HIPAA


eral laws governing research with human subjects. I do not think, however, that these are the provisions that are causing the big-gest problems.

For some research, getting signed au-thorization from the patient is diffi cult or impossible. For example, obtaining au-thorizations for research using PHI that is housed in registries and other data reposi-tories is often problematic. Contact infor-mation for the individuals may be incom-plete, outdated, or unavailable, or patients may be deceased.

Similarly, much health services research (research designed to improve the quality of health care, reduce its cost, improve pa-tient safety, decrease medical errors, and broaden access to essential services that is often accomplished by analyzing exist-ing large databases of health care informa-tion collected or maintained by health care providers, institutions, and payers) can in-volve such large numbers of subjects that attempting to contact all the subjects to ob-tain authorization is not practicable. Even if it were, low acceptance rates or differ-ent acceptance rates from different groups of subjects could reduce signifi cantly the power of the research design.

To cover situations like this the priva-cy rule includes the “waiver of authoriza-tion” requirements contained in 45 C.F.R. §164.512(i). In my experience, this is where most of the ambiguity and adminis-trative burden identifi ed by the researchers in the AAHC report resides.

For a covered entity to use or disclose PHI for research purposes without authorization it fi rst must obtain documentation of a waiv-er of authorization from an institutional re-view board (IRB) or privacy board. Obtain-ing a waiver of authorization can be an in-volved process. A waiver may be granted by an IRB or privacy board only when the fol-lowing minimum criteria are met:

The use or disclosure of PHI in-volves no more than a minimal risk to the privacy of individuals, based

on, at least, the presence of the fol-lowing elements:

an adequate plan to protect the iden-tifi ers from improper use and disclo-sure;an adequate plan to destroy the identifi ers at the earliest opportuni-ty consistent with conduct of the re-search, unless there is a health or re-search justifi cation for retaining the identifi ers or such retention is oth-erwise required by law; andadequate written assurances that the PHI will not be reused or disclosed to any other person or entity, except as required by law, for authorized over-sight of the research study, or for oth-er research for which the use or dis-closure of PHI would be permitted by this subpart.3

— In addition, two other conditions must apply before a waiver can be granted.

— the research could not practi-cably be conducted without the waiver or alteration; and

— the research could not practica-bly be conducted without access to and use of the PHI.4

While on the surface these rules may seem fairly straightforward, there are a number of tricky issues that can and do crop up. For example, there can be vari-ability in how different IRBs and privacy boards apply the criteria for a waiver. This can lead to problems in multi-institutional studies with different IRBs.

Although in the preamble section of the rule the United States Department of Health and Human Services (HHS) states that, while a covered entity need only “obtain…documentation that one IRB or privacy board has approved the alteration or waiver of authorization,”5 HHS also notes that “covered entities may elect to require duplicate IRB or Privacy Board re-views before disclosing [PHI] to request-


Julene Brown, RN, MSN, CHC, CPC, has worked in health care for 20 plus years

and in compliance for 10 years. Her current position is compliance offi cer at MeritCare Health System in Fargo, North Dakota. She can be reached at

[email protected].

Recovery Audit Contractor Example Illustrates How to Obtain Buy-In and How to Prepare for a Project

Many of you have passed the starting point of readiness implementation for the recovery audit contractor (RAC) project. Good for you!

Some of you are just starting to think about it and may not be clear about where to begin. I will share a pro-cess that I use to move projects and initiatives forward that need to be addressed in the organization. I am going to discuss building a contract regarding the project and what to include in that contract.

Have you struggled with getting buy-in to further ad-vance a new initiative or project? Building a contract to address this situation assists in laying out the facts and information to assist in enhancing your case for a proj-ect or initiative. Even though it is only a paper docu-ment, it can serve to move in the right direction or get started on the right path. I use a project contract to com-municate information to the senior executives to assist in seeking approval to move the project forward. This gives them brief information, but enough to approve or deny the project.

I will use RAC readiness implementation as an exam-ple of the use of a contract. The RACs are coming to your state if they have not already been there through the pi-lot project. Internally, as an organization, a best practice would be to develop a readiness implementation plan. Below I will review the contract I used to begin readi-ness for this upcoming activity.

It begins with:Project Title — RAC Readiness ProjectRequestor Name: J. BrownProject Leaders: (Name the project leaders here.) Our project leaders are the compliance offi cer, contracting and reimbursement executive, and physician executive.

BEST PRACTICEJULENE BROWN

Establishing a Contract Upfront Can Help Further a New Initiative


Best Practice

Project Description: Prepare for RAC im-plementation:

Is this a New or Modifi ed Service? In this case, new.

Is this Program New or Modifi ed? In this case, new.Reasons for Change: 1. Contractor will not get information he

or she requests — organization is liable for providing information within speci-fi ed timeframes upon RAC request.

2. Tracking will not be done to provide information on patterns, payment, appeals to be made, or education.

3. The organization may lose money.4. There is no clear appeal process in

place.Current state: New Centers for Medicare & Medicaid Services (CMS) program not in place in this state but has been piloted for three years in other states. Schedule indicates this state due for RAC imple-mentation in the summer of 2008.Vision: 1. Lessen monetary losses.2. Centralized tracking system in place

to assure minimizing reimbursement loss and to target areas of documen-tation focus.

3. Clear appeal process in place.4. Compliance with RAC/Offi ce of In-

spector General (OIG) process.Key system gaps: (List problems, needs, and defi ciencies here.) 1. Different process in different areas,2. Lack of understanding,3. Apathy,4. Breakdown in operational processes,5. Lack of accountability, resource —

education, time.

Objectives: (List of specifi c things to be accomplished)1. Communication,2. Structure — teams for responses,

tracking, appeals,3. Appeals process — internal versus

external.Measures:1. Decreased monies given out for re-

funds.2. Satisfaction with understanding issue.3. Eventual decreased RAC requests

(compliance).4. Eventual decreased costs of program.Deliverables: (Specifi c products team will produce):1. Education tools,2. Data-mining reports,3. Consistent processes,4. “Go to” people,5. RAC team,6. Work fl ow coordination, 7. Appeals process,8. Staffi ng impact,9. Relations with medical staff,10. Tracking and trending data.Boundaries: (Document areas where changes should not be made)Approval Process: (Approval body in your organization) approved by compliance and internal audit steering committee.Resource and Schedule Expectations: Document this for the organization.Business incentives (rewards): 1. Consistent processes.2. Revenues will not have to be refunded.

This is a best practice I use from time to time to move a project forward. Hopefully, it will help others as well.


Harry Feder, MPA, the senior vice president/chief operating offi cer for

IPRO, is responsible for the monitoring and assessment of health care

provided to Medicare, Medicaid, and private patients across the continuum

of care.

Study Shows Gaps in Knowledge about QIOs and Filing a Medicare Quality of Care Complaint

A special study on behalf of the Centers for Medicare & Medicaid Services (CMS) aimed at increasing benefi ciary awareness of the quality improvement

organization (QIO) case review program under Medicare was recently completed by IPRO, the quality improve-ment organization (QIO) for New York State. This special study was one of four studies designed to identify effective and cost-effi cient outreach methods that support CMS’ na-tional focus to promote benefi ciary awareness. CMS, an agency of the United States Department of Health and Hu-man Services (HHS) commissioned similar studies from other large-state QIOs, including organizations in Florida, Ohio, and California.

IPRO’s 120-day, multi-media outreach campaign fo-cused primarily on increasing awareness of the right of Medicare benefi ciaries to fi le written quality of care complaints with QIOs free of charge, with special atten-tion to increasing awareness among underserved pop-ulations. Family members were instructed that, while they may lodge complaints on behalf of benefi ciaries and that QIOs are available to assist them in framing these complaints, ultimately benefi ciaries would need to include their signature on the written complaints to initiate formal reviews.

When a QIO medical record and documentation re-view confi rms that care did not meet professionally rec-ognized standards, the QIO has the authority to require that a practitioner and provider participate in quality improvement activities and monitoring. In rare instanc-es of inability to improve, QIOs refer cases to the HHS Inspector General, which has the authority to undertake sanctions, up to and including termination of Medicare provider status.

QIOHARRY M. FEDER / LINDA SION

Medicare Benefi ciaries Respond to Quality of Care Complaint Outreach

Linda Sion, MA, MS, is IPRO’s editor and the project manager for the

Benefi ciary Outreach Special Study.

This material was prepared by IPRO, the Medicare Quality Improvement

Organization for New York State, under contract with the Centers for Medicare & Medicaid Services (CMS), an agency of the U.S. Department of Health and Human Services. The contents do not necessarily refl ect CMS policy. 8SOW-

NY-SSBO-08-26.


QIO

IPRO’s initial review of the data suggest-ed that the right to lodge a quality of care complaint was poorly understood. Focus group fi ndings suggested that this was true, even for health care professionals and pa-tient advocates. The data indicated that for the most recent one-year period, IPRO re-ceived only 343 written complaints, against a New York State Medicare population of almost three million benefi ciaries. Afri-can-Americans lodged only 45 complaints against a statewide population of 370,000, while Latinos accounted for a mere four complaints, despite a population of 97,000.

Armed with these fi ndings, our organiza-tion committed to an aggressive, statewide outreach campaign, dubbed “Your Health. Your Voice.” (“Su Salud. Su Voz.”) with a dedicated toll-free telephone helpline and multi-language Web site (presented in Eng-lish, Spanish, Russian, and Chinese). This special effort was viewed as necessary to distinguish the impact of the campaign from the impact of IPRO’s existing telephone hel-pline and consumer Web site.

To kick off the campaign, IPRO partnered with American Association of Retired Per-sons (AARP) New York and the public re-lations fi rm of M. Booth & Associates to create the fi rst New York Medicare Qual-ity of Care Complaints Report Card that tallied complaints by health care setting, ethnic group/population, and by county of residence. The media interest (print, Web-based, radio, television) that resulted from the report card helped to promote the cam-paign message and localize coverage. The report card event was followed by “teach-ins” in fi ve cities across the state as well as presentations made in English and Spanish by full-time outreach coordinators at local community events.

Campaign materials included multi-lan-guage brochures, a PowerPoint presenta-tion, refrigerator magnets, a mass mailing to households in selected zip codes, radio public service announcements, advertis-ing and news editorials, a cable-television video presentation, newspaper advertising,

and an opinion editorial for placement in daily and weekly newspapers.

The campaign Web site was supported by keyword targeting and ad placement on other sites. Additionally, a Spanish-lan-guage event was held with co-sponsors, in-cluding leading community advocacy orga-nizations, a Latino radio station, and a La-tino newspaper.

Major fi ndings included the following.

#1: BENEFICIARIES RESPOND TO QUALITY OF CARE COMPLAINT OUTREACHCalls to the campaign-dedicated toll-free helpine averaged 10 calls a week for the fi rst eight weeks of the campaign but shot up to 97 calls per week for the fi nal four weeks of the campaign. The campaign-dedicated Web site accounted for 5,500 unique visi-tors and over 160,000 hits, with a 67 percent increase in unique visits during the second four weeks of the campaign, corresponding with the fi ve teach-ins across the state.

In terms of online activity, keyword tar-geting proved disappointing, while ad place-ment on external Web sites proved relatively successful. Radio advertising on an upscale station in New York City appears to have been quite effective while earned media re-sulted in benefi ciary responses as well.

#2: A POSITIVE, SYNERGISTIC EFFECT CAN BE ACHIEVED BY DEPLOYING NUMEROUS OUTREACH STRATEGIES SIMULTANEOUSLY

Given overlapping timelines, it is diffi cult to attribute results to specifi c interven-tions. It appears that call volume increased signifi cantly during week nine, which was characterized by a number of activities oc-curring simultaneously, including teach-ins, onsite presentations, distribution of outreach materials, and earned and paid media. Call volume increased again when a mass mailing was undertaken in week 12.

Similarly, the increase in quality of care complaints in progress attributed to the campaign increased most dramatical-



Beth Hjort is professional practice resource manager at AHIMA. She can

be reached at [email protected]. Acknowledgements: Jill Dennis,

Margaret Williams, and Kevin Heubusch

A True-to-Life Example Illustrates the Struggle Health Care Professionals Face

In a fast-paced society, decisions often are made with-out all the facts. Absent facts, decisions may be based on perception — and that information that can be rea-

sonably gathered in the time available. In health care, the timeframe, out of necessity, may be quite short. Quality of care may depend not only on the complete-ness of information, but also the speed with which it can be obtained.

Health care professionals at times are put in the posi-tion of balancing information privacy with health care’s ultimate aim of providing the best patient care. Advanc-es in technology bring new meaning and create new ex-pectations to established health care mission statements, which include pledges to provide “services with sensitiv-ity to… individual needs,” for “excellent patient care each and every time” and to “promote lifelong wellness.”

While forward-looking health care initiatives mesh into an infrastructure of systems that optimize technol-ogy benefi ts for the greater good, health care profession-als grapple with consumer trust questions and the big privacy picture. One constant, however, remains solid-ly central to health care operations —the patient, and whether the health care provided to the patient is the best possible.

This article touches on one element in achieving health reform — the balance between the goals to uphold an individual’s privacy rights of protected health infor-mation at the same time we optimize information avail-ability for the sake of patient care. Within health care or-ganization operations, are we interpreting confi dentiality obligations in a manner that recognizes both are neces-sary as we address caregiver needs along the continuum of care, the benefi ts of aggregate data — and for the sup-

HEALTH INFORMATION MANAGEMENTBETH HJORT

Quality Health Care: Can Health Information Be Both Available and Private?


Health Information Management

port circle of family and friends concerned with the patient’s best interests?

Before 2004 federal change drivers were initiated — the presidential 10-year goal for every American to have an electron-ic health record and the strategic plan laid out by the Offi ce of the National Coordi-nator for Health Information Technology (ONC)1 — privacy programs were adminis-tered in more absolute terms. Local priva-cy leaders, operating within a framework of state and federal laws to which organiza-tions may be disparately beholden, formed their own defi nitions of right and wrong ac-cordingly. Today, while industry agendas for improvement in health care provisions evolve in many areas, information privacy statutory and regulatory compliance fi nds itself on shifting sands, perhaps getting in its own way, while answers are sought to ensure effi cient information availability without bumping up against rules leaning toward its tighter lockdown.

Privacy-impacting technology questions are not quickly resolved — the reach of pri-vacy laws, management of patient health in-formation used for purposes other than di-rect patient care (secondary data), the need for consumer education and trust, and deal-ing with illegal and unethical behavior fair-ly and consistently. But, given the vision of cultural change as set forth by ONC, health care professionals cannot afford to wait un-til standards are adopted, health informa-tion exchange gains clarity, and legal issues are deciphered to integrate the vision into local policies. Accounts of strict privacy in-terpretations and infl exible decision mak-ing are found in the media, painting a pic-ture of regrettable outcomes inconsistent with the current health care vision.

A true-to-life example illustrates this sit-uation: A physician called a patient imme-diately at home when he learned from test results her medication dosage level was life-threatening. She was not home; her husband explained that she would return late in the day. Without permission to disclose or the ability to verify that the man is who he says

he is, what would you do? To read about what the doctor in this situation did and decisions others have made in similarly diffi cult situa-tions, see the article in the Seattle Times: se-attletimes.nwsource.com/cgi-bin/PrintSto-ry.pl?document_id=2001891032&zsection_id=2001780260&slug=hunt30m&date=20040330.Change will necessarily be precau-tionary and incremental at the local level.

The challenge redesigning confi den-tiality efforts that respect privacy rights and meet compliance obligations at the same time information speeds to the point of care.The dilemma moving in the direction of balancing privacy and information availability as national compliance and enforcement efforts become more active and case law precedent emerges.As questions such as the following emerge,

the guiding question an organization upholds remains “how to do the right thing.”

Is our organization philosophy and cul-ture adapting to meet the changes in the health care environment?Do we need to take another look at our interpretation of the “reasonable” guid-ance in the HIPAA privacy rule?Do we place greater emphasis on the ri$k of fi nancial penalties than we do on the risk of falling short in patient care?Do periodic privacy and security risk as-sessments scrutinize regulatory compliance risks alone, or do they also consider the risk to the patient who is being treated based on inadequate information availability?Have we created fear-based cultures — or is every question safe to ask and every policy safe to challenge?To what degree is it possible to empower expedient privacy decisions at the opera-tional level where circumstances are ful-ly grasped? Alternatively, how might a routine policy be challenged and speed-ed along to the “Go To” decision maker?Are patient self-determination prac-tices applied when time allows? What exactly does it mean to respect a con-



D. Scott Jones, CHC, LHRM, is vice president of corporate compliance and risk management for American

Healthcare Providers Insurance Services, a national professional liability insurance management company with

headquarters in Philadelphia, PA. He has conducted quality and compliance

assessments in over 1,000 health care organizations across the United

States over the last decade. He can be reached at [email protected] or by

phone at 904/294-5633.

A Compliance Offi cer Who Stays Behind the Desk May be Mistaken for Just Another Piece of Furniture

PART OF THE SOLUTION OR PART OF THE PROBLEM?

In health care, as in most other instances, the old saying is true: “If you are not a part of the solution, you are part of the problem.” We face problems that are almost be-yond counting — and it is our decision-making and drive that will determine whether we can indeed become part of the solution.

We have managers galore. We have quality managers, department managers, nurse managers, plant operations managers, and so on. We can set deadlines, develop spread-sheets, and count widgets. We speak an entirely different language than the rest of the country, with JCAHO, NPSG, AOB, LWOT, AMA, CMS, and other acronyms that baffl e the unenlightened. Yet, can we say that we are doing a better job at caring for patients and running our facilities today than we were 10 years ago? In a world of increasing scrutiny and enforced compliance, is our quality increas-ing? If you believe it is, let us phrase it another way — is our quality increasing in proportion to the amount of com-pliance regulations that we are required to follow?

This may not be the case, and the reason may well be within our grasp. We may be managing when we should be leading our organizations. Quite frankly, our observa-tion is that health care managers often fail to make the transition to leadership.

DEFINING LEADERSHIP

Leadership has many defi nitions and descriptions. Some declare that it means getting the job done by whatever means necessary. Others say that the leader provides purpose, direction, and motivation. Others maintain that “You manage things and lead people.” All have some part of the truth.

COMPLIANCE AND QUALITYD. SCOTT JONES / LT. COL. PAUL N. BIRD, JR.

Are Compliance Offi cers Leading the Way When It Comes to Quality?

Author’s note: This month’s Compliance and Quality article features Lt. Col. Paul

N. Bird, Jr., MS, a leadership educator, health care administrator, speaker, and author with national experience and recognition. Paul served as director of the Cardiac Pulmonary Rehabilitation, Comprehensive Weight Management Center, Diabetes Management Center,

and Wound Management Center at Central Mississippi Medical Center in

Jackson, Mississippi. He is currently on leave of absence from CMMC – Serving

as the Inspector General for the 155th Brigade Combat Team, which is training

for possible deployment in 2009.


Compliance and Quality

The leader casts a vision. A vision does not mean “Here are some more require-ments we must meet.” A vision is of a de-sired/desirable future state. For example, “Our patients will receive the best possible care, and their personal information will be safeguarded. Other facilities will come here to learn how to ‘Do things right’.”

Leaders must go beyond vision to an op-erational plan. Often, managers skip right by the vision piece and go directly to the plan. This makes for a lot of motion — and not necessarily any progress. Once the vi-sion has been cast, however, a sound oper-ational plan tells the staff how to get from Point A to Point B — and how to measure progress along the way.

Once the plan has been made, the lead-er must communicate the plan. The best plan does no good if it is not understood by those who have to accomplish it. Then, the leader must check on the progress of the plan. He or she must be visible to the staff, asking questions, offering encouragement, improving processes, and de-confl icting re-source requests. The leader also must com-municate the plan and progress to those to whom he or she reports. The “boss’s boss” wants to be in the know as well.

Finally, the leader must approach all is-sues from an ethical standpoint. If the lead-er once compromises on his or her stan-dards, the moral authority by which he or she leads is gone. Others will pay lip ser-vice to obedience, but they will never go out on a limb to make the plan work.

APPLYING LEADERSHIP PRINCIPLES IN HEALTH CARE COMPLIANCEHaving said all of that, how does it apply to those of us interested in compliance and quality in a health care setting? Quite sim-ply, it applies in almost every avenue of the job. Too often, compliance offi cers fail to es-tablish a vision, opting instead to cite “an-other requirement” to be met. Compliance offi cers put together impressive checklists, inspection criteria, and deadlines for report submission. Is it any wonder that subordi-

nate leaders sigh and “strive for mediocrity?” Keeping in mind that one overall goal is to improve the quality of care and safeguard all of the stakeholders in the organization, let me offer a few suggestions about what compliance offi cers should do as leaders.

First of all, present compliance infor-mation as a way of meeting your facility’s goals. Every project you undertake should be nested within the overarching vision of the facility. If it does not, one of two things needs to occur. Either you should not be do-ing the project, or you need to review and revise your vision. Do not short-change the vision in an effort to get on to the opera-tional plan. The vision is more important than the plan. The plan tells how; the vi-sion gives the more important why. If peo-ple understand the why and buy into the vision, they will fi nd a way to accomplish the how.

Once you get them sold on the vision, present the plan. Ask for input. Tell the staff to question your assumptions. At least one person should ask — if we perform this com-pliance task successfully, what will we have accomplished? Remember, it is acceptable to change your plan if you come up with a better way to accomplish your goals.

LEADING FROM THE FRONT

Now comes the hard part. It is easier for all of us to stay behind our desks. We have plenty to do. There is always one more report or one more telephone call. But, if you believe that compliance in general, and this project in particular, will help you achieve your vision for the facility, then by all means go to where the action is and lend your guidance and support. Subordinate leaders will respond to the things that are reviewed by their supe-riors. Spot check activity. Ask how the project is going. Ask how much time the subordinate leader takes in performing the tasks assigned by this project. That is why football coaches are on the side-lines with the players. They can commu-nicate clearly, they can offer course cor-



rections, and they can get a feel for how their plans are working.

MENTORING

Your subordinate leaders need a mentor. Being out among them reviewing compli-ance issues and ongoing quality projects al-lows you the opportunity to become that mentor. You can offer insight that they do not have at their level. You can watch their processes and suggest improvements. You can get a feel for the pulse of the entire or-ganization, and you can positively impact the attitudes of your staff — and that direct-ly affects the quality of care.

As part of your informal mentoring program, you can help develop the ethi-cal awareness of your staff. They need to know that you aren’t just checking a block but that you are intensely interested in doing the right thing — all the time. You know there will be opportunities for them to make ethical decisions that will affect the future of the organization. Before that occurs, give them guidance. There should not be anyone more qualifi ed to teach the ethical decision making process than you.

THE VALUE OF RECONNAISSANCE

We have mentioned several positive rea-sons to get out from behind the desk and interact with staff members on compliance tasks. There is another benefi t to you and to your leader. The compliance offi cer is con-stantly being asked to provide update brief-ings to the chief executive offi cer (CEO) and to the board of directors. Your reports will be much more realistic and valuable when they come from someone who has been out with the staff, who has interacted with them and can speak of the project from the user level. Do you really think the CEO or board wants one more pie chart or one more dry briefi ng? Being onsite allows you to speak of your progress in fi rst person.

WHAT WE MUST DO

Certain training, education, and leadership roles are clearly stated in the Offi ce of In-

spector General (OIG) compliance guid-ance documents. These are some of the roles compliance offi cers are required to fulfi ll — in other words, what we must do:

Compliance offi cers are expected to pro-vide or manage the provision of educa-tional programs for staff members.1

Compliance offi cers are expected to provide regular reports to the CEO and board of directors.2

Compliance offi cers are expected to pro-vide staff with the means to report com-pliance concerns.3

Compliance offi cers are expected to play a role as senior advocates for compliance and quality.4

Of course, these are just a few of the “must do” items on a compliance offi cer’s list of tasks, but do these required roles translate into compliance offi cers serving as leaders in their health care organizations? Readers of the above discourse on leadership will readily answer: Not necessarily.

WHAT WE SHOULD DO

Hopefully, compliance failures seldom oc-cur in the compliance offi ce. Analysis of corporate integrity agreements and indus-try publications like the Journal of Health Care Compliance tells us that compliance (and quality) failures typically occur in the process of delivery and billing of care. Data from the professional liability insurance in-dustry clearly shows that 65.18 percent of all compensable patient injuries occur in hospitals, and 3.33 percent of compensable injuries occur in outpatient departments of hospitals. The balance of injuries occurs in a variety of other settings.5

As compliance offi cers, are we present and visible in the settings in which failures of quality or compliance may occur? Or do we lead from the rear?

Compliance offi cers should be visible, present, and interactive with staff, physi-cians, patients, and families in our health care institutions. The best way to observe compliance and quality (or lack of it) is to go to the people charged with providing the



patient care, documentation, and services the organization generates.

In an earlier article, we challenged com-pliance offi cers to personally observe pa-tient throughput issues that can relate to quality in the delivery of emergency de-partment and nursing fl oor services. That is one example of how a compliance offi -cer can take a visible and active leadership role in quality. The following paragraphs describe some compliance and quality con-cerns identifi ed in various departments of health care facilities.

Areas that Compliance Offi cers who are Leaders Should Review

Admissions ProcessesIs accurate and appropriate data captured in a timely manner that speeds the deliv-ery of care and allows complete and ac-curate billing to occur? Is communication with patients and families meaningful and helpful to them? When was the last time you visited and observed the admissions desk over a period of time?

In a recent quality and compliance assess-ment, an organization realized that although it captured information on medications and medical problems, it did not record data on medical devices used by patients at home. A post-surgical patient with sleep apnea was not prescribed a continuous positive airway pressure (CPAP) machine such as he used at home and subsequently died of apnea-re-lated cardiac arrest. For a review of compli-ance guidance in admissions, see the Sup-plemental Compliance Guidance for Hospi-tals issued January 2005.6

DiagnosisHow does our organization provide medi-cally appropriate diagnostic testing? Are diagnostic tests appropriately ordered, per-formed, and documented in a timely man-ner? Is there clear documentation of the medical necessity and reasoning behind tests ordered? Are tests ordered with pa-tient safety as a primary consideration? Is

the fl ow of information from laboratories or radiology swift and complete? Are there appropriate quality controls in place to val-idate test results, or over-read radiologic fi lms? When was the last time you visited laboratories or radiology departments to observe how processes really work?

A health care facility recently realized that some department nurses ordered radi-ology exams in advance of physician orders — which were completed and billed. “We thought it would speed up care to have some tests ordered in advance of the doctor seeing the patient” explained one nurse.

Medical TreatmentIs the care rendered in various fl oors of a hospital, long-term care facility, or depart-ments of an outpatient facility appropri-ate to the needs of the patient and consis-tent with diagnosis and test results? Are there unnecessary delays in the provision of care? Are patients and families satisfi ed with care? Are patient volumes appropri-ate to the staff allocated to care for them? Does staff spend most of its time caring for patients, or pursuing documentation? As a compliance offi cer, have you visited care settings to observe quality of care and learn from nursing staff?

A group of nursing staff in one recent qual-ity and compliance assessment complained that they had no training or understanding of the risks, benefi ts, or complications associat-ed with some procedures but were expected by management to obtain signed informed consent documents from patients. Manage-ment thought it took too much time for phy-sicians to conduct informed consent.

DocumentationIt may be said that quantitative aspects of documentation allow for proper billing (i.e., suffi cient review of systems documenta-tion relates to the CPT®-4 used). Qualitative aspects of documentation support that bill-ing and can protect organizations against a variety of risk exposures. How does your organization document? Is there suffi cient



data recorded? Are nursing and physician notes complete? Is there concordance, or explanation of differences? Are medication and problem lists maintained? Is documen-tation completed in a timely manner?

Does the record support the level of service for which it is billed? Can the re-cord serve as the basis for providing cor-rect care? Can documentation protect the patient, physician, and health care organi-zation in the event of a negative outcome? Do we, as compliance offi cers, personally know how to review a medical record and make quality judgments on its content? In a recent presentation to a State Academy of Family Physicians, we asked a group of over 30 physicians to read a copy of an ex-amination note handwritten by a physi-cian. One of the group could make out the fi rst three words of the written entry.

DischargeThe health care industry faces increas-ing pressure from managed care compa-nies and hospital administration to effect speedy discharge of patients. Managed care companies realize the expense of extended length of stay (LOS). They counter this cost by negotiating restrictive rates of payment for extended LOS. As a result, administra-tion is motivated to encourage physicians to discharge patients speedily.

Professional liability insurance statistics show us that 26.17 percent of compensable patient injuries occur in the patient’s home, following treatment or discharge.7 An in-creasing number of medical malpractice cas-es include incorrect or premature discharge as a leading complaint. Referral problems related to managed care companies are also an increasing source of allegations.

Does your facility appropriately manage patient discharge? Are patients monitored in post anesthesia care units (PACU) by suf-fi cient numbers of staff members? What is the average ratio of health care provider to patient in recovery units? Does discharge re-quire appropriate physician assessment of the patient? If anesthesiologists manage eval-

uation and discharge, how accessible is the treating physician in the event of problems? Are patient education processes and dis-charge instructions complete and thorough? We’ve observed PACU nursing to patient ra-tios of 1:10 in some facilities. What will hap-pen if two patients crash simultaneously?

BillingCompliance offi cers are, of course, deep-ly involved in the process of correct bill-ing for services rendered. This includes as-sessment of documentation provided by physicians, nurses, and other care provid-ers; assessment of correct coding; review of medical necessity for services rendered; and dealing with incidents of over or under coding, billing, and reimbursement. Most of these processes are retrospective reviews conducted by trained staff. Results are then compiled in reports, and data are analyzed to ensure proper billing has occurred.

When was the last time you as a compli-ance offi cer ventured into the documenta-tion, billing, and coding process as it occurs in your facility? Have you conducted as-sessments of the quality of documentation and coding processes as they occur?

Observing and learning about the various services rendered and how they are docu-mented/coded is a signifi cant step toward an overall understanding of compliance and quality risk exposure. Can you conduct a level of service review and accurately judge the correct CPT®-4 (Current Procedure Ter-minology) code that should be used for out-patient or medical practice billing?

COMPLIANCE OFFICERS AS LEADERS

On a fi nal note, we encourage compliance offi cers to lead by encouraging others in leadership roles to, as Tom Peters suggested in his book titled “In Search of Excellence,” MBWA — Manage By Walking Around. Health care facilities and quality of care benefi t at all levels when members of man-agement, administration, and even the gov-erning body learn about the care rendered by observing service delivery fi rst hand.



Structured observation by a manageable number of organization leaders results in better understanding of patient, staff, and physician needs. Typically, this leads to im-proved quality. It is a truism that people perform better when they are observed. You also may be surprised to learn that compe-tent staff welcome the opportunity to teach about the job they do and the quality they attempt to achieve day to day. Compliance offi cers are in a unique position to touch staff, physicians, and patients throughout their facilities, if they will take advantage of the opportunities their role creates.

Endnotes:1. Notice, 65 FR 59434, Oct. 5, 2000, Compliance

Program Guidance for Individual and Small Group Physician Practices.

2. Notice, 63 FR 8989, Jan. 23, 1998, Compliance Program Guidance for Hospitals, No. 35, 2(2).

3. Id.4. Notice, 70 FR 4858, 4870, Jan. 31, 2005, Supplemental

Compliance Guidance For Hospitals, Substandard Care.

5. Physician Insurers Association of America (PIAA), Data Sharing Report 071, Location of Loss / Type of Institution, Combined Specialties, Report 10 (2007).

6. Supplemental Compliance Guidance For Hospitals, supra note 4, at 4861, Admissions, 2(A)(2).

7. Physician Insurers Association of America (PIAA), supra note 5.


Reba L. Kieke is the managing editor of the Journal of Health Care Compliance.

She can be reached at [email protected] or 512/336-7262.

From a Privacy Compliance Standpoint, Awareness Is Half the Battle

As health care continues to expand across national and international borders, the pressure is on for companies to meet the challenges of operating at

home as well as abroad. For many, like Philips Health-care, privacy concerns convene as an intricate web of global regulations and risk management considerations.

Philips Healthcare is a Netherlands-based compa-ny that operates under the umbrella of European pri-vacy principles but conducts a global business. As a re-sult, like many of its kind, the company is faced with the challenge of balancing the laws and requirements of many regions.

GLOBAL PRIVACY COMPLIANCE

Philips Healthcare has more than 30,000 employees with operations in over 60 countries. As such, the com-pany understands fi rsthand the challenges of global privacy compliance.

“From a privacy standpoint, perhaps the biggest chal-lenge of global compliance is the matrix of regulations,” according to Kristen Knight, director of privacy compli-ance at Philips Healthcare. “In the United States, not only are there federal regulations, but there are also var-ious state requirements, such as privacy breach report-ing and notifi cation requirements and contract-driven, customer obligations. It can get very complex.”

Unlike many countries in Europe, the United States does not recognize a constitutional right to privacy. In-stead, derivative privacy rights are generally subject-matter related or driven by data types, and many indus-tries (e.g., the fi nancial industry or the telecommuni-cations industry) have their own regulations. Enforce-ment, therefore, often is based on the laws governing

RISK MANAGEMENTREBA L. KIEKE

Overcoming Global Compliance Management Challenges


Risk Management

a particular industry rather than a general right of privacy to all citizens.

Even with the Organisation for Econom-ic Co-Operation and Development (OECD) data privacy principles, the European ma-trix can be equally complex, says Knight. While many countries adhere to the OECD principles, each country (and sometimes each state or region within a country) may have its own set of requirements, further complicating the matrix.

“The biggest challenge, as a multina-tional company, is coming up with an ap-propriate privacy compliance framework that will address the many, many require-ments while allowing us to continue to op-erate and grow our business successfully,” Knight explained.

Although there are many obstacles fac-ing the industry, navigating the interna-tional privacy waters, to be sure, is a most signifi cant challenge. As a Dutch company, Philips operates under European princi-ples fi rst and foremost, regardless of where it does business. Regional requirements, however, can modify the company’s ap-proach because it must operate within the parameters of any given regulatory en-vironment. Also consider that Philips of-fers different types of health care services. Some of its services are direct to the patient or end user; some involve business-to-busi-ness transactions in which the company provides devices and services to a hospital or health care provider.

“Philips works hard to understand how best to meet the international requirements that impact our business, our customers, and patients,” Knight said. “Philips plays an active role in industry consortia aimed at addressing these various challenges with-in our industry. We work both internally and with outside resources to keep abreast of changes in the privacy realm and how those changes may affect our business and our customers. Privacy is a relatively novel area of jurisprudence, especially in the U.S. Because of the many technological advanc-es and how those advances impact “person-

al data,” it can be diffi cult to predict what the courts will do and how the laws might change in the U.S., or internationally.”

BEING PROACTIVE

Perhaps one of the most effective ways to tackle this type of challenge is to be proac-tive, Knight said. “As with any area of risk, you fi rst have to understand the scope. If you can measure it, you can manage it. In a large company like Philips, it can be dif-fi cult to get a full picture of all the process-es that involve personal data. It can be the ‘devil you don’t know’ that poses the great-est risk,” she added.Like many companies in the health care industry, Philips has turned to automated tools and services for help. Tor example, Philips recently selected Agiliance, a sof-ware tool designed to reduce risk and im-porvie compliance while cutting costs and meeting multiple legislative mandates. Simply put, the solution offers an auto-mated and repeatable solution for mapping and controlling regulations across organi-zational silos.

“Right now, my goal is to be able to see and measure the big picture for privacy compliance,” Knight said. “Because we are so large and we have so many processes, we [believe] it will be extremely benefi -cial to automate our assessment process and create a uniform way to assess privacy compliance and privacy-related risk across the board. Manually working through pri-vacy impact assessments one by one in a company that has thousands of processes — it’s just not possible. The goal is to auto-mate that process using the Agiliance tool and then review the assessment to devel-op appropriate mitigation plans, while also having a standardized way to report priva-cy risk to management. Although we are very early in the implementation phase, we believe a tool of this nature will enable us to do just that.”

“Automating the process allows me to reach more people, and the more people



The author, Richard Kusserow, is the former HHS Inspector General

and is CEO of Strategic Management Systems, Inc., which has been

providing specialized compliance advisory services since 1992. For more information, see www.strategicm.com

or call him directly at 703/535-1411.

Agreements Must Take Into Consideration a Host of Regulatory Requirements

Hospitalist programs are increasingly common at hospitals as a response to a variety of recognized needs, including patient care, teaching, research,

and leadership related to hospital care. Unlike medi-cal specialists, most hospitalists help manage patients throughout the continuum of hospital care. Most hospi-talists are members of the medical staff. While hospital medicine is a relatively new phenomenon in the United States, it has many benefi ts, including:

increased effi ciency and reduced waiting in the emer-gency room;decreased length of stay by streamlining the care process;decreased cost of an inpatient stay;immediate availability of a physician for an emergen-cy medical admission when a patient does not have a physician; andimmediate availability of medical consultations with specialty physicians.Many hospitalist programs are subsidized at least ini-

tially. Sources for a subsidy include the hospital itself, local primary care, and multispecialty groups. This ar-ticle focuses on such subsidy payments. When the pro-gram is subsidized by a hospital, such payments often are viewed by the government as an additional cost of “doing business” because of contracting and economic demands made by the service providers on the hospital/health care system and as a result of the economic climate and competition for the specialty in the community.

Under the conditions of participation in Medicare and Medicaid and by licensure under the state, hospitals must have adequate medical staffs and provide quality care. They are dependent on physician providers to sat-isfy these requirements. Depending upon the market-

ANTI-KICKBACK STATUTERICHARD KUSSEROW

Understanding the Complexities of Subsidy Payments for Hospitals


Anti-Kickback Statute

place and other competitive attributes, it is not uncommon for a hospital or health care system to be presented by a demand that the failure to pay a subsidy will result in a physician or physician group disassociating with the hospital or health care system.

A subsidy arrangement is very similar in certain respects to an “income guaran-tee” that is provided by a hospital to a phy-sician who is recruited to a hospital’s geo-graphic area or is used as an incentive to retain a physician in the area who intends to leave. Often, a recruited physician is guaranteed a certain amount of income for a defi ned period of time by the hospital. In certain situations now, a hospital may provide monies to a physician to remain in the geographic area to ensure that his or her specialty services remain available to residents of the community.

The various regulatory authorities have continued to approve the use of, and need for, income guarantees in both of these sit-uations when certain conditions are met and when certain requirements placed upon the recruited or retained physician are satisfi ed. Although not mandated un-der the Stark regulations, hospitals often will require certain commitments from these physicians, e.g., provision of services to charity care patients, call coverage obli-gations, et cetera.

The Offi ce of Inspector General (OIG) recognizes the need for subsidies under cer-tain circumstances. Also, several “safe har-bors” under the anti-kickback statute allow for compensation arrangements between health care providers and physicians if such arrangements are properly structured.

One such safe harbor is the “personal services and management contracts” safe harbor. The conditions in this safe harbor are quite similar to those found in the ap-plicable exception under the Stark law dis-cussed below and include, among others, that (1) the agreement be set out in writing, signed by the parties, and be for a term of at least one year; (2) the compensation paid must be “set in advance,” in the aggregate

and be consistent with fair market value in an arms-length transaction, and not deter-mined in a manner that takes into account the volume or value of any referrals or oth-er business generated between the parties; (3) the agreement must cover all of the ser-vices the physician will provide to the pro-vider during the term of the agreement and any services to be provided by the provider to the physician; and (4) the aggregate ser-vices contracted for do not exceed those that are reasonably necessary to accomplish the commercially reasonable business purpose of the services to be provided.

The OIG Guidance for Hospitals states as a “general rule of thumb” that any re-muneration fl owing between hospitals and physicians must be at fair market value for actual and necessary items furnished or services rendered based upon an arm’s-length transaction and should not take into account, directly or indirectly, the value or volume of any past or future referrals or other business generated between the par-ties. Arrangements pose signifi cant risk when the hospitals (1) provide physicians with items or services for free or less than fair market value, (2) relieve physicians of fi nancial obligations they otherwise would incur, or (3) infl ate compensation paid to physicians for items or services. In such circumstances, an inference arises that the remuneration may be in exchange for gen-erating business.

The compliance guidance further pro-vides that a hospital should ensure that the “services obtained from a physician [are] legitimate, commercially reasonable, and necessary to achieve a legitimate business purpose of the hospital (apart from obtain-ing referrals).” Furthermore, “the determi-nation of fair market value [should be] based upon a reasonable methodology that is uni-formly applied and properly documented.”

Financial arrangements that contain a guaranteed payment exist in many other settings involving the delivery of health care services, such as guaranteed



Frank Sheeder is a partner in the health care law practice of Jones

Day, resident in the Dallas offi ce. He may be reached at 214/969-2900 or

[email protected]

Even if You Aren’t a Country Music Fan, You Can Probably Relate to at Least One of These Song Titles

We all get our inspiration from different places. As you will see, country music can support some of the best themes that we can establish

as compliance professionals. The titles of some of the more popular songs evoke all sorts of interesting paral-lels with what we confront in the compliance world ev-ery day. For example:

1. FAMOUS IN A SMALL TOWN, BY MIRANDA LAMBERT The theme of this song is that word gets around quick-ly in a small town. Your organization’s setting is proba-bly no different, regardless of its size. In the compliance realm, word gets around quickly (and sometimes not ac-curately) about what the compliance professionals are doing, what the management commitment is to compli-ance, and whether you are “walking the walk.”

Keep that in mind when you go about your compliance tasks. People are watching, and the grapevine is strong. Use this to your advantage by outwardly exhibiting all of the many good things that you are doing. Beware, howev-er, that missteps are going to get much more attention.

2. FRIENDS IN LOW PLACES, BY GARTH BROOKS

Remember that all sorts of people, up and down the lad-der, can cause compliance headaches if they are not given the proper respect, attention, and follow-up. Suc-cessful compliance professionals bond with as many folks in their organization as possible. My friend Al Jo-sephs, who is a former president of the Health Care Compliance Association, has demonstrated this princi-ple. I would visit him for lunch in the hospital where he used to work, and it would take us 20 minutes to make a 5-minute walk to the cafeteria.

CORPORATE CULTUREFRANK SHEEDER

Compliance and Country Music


Corporate Culture

Al would stop and greet people as we went. He worked hard to build relationships with all people, and it paid dividends when compliance issues arose. First, people were not afraid to come and see him. Second, people knew and (justifi ably) trusted him when he was leading a compliance process or investigation. He became more like a mayor than a sheriff through his ability to develop genuine friendships with people.

3. THE GAMBLER, BY KENNY ROGERS

As the refrain says, “You’ve got to know when to hold ‘em, know when to fold ‘em.…” The fi rst message here, from this lawyer’s perspective, is know when to stop an investigation or audit process and con-sider establishing attorney-client privilege or work product protection under the aus-pices of counsel. Sometimes compliance professionals or consultants delve too far into an issue without considering the legal and risk implications of proceeding.

This does not mean that every compliance investigation or process should be shrouded in confi dentiality. It does mean compliance professionals should exercise sound judg-ment about when to “fold ‘em” and involve counsel. The second message is that some-times you have to settle or disclose, which is akin to “folding.” When you have a poten-tially signifi cant compliance issue that can cause material risk to the organization and a fi nancial impact to a payer, sometimes the best course is to be in a candid, cooperative mode. This, of course, depends on the hand that you have been dealt.

4. FUNNY HOW TIME SLIPS AWAY, BY WILLIE NELSONCompliance processes, and investigations and remedial steps in particular, always seem to take longer than everyone antic-ipated. To prevent slippage, compliance professionals should have detailed work plans for any signifi cant projects or inves-tigations. These work plans specifi cally should have assigned accountability and set deadlines.

It is also a good idea to keep a running log of the various steps that you have tak-en. If either an internal stakeholder or a regulator later questions or challenges the effectiveness of your compliance program because a particular activity took too long, you can refer back to the work plan and the timeline and demonstrate that you have made consistent progress, even if it was not as rapid as anticipated.

5. ACE IN THE HOLE, BY GEORGE STRAIT

Compliance offi cers have “several aces in the hole.” The fi rst one is their organiza-tion’s code of conduct and compliance pro-gram. The second one is the commitment of management and the governing body to do the right thing. The third is government guidance on particular issues.

Compliance offi cers can use such guid-ance to help convince their colleagues that the compliance offi cer is not blowing a situ-ation out of proportion but rather that the government has certain expectations. The third one is the ability to ask people who are resisting doing the right thing what they see as the alternative. This approach can of-ten lead to a more appropriate outcome.

6. MY GIVE A [DARN’S] BUSTED, BY JO DEE MESSINAAs a compliance professional, you might hear all sorts of rationalizations for ques-tionable conduct. “If we can’t do this, we will go out of business.” “Our competitors do it, so we have to as well.” “We will never get caught because we have such a strong reputation/provide such good care/fi ll in the blank.” “The payers arbitrarily take money away from us all the time. If we are overpaid this time, we shouldn’t have to give it back because keeping it just balanc-es things out a little.”

Many of us also have heard the compli-ance department called the “revenue pre-vention department,” the “deal killers,” or the “cops.” This is not usually helpful or accurate but rather a way of attacking



Melinda S. Stegman, MBA, CCS, is a clinical technical editor at Ingenix.

Staff Members Should Review Claims Data to Ensure Compliance with Guidelines

For acute-care hospital billing, each fi eld on the UB-04 and corresponding 837i electronic claim form is important, but one frequently overlooked fi eld

is the “source of admission,” found at fi eld locater (FL) number 15 on the UB-04 and CL102 data element num-ber on the 837i form. The completion of this fi eld is re-quired for Medicare billing for inpatient and outpatient hospital visits, home health care encounters, and inpa-tient skilled nursing facility (SNF) visits.

For most commercial payers and TRICARE/CHAM-PUS, the fi eld is required for inpatient cases only. This data element represents the method by which the pa-tient was referred to the health care facility for care. The most commonly assigned source of admission values, along with those discussed here, are shown in Figure 1.

Unfortunately, many health care providers use a de-fault value of “1: Physician Referral” for the vast major-ity of their patient claims. While this may represent the most commonly assigned value for their particular pa-tient population, it may be inaccurate and cause inap-propriate payment and compliance risk.

For instance, recent Offi ce of Inspector General (OIG) audit initiatives have focused on source of admission “D: Transfer from Hospital Inpatient in the Same Facility Re-sulting in a Separate Claim to the Payer.” This is a rou-tine situation in many multidisciplinary facilities com-prised of “distinct units,” or unique units or levels of care in the facility.

Because reimbursement methodologies may be dif-ferent depending on the site and type of service, when patients are transferred from one of these distinct units to another area of the facility, it is not a continuation of care but a discharge from the fi rst unit. The patient

CODING AND BILLINGMELINDA S. STEGMAN

Source of Admission: An Often Overlooked but Important Billing Field


Coding and Billing


is then admitted to the second unit, and a new, separate claim is produced for the ser-vices provided in the second unit.

The source of admission, and whether or not the patient was transferred from an acute care facility, is especially important to patients transferred to inpatient psychiat-ric facilities (IPFs). Under the IPF Medicare prospective payment system (pursuant to 42 CFR § 412.424), an additional payment is made to IPFs for the fi rst day of a benefi cia-ry’s inpatient psychiatric stay to account for emergency department (ED) costs if the IPF has a dedicated emergency department.

This additional payment, however, is not made if the patient was discharged from the acute care section of a hospital to its own

hospital-based IPF. It would be assumed that any ED costs would be accounted for in the Medicare inpatient diagnosis related group (DRG) payment made to the hospital for the patient’s immediately preceding in-patient stay.

The OIG conducted a sample review of IPF claims paid by Mutual of Omaha, the Medicare Part A fi scal intermediary for Massachusetts, Missouri, Louisiana, and Texas. OIG reviewed a sample of 300 IPF claims submitted for benefi ciaries who had an immediately preceding stay in the same facility’s acute care section during 2005 and 2006. The cases were identifi ed using the Centers for Medicare & Medicaid Ser-

Figure 1: Commonly Assigned Source of Admission Values

Value Description Inpatient Defi nition Outpatient Defi nition

1 Physician ReferralThe patient’s personal physician recommended admission.

A personal physician referred the patient for outpatient or referenced diagnostic services, or the patient independently requested outpatient services (self-referral).

4Transfer from a Hospital (Different Facility)

The patient was transferred from an acute care hospital where he or she was an inpatient.

A physician of another acute care facility referred the patient to this facility for outpatient or referenced diagnostic services.

5 Transfer from a SNFThe patient was transferred from a SNF where he or she was an inpatient.

A SNF physician referred the patient (who is an inpatient) to this facility for outpatient or referenced diagnostic services.

6Transfer from another Health Care Facility

The patient was transferred from a health care facility other than an acute care hospital or a SNF. Includes nursing homes, long-term care facilities, and SNFs where the patient is at a nonskilled level of care.

A physician of another health care facility referred the patient (who is an inpatient) to this facility for outpatient or referenced diagnostic services.

7 Emergency Room (ER)The patient was admitted based on the recommendation of the ER physician of this facility.

The patient received services in this facility’s emergency department.

ATransfer from a Critical Access Hospital (CAH)

The patient was admitted to this facility as a transfer from a CAH where he or she was an inpatient.

The patient was referred for outpatient or referenced diagnostic services by a physician of the CAH where he or she was an inpatient.

D

Transfer from Hospital Inpatient in the Same Facility Resulting in a Separate Claim to the Payer

The patient was admitted to this facility as a transfer from hospital inpatient within this hospital resulting in a separate claim to the payer.

The patient received outpatient services in this facility as a transfer from within this hospital resulting in a separate claim to the payer.


Gadi Weinreich and Ramy Fayed are attorneys in the national Health

Care Group of Sonnenschein Nath & Rosenthal LLP (healthcare.

sonnenschein.com).

A Closer Look at the Chain of Financial Relationships Involved in the Case

The U.S. Department of Justice (DOJ) and the U.S. Department of Health and Human Services, Of-fi ce of Inspector General (OIG) recently entered

into a $5.08 million settlement with Memorial Health, Inc., the parent company of Memorial Health University Medical Center, Inc., to resolve allegations that Memo-rial Health (and its affi liates) violated the federal physi-cian self-referral law (the “Stark law”)1 and, a fortiori, the federal civil False Claims Act (FCA).2 This settlement is part of an ongoing trend in which the federal govern-ment and whistleblowers alike are relying with increas-ing frequency, and arguably success, on the Stark law to aver that hospitals and other health care providers have presented false reimbursement claims in contravention of the FCA. (The Stark law is a strict liability law which prohibits (1) a physician from “referring” patients to an “entity” for the furnishing of certain designated health services (DHS) that are covered by Medicare if the phy-sician (or one of his or her immediate family members) has a “fi nancial relationship” with the entity and none of the law’s exceptions applies;3 and (2) the “furnishing” entity (e.g., a hospital) from submitting a claim for reim-bursement for such DHS to Medicare or any other pro-gram, entity, or person.4)

In July 2006, Ryan Boland, MD, fi led a qui tam (whis-tleblower) action against the Medical Center, Provident Eye Physicians, Inc., a Memorial Health affi liate that em-ploys ophthalmologists, and Georgia Eye Institute Inc. (GEI), a Memorial Health affi liate that provides ophthal-mologic services to patients and is staffed by Provident physicians. According to Dr. Boland, the Medical Center schemed improperly to secure patient referrals through the payment of excessive funds to physicians.

SETTLEMENTSGADI WEINREICH / RAMY FAYED

The Memorial Health Settlement: Good Law or Bad Lore?


Settlements

Dr. Boland contended that in 2003, the Medical Center negotiated new contracts with Provident, which did not account for the physicians’ teaching and indigent care services. The Medical Center corrected this defi ciency, Dr. Boland averred, by paying Provident an additional $500,000 per year between 2003 and 2005 and $600,000 for 2006. These annual payments, however, allegedly were not distributed among the physicians in proportion to their teaching and indigent care services. Rather, Dr. Bo-land asserted, such additional payments were distributed by Provident to a small cadre of physicians that the Medical Cen-ter wanted to retain within the Memorial Health system.5 The DOJ, in turn, inter-vened in the action (without amending Bo-land’s complaint), claiming that Memorial Health (and its affi liates) violated the Stark law’s referral and billing prohibitions by paying physicians compensation at levels that were neither commercially reasonable nor consistent with the fair market value (FMV) of the physicians’ services.

Under the 2001 “Phase I” Stark law reg-ulations (which were in effect during the period covered by the alleged wrongdoing, i.e., January 2003 through December 2006), a referring physician does not have a direct compensation arrangement with a DHS en-tity if there is at least one “intervening en-tity” in the chain of fi nancial relationships that connect the physician and the DHS entity. Thus, pursuant to the Phase I regu-lations, the chain of fi nancial relationships — Medical Center > Memorial Health > Provident > Physician Medical Center — did not give rise to a direct compensation arrangement between the physician and the Medical Center. This chain would give rise to an indirect compensation arrange-ment (ICA), however, if three conditions were met.6

The fi rst condition is that there exist be-tween the physician (one of the Provident physicians) and the DHS entity (Medical Center) an “unbroken chain” of at least two fi nancial relationships.7 Based on the lim-

ited facts available to the public, it appears that Memorial Health, the parent of the Medical Center, contracted with its corpo-rate affi liate, Provident, a physician orga-nization comprised of ophthalmologists, to provide various physician services, includ-ing teaching services and care to indigent patients. Because both Memorial Health and Provident constitute intervening en-tities in the fl ow of remuneration at issue (i.e., Medical Center > Memorial Health > Provident > Physician), the parties satis-fi ed the fi rst prong of the ICA defi nition.

The second condition of the ICA defi ni-tion (as it existed under the Phase I regu-lations) is satisfi ed if and only if the “ag-gregate compensation” in the “compensa-tion arrangement” (as opposed to owner-ship or investment interest) that is closest to the physician “varies with, or otherwise refl ects, the volume or value of referrals or other business generated by the refer-ring physician for the entity furnishing the DHS.”8 Thus, in this case, the closest compensation arrangement in the chain — Medical Center > Memorial Health > Provident > Physician — would be the physician’s compensation arrangement with Provident. As such, the question is whether the aggregate compensation that each referring physician receives from his or her employer, Provident, varies with, or otherwise refl ects, the volume or value of referrals or other business generated by the physician for the Medical Center.

The third and fi nal ICA defi nition con-dition is that the DHS entity (the Medical Center) must have “actual knowledge” (or act “in reckless disregard or deliberate ig-norance”) that the physician “receives ag-gregate compensation that varies with, or otherwise refl ects, the volume or value of referrals or other business generated by the referring physician for the entity furnishing the DHS.”9 Thus, even though there is an unbroken chain of fi nancial re-lationships between the Provident physi-cians and the Medical Center — and even



Christopher Young, CHC, is the president of Laboratory Management Support Services (LMSS) in Phoenix, Ariz. He can be reached at 602/277-

5365 or by email at [email protected].

Labs Will Have to Decide Whether to Maintain or Remove LCD Edits from their Systems

Most laboratories and other kinds of providers might consider the retirement of a local cover-age determination (LCD) a blessing rather than a

problem. That’s because while an LCD is active, claims de-nials are automatic. If the requirements of the LCD are not met, laboratories and other providers have to determine if an advance benefi ciary notice (ABN) must be obtained. In addition, physicians or laboratories have to explain the whole process to Medicare benefi ciaries who often are not aware of this aspect of their Medicare coverage.

Further, laboratories must maintain databases of LCD edits and update them when LCDs change or new ones are issued, spend time and resources educating their customers about the policies, and have processes in place to contact customers when they receive requisi-tions that need additional information because a test is covered under an LCD. All of this goes away when a LCD is retired, doesn’t it? Not necessarily, according to many Medicare contractors and the Medicare Program Integrity manual.

THE CONTRACTOR’S VIEW

Recently, retiring LCDs have become a quickly expand-ing trend in the Medicare contractor community. Some of this may be due to the Medicare administrative con-tractor (MAC) Medicare contract reform process and its competitive bidding selection process. As I understand this process, the MAC contracts are being bid at much lower dollar amounts than previously. Presumably, there are effi ciencies the contractors can get from the consolidation of many contractors into one.

The expectation that the government has for con-tract reform is better benefi ciary service, better provid-

LABCHRISTOPHER YOUNG

Retired LCDs: A New Problem for Clinical Laboratories


Lab

er service, better fi scal management of the claims process, and improved effi ciencies at the contractor level translating into sav-ings for the Medicare program. This means, in reality, the winning contractors have to look to improve or maintain service levels and cut costs to retain their contract. One way to do that is to retire LCDs.

LCDs require a fairly large commitment of a contractor’s resources to meet Medi-care requirements for them.1 These in-clude making sure the information on the local Web site matches the information on the national Web site, periodic reviews, re-visions and updates when regulations or codes change, if applicable, at 90-day, 120-day and annual intervals, and reviews to consider retiring LCDs when they become outdated or are no longer needed. Retiring LCDs relieves them of these burdens.

Here is a quote from the MAC Jurisdiction 3 contractor (Noridian Administrative Servic-es) from a question and answer session on April 24, 2008:

When you retire the LCDs the con-tractors are not adding new CPT®/HCPC/ICD-9s to the retired local coverage determinations. The LCD would be useful to the provider to use as a guide to the medical neces-sity criteria on which the LCD was created and allow ICD-9 based on the guidance of the old LCD. How-ever, retirement means the contrac-tor has evidence that the medical necessity for the procedure/drug has been defi ned and become clear, hence, the contractor can no longer justify the use of the Medicare bud-get to continue to update and main-tain the LCD.

Another reason, LCDs are considered educational tools by the contractor com-munity and the Centers for Medicare & Medicaid Services (CMS). An LCD is cre-ated when some kind of problem exists like overutilization of a test or inappropriate

use of a test. Sometimes when new tests or technology are introduced, LCDs help edu-cate physicians and laboratories concern-ing CMS’ view of when the new test is ap-propriate.

The presumption is that laboratories and physicians learn the proper way to uti-lize the test according to Medicare’s medi-cal necessity rules while the LCD is active. Once the coding and claims errors stop, the LCD can be retired because the communi-ty has learned the correct way to utilize the test. But, recent contractor communica-tions seem to indicate that even though an LCD is retired, the responsibility to adhere to its guidance does not retire with it, and a laboratory or provider may be subject to post-payment recoupment even up to sev-eral years later.

According to a notice about retired LCDs placed on the same MAC J3 Web site and distributed over its list serve to both Part A and B providers and suppliers in 11 states, providers should continue to adhere to the LCD’s criteria even after retirement:

Where providers have adjusted their billing and coding practices to cor-respond to the guidance in LCDs, they will want to be very careful in departing from these practices just because the LCD is retired.

This notice further comments:

Post-pay review will continue not only as before, but also with the addition of Recovery Audit Con-tractors (RACs), who over the next several years will be in place in all states. Payment for a service does not mean the service was medi-cally necessary and/or correctly billed. Therefore, the service may be subject to recoupment even sev-eral years later.

These comments from the fi rst and most experienced MAC contractor may be the


Lab

harbinger of things to come for all MACs. This was posted on the National Govern-ment Services Web site attached to a retired LCD notifi cation:

All local policy rules, requirements, and limitations within this LCD will no longer be applied on a prepay-ment basis, but as with any billed service, will be subject to post pay-ment review. All Centers for Medi-care & Medicaid Services national policy rules, requirements, and lim-itations remain in effect.

These notices would seem to indicate that even though an LCD has been retired and claims will not be denied on pre-pay-ment automatic edits, they could be the target of post-payment review and recoup-ment years later by the MAC or a recovery audit contractor. What all this means is that if the provider sends a claim that does not meet the medical necessity requirements of the previously existing LCD, it will be paid, but the provider may be liable for re-coupment two or three years later for that claim. Because recovery audit contrac-tors can go back up to three years, provid-ers must consider this the time period that they may be at risk for these claims.

PROBLEM FOR LABS

Laboratory LCD retirements are particular-ly troubling for laboratories. First, because they are laboratory LCDs, physicians tend to think of them as a laboratory problem and may not be too concerned about med-ical necessity issues once the LCD goes away. After all, the laboratory will be the one subject to recoupment even though the physician improperly utilized the test.

When there is an active LCD in place, the laboratory has tools it can use to protect itself from this situation. It can use the ac-tive LCD to inform and educate the physi-cian community, and it can obtain an ABN when appropriate medical necessity docu-mentation is not provided. Once the LCD is

retired, the laboratory fi nds itself in the un-tenable position of policing physician uti-lization when there is no active policy and claims are not going to be denied.

Further, because there is no expecta-tion of a denial, the laboratory cannot le-gally obtain an ABN according to the cur-rent ABN rules.2 Even if the laboratory did obtain an ABN, does anyone think that it will successfully collect from a benefi cia-ry two or three years later when the post-payment review occurs and recoupment is demanded?

One of the more troubling aspects of the aforementioned Noridian MAC notice to its providers is that it instructs them to obtain an ABN, which would potentially violate the ABN rules and put a provider at risk for that. Further, the ABN prohibition against routine and generic notices are designed to protect benefi ciaries from having to make a fi nancial decision about whether to re-ceive a service and pay for it out of pocket or not, only when there is a certainty that coverage will be denied.

Confronting a benefi ciary may cause a benefi ciary to forego a test he or she needs for fi nancial reasons when there is no rea-son to expect a claims denial. This adds additional liability for the laboratory if it causes a benefi ciary to forgo a test that would have been paid and there is a nega-tive medical outcome as a result. Further, the notice instructs a laboratory to append a GZ modifi er to its claims in this case if it does not get an ABN.3 That is also incorrect according to the description for this modifi -er, which says, “Item or service expected to be denied as not reasonable or necessary.”

WHAT SHOULD LABS DO?There are not many really good alternatives for laboratories. Laboratories will have to make a choice of whether to maintain the LCD edits in their systems and go through the pain and expense of notifying physi-cians that they have not submitted appro-priate diagnosis information to the labora-tory or remove the edits from their systems


Lab

and take the risk of a post-payment review sometime later.

I cannot recommend collecting ABNs for these retired LCDs because I believe that is a clear violation of ABN rules, there is little chance of ever getting paid by a ben-efi ciary if the claim is subsequently denied years later on a post-payment review, and the laboratory could affect patient care by deterring a benefi ciary from getting a test he or she may need. I also would not rec-ommend using the GZ modifi er on these claims because there is no expectation of denial of the claim.

Best practices for this case would be to maintain the LCD edits in the laborato-ry system as a means to track and moni-tor the utilization of the affected tests but not to delay or inhibit claims submission. If the laboratory begins to see a trend of mis-use or inappropriate coding for a particu-lar test, it can use the information to notify its customers and try to educate them con-cerning the medical necessity of the test

even when an LCD has been retired. Track-ing these also can provide information about the actual fi nancial liability a labora-tory may be facing should a post-payment review and recoupment occur.

Lastly, the laboratory could use the in-formation to seek reinstatement of the LCD by the local Medicare contractor. Whether the lab chooses not to submit claims when they do not meet the requirements of the retired LCD on the chance that a post-payment review may occur and that they could not win an appeal of the review is up to each laboratory.

Endnotes:1. See the Medicare Program Integrity Manual, Pub.100-

08, Chapter 13, §13.4(C) for a complete list of requirements for an LCD.

2. See the Medicare Claims Processing Manual,Pub. 100-04, Chapter 30 Financial Liabilities Protections, §40.3 and §§40.3.6 through 40.3.6.4.

3. See the MAC J3 Web site at www.noridianmedicare.com/macj3b/news/ and search for “LCD Retirement Clarifi cation.”


O’BRIENCONTINUED FROM 12

payment to the provider’s or supplier’s entire patient population. The Medi-care Modernization Act (MMA) sets lim-its regarding when statistical extrapola-tion may be used, and the CMS manu-als establish guidelines for CMS to follow when performing an audit based upon a statistical sample.

If an extrapolation is flawed, it may be successfully challenged, bringing the to-tal dollars at issue to the “actual” alleged overpayment, and not the extrapolated alleged overpayment. For example, in one recent case, CMS conducted an au-dit in which it found an “actual” overpay-ment of approximately $28,000, which it then extrapolated to determine its over-payment demand of over $1.5 million. The provider was successful in challeng-ing the methodology of the statistical ex-trapolation, and the extrapolation was overturned.

Pursuant to §935 of the MMA: LIM-ITATION ON USE OF EXTRAPOLA-TION — A Medicare contractor may not use extrapolation to determine overpayment amounts to be recov-ered by recoupment, offset, or oth-erwise, unless the Secretary deter-mines that —A. there is a sustained or high level

of payment error; orB. documented educational inter-

vention has failed to correct the payment error.

CMS also has established guidelines for statistical extrapolations, which are set forth in the Medicare Program Integ-rity Manual (CMS Pub. 100-08, Chapter 3, §§ 3.10.1 through 3.10.11.2). Notably, the RACs are authorized to use extrapo-lation, provided that they adhere to the above-referenced statute and manual pro-visions.19 CMS and its contractors must

follow these guidelines in conducting sta-tistical extrapolations. If it fails to do so, a Medicare provider may have success chal-lenging the validity of the extrapolation.

CONCLUSION

Medicare providers and suppliers should be ready for increased Medicare auditing activity as the RAC program expands na-tionwide. Providers and suppliers should make efforts now to evaluate their com-pliance with Medicare policies. Should a provider or supplier be subject to a RAC or other Medicare audit, effective strate-gies are available that can be employed successfully in the appeals process to de-fend Medicare audits.

Endnotes:1. CMS RAC Demonstration Evaluation Report, June

2008, at p. 2, 15, available at www.cms.hhs.gov/RAC (last accessed July 15, 2008).

2. Id at Appendix #Q. See also Permanent RAC Expansion Schedule, available at www. cms.hhs.gov/RAC (last acessed July 15, 2008).

3. Id. 4. CMS RAC Demonstration Evaluation Report, supra

note 1, at p. 2, 15. 5. RAC Statement of Work, available at www.cms.hhs.

gov/RAC/10_ExpansionStrategy.asp#TopOfPage (last accessed July 15, 2008); see also RAC Statement of Work for the RAC demonstration, available at www.fbo.gov/index?s=opportunity&mode=form&id=1889cc7b8672a9e2c1cbe5a007b9dceb&tab=core&_cview=1 (last accessed July 15, 2008).

6. Id. 7. Id. 8. CMS RAC Demonstration Evaluation Report, note 1,

at p. 2, 15. See also RAC Statement of Work, supra note 5.

9. CMS RAC Demonstration Evaluation Report, note 1, at p. 19.

10. Id. 11. See also RAC Statement of Work, note 5. 12. 42 U.S.C. § 1395pp. See also Medicare Claims

Processing Manual, Pub. 100-04, Chapter 30, § 20.13. 42 U.S.C.§ 1395gg.14. Medicare Financial Management Manual, Pub. 100-

06, Chapter 3, § 70.3.15. 20 C.F.R. § 404.507.16. Medicare Financial Management Manual, Pub. 100-

06, Chapter 3, §§ 80 and 90.17. See also Medicare Claims Processing Manual, Pub.

100-04, Chapter 29, § 90 and Medicare Financial Management Manual, Pub. 100-06, Chapter 3, § 80.1.

18. Id. Although providers have experienced


et cetera, but to me what is critical is that we have all of the requisite knowledge for achieving our compliance goals, and that includes clinical (nursing and therapy), accounting and reimbursement, auditing, coding, human resources, and legal. It mat-ters not who drives the process as long as the resources are available and committed to the goals.

FOR THE RECORDCONTINUED FROM 30

Warren Bennis claims that trust is one of six basic ingredients of leadership. “Integri-ty is the basis of trust, which is not so much an ingredient of leadership as it is a prod-uct. Trust is the one quality that cannot be acquired, but must be earned. It is given by coworkers and followers, and without it, the leader can’t function.”1

Trust is the foundation upon which rela-tionships in every setting are built. Ethics can best be communicated and taught to the workforce and business partners by the tone of an organization’s leadership. This responsibility falls upon them. Continu-ous education about developing trust and personally owning ethics is one of the best ways to impact the ethical culture of the entire workforce of the organization. It is also essential, however, that organizations do not become overly consumed with just emphasizing personal ethics and focus on additional elements addressed in the Sen-tencing Guidelines to create an effective ethics and compliance program. Regard-less of the amount of ethics education con-ducted, people will behave in a way that

COMPLIANCE OFFICERCONTINUED FROM 32

and ANDA applications for domestic mar-keting approval.

CONCLUSION

As clinical trials across the world contin-ue to increase, it will be increasingly im-portant to know how to conduct such trials not only in the United States but also in the EU and Eastern Europe. Adherence to prin-ciples of GCP guidance will be important, and GCP will evolve over time in the best interests of trial subjects and the integrity of clinical trials.

© 2008 Paul R. DeMuro and Andrea Jaeger-Lenz. All rights reserved. Reprinted with permission of Paul R. DeMuro and Andrea Jaeger-Lenz.

This article also appeared in the following publication and is being reprinted with permission: NEWSLETTER, Health Care Compliance Letter, Vol. 11 Issue 13, June 24, 2008, How to conduct clinical trials in the EU and Eastern Europe: Overview and comparison with the U.S. system*.

Portions of this article were adapted from David Clark, Paul DeMuro, & John Steiner, Fundamentals of Research, Health Care Compliance Association Research Compliance Conference, Oct. 31, 2007, Chicago, Illinois.

Endnotes:1. Directive 2001/20/EC of the European

Parliament and the Council of 4 April 2001 on the approximation of the laws, regulations, and administrative provisions of the Member States relating to the implementation of good clinical practice in the conduct of clinical trials on medicinal products for human use, Offi cial Journal of the European Communities, L121/34, May 5, 2001.

2. This section was adapted from Carolyne Hathaway, John Manthei, & Cassie Scherer, “New FDA Regulation Alters Standards for Foreign Clinical Trials,” Latham &

DEMUROCONTINUED FROM 26

success challenging reopenings under these regulations, providers should be aware that a recent Medicare Appeals Council decision has found that CMS lacks jurisdiction to consider challenges to reopenings under the Medicare appeals process. See Critical Care of North Jacksonville v. First Coast Service Options, Inc., decided February 29, 2008.

19. RAC Statement of Work, supra note 5.

Watkins LLP Client Alert, No. 709, May 29, 2008.3. 21 C.F.R. 21 C.F.R. §312.120.4. 21 C.F.R. Part 312, Subpart D.5. 21 C.F.R. §312.3.6. 21 C.F.R. §312.120(b).7. 21 C.F.R. §312.120(d).


is not always consistent with the organiza-tion’s principles and may condone or con-duct criminal conduct.

The Sentencing Guidelines advise organi-zations to (1) exercise due diligence to pre-vent and detect criminal conduct; and (2) take reasonable steps to ensure that the or-ganization’s compliance and ethics program is followed, including monitoring and audit-ing to detect criminal conduct. It is obvious, based on both the federal guidelines and the Offi ce of Inspector General, that it is equally important to include all the elements of com-pliance within an organization’s compliance program. An organization also must imple-ment activities designed to detect and pre-vent criminal or unethical conduct through auditing and monitoring activities.

These elements are important enough that the guidelines culpability scores in-clude whether an organization has activi-ties in place to detect wrongdoing and whether it has standards in place to consis-tently enforce and address the wrongdoing. To effectively infl uence an organization’s ethical culture, ethics cannot stand alone, it must be weaved into the other required compliance elements outlined in the Sen-tencing Guidelines.

Endnotes:1. John C. Maxwell, Ethics 101 What Every Leader Needs

to Know (2003).

ing researchers.”6 (emphasis added)In my experience with larger covered enti-ties that have internal IRBs, each institu-tion participating in a multi-institutional study usually wants to have any research conducted within its four walls approved by its own IRB, and just because one IRB gives a thumbs up does not guarantee that another will do likewise.

Preparing the required written assur-ances and plans also can be a big head-

HIPAACONTINUED FROM 36

ache for researchers. Once again, the problem of dealing with multiple IRBs or privacy boards signifi cantly adds to the researchers’ paperwork; what satisfi es one IRB may not be good enough for an-other, resulting in the researcher having to exclude blocks of subjects from a multi-institutional health services research and, thus, potentially adding a signifi cant source of error to the fi ndings.

Another problem for researchers is the additional restriction placed on re-use of PHI without authorization or a waiver for each additional use or disclosure beyond the original use or disclosure. One com-mon re-use of PHI is for meta-analytic re-search, a technique often used in health services research. Meta-analysis combines the results of several studies that address a set of related research hypotheses and is widely used in health services research. The privacy rule provisions have tended to discourage the sharing of PHI for meta-an-alytic studies by adding new administrative burden to the process.

Many of these problems could be cir-cumvented or partially mitigated by using de-identifi ed data or a limited data set, but the creation of de-identifi ed information or a limited data set from PHI brings with it its own set of administrative overhead.

Although HHS has produced a num-ber of publications designed to help cov-ered entities and researchers understand and comply with the research provisions of the privacy rule (available online at privacyruleandresearch.nih.gov/health-servicesprivacy.asp), there is no getting around that the privacy rule has had a significant negative effect on medical and other health care-related research. Because there have been few reported privacy rule complaints filed with the Office for Civil Rights related to uses and disclosures of PHI for research purpos-es, perhaps it is time to reassess the cost to important research versus the benefit to patient privacy provided by the pri-vacy rule.


you reach, the more insight you have on in-ternal processes and potential risks. From a compliance standpoint, awareness is half the battle,” she added.

For more information about Philips Healthcare, go to www.medical.philips.com. For additional information about Agil-iance, go to www.agiliance.com.

RISK MANAGEMENTCONTINUED FROM 50

payments to provide on call coverage, locum tenens agreements, and recruit-ment agreements in which there is a new or underutilized health care facility or a facility located in an underserved or un-derpopulated area to attract physicians to such facility. In 2007, the OIG provided, in an advisory opinion, factors to consid-er in reviewing such arrangements and stated that “[w]e are aware that hospitals increasingly are compensating physicians for on-call coverage for hospital emergen-cy rooms…and we are mindful that legiti-

ANTI-KICKBACK STATUTECONTINUED FROM 52

tency, if we lock it down and it’s unavail-able to support patient care?What is the default in your organization

— “if in doubt, don’t give it” or “err on the side of patient care?” With technology’s po-tential to improve the quality of patient care by reducing medical errors, we might consider it a success if erring on the side of patient care became the standard.

Endnotes:1. U.S. Dept. of Health and Human Services. Office of

the National Coordinator for Health Information Technology, The Decade of Health Information Technology: Delivering Consumer-Centric and Information-Rich Health Care. (July 2004), available at www.hhs.gov/healthit/documents/hitframework.pdf.

Endnotes:1. Report available at www.aahcdc.org/policy/reddot/

AAHC_HIPAA_Creating_Barriers.pdf.2. 45 C.F.R. §164.508 (c)(1)(v).3. www.hhs.gov/ocr/hipaa/guidelines/research.pdf.4. Id.5. Final rule, 65 FR 82462, 82692, Dec. 28, 2000.6. Final rule, 67 FR 53182, 53232, Aug. 14, 2002.

ly from week 12 of the campaign to week one post-campaign (24 complaints to 38). This suggests a positive, cumulative ef-fect from a combination of outreach ac-tivities taking place concurrently.

The results of IPRO’s Benefi ciary Out-reach Special Study pilot suggest that ben-efi ciaries/families, health care profession-als/advocates, and providers all have gaps in their knowledge of QIOs and the right to fi le a Medicare quality of care complaint. Furthermore, it appears that successful outreach to underserved populations will require sustained partnership with trusted community organizations. In addition, the QIO branding effort now underway at CMS will be helpful as a means of underscor-ing QIO roles and responsibilities for ben-efi ciaries/families, health care profession-als/advocates, and providers.

QIOCONTINUED FROM 40

sumer-centric vision? It can work both ways. Perhaps disclosure is allowed by law, but it appears it may not be in the best interest of the patient. Alterna-tively, perhaps the law does not allow disclosure, but putting forth the extra effort to determine patient choice can resolve uncertainties. The definition of “sensitive” may vary from patient to patient. How would you want it to be handled if you were the patient and it was your information?Is health information serving its pur-pose, regardless of accuracy and consis-

HEALTH INFORMATION MGMNT.CONTINUED FROM 42


mate reasons exist for such arrangements in many circumstances.”

In the last few years the OIG has pro-vided guidance on “interim subsidies” by hospitals in the form of financial assis-tance to physicians experiencing limit-ed access to, and affordability of, medi-cal malpractice insurance. Such a subsi-dy is permissible when the physician is a member of the active medical staff of the hospital, the criteria for the receipt of the subsidy are not based on the vol-ume or value of referrals or other busi-ness generated by the physician, and the physician will pay at least as much going forward as he or she currently pays for the malpractice insurance.

With the foregoing in mind, any hos-pitalist agreement should stipulate in ad-vance the “target compensation amount” in aggregate, and such amount must rep-resent fair market value. This is to meet the Stark laws and anti-kickback statute standards. Fair market value should take into consideration independent objective compensation information, such as Medi-cal Group Management Association com-pensation data. The overhead expense amount must be agreed upon in advance and evaluated against an objective rea-sonableness standard.

the messenger or obfuscating the real is-sue. While you have to be patient and po-lite, that does not mean that you have to buy into these approaches. Say to your-self, “My give a darn’s busted.”

INVISIBLY SHAKEN7. , BY RODNEY ATKINS

This one is simple. Being a compliance professional is a tough job. You hear lots of challenging things on a daily basis. Never let them see you shaken.

CORPORATE CULTURECONTINUED FROM 54

That’s all for now. Next time, maybe we will do “Compliance and Rock & Roll.” Send your song suggestions to [email protected].

vices’ (CMS’) National Claims History and Common Working Files, which can cross-reference multiple health care encounters for each benefi ciary.

Of the 300 sampled claims, 80 were paid correctly, but the remaining 220 claims contained overpayments as a result of in-appropriate assignment of the source of ad-mission value. The 220 claims resulted in overpayment of more than $6,300. Based on the results from the sample, the OIG auditors extrapolated a total overpayment of $213,320 for incorrectly coded claims for 2005 and 2006 in these jurisdictions. The full OIG report, released July 9, 2008, can be found at oig.hhs.gov/oas/reports/region1/10700519.pdf.

Acute care facilities should carefully monitor both source of admission and pa-tient status (discharge disposition) values. Transfers among acute care hospitals are exceedingly common, particularly in ru-ral areas and in regional referral centers. When this occurs, both the source of ad-mission and patient status values must re-fl ect the circumstances appropriately. For instance, source of admission values of ei-ther “4: Transfer from a Hospital (Differ-ent Facility)” or “A: Transfer from a Critical Access Hospital” should be assigned as the source of admission for the receiving hos-pital’s fi nal claim.

CMS Common Working File (CWF) ed-its identify all benefi ciary claims that are both discharged and admitted to acute care facilities on the same date of service. The DRG payment is prorated between the two facilities. In addition, source of admission and discharge status values assignment in-

CODING AND BILLINGCONTINUED FROM 56


(upon its announcement) on the ground that the government misapplied the Stark law (by focusing on the wrong fi nancial re-lationship in the chain of fi nancial relation-ships between the Provident physicians and the Medical Center) and, as such, had overseen a miscarriage of justice. At bot-tom, these critics rebuked the DOJ for (in-correctly) focusing on the payments made by Memorial Health to Provident for teach-ing and indigent care services.

They also questioned the notion that a physician organization (i.e., Provident) was required to distribute payments for services to those physicians in the organization who actually performed the services. Whatever prompted Memorial Health, these critics asked rhetorically, to settle the case for so much money?

The critics of the Memorial Health set-tlement are correct that, under the Phase I regulations, the analysis turns on the com-pensation arrangement closest to the refer-ring physician — i.e., the salary and bonus payments made by Provident to its physi-cians. They also are correct that the Stark law does not require Provident (or any other physician organization) to allocate the ser-vice fees it received from Memorial Health to those physicians who actually performed the services on a proportional or any other basis. Both of these (accurate) facts, howev-er, ultimately may be irrelevant.

A careful reading of the publicly avail-able documents suggests that DOJ did focus on the correct stream of remuner-ation — i.e., the compensation received by the individual physicians (as opposed to the payments received by Provident). Indeed, Boland’s complaint (as adopted by DOJ) contends that individual phy-sicians received compensation (from Provident) that was commercially un-reasonable, inconsistent with fair mar-ket value, and designed to retain certain high-referring physicians within the Me-morial Health system.

Assuming the truth of that contention, then it is likely, indeed probable, that

fl uence reimbursement for those inpatient DRGs designated as “Post-Acute.” If the pa-tient is transferred to a rehabilitation facil-ity or unit, SNF, or will receive home health services, the DRG reimbursement will be affected based on these values.

For further information on the guidelines related to source of admission “D: Transfer from Hospital Inpatient in the Same Facili-ty Resulting in a Separate Claim to the Pay-er,” the following links direct the reader to the CMS transmittal and Medicare Learn-ing Network (MLN) articles:

www.cms.hhs.gov/MLNMattersArti-cles/downloads/MM3881.pdfwww.cms.hhs.gov/ContractorLearnin-gResources/downloads/JA3881.pdfwww.cms.hhs.gov/transmittals/down-loads/R718CP.pdfIn particular, staff members at inpatient

psychiatric facilities are urged to review their claims data to ensure compliance with the source of admission guidelines. Before the source of admission value of D was available, the value of “4: Transfer from a Hospital (Different Facility)” was utilized. If an IPF is a distinct unit of a multispe-cialty facility, a sample of claims should be reviewed to determine whether a value of 4 was assigned instead of D since the guide-lines were updated in mid-2005. As the OIG audit report demonstrates, there are obvi-ously a signifi cant proportion of claims be-ing submitted with inappropriate source of admission assignment.

assuming that Provident’s aggregate com-pensation to its physician-employees did vary with, or otherwise refl ect, the volume or value of referrals or other business gen-erated by the physicians for the hospital — the ICA defi nition would not be satisfi ed unless the Medical Center knew or should have known about this fact.

Many commentators promptly chal-lenged the Memorial Health settlement

SETTLEMENTSCONTINUED FROM 58


the chain of fi nancial relationships at is-sue (Medical Center > Memorial Health > Provident > Physician) satisfi ed the Phase I regulations’ ICA defi nition. If the payments from Provident to its physician-employees (or at least some of them) was in excess of fair market value (or other-wise took into account the volume or val-ue of referrals of the physician), then the only potentially relevant exception — i.e., the exception for indirect compensation arrangements10 — would not apply, mean-ing that the Stark law was not only impli-cated but indeed violated.

Of course, like the settlement’s many critics, neither author of this article was involved in the case itself. The authors posit, however, that perhaps their analy-sis may be closer to the truth, explaining why Memorial Health settled the case for $5.08 million and recognizing that while all law enforcement efforts give rise to good faith disputes between the govern-

ment and the defense bar, DOJ does un-derstand the fundamentals of the Stark law and did not make the colossal mis-take suggested by some.

Endnotes:1. 42 U.S.C. § 1395nn et seq. 2. Settlement Agreement among the United States of

America and Memorial Health, Inc., effective as of Feb. 11, 2008.

3. 42 U.S.C. § 1395nn(a)(1)(A); 42 C.F.R. § 411.353(a).4. 42 U.S.C. § 1395nn(a)(1)(B).5. U.S. ex rel. Boland v. Memorial Health University

Medical Center, Inc., Case No. CV406-157 (N.D.Ga.).6. 42 C.F.R. § 411.354(c)(2).7. Id. § 411.354(c)(2)(i).8. 42 C.F.R. § 411.354(c)(2)(ii). This is true regardless

of whether the “individual unit of compensation satisfi es the special rules on unit-based compensation” (i.e., special compensation rules). Note that the text of § 411.354(c)(2)(ii) was changed as part of the 2007 “Phase III” regulations, Final rule, 72 FR 51012, Sept. 5, 2007. This change does not affect the analysis of pre-2007 arrangements.

9. Id. at § 411.354(c)(2)(iii).10. 42 C.F.R. § 411.357(p).

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Volume 10, Number 5 September–October 2008...Designing and Implementing Ethics into the Fabric of...

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