Appendix

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1 The OIG1 has issued compliance program guidances for the following seven industry sectors: hospitals, clinical laboratories, home health agencies, durable medical equipment suppliers, third-party medical billing companies, hospices, and Medicare+Choice organizations offering coordinated care plans. Over the next year, the OIG plans to issue compliance guidances for ambulance companies and individual and small group physician practices.

2 For the purpose of this guidance, the term “nursing facility” includes a skilled nursing facility (SNF) and a nursing facility (NF) that meet the requirements of sections 1819 and 1919 of the Social Security Act (Act), respectively, 42 U.S.C. 1395i–3 and 42 U.S.C. 1396r. Where appropriate, we distinguish between SNFs and other nursing facilities.

3 The term “Federal health care programs” includes any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government (i.e., via programs such as Medicare, Federal Employees Health Benefits Act, Federal Employees’ Compensation Act, Black Lung, or the Longshore and Harbor Worker’s Compensation Act) or any State health plan (e.g., Medicaid, or a program receiving funds from block grants for social services or child health services). See 42 U.S.C. 1320a–7b(f). In this document, the term “Federal health care program requirements” refers to the statutes, regulations and other written directives governing Medicare, Medicaid, and all other Federal health care programs.

4 Recent case law suggests that the failure of a corporate director to attempt in good faith to institute a compliance program in certain situations may be a breach of a director’s fiduciary obligation. See, e.g., In re Caremark Int’l Inc. Derivative Litig., 698 A.2d 959, 970 (Ct. Chanc. Del. 1996).

5 See 63 FR 70137 (December 12, 1998), Notice for Solicitation of Information and Recommendations for Developing OIG Compliance Program Guidance for the Nursing Home Industry.

6 The OIG periodically issues advisory opinions responding to specific inquires concerning the application of the OIG’s authorities and Special Fraud Alerts, setting forth activities that raise legal and enforcement issues. These documents, as well as reports from OAS and OEI can be obtained on the Internet at: http://www.hhs.gov/oig. We also recommend that nursing home providers regularly review the Health Care Financing Administration (HCFA) website on the Internet at: http:// www.hcfa.gov, for up-to-date regulations, manuals, and program memoranda related to the Medicare and Medicaid programs.

7 Counsel to the nursing facility should be consulted as appropriate regarding interpretation and legal analysis of laws related to the Federal health care programs and laws related to fraud, abuse and other legal requirements.

8 For example, the OIG will consider the existence of an effective compliance program that pre-dated any governmental investigation when addressing the appropriateness of administrative sanctions. However, the burden is on the nursing facility to demonstrate the operational effectiveness of the compliance program. Further, the False Claims Act, 31 U.S.C. 3729–3733, provides that a person who has violated the Act, but who voluntarily discloses the violation to the Government within 30 days of detection, in certain circumstances will be subject to not less than double, as opposed to treble, damages. See 31 U.S.C. 3729(a). In addition, criminal sanctions may be mitigated by an effective compliance program that was in place at the time of the criminal offense. See note 11.

9 For example, this would include providers that own hospitals, skilled nursing facilities, long term care facilities and hospices.

10 A formal commitment may include a resolution by the board of directors, owner(s), or president, where applicable. Evidence of that commitment should include the allocation of adequate resources, a timetable, and the identification of an individual to serve as a compliance officer or coordinator to ensure that each of the recommended and adopted elements is addressed. Once a commitment has been established, a compliance officer should immediately be chosen to oversee the implementation and ongoing operation of the compliance program.

11 See United States Sentencing Commission Guidelines, Guidelines Manual, 8A1.2, Application

Note 3(k). The Federal Sentencing Guidelines are detailed policies and practices for the Federal criminal justice system that prescribe the appropriate sanctions for offenders convicted of Federal crimes.

12 The roles of the compliance officer and the corporate compliance committee in implementing an effective compliance program are discussed throughout this guidance. However, the OIG recognizes that differences in the sizes and structures of nursing facilities may result in differences in the ways in which compliance programs function.

13 Training and educational programs for nursing facilities should be detailed, comprehensive and at the same time targeted to address the needs of specific employees based on their responsibilities within the facility. Existing in-service training programs can be expanded to address general compliance issues, as well as the risk areas identified in that part of nursing home operations.

14 For example, periodically spot-checking the work of coding and billing personnel should be part of a compliance program. In addition, procedures to regularly monitor the care provided to nursing facility residents and to ensure that deficiencies identified by surveyors are corrected should be incorporated into the compliance program’s evaluation and monitoring functions.

15 According to the Federal Sentencing Guidelines, an organization must have established compliance standards and procedures to be followed by its employees and other agents in order to receive sentencing credit for an “effective” compliance program. The Federal Sentencing Guidelines define “agent” as “any individual, including a director, an officer, an employee, or an independent contractor, authorized to act on behalf of the organization.” See United States Sentencing Commission Guidelines, Guidelines Manual, 8A1.2, Application Note 3(d).

16 The OIG strongly encourages the participation and involvement of the nursing facility’s owner(s), governing board, CEO, as well as other personnel from various levels of the organizational structure in the development of all aspects of the compliance program, especially the standards of conduct. Management and employee involvement in this process communicates a strong and explicit commitment to all employees of the need to comply with the organization’s standards of conduct.

17 The code also should be distributed, or at least available, to the residents and their families, as well as the physicians and contractors associated with the facility.

18 Documentation of employee training and other compliance efforts is important in conducting internal assessments of the compliance program, as well as during any third-party evaluation of the facility’s efforts to comply with Federal health care program requirements. See section II.F.

19 See http://www.hcfa.gov for information on obtaining a set of all Medicare and Medicaid manuals.

20 In addition, all providers should be aware of the enforcement priorities of Federal and State regulators and law enforcement agencies. OIG periodically issues Special Fraud Alerts and Special Advisory Bulletins that identify activities believed to raise enforcement concerns. These documents and other materials that provide insight into the nursing home enforcement priorities of the OIG are referenced throughout this guidance.

21 The OIG recommends that, in addition to the list set forth below, the provider review the OIG’s Work Plan to identify vulnerabilities and risk areas on which the OIG will focus during the following year. In addition, it is recommended that the nursing facility routinely review the OIG’s semiannual reports, which identify program vulnerabilities and risk areas that the OIG has targeted during the preceding six months. All of these documents are available on the OIG’s webpage at http://www.hhs.gov/oig.

22 State and local agegncies enter into agreements with DHHS under which they survey and make recommendations regarding whether providers meet the Medicare participation requirements or other requirements for SNFs and NFs. See 42 CFR 488.10, 488.12.

23 42 CFR 483.25. See OIG report OEI–02–98– 00060 “Quality of Care in Nursing Homes: An Overview,” in which the OIG found that, although the overall number of deficiencies identified through the survey and certification process was decreasing, the number of “quality of care” and other serious deficiencies was increasing.

24 See 42 CFR part 483, which establishes requirements for long term care facilities. HCFA’s regulations establish requirements that must be met for a nursing facility to qualify to participate in the Medicare and Medicaid programs. State licensure laws may impose additional requirements for the establishment and certification of a nursing facility.

25 See 42 CFR part 488, subparts A, B, C, E, and F. The survey instrument is used to identify deficiencies, such as: failure to notify residents of their rights; improper use of restraints for discipline purposes; lack of a clean and safe environment; failure to provide care for basic living activities, including failing to prevent and/or treat pressure ulcers, urinary incontinence and hydration; and failing to properly feed residents.

26 As stated above, each resident must receive the necessary care and services to attain or maintain the highest practicable physical, mental, and psychosocial well-being, in accordance with the resident’s assessment and plan of care. See 42 CFR 483.25. The OIG recognizes that this standard does not always lend itself to easy, objective evaluation. The matter is further complicated by the right of the resident, or his or her legal representative, to decide on a course of treatment that may be contraindicated. The Patient Self-Determination Act (Omnibus Budget Reconciliation Act of 1990, Pub.

L. 101–508, sec. 4206 and 4751) requires health care institutions to educate patients about advance directives and to document their decision on life-sustaining treatments.

27 HCFA has created a repository of best practice guidelines for the care of residents at risk of pressure ulcers, dehydration, malnutrition, and other clinical conditions. See http://www.hcfa.gov/ medicaid/siq/siqhmpg.htm.

28 42 CFR 483.15(e)(1).

29 The OIG has conducted a series of reviews that focused on prescription drug use in nursing homes. See OIG reports OEI–06–96–00080, OEI–06–96– 00081, OEI–06–96–00082—”Prescription Drug Use in Nursing Homes—Reports 1, 2 and 3.” The OIG found that patients experienced adverse reactions to various drugs as a result of inappropriate prescribing and inadequate monitoring of medication usage. The reviews revealed serious concerns, including residents receiving drugs for which their medical records lacked evidence of a prescription and the prescription of drugs judged inappropriate for use by elderly persons. The studies also found that medication records were often incomplete and not readily accessible, making it difficult for a pharmacist to identify or confirm drug regimens or problems.

30 For example, Federal regulations require that the medical care of each resident be supervised by a physician, who must see the resident at least once every 30 days for the first 90 days after admission and at least once every 60 days thereafter. See 42 CFR 483.40(c). The facility also must retain the services of a registered nurse for at least 8 consecutive hours a day, 7 days a week (42 CFR 483.30), as well as a qualified dietitian (42 CFR 483.35). In addition to these basic Federal requirements, the OIG strongly believes that the facility should conform to State-mandated staffing levels where they exist and, in addition, adopt its own minimum “hours per patient” (or acuity) staffing standards. A facility should ensure that it has a sufficient number of staff, including registered nurses (RNs), Licensed Practical Nurses (LPNs,) Certified Nurses Assistants (CNAs) and Nursing Assistants (collectively “Nursing Staff”) and other health care professionals to fully meet the needs of all of its residents. Sufficient staff should be provided to ensure that residents receive nursing and other health care services on a 24-hour basis that allows each resident to attain or maintain the highest practicable physical, mental and psychosocial well-being as determined by individual resident assessments and plans of care. A facility should establish staffing standards on a facility-specific (or, often more appropriately, a unit-specific) basis that reflect the acuity level and needs of the residents. The use of an acuity level/ staffing ratio model gives the facility the ability to adjust staffing levels as resident needs fluctuate, as well as a basis for conducting compliance audits. On an ongoing basis, the compliance officer should monitor the facility’s compliance with the staffing ratios established by the quality assurance committee, to ensure that the facility maintains staffing levels sufficient to serve resident needs. At the heart of many quality of care deficiencies is a lack of adequate staff needed to provide basic nursing services.

31 See OIG report OEI–09–97–00120 “Medical Necessity of Physical and Occupational Therapy in Skilled Nursing Facilities,” which found a high rate of medically unnecessary therapies in a number of nursing facilities; such unnecessary services may lead to inappropriate care. See also OAS Report A– 06–99–00058 “Infusion Therapy Services Provided in Skilled Nursing Facilities,” which found similar problems with unnecessary infusion therapy services. With the introduction of the prospective payment system, nursing facilities should ensure that financial pressures do not create incentives to underutilize medically necessary therapeutic services.

32 In addition to providing the facility’s management important information about the state of care in the facility, the self-reporting of resident abuse, including injuries of unknown sources, is a condition of participation. See 42 CFR 483.13(c)(2). Although State surveyors conduct complaint surveys when they receive a complaint, these surveys can only occur if the surveyors are aware of the problem.

33 See generally, 42 U.S.C. 1395i–3 and 42 CFR part 483.

34 In OIG report OEI–02–98–00350 “Long Term Ombudsman Program: Complaint Trends,” the OIG points out that complaints about resident care and resident rights have been increasing. Resident care concerns included complaints about personal care, such as pressure ulcers and hygiene, lack of rehabilitation, the inappropriate use of restraints, abuse and neglect, problems with admissions and eviction, and the exercise of personal rights. Some ombudsmen observed that the increasing number of complaints could be due to a greater presence of ombudsmen staff in nursing homes. However, a comparison of each State’s staffing ratio and visitation rate to their complaint ratio found that States with more staff and more frequent visits did not necessarily have more complaints.

35 Nursing facilities must offer care to all residents who are eligible in accordance with Federal and State laws governing admissions. See 42 CFR 483.12(d). The provider also must maintain identical policies regarding “transfer, discharge, and provision of services under the State plan” for all residents, regardless of payment source. See 42 CFR 483.12(c). See also OIG report OEI–02–99– 00401 “Early Effects of the Prospective Payment System on Access to Skilled Nursing Facilities.” It also is inappropriate to condition admission on a prospective resident’s agreement to hold the facility harmless for injuries or poor care provided to the individual.

36 See California Nursing Homes: Care Problems Persist Despite Federal and State Oversight, GAO/ HEHS–98–202 (July 1998). As noted previously, the facility must establish a process by which the facility administrator and other officials in accordance with State law (including the State survey and certification agency) are informed of incidents of abuse and an investigation is conducted within 5 days of the incident. See 42 CFR 483.13(c)(4).

37 See OIG report OEI–01–91–00840 “Minimizing Restraints in Nursing Homes: A Guide to Action.”

38 It is a violation of the Medicare participation requirements to make unauthorized disclosures from the resident’s medical records. See 42 CFR 483.10(e). The facility also must establish policies that respect each resident’s right to privacy in personal communications, including the right to receive mail that is unopened and to the use of a telephone where calls can be made in privacy. See 42 CFR 483.10(i) and (k).

39 The right of self-determination includes the resident’s right to choose a personal physician, to be fully informed of his or her health status, and participate in advance in treatment decisions, including the right to refuse treatment, unless adjudged incompetent or incapacitated. See 42 CFR 483.10(d).

40 This includes preserving the resident’s right to manage his or her financial affairs or permit the facility to hold and manage personal funds. The resident must receive a full and complete accounting of personal funds held by the facility. See 42 CFR 483.10(c). If misappropriation of a resident’s property is uncovered, the facility administrator and other officials, in accordance with State law, must be notified immediately and an investigation conducted. Finally, the provider must take measures to ensure that personal funds have not been used to pay for items or services paid for by Medicare or Medicaid. Id.

41 See OIG report A–17–99–00099 “Improper Fiscal Year 1998 Fee-for-Service Payments,” in which the OIG estimated that improper Medicare benefit payments made during fiscal year 1998 totaled $12.6 billion in processed fee-for-service payments. SNF payment errors were a result of claims for services lacking medical necessity and represented 7 percent of the total estimated improper payments. The OIG could not and did not quantify what percentage of the improper payments was the result of fraud. Significantly, it was only through a review of medical records that the majority of these billing errors were detected, since when the claims were submitted to the Medicare contractor, they contained no visible errors.

42 The Balanced Budget Act of 1997 (BBA) (Pub.L. 105–33), established PPS for SNFs. Under PPS, all costs (routine, ancillary, and capital) related to services furnished to beneficiaries covered under Part A, including certain Part B services, are paid a predetermined per diem amount. This amount is based on the medical condition and needs of the resident, as reflected in the Resource Utilization Group (RUG) code assigned to that resident. The BBA also required consolidated billing for SNFs. Under consolidated billing, all services provided by the SNF, including those furnished under arrangements with an outside supplier, for a resident of a SNF in a covered Part A stay are included in the SNF’s Part A bill. If a resident is not in a covered Part A stay, under consolidated billing, the SNF still bills for all services furnished to the resident (except for those services specifically excluded from consolidated billing). However, the implementation of consolidated billing with respect to services furnished to residents in a Part B stay has been delayed indefinitely, and various ancillary services continue to be reimbursed separately to outside suppliers until further notice. See HCFA Program Memorandum (PM) Transmittal No. AB– 98–35 (July 1998); PM Transmittal No. AB–98–45 (August 1998); and PM Transmittal No. AB–99–90 (Dec. 1999).

43 For example, the OIG has investigated suppliers of ancillary services that improperly bill for an hour of therapy when only a few minutes were provided. Similarly, vendors that knowingly submit a claim for an expensive prosthetic device when the resident only received non-covered adult diapers have been the subject of enforcement actions. When consolidated billing is implemented, vendors will not submit bills directly to Medicare for such services. As the entity submitting the claim, the nursing facility will need to have any certifications or orders necessary to provide the service, as well as any required supporting documentation, to receive payment.

44 Billing for medically unnecessary services, supplies and equipment involves seeking reimbursement for a service that is not warranted by a resident’s documented medical condition. See 42 U.S.C. 1395y(a)(1)(A) (“no payment may be made under part A or part B [of Medicare] for any expenses incurred for items or services which

* * * are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of the malformed body member”). At the same time, nursing facilities are required to provide the services necessary to attain or maintain the highest practicable physical, mental and psychosocial well-being of each resident. See 42 U.S.C. 1395i–3(b)(2) and 1396r(b)(2). In order to meet these obligations, nursing homes should formulate policies and procedures that include periodic clinical reviews, both prior and subsequent to billing for services, as a means of verifying that patients receive appropriate services.

In the Special Fraud Alert “Fraud and Abuse in the Provision of Services in Nursing Facilities” (June 1996), the OIG identified several types of fraudulent arrangements through which health care providers inappropriately billed Medicare and Medicaid for unnecessary or non-rendered items and services. Under PPS, the provision of unnecessary services may take a different form. As discussed below, manipulation of the Minimum Data Set (MDS) to fit a resident into a higher RUG can result in the provision of medically unnecessary services. In addition, a nursing facility may not enter into arrangements with providers of ancillary services through which the facility overutilizes services reimbursed under Part B in return for an offset in the cost of items or services covered under Part A.

45 In order for a SNF stay to be covered by Medicare, the beneficiary must have a preceding three-day inpatient hospital stay. Observational stays and emergency room care do not qualify towards the 3-day hospital stay requirement. In addition, Medicare Part A benefits in skilled nursing facilities are limited to beneficiaries who require skilled services rendered by technical or professional personnel in a skilled nursing setting. See 42 CFR 409.31. Knowingly misrepresenting the nature or level of services provided to a Medicare beneficiary to circumvent the program’s limitation is fraudulent.

46 Duplicate billing occurs when the nursing facility bills for the same item or service more than once or when a vendor bills the Federal health care program for an item or service also billed by the facility. Although duplicate billing can occur due to simple error, the knowing submission of duplicate claims—which is sometimes evidenced by systematic or repeated double billing—can create liability under criminal, civil, or administrative law. A recent OIG survey of SNF PPS claims found a significant number of erroneous payments made by the Medicare carrier for services for which payments were already included in the SNF’s PPS payment. As Medicare continues the implementation of consolidated billing, facilities should modify all agreements with vendors to require that the vendor bill the facility for those services covered under consolidated billing requirements and not submit bills directly to Medicare for such services. Communication mechanisms also should be established to ensure duplicative billings do not occur. For example, a facility may wish to flag a referral to an outpatient provider as a “PPS resident” and inform the provider that the nursing home will be responsible for billing Medicare for the ancillary services.

47 A credit balance is an excess payment made to a health care provider as a result of patient billing or claims processing error. Nursing facilities should institute procedures to provide for the timely identification, accurate reporting and repayment of credit balances. In addition, the provider should promptly repay if a resident is also entitled to a credit. See OIG reports OEI–07–09–00910 “Medicare Credit Balances in Skilled Nursing Facility Patient Accounts” and OEI–07–09–00911 “Medicaid Credit Balances in Skilled Nursing Facility Patient Accounts,” in which the OIG found that skilled nursing facilities were not accurately or completely adjusting and reporting credit balance amounts due to the Medicare and Medicaid programs. Significantly, the intentional concealment of a known overpayment may expose a provider to criminal sanctions (see 42 U.S.C. 1320a–7b(a)(3)), and civil liability under the False Claims Act.

48 Billing for services or items not ordered involves seeking reimbursement for services provided but not ordered by the treating physician or other authorized person.

49 See discussion on quality of care standards in nursing facilities in section II.B.2.a above and the accompanying notes. Although the OIG is not suggesting that each and every survey citation or failure to meet the applicable standard of care is a per se violation of the False Claims Act (or a criminal, other civil, or administrative violation), knowingly billing for nonexistent or substandard care, items, or services may give rise to criminal, civil, and/or administrative liability.

50 Upcoding involves the selection of a billing code that is not the most appropriate descriptor of the service or condition, in order to maximize reimbursement. Under PPS, upcoding may take the form of “RUG creep.” RUG creep occurs when a provider falsely or fraudulently completes the MDS, which results in assigning a resident to a higher RUG category.

51 A related risk area involves bill splitting schemes. This billing abuse usually takes the form of manipulating the billing for procedures to create the appearance that the services were rendered over a period of days when, in fact, all treatment occurred during one visit.

52 The OIG has investigated a number of cases where signatures were forged, either to fabricate evidence that a physician ordered equipment or services or to create a paper trail in support of items or services that were never provided.

53 Nursing homes are required to submit various reports to Federal and State agencies in connection with facility operations and to receive reimbursement for the care provided to program beneficiaries. Because program payments are in part based on self-reported operating costs, providers must implement procedures to ensure that these reports are prepared as accurately as possible. This should include measures to ensure that adequate documentation exists to support information provided in the report, non-allowable costs are appropriately identified and removed, and related party transactions are treated consistent with program requirements. See 42 CFR part 413. If the provider intends to claim costs in non-conformity with program rules, those items should be flagged in a letter accompanying the cost report.

Prior enforcement actions involving nursing home cost reports have focused on nursing facilities that claimed salary expenses for employees who did not exist, inflated the number of residents served, included non-reimbursable costs with nursing home-related expenses, inappropriately shifted costs to cost centers that were below the reimbursement cap, and shifted non-Medicare related costs to Medicare cost centers.

54 The CIA imposes reporting requirements, independent audits, and other procedures on providers who have demonstrated an inability or unwillingness to independently adopt these measures. It is clearly in a provider’s best interest to avoid the implementation of a CIA by instituting its own prevention, detection, and disclosure mechanisms.

5542 CFR 483.13(c)(1).

56 In OIG report A–12–97–0003 “Safeguarding Long Term Care Residents,” it was noted that, although no Federal requirement exists for criminal background checks on nursing home staff, 33 States currently require that such checks occur. However, there appears to be great diversity in the way States identify, investigate, and report suspected abuse of nursing home residents.

57 The effect of an OIG exclusion from Federal health care programs is that no Federal health care program payment may be made for any items or services: (1) furnished by an excluded individual or entity; or (2) directed or prescribed by an excluded physician. See 42 CFR 1001.1901. An excluded individual or entity that submits a claim for reimbursement to a Federal health care program, or causes such a claim to be submitted, may be subject to a civil money penalty of $10,000 for each item or service furnished during the period that the person or entity was excluded. See 42 U.S.C. 1320a–7a(a)(1)(D). The individual or entity also may be subject to treble damages for the amount claimed for each item or service. See 42 U.S.C. 1320a–7a(a). See also OIG Special Advisory Bulletin “The Effect of Exclusion From Participation in Federal Health Care Programs” (September 1999).

58 Likewise, the facility should establish standards prohibiting the execution of contracts with companies that recently have been convicted of a criminal offense related to health care or that are listed by a Federal agency as debarred, excluded, or otherwise ineligible for participation in Federal health care programs. Prospective employees or contractors that have been officially reinstated into the Medicare and Medicaid programs by the OIG may be considered for employment upon proof of such reinstatement.

59 Among the sources of information on prospective employees are the State registry of nurses’ aides, which provides a list of nurse aides that have successfully completed training and competency evaluations and the National Practitioner Data Bank (NPDB). The NPDB is a database that contains information about physicians subject to medical malpractice payments, sanctions by boards of medical examiners or State licensing boards, adverse clinical privilege actions, and adverse professional society membership actions. Health care entities can have access to this database to seek information about their own medical or clinical staff, as well as prospective employees or physician contractors.

60 The OIG “List of Excluded Individuals/ Entities” provides information to health care providers, patients, and others regarding individuals and entities that are excluded from participation in Medicare, Medicaid, and other Federal health care programs. This report, in both an on-line searchable and downloadable database, can be located on the Internet at http:// www.hhs.gov/oig. In addition, the General Services Administration maintains a monthly listing of debarred contractors, “List of Parties Excluded From Federal Procurement and Nonprocurement Programs,” at http://epls.arnet.gov.

The OIG sanction information is readily available to users in two formats on over 15,000 individuals and entities currently excluded from program participation through action taken by the OIG. The on-line searchable database allows users to obtain information regarding excluded individuals and entities sorted by: (1) the legal bases for exclusions; (2) the types of individuals and entities excluded by the OIG; and (3) the States where excluded individuals reside or entities do business.

61 The introduction of PPS and consolidated billing for Medicare Part B services means that vendors and their subcontractors no longer submit bills directly to Medicare for their services. Instead, the nursing facility will be submitting consolidated bills for certain services provided to residents. Because of the new responsibilities that are imposed on nursing facilities under these reimbursement schemes, the facility may be held responsible if it claims reimbursement for items or services provided by a contractor that has been excluded.

62 The anti-kickback statute provides criminal penalties for individuals and entities that knowingly offer, pay, solicit or receive bribes, kickbacks, or other remuneration in order to induce business reimbursable by Federal health care programs. See 42 U.S.C. 1320a–7b(b). Civil penalties and exclusion from participation in the Federal health care programs may also result from a violation of the prohibition. See 42 U.S.C. 1320a– 7a(a)(5) and 1320a–7(b)(7).

63 The Stark physician self-referral law prohibits a physician from making a referral to an entity with which the physician or any member of the physician’s immediate family has a financial relationship, if the referral is for the furnishing of designated health services. See 42 U.S.C. 1395nn.

64 The OIG has issued several advisory opinions applying the anti-kickback statute to arrangements that affect nursing facilities. The opinions are available on the Internet at http://www.hhs.gov/oig.

65 Contracts between the facility and any entity in which the facility’s medical director has a financial interest may be subject to the Stark law and should be reviewed and approved by legal counsel.

66 In the OIG Special Fraud Alert “Routine Waiver of Part B Co-payments/Deductibles” (May 1991), the OIG describes several reasons why routine waivers of these cost-sharing amounts pose abuse concerns. The Alert sets forth the circumstances under which it may be appropriate to waive these amounts.

67 In the Special Fraud Alert “Fraud and Abuse in Nursing Home Arrangements with Hospices” (March 1998), the OIG sets out the vulnerabilities in nursing home arrangements with hospices. The Alert provides several examples of questionable arrangements between hospices and nursing homes that could inappropriately influence the referral of patients. Examples include the offering of free goods or goods at below fair market value to induce a nursing home to refer patients to the hospice. Other examples demonstrating vulnerability to fraud and abuse include: (1) a hospice paying for room and board in excess of the amounts the nursing home would normally charge or receive from Medicaid; (2) a hospice paying for additional services that should be already included in the room and board payment; and (3) a hospice referring patients to the nursing home in return for the nursing home’s referral to the hospice. While the Special Fraud Alert focused on arrangements with hospices, nursing facilities should adopt policies that prohibit similar questionable arrangements with all health care providers.

68 Providers should establish clear policies governing gift-giving, because such exchanges may be viewed as inducements to influence business decisions. Offering or providing any gift of more than nominal value to any beneficiary may be done with the intent to inappropriately influence health care decisions of the beneficiary or his or her family. Similarly, accepting gifts, hospitality, or entertainment from a source that is in a position to benefit from the referral of business, raises concerns that the gift may influence the employee’s independent judgment. If the provider decides to allow employees to accept gifts or other gratuities below a certain nominal value or in an aggregate amount below an established amount per year, the provider should consider requiring employees to report those gifts.

69 See 42 U.S.C. 1320a–7b(d)(2), which prescribes criminal penalties for knowingly and willfully charging for services provided to a Medicaid patient in excess of the rates established by the State. See also 42 CFR 483.12(d).

70 Under PPS, the payment rates represent payment in full, subject to applicable coinsurance. This includes payment for all costs associated with furnishing covered SNF services to Medicare beneficiaries. It is impermissible for a hospital to pay for SNF services if it were to do so only for those residents who are Medicare beneficiaries discharged from that hospital. However, it would be permissible for a hospital to provide or pay for items or services that are furnished to SNF residents generally, if such payments are made without regard to the payment source for the individual resident. In addition, a hospital and a SNF can enter into a permissible bed reservation agreement. See Provider Reimbursement Manual, Part I, section 2105.3.

71 All physician contracts and agreements should be reviewed to avoid violation of the anti-kickback, self-referral, and other relevant Federal and State laws. The OIG has published safe harbors that define practices not subject to the anti-kickback statute, because such arrangements would be unlikely to result in fraud or abuse. Failure to comply with a safe harbor provision does not make an arrangement per se illegal. Rather, the safe harbors set forth specific conditions that, if fully met, would assure the entities involved of not being prosecuted or sanctioned for the arrangement qualifying for the safe harbor. One such safe harbor applies to personal services contracts. See 42 CFR 1001.952(d).

72 See OIG Special Fraud Alert “Fraud and Abuse in the Provision of Medical Supplies to Nursing Facilities” (August 1995). As well as violating the anti-kickback statute, both the supplier and the nursing facility may be liable for false claims if the medically unnecessary items are billed to Federal health care programs. See also OIG Advisory Opinion 99–2 (February 1999).

73 In addition to raising concerns related to the anti-kickback statute, the unauthorized disclosure of confidential records violates the resident’s rights. See 42 CFR 483.10(e).

74 See OIG Special Fraud Alert “Joint Venture Arrangements” (August 1989); OIG Special Fraud Alert “Fraud and Abuse in the Provision of Services in Nursing Facilities” (May 1996).

75 “Swapping” occurs when a supplier gives a nursing facility discounts on Medicare Part A items and services in return for the referrals of Medicare Part B business. With swapping, there is a risk that suppliers may offer a SNF an excessively low price for items or services reimbursed under PPS in return for the ability to service and bill nursing facility residents with Part B coverage. See OIG Advisory Opinion 99–2 (February 1999).

76 Medical record documentation should support the medical necessity of the services provided as well as the level of service billed.

77 Among the materials useful in documenting the compliance program are employee certifications relating to training and other compliance initiatives, copies of compliance training materials, and hotline logs and any corresponding reports of investigation, outcomes, and employee disciplinary actions. In addition, the facility should keep all relevant correspondence with carriers, fiscal intermediaries, private health insurers, HCFA, and State survey and certification agencies.

78 In addition to prohibiting the falsification and backdating of records, the provider should have clear guidelines, consistent with applicable professional and legal standards, that set out those individuals with authority to make entries in the medical record and the circumstances when late entries may be made in a record.

79 For multi-facility organizations, the OIG encourages coordination with each facility owned by the corporation through the use of a headquarter’s compliance officer, communicating with parallel positions or compliance liaison in each facility or regional office, as appropriate.

80 The OIG believes it is not advisable for the compliance function to be subordinate to the nursing facility’s general counsel, or comptroller or similar financial officer. Free-standing compliance functions help to ensure independent and objective legal reviews and financial analysis of the institution’s compliance efforts and activities. By separating the compliance function from the key management positions of general counsel or chief financial officer (where the size and structure of the nursing facility make this a feasible option), a system of checks and balances is established to more effectively achieve the goals of the compliance program.

81 See note 59.

82 See note 60.

83 The compliance officer may also have to ensure that the criminal backgrounds of employees have been checked depending upon State requirements or nursing facility policy.

84 There are many approaches the compliance officer may enlist to maintain the vitality of the compliance program. Periodic on-site visits of nursing facility operations, bulletins with compliance updates and reminders, distribution of audiotapes or videotapes on different risk areas, lectures at management and employee meetings, and circulation of recent health care articles covering fraud and abuse are some examples of approaches the compliance officer can employ.

85 The compliance committee benefits from having the perspectives of individuals with varying responsibilities in the organization, such as operations, finance, audit, human resources, and clinical management (e.g., the medical director), as well as employees and managers of key operating units. The compliance officer should be an integral member of the committee as well. All committee members should have the requisite seniority and comprehensive experience within their respective departments to implement any necessary changes to policies and procedures as recommended by the committee.

86 A health care provider should expect its compliance committee members and compliance officer to demonstrate high integrity, good judgment, assertiveness, and an approachable demeanor, while eliciting the respect and trust of employees of the nursing facility. These interpersonal skills are as important as the professional experience of each member of the compliance committee.

87 Specific compliance training should complement any “in-service” training sessions that a nursing facility may regularly schedule to provide an ongoing program for the training of employees as required by the Medicare program.

88 Some publications, such as OIG’s special Fraud Alerts, audit and inspection reports, and advisory opinions are readily available from the OIG and can provide a basis for educational courses and programs for appropriate nursing facility employees.

89 Significant variations in the functions and responsibilities of different departments or groups may create the need for training materials that are tailored to compliance concerns associated with particular operations and duties.

90 Certain positions, such as those that involve billing, coding and the submission of reimbursement data, create greater organizational legal exposure, and therefore require specialized training. Those hired to treat residents should undergo specialized training in residents’ rights.

91 Post-training tests can be used to assess the success of training provided and employee comprehension of the nursing facility’s policies and procedures.

92 In addition, where feasible, the OIG recommends that a nursing facility give vendors and outside contractors the opportunity to participate in the nursing facility’s compliance training and educational programs. Such training is particularly important for facilities that rely on agencies to provide temporary direct care staff. The introduction of consolidated billing gives added importance to educating vendors about the facility’s compliance policies and procedures.

93 Currently, the OIG is monitoring a significant number of corporate integrity agreements that require many of these training elements. The OIG usually requires a minimum of one to three hours annually for basic training in compliance areas. Additional training is required for specialty fields such as claims development and billing.

94 In some cases, employees sue their employers under the False Claims Act’s qui tam provisions out of frustration because of the company?s failure to take action when the employee brought a questionable, fraudulent, or abusive situation to the attention of senior corporate officials. Whistle blowers must be protected against retaliation, a concept embodied in the provisions of the False Claims Act. See 31 U.S.C. 3730(h).

95 Nursing facilities also may wish to consider rewarding employees for appropriate use of established reporting systems. After all, the employee who identifies and helps stop an abusive practice can benefit the corporation as much as one who identifies cost-savings measures or increases corporate revenues.

96 The OIG recognizes that it may not be financially feasible for a smaller nursing facility to maintain a telephone hotline dedicated to receiving calls about compliance issues. These companies may want to explore alternative methods, e.g., outsourcing the hotline or establishing a written method of confidential disclosure.

97 In addition, an effective employee exit interview program could be designed to solicit information from departing employees regarding potential misconduct and suspected violations of nursing facility policy and procedures.

98 42 CFR 483.10(b)(7)(iii). Nursing facilities also should post in a prominent area the HHS–OIG Hotline telephone number, 1–800–447–8477 (1– 800–HHS–TIPS).

99 To efficiently and accurately fulfill such an obligation, the nursing facility should create an intake form for all compliance issues identified through reporting mechanisms. The form could include information concerning the date that the potential problem was reported, the results of the internal investigation, and, as appropriate, the corrective action implemented, the disciplinary measures imposed, and any identified overpayments returned.

100 Information obtained over the hotline may provide valuable insight into management practices and operations, whether reported problems are actual or perceived.

101 Even when a nursing facility or group of facilities is owned by a larger corporate entity, the regular auditing and monitoring of the compliance activities of an individual facility must be a key feature in any annual review. Appropriate reports on audit findings should be periodically provided and explained to a parent organization’s senior staff and officers.

102 See also section II.B.2.

103 The OIG recommends that when a compliance program is established in a nursing facility, the compliance officer, with the assistance of department managers, should take a “snapshot” of their operations from a compliance perspective. This assessment can be undertaken by outside consultants or internal staff, provided they have knowledge of health care program requirements. This “snapshot” can serve as a baseline for the compliance officer and other managers to judge the nursing facility’s progress in reducing potential areas of vulnerability.

104 See Provider Reimbursement Manual Part I, section 2836(D)(3), which sets out the MDS correction policy.

105 In addition, when appropriate, as referenced in section II.H.2, below, reports of fraud or systemic problems also should be made to the appropriate governmental authority.

106 Examples of CIA audit protocols can be obtained from the OIG by submitting a request pursuant to the Freedom of Information Act. The OIG recently has entered into CIAs with a number of nursing home providers that may be of particular relevance. In addition, the American Institute of Certified Public Accountants (AICPA) has issued a detailed guide for conducting an independent assessment of a health care provider’s conformance to a CIA. See AICPA Statement of Position 99–1, “Guidance to Practitioners in Conducting and Reporting on an Agreed-Upon Procedures Engagement to Assist in Evaluating Compliance with a Corporate Integrity Agreement” (May 1999).

107 The OIG recognizes that nursing facilities that have limited resources may not be able to use internal reviewers who are not part of line management or hire outside reviewers.

108 Instances of noncompliance must be determined on a case-by-case basis. The existence or amount of a monetary loss to a health care program is not solely determinative of whether the conduct should be investigated and reported to governmental authorities. In fact, there may be instances where there is no readily identifiable monetary loss, but corrective actions are still necessary to protect the integrity of the applicable program and its beneficiaries, e.g., where failure to comply with the facility’s policies and procedures results in inadequate or inappropriate care being furnished to a facility resident.

109 The nursing facility may seek advice from its in-house counsel or an outside law firm to determine the extent of the facility’s liability and to plan the appropriate course of action.

110 Nursing facilities are required to immediately report all alleged incidents of mistreatment, neglect, abuse (including injuries of unknown source), and misappropriation of resident property to both the facility administrator and other officials in accordance with State law. See 42 CFR 483.13(c)(2). This is the appropriate channel for reporting quality of care issues. The OIG also has established a provider self-disclosure protocol that encourages providers voluntarily to report suspected fraud. The concept of voluntary self-disclosure is premised on a recognition that the Government alone cannot protect the integrity of Medicare and other Federal health care programs. Health care providers must be willing to police themselves, correct underlying problems, and work with the Government to resolve these matters. The self-disclosure protocol can be located on the OIG’s web site at: http:// www.hhs.gov/oig.

111 The parameters of a claims review subject to an internal investigation will depend on the circumstances surrounding the issues identified. By limiting the scope of an internal audit to current billing, a nursing facility may fail to discover major problems and deficiencies in operations, and may subject itself to liability.

112 Appropriate Federal and State authorities include the OIG, the Criminal and Civil Divisions of the Department of Justice, the U.S. Attorney in relevant districts, the Federal Bureau of Investigation, and the other investigative arms for the agencies administering the affected Federal or State health care programs, such as the State Survey Agency, the State Medicaid Fraud Control Unit, the Defense Criminal Investigative Service, the Department of Veterans Affairs, and the Office of Personnel Management (which administers the Federal Employee Health Benefits Program). State law may further specify types of misconduct and to whom a facility must report its findings. See note 110.

113 In contrast, to qualify for the “not less than double damages” provision of the False Claims Act, the provider must provide the report to the Government within 30 days after the date when the provider first obtained the information. See 31 U.S.C. 3729(a).

114 Some violations may be so serious that they warrant immediate notification to governmental authorities prior to, or simultaneous with, commencing an internal investigation. By way of example, the OIG believes a provider should report misconduct that: (1) is a clear violation of OIG administrative authorities, or civil or criminal fraud laws; (2) has a significant adverse effect on the quality of care provided to residents (in addition to any other legal obligations regarding quality of care); or (3) indicates evidence of a systemic failure to comply with applicable laws or an existing corporate integrity agreement, regardless of the financial impact on Federal health care programs.

115 The OIG has published criteria setting forth those factors that the OIG takes into consideration in determining whether it is appropriate to exclude a health care provider from program participation pursuant to 42 U.S.C. 1320a–7(b)(7) for violations of various fraud and abuse laws. See 62 FR 67392 (December 24, 1997).

116 A nursing facility should consult with its Medicare fiscal intermediary (FI) and the appropriate sections of the Provider Reimbursement Manual for additional guidance regarding refunds under Medicare Part A. See note 104. The FI may require certain information (e.g., alleged violation or issue causing overpayment, description of the internal investigative process with methodologies used to determine any overpayments, and corrective actions taken, etc.) to be submitted with the return of any overpayments, and that such repayment information be submitted to a specific department or individual. When appropriate, interest may be assessed on the overpayment. See 42 CFR 405.378.

117 See 42 U.S.C. 1320a–7b(a)(3) and 18 U.S.C. 669.
Summary
Background

I. Introduction
II. Compliance Program Elements
A. The Seven Basic Compliance Elements
B. Written Policies and Procedures
C. Designation of a Compliance Officer and a Compliance Committee
D. Conducting Effective Training and Education
E. Developing Effective Lines of Communication
F. Auditing and Monitoring
G. Enforcing Standards Through Well-Publicized Disciplinary Guidelines
H. Responding to Detected Offenses and Developing Corrective Action Initiatives
III. Assessing the Effectiveness of a Compliance Program
IV. Conclusion
Appendix