Draft OIG Compliance Program Guidance for Nursing Facilities

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General

Draft OIG Compliance Program Guidance for Nursing Facilities

AGENCY: Office of Inspector General (OIG), HHS.

ACTION: Notice and comment period.

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SUMMARY: This Federal Register notice seeks the comments of interested

parties on draft compliance guidance developed by the Office of

Inspector General (OIG) for nursing facilities. Through this notice,

the OIG is setting forth its general views on the value and fundamental

principles of nursing facilities' compliance programs, and the specific

elements that nursing facilities should consider when developing and

implementing an effective compliance program.

DATE: To assure consideration, comments must be delivered to the

[[Page 58420]]

address provided below by no later than 5 p.m. on November 29, 1999.

ADDRESSES: Please mail or deliver written comments to the following

address: Office of Inspector General, Department of Health and Human

Services, Attention: OIG-5P-CPG, Room 5246, Cohen Building, 330

Independence Avenue, SW, Washington, DC 20201.

We do not accept comments by facsimile (FAX) transmissions. In

commenting, please refer to file code OIG-5P-CPG. Comments received

timely will be available for public inspection as they are received,

generally beginning approximately 2 weeks after publication a document,

in Room 5541 of the Office of Inspector General at 330 Independence

Avenue SW., Washington, DC 20201 on Monday through Friday of each week

from 8:00 a.m. to 4:30 p.m.

FOR FURTHER INFORMATION CONTACT: Lewis Morris, Office of Counsel to the

Inspector General, (202) 619-2078.

SUPPLEMENTARY INFORMATION:

Background

The creation of compliance program guidance is a major initiative

of the OIG in its effort to engage the private health care community in

combating fraud and abuse. In the last several years, the OIG has

developed and issued compliance program guidance directed at the

following segments of the health care industry: the hospital industry;

home health agencies; clinical laboratories; third-party medical

billing companies; the durable medical equipment, prosthetics,

orthotics and supply industry; and hospices. The development of these

types of compliance program guidance is based on our belief that a

health care provider can use internal controls to more efficiently

monitor adherence to applicable statutes, regulations and program

requirements.

Copies of these compliance program guidances can be found on the

OIG website at http://www.hhs.gov/oig.

Developing Draft Compliance Program Guidance for Nursing Facilities

On December 18, 1998, the OIG published a solicitation notice

seeking information and recommendations for developing formal guidance

for nursing facilities (63 FR 70137). In response to that solicitation

notice, the OIG received 16 comments from various outside sources. In

developing this notice for formal public comment, we have considered

those comments, as well as previous OIG publications, such as other

compliance program guidances and Special Fraud Alerts. In addition, we

have also taken into account past and recent fraud investigations

conducted by the OIG's Office of Investigations and the Department of

Justice, and have consulted with the Health Care Financing

Administration.

This draft guidance for nursing facilities contains seven elements

that the OIG has determined are fundamental to an effective compliance

program:

Implementing written policies;

Designating a compliance officer and compliance committee;

Conducting effective training and education;

Developing effective lines of communication;

Conducting internal monitoring and auditing;

Enforcing standards through well-publicized disciplinary

guidelines; and

Responding promptly to detected offenses and developing

corrective action.

These elements are contained in previous guidances issued by the

OIG. As with previously issued guidances, this draft compliance program

guidance represents the OIG's suggestions on how nursing facilities can

best establish internal controls and prevent fraudulent activities. The

contents of this guidance should not be viewed as mandatory or as an

exclusive discussion of the advisable elements of a compliance program;

the document is intended to present voluntary guidance to the industry

and not represent binding standards for nursing facilities.

Public Input and Comment in Developing Final Guidance

In an effort to ensure that all parties have an opportunity to

provide input into the OIG's guidance, we are publishing this guidance

in draft form. We welcome any comments from interested parties

regarding this document. The OIG will consider all comments that are

received within the above-cited time frame, incorporate any specific

recommendations as appropriate, and prepare a final version of the

guidance thereafter for publication in the Federal Register.

Draft Compliance Program Guidance for Nursing Facilities

I. INTRODUCTION

The Office of Inspector General (OIG) of the Department of Health

and Human Services (DHHS) continues in its efforts to promote

voluntarily implemented compliance programs for the health care

industry.\1\ This compliance guidance is intended to assist nursing

facilities \2\ develop and implement internal controls and procedures

that promote adherence to applicable statutes and regulations of the

Federal health care programs \3\ and private insurance program

requirements. Compliance programs strengthen Government efforts to

prevent and reduce fraud and abuse, as well as further the mission of

all nursing facilities to provide quality care to their residents.

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\1\ Currently, the Office of Inspector General has issued

compliance program guidances for the following six industry sectors:

hospitals, clinical laboratories, home health agencies, durable

medical equipment suppliers, third-party medical billing companies

and hospices. Over the next year, the OIG plans to issue compliance

guidances for Medicare+Choice organizations offering coordinated

care plans, ambulance companies 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) organization 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 facilities.

\3\ The term ``Federal health care programs,'' as defined in 42

U.S.C. 1320a-7b(f), 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). In this

document, the term ``Federal health care program requirements''

refers to the statutes, regulations and other rules governing

Medicare, Medicaid, and all other Federal health care programs.

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Through this document, the OIG provides its views on the

fundamental elements of nursing facility compliance programs, as well

as the principles that each nursing facility should consider when

developing and implementing an effective compliance program. While this

document presents basic procedural and structural guidance for

designing a compliance program, it is not in and of itself a compliance

program. Rather, it is a set of guidelines that nursing facilities

should consider when developing and implementing a compliance program.

Implementing an effective compliance program in a nursing facility

may require a significant commitment of time and resources by all parts

of the organization. However, superficial efforts or programs that are

hastily constructed and implemented without a long-term commitment to a

culture of compliance will likely be ineffective and may expose the

nursing facility to greater liability than if it had no

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program at all.\4\ Although an effective compliance program may require

a reallocation of existing resources, the long-term benefits of

establishing a compliance program significantly outweigh the initial

costs. In short, compliance measures are an investment that advances

the goals of the nursing facility, the solvency of the Federal health

care programs, and the quality of care provided to the nursing home

resident.

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\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 International Inc. Derivative

Litigation, 698 A.2d 959 (Ct. Chanc. Del. 1996).

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In a continuing effort to collaborate closely with health care

providers and the private sector, the OIG placed a notice in the

Federal Register soliciting comments and recommendations on what should

be included in this compliance program guidance.\5\ In addition to

considering these comments in drafting this guidance, we reviewed

previous OIG publications, including OIG Special Fraud Alerts and OIG

Medicare Advisory Bulletins, as well as reports issued by OIG's Office

of Audit Services (OAS) and Office of Evaluation and Inspections (OEI)

affecting the nursing home industry.\6\ In addition, we relied on the

experience gained from fraud investigations of nursing home operators

conducted by OIG's Office of Investigations, the Department of Justice,

and the Medicaid Fraud Control Units.

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\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 inquiries 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.

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A. Benefits of a Compliance Program

The OIG believes a comprehensive compliance program provides a

mechanism that brings the public and private sectors together to reach

mutual goals of reducing fraud and abuse, improving operational

functions, improving the quality of health care services, and reducing

the cost of health care. Attaining these goals provides positive

results to the nursing facility, the Government, and individual

citizens alike. In addition to fulfilling its legal duty to ensure that

it is not submitting false or inaccurate claims to Government and

private payers, a nursing facility may gain numerous additional

benefits by voluntarily implementing a compliance program. The benefits

may include:

The formulation of effective internal controls to assure

compliance with statutes, regulations and rules;

A concrete demonstration to employees and the community at

large of the nursing facility's commitment to responsible corporate

conduct;

The ability to obtain an accurate assessment of employee

and contractor behavior;

An increased likelihood of identifying and preventing

unlawful and unethical behavior;

The ability to quickly react to employees' operational

compliance concerns and effectively target resources to address those

concerns;

Improvement of the quality, efficiency, and consistency of

providing services;

A mechanism to encourage employees to report potential

problems and allow for appropriate internal inquiry and corrective

action;

A centralized source for distributing information on

health care statutes, regulations and other program directives;\7\

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\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.

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A mechanism to improve internal communications;

Procedures that allow the prompt, thorough investigation

of alleged misconduct; and

Through early detection and reporting, minimizing loss to

the Government from false claims, and thereby reducing the nursing

facility's exposure to civil damages and penalties, criminal sanctions,

and administrative remedies.\8\

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\8\ The OIG, for example, 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.

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The OIG recognizes that the implementation of a compliance program

may not entirely eliminate fraud and abuse from the operations of a

nursing facility. However, a sincere effort by the nursing facility to

comply with applicable statutes and regulations as well as Government

and private payer health care program requirements, through the

establishment of a compliance program, significantly reduces the risk

of unlawful or improper conduct.

B. Application of Compliance Program Guidance

Given the diversity within the long-term care industry, there is no

single ``best'' nursing facility compliance program. The OIG recognizes

the complexities of this industry and is sensitive to the differences

among large national chains, regional multi-facility operators, and

small independent homes. However, the elements of this guidance can be

used by all nursing facilities to establish a compliance program,

regardless of size (in terms of employees and gross revenue), number of

locations, or corporate structure. Similarly, a corporation that

provides long term care as part of an integrated health care delivery

system may incorporate these elements into its structure.\9\

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\9\ For example, this would include providers that own

hospitals, skilled nursing facilities, long-term care facilities and

hospices.

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We recognize that some nursing facilities may not be able to adopt

certain elements to the same degree that others with more extensive

resources may achieve. At the end of several sections of this document,

the OIG has offered suggestions to assist these smaller nursing

facility providers in implementing the principles expressed in this

guidance. Regardless of size, structure or available resources, the OIG

recommends that every nursing facility should strive to accomplish the

objectives and principles underlying all of the compliance polices and

procedures in this guidance.

By no means should the contents of this guidance be viewed as an

exclusive or complete discussion of the advisable elements of a

compliance program. On the contrary, the OIG strongly encourages

nursing facilities to develop and implement compliance elements that

uniquely address the areas of potential problems, common concerns, or

high risk areas that apply to their own facilities. Furthermore, this

guidance may be modified and expanded as more information and knowledge

is obtained by the OIG, and as changes in the statutes, regulations and

rules of the Federal, State, and private health plans occur. New

[[Page 58422]]

compliance practices also may be incorporated into this guidance if the

OIG discovers enhancements that promote effective compliance.

II. Compliance Program Elements

A. The Seven Basic Compliance Elements

The OIG believes that every effective compliance program must begin

with a formal commitment10 by the nursing facility's

governing body to address all of the applicable elements listed below,

which are based on the seven steps of the Federal Sentencing

Guidelines.11 The OIG recognizes that full implementation of

all elements may not be immediately feasible for all nursing

facilities. However, as a first step, a good faith and meaningful

commitment on the part of nursing facility management will

substantially contribute to the program's successful implementation. As

the compliance program is effectuated, that commitment should cascade

down through management to every employee and contractor of the nursing

facility.

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\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 of the compliance program.

\11\ See United States Sentencing Commission Guidelines,

Guidelines Manual, 8 A1.2, 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.

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At a minimum, a comprehensive compliance program should include the

following seven elements:

(1) The development and distribution of written standards of

conduct, as well as written policies, procedures and protocols that

promote the nursing facility's commitment to compliance (e.g., by

including adherence to the compliance program as an element in

evaluating managers and employees) and address specific areas of

potential fraud and abuse, such as claims development and submission

processes, quality of care issues facing residents, and financial

arrangements with physicians and outside contractors that may affect

the health care provided to beneficiaries;

(2) The designation of a compliance officer and other appropriate

bodies (e.g., a corporate compliance committee), charged with the

responsibility for developing, operating and monitoring the compliance

program, and who reports directly to the owner(s), governing body and/

or CEO; 12

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\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 the differences in the sizes and structures of nursing

facilities may result in differences in the way in which compliance

programs function.

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(3) The development and implementation of regular, effective

education and training programs for all affected employees;

13

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\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.

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(4) The creation and maintenance of an effective line of

communication between the compliance officer and all employees,

including a process, such as a hotline or other reporting system, to

receive complaints, and the adoption of procedures to protect the

anonymity of complainants and to protect whistle blowers from

retaliation;

(5) The use of audits and/or other risk evaluation techniques to

monitor compliance, identify problem areas, and assist in the reduction

of identified problems; 14

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\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 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.

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(6) The development of policies and procedures addressing the non-

employment or retention of excluded individuals or entities; and the

enforcement of appropriate disciplinary action against employees or

contractors who have violated corporate or compliance policies and

procedures, applicable statutes, regulations, or Federal, State, or

private payor health care program requirements; and

(7) The development of policies and procedures with respect to the

investigation of identified systemic problems, which include direction

regarding the prompt and proper response to detected offenses, such as

the initiation of appropriate corrective action, repayments and

preventive measures.

B. Written Policies and Procedures

Every compliance program should develop and distribute written

compliance standards, procedures and practices that guide the nursing

facility and the conduct of its employees throughout day-to-day

operations. These policies and procedures should be developed under the

direction and supervision of the compliance officer, the compliance

committee, and operational managers. At a minimum, they should be

provided to all employees who are affected by these policies, as well

as physicians, suppliers, nursing facility agents, and contractors who

may affect or be affected by the nursing facility's billing and care

functions.15 In addition to general corporate policies and

procedures, an effective compliance program should include specific

policies and procedures for the different clinical, financial, and

administrative functions of a nursing facility.

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\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 Commission Guidelines, Guidelines

Manual, 8A1.2, Application Note 3(d).

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1. Code of Conduct

While a clear statement of policies and procedures is at the core

of a compliance program, the OIG recommends that nursing facilities

start the process with the development of a corporate statement of

principles that will guide the operations of the provider. One common

expression of this statement of principles is the code of

conduct.16

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\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.

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The code should function in the same fashion as a constitution,

i.e., as a foundational document that details the fundamental

principles, values, and framework for action within an organization.

The code of conduct for a nursing facility should articulate the

organization's expectations of employees, as well as summarize the

basic legal principles under which the organization must operate.

Unlike the more detailed policies and procedures, the code of conduct

should be brief, easily readable and cover general principles

applicable to all employees.

The code of conduct should be distributed to, and comprehensible

by, all affected employees.17 Depending on

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the facility's work force, this may mean that the code should be

translated into other languages when necessary and written at

appropriate reading levels. Further, any employee handbook delineating

the standards of conduct should be regularly updated to reflect

developments in applicable Government and private health care program

requirements. Finally, the OIG recommends that current employees, as

well as those newly hired, should certify that they have received and

read the organization's code of conduct. These certifications should be

updated on a regular basis, possibly as part of an annual training

program, retained in the employee's personnel file and made available

for review.18

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\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

facility's efforts to comply with Federal health care program

requirements. See section II.F.

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The OIG believes that all nursing facilities should operate under

the guidance of a code of conduct. While the OIG recognizes that some

nursing facilities may not have the resources to establish a

comprehensive compliance program, we believe that every nursing

facility can design a program that addresses the seven elements set out

in this guidance, albeit at different levels of sophistication and

complexity. In its most fundamental form, a facility's code of conduct

is a basic set of standards that articulate the organization's

philosophy, summarizes basic legal principles, and teaches employees

how to respond to practices that may violate the code of conduct and

standards. These standards should be posted and distributed to every

employee. Further, even a small nursing facility should obtain written

attestation from its employees to confirm their understanding and

commitment to the nursing facility's code of conduct.

2. Specific Risk Areas

As part of their commitment to a compliance program, nursing

facilities should prepare a comprehensive set of written policies and

procedures that are in place to prevent fraud and abuse in facility

operations and to ensure the appropriate care of their residents. These

policies and procedures should educate and alert all affected managers

and employees of the Federal health care program requirements, the

consequences of noncompliance, and the specific procedures that nursing

facility employees should follow to report problems, to ensure

compliance, and to rectify any prior noncompliance.

The OIG recognizes that most facilities have in place policies and

procedures to prevent fraud and abuse in their institutions. These

providers may not need to develop a new, comprehensive set of policies

as part of their compliance program if existing policies encompass the

provider's operations and relevant rules. However, the nursing home

industry is subject to numerous Federal and State statutes, rules,

regulations and manual instructions.19 Because these program

requirements are frequently modified, the OIG recommends that all

nursing facilities evaluate their current compliance policies and

procedures by conducting a baseline assessment of risk areas, as well

as subsequent reevaluations.20 The OIG also recommends that

these internal compliance reviews be undertaken on a regular basis to

ensure compliance with current program requirements.

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\19\ See http://www.hcfa.gov for 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.

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To assist nursing facilities in performing this internal

assessment, the OIG has developed a list of potential risk areas

affecting nursing facility providers. These risk areas include quality

of care and residents' rights, employee screening, vendor

relationships, billing and cost reporting, and recordkeeping and

documentation. This list of risk areas is not exhaustive, nor all

encompassing. Rather, it should be viewed as a starting point for an

internal review of potential vulnerabilities within the nursing

facility.21 The objective of this assessment should be to

ensure that the employees, managers and directors are aware of these

risk areas and that steps are taken to minimize, to the extent

possible, the types of billing and quality of care problems identified.

While there are many ways to accomplish this objective, the OIG has

observed that comprehensive, clear written standards, policies and

procedures that are communicated to all appropriate employees and

contractors are the first step in an effective compliance program.

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\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.

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The OIG believes that sound operating compliance policies are

essential to all nursing facilities, regardless of size and capability.

If a lack of resources to develop such policies is genuinely an issue,

the OIG recommends that those nursing facilities focus first on those

risk areas most likely to arise in their business operations. At a

minimum, resources should be directed to analyze the results of annual

surveys,22 and to verify that the facility has effectively

addressed any deficiencies cited by the surveyors. An effective and

low-cost means to accomplish this is through the use of the facility's

Quality Assessment and Assurance Committee. The committee should

consist of facility staff members, including the Director of Nursing

and the facility physician. On a periodic basis, the committee should

meet to identify compliance issues affecting the quality of care

provided to the residents and to develop and implement appropriate

corrective actions. The time commitment required for this collaborative

effort will vary according to the magnitude of the facility's quality

assessment and assurance issues.

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\22\ State and local agencies enter into agreements with DHHS

under which they survey and make recommendations regarding whether

providers meet the Medicare conditions of participation or other

requirements for SNFs and NFs (See 42 CFR 488.10).

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Creating a resource manual from publicly available information may

be a cost-effective approach for developing policies and procedures to

improve the quality of each resident's life. For example, a simple

binder that contains a facility's written policies and procedures, the

most recent survey findings and plan of correction, relevant HCFA

instructions and bulletins, and summaries of key OIG documents (e.g.,

Special Fraud Alerts, Advisory Bulletins, inspection and audit reports)

can be regularly updated and made accessible to all employees.

Particularly in the case of more technical materials, it may be

advisable to provide summaries in the handbook and make the source

documents available upon request. If individualized copies of this

handbook are not made available to all employees, then a reference copy

should be available in a readily accessible location, as well as from

the designated compliance officer.

a. Quality of Care. The OIG believes that a nursing facility's

compliance policies should start with a statement that affirms the

facility's commitment to

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providing the care necessary to attain or maintain the resident's

``highest practicable physical, mental and psychosocial well-being.''

\23\ To achieve the goal of providing quality care, nursing facilities

should continually measure their performance against comprehensive

standards, which at a minimum should include the Medicare conditions of

participation.\24\ In addition to these regulations, a facility should

develop its own standards of quality care and the mechanisms for

evaluating its performance.

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\23\ 42 CFR 483.25. See OIG report OEI-02-98-00331 ``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 conditions

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.

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As noted above, current and past surveys are a good place to begin

to identify specific risk areas and regulatory vulnerabilities at the

individual facility. Any deficiencies discovered by annual State agency

or Federal validation surveys may reflect noncompliance with the

program regulations and can be the basis for enforcement actions.\25\

Those deficiencies identified by the State health agency survey

instrument should be addressed and, where appropriate, the corrective

action should be incorporated into the facility's policies and

procedures as well as reflected in its training and educational

programs. In addition to responding promptly to deficiencies identified

through the survey and certification process, nursing facilities should

take proactive measures to identify, anticipate and respond to quality

of care risk areas identified by the nursing home ombudsman or other

sources.

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\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 sores, urinary incontinence,

hydration; and failing to properly feed residents.

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As noted throughout this guidance, each provider must assess its

vulnerability to particular abusive practices in light of its unique

circumstances. However, the OIG, HCFA, the Department of Justice, and

State enforcement agencies have substantial experience in identifying

quality of care risk areas. Some of the special areas of concern

include:

Absence of a comprehensive, accurate assessment of each

resident's functional capacity and a comprehensive care plan that

includes measurable objectives to meet the resident's medical, mental

and psychosocial needs;\26\

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\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 contra-in-di-cated. The Patient

Self-Determination Act (P.L. 103-413) requires health care

institutions to educate patients about advance directives and to

document their decision on life-sustaining treatments.

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Inappropriate or insufficient treatment and services to

address residents' clinical conditions, including pressure ulcers,

dehydration, malnutrition, incontinence of the bladder, and mental or

psychosocial problems; \27\

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\27\ HCFA has created a repository of best practice guidelines

for the care of residents at risk of pressure ulcers, dehydration

and malnutrition. In addition, the Food and Nutrition Board of the

National Research Council, National Academy of Sciences, has

established recommended dietary allowances.

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Failure to properly prescribe, administer and monitor drug

medication usage, including psychotropic and anti-depressant

medications; \28\

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\28\ 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-06-96-0008, OEI-06-96-00082, ``Prescription Drug Use in

Nursing Homes.'' 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.

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Inadequate or insufficiently trained staff to provide

medical, nursing, and related services; \29\

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\29\ For example, Federal regulations require that the medical

care of each resident should 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, 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 adopt its own minimum

``hours per patient'' staffing standards in any case. At the heart

of many quality of care deficiencies is a lack of adequate staff

needed to provide basic nursing services.

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Failure to provide appropriate therapy services; \30\

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\30\ 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 lead to

inappropriate care. 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.

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Failure to provide appropriate services to assist

residents with activities of daily living (e.g., feeding, dressing,

bathing, etc.); and

Failure to report incidents of mistreatment, neglect, or

abuse to the administrator of the facility and other officials as

required by law.\31\

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\31\ 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.

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As noted previously, a nursing facility that has a history of

serious deficiencies should use those survey results as a starting

point for implementing a comprehensive plan to improve its quality of

care. Effectively addressing these risk areas with written policies and

procedures, which are then implemented through effective training

programs, can most directly improve the quality of the nursing home

residents's life.

b. Residents' Rights. The Budget Reconciliation Act (OBRA) of 1987,

Public Law 100-203, established a number of requirements to protect and

promote the rights of each resident.\32\ In addition, many States have

adopted specific lists of residents' rights.\33\ The nursing facility's

policies should address the residents' right to a dignified existence

that promotes freedom of choice, self-determination, and reasonable

accommodation of individual needs. To protect the rights of each

resident, the OIG recommends that a provider address the following risk

areas as part of its compliance policies:

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\32\ See generally, 42 U.S.C. 1395i-3 and 42 CFR part 483.

\33\ 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 a pressure and hygiene, lack of rehabilitation, the inappropriate

use of restraints, abuse and neglect, problems with admissions and

eviction, and the exercise of personal rights.

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Discriminatory admission or improper denial of access to

care; \34\

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\34\ Nursing facilities should offer care to all patients who

are eligible in accordance with Federal and State laws governing

admissions (See 42 CFR 483.12(d)). The provider also should 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-

99-00400 ``Early Effects of the Prospective Payment System on Access

to Skilled Nursing Facilities.''

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[[Page 58425]]

Verbal, mental or physical abuse, corporal punishment and

involuntary seclusion; \35\

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\35\ 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 is informed of incidents of abuse and an

investigation is conducted within 5 days of the incident (See 42 CFR

483.13(c)(4)).

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Inappropriate use of physical or chemical restraints; \36\

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\36\ See OIG Report OEI-01-91-00840 ``Minimizing Restraints in

Nursing Homes: A Guide to Action.''

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Failure to ensure that residents have access to their

personal records upon request and that the privacy and confidentiality

of those records are protected; \37\

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\37\ It is a violation of the Medicare conditions of

participation to make unauthorized disclosures from the resident's

medical records (See 42 CFR 483.10(e)). The facility should also

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.

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Denial of a resident's right to participate in his or her

care and treatment; \38\

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\38\ 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 treatment decisions, including

the right to refuse treatment, unless adjudged incompetent or

incapacitated (See 42 CFR 483.10(d)).

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Failure to safeguard residents' financial affairs.\39\

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\39\ 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 should receive a full and complete

accounting of personal funds held by the facility (See 42 CFR 483.10

(c)). If a misappropriation of a resident's property is uncovered,

the facility administrator should be notified immediately and an

investigation conducted. Finally, the provider should take measures

to ensure that personal funds have not been used to pay for items or

services paid for by Medicare or Medicaid.

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c. Billing and Cost Reporting. Abusive and fraudulent billing

practices in the Federal health care programs drain the public fisc of

the funds needed to provide program beneficiaries medically necessary

items and services. Over the last twenty years, the OIG has identified

patterns of improper and fraudulent activities that cover the spectrum

of health care services and have cost taxpayers billions of

dollars.\40\ These fraudulent billing practices, as well as abuses in

other risk areas that are described in these compliance program

guidances, have resulted in criminal, civil and administrative

enforcement actions. Because the consequences of these enforcement

actions can have a profound adverse impact on a provider, the

identification of risk areas associated with billing and cost reporting

should be a major part of a nursing facility's compliance program.

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\40\ 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 FY 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.

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The introduction of a prospective payments system (PPS) for

Medicare SNFs and implementation of consolidated billing create

additional issues to be addressed when designing billing and cost

reporting compliance policies and procedures.\41\ In the following

discussion of billing risk areas, the OIG has attempted to identify

issues that pose concerns under the current systems of reimbursement,

the transition period to consolidated billing, as well as anticipate

potential compliance issues stemming from these program changes. As is

the case with all aspects of compliance, the nursing facility must

continually reassess its billing procedures and policies to ensure that

unanticipated problems are promptly identified and corrected. Listed

below are some of the reimbursement risk areas a nursing facility

should consider addressing as part of its written compliance policies

and procedures:

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\41\ The Balanced Budget Act of 1997 (BBA), Public Law 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 amount based on the medical condition and needs of the

resident, as reflected in the Resource Utilization Group (RUG) code

assigned to that resident. Other Part B services will continue to be

reimbursed separately to the providers of such services pending

implementation of a new consolidated billing system.

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Billing for items or services not rendered or provided as

claimed; \42\

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\42\ 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 supporting documentation required, to

receive payment.

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Submitting claims for equipment, medical supplies and

services that are medically unnecessary; \43\

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\43\ 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. 1395i(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''). 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.

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Submitting claims to Medicare Part A for residents who are

not eligible for Part A coverage; \44\

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\44\ Medicare Part A benefits in skilled nursing facilities are

limited to beneficiaries who require services rendered by technical

or professional personnel in a skilled nursing setting (See 42 CFR

409.30). Knowingly misrepresenting the nature or level of services

provided to a Medicare beneficiary to circumvent the program's

limitation is fraudulent.

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Duplicate billing; \45\

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\45\ 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. When

Medicare Part B implements 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.

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Failing to identify and refund credit balances; \46\

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\46\ 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 report 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.

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[[Page 58426]]

Submitting claims for items or services not ordered;\47\

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\47\ Billing for services or items not ordered involves seeking

reimbursement for services provided but not ordered by the treating

physician or other authorized person.

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Knowingly billing for inadequate or substandard care;\48\

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\48\ See discussion on quality of care standards in nursing

facilities in section II.B.2.a above and the accompanying notes.

Knowingly billing for inadequate or substandard care may create

liability under administrative, civil and criminal law.

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Providing misleading information about a resident's

medical condition on the MDS or otherwise providing inaccurate

information used to determine the RUG assigned to the resident;

Upcoding the level of service provided; \49\

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\49\ 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.

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Billing for individual items or services when they either

are included in the facility's per diem rate or are of the type of item

or service that must be billed as a unit and may not be unbundled;\50\

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\50\ 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 all treatment occurred during one visit.

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Billing residents for items or services that are included

in the per diem rate or otherwise covered by the third-party payor;

Forging physician or beneficiary signatures on documents

used to verify that services were ordered and/or provided;\51\

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\51\ 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.

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Failing to maintain sufficient documentation to establish

that the services were ordered and/or performed; and

False cost reports.\52\

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\52\ 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 do not

exist, inflated the number of residents served, included non-

reimbursable costs with nursing home-related expenses,

inappropriately shifted costs to cost centers that are below the

reimbursement cap, and shifted non-Medicare related costs to

Medicare cost centers.

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The OIG recommends that a nursing facility, through its policies

and procedures, take all reasonable steps to ensure compliance with the

Federal health care programs when submitting information that affects

reimbursement decisions. The risk areas associated with billing and

cost reporting have been among the most frequent subjects of

investigations and audits by the OIG. In addition to facing criminal

sanctions and significant monetary penalties, providers that have

failed to adequately ensure the accuracy of their claims and cost

report submissions can be excluded from program participation, or in

lieu of exclusion, be required by the OIG to execute a corporate

integrity agreement (CIA).\53\

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\53\ 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.

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d. Employee Screening. Nursing facilities are required by Federal,

and in some cases State, law to investigate the background of certain

employees. Nursing facilities should conduct a reasonable and prudent

background investigation and reference check before hiring those

employees who have access to patients or their possessions, or who have

discretionary authority to make decisions that may involve compliance

with the law. The employment application should specifically require

the applicant to disclose any criminal conviction, as defined by 42

U.S.C. 1320a-7; or exclusion from participation in the Federal health

care programs.

This pre-employment screening is critical to ensuring the integrity

of the facility's work force and safeguarding the welfare of its

residents. Because providers of nursing care have frequent, relatively

unsupervised access to vulnerable people and their property, a nursing

facility also should seriously consider whether to employ individuals

who have been convicted of crimes of neglect, violence, theft or

dishonesty, or financial misconduct.\54\

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\54\ 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.

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Nursing facility policies should prohibit the continued employment

of individuals who have been convicted of a criminal offense related to

health care or who are debarred, excluded, or otherwise become

ineligible for participation in Federal health care programs.\55\ In

addition, if the facility has notice that an employee or contractor is

charged with a criminal offense related to any Federal health care

program, or is proposed for exclusion during his or her employment or

contract, the facility shall take all appropriate actions to ensure

that the responsibilities of that employee or contractor do not

adversely affect the quality of care rendered to any patient or

resident, or the accuracy of any claims submitted to any Federal health

care program.\56\ If resolution of the matter results in conviction,

debarment, or exclusion, the nursing facility should terminate its

employment or other contract arrangement with the individual.

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\55\ 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 may also be subject to

treble damages for the amount claimed for each item or service (See

42 U.S.C. 1320a-7a(a)). Also see OIG Special Advisory Bulletin ``The

Effect of Exclusion From Participation in Federal Health Care

Programs'' (September 1999).

\56\ Likewise, the facility should establish standards

prohibiting the execution of contracts with companies that have been

recently 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.

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In order to ensure that nursing facilities undertake background

checks of all employees to the extent required by law, the OIG

recommends that the following measures be incorporated into the

compliance program's policies and procedures:

Investigate the background of employees by checking with

all

[[Page 58427]]

applicable licensing and certification authorities to verify that

requisite licenses and certifications are in order;\57\

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\57\ Among the sources of information on prospective employees

are the State registry of nurse's aides, which provides a list of

nurse aides that have successfully completed training and competency

evaluations and the National Practitioner Data Bank. The Data Bank

is a data base that contains information about 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 data base to seek information about their own

medical or clinical staff, as well as prospective employees or

physician contractors.

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Require all potential employees to certify that they have

not been convicted of an offense that would preclude employment in a

nursing facility and that they are not excluded from participation in

the Federal health care programs;

Check available public sources, including the OIG's List

of Excluded Individuals/Entities and the GSA's list of debarred

contractors, to verify that employees are not excluded from

participating in the Federal health care programs;\58\ and

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\58\ 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 and 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 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 www.arnet.gov/epls.

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.

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Periodically check the OIG and GSA web sites to verify the

participation/exclusion status of independent contractors and retain on

file the results of that query.\59\

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\59\ 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.

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Regardless of the size or resources of the nursing facility,

employee screening is a critical component of compliance policies and

procedures. Nursing facilities, like all corporations, must act through

their employees and are held accountable for their actions. One of the

best ways to ensure that the organization will act in conformance with

the law is to hire employees and contractors who can be trusted to

embrace a culture of compliance. While the resources required to check

the OIG List of Excluded Individuals/Entities are minimal, the absence

of an accessible centralized site for criminal background checks may

result in inefficiencies and expense. While large providers may elect

to outsource the screening process, this may not be a realistic option

for smaller nursing facilities. Nevertheless, the OIG recommends that

all nursing facilities implement a policy to undertake background

checks of all employees.

e. Kickbacks, Inducements and Self-Referrals. A nursing facility

should have policies and procedures to ensure compliance with the anti-

kickback statute,\60\ the Stark physician self-referral law \61\ and

other relevant Federal and State laws by providing guidance in

situations that could lead to a violation of these laws.\62\ In

particular, arrangements with hospitals, hospices, physicians and

vendors are vulnerable to abuse. For example, in the case of hospitals,

physicians and hospital staff exert influence over the patient and can

influence the choice of a nursing facility. In addition, his or her

roles as medical director and/or attending physician, a physician

frequently can influence the utilization of ancillary services.\63\

Moreover, by contrast, a nursing facility operator can influence the

selection of which hospices will provide hospice services and which

vendors will deliver equipment and services to the facility's

residents. In addition to developing policies to address arrangements

with other health care providers and suppliers, nursing facilities also

should implement measures to avoid offering inappropriate inducements

to residents. Possible risk areas that should be addressed in the

policies and procedures include:

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\60\ The anti-kickback statute provides criminal penalties for

individuals and entities that knowingly offer, pay, solicit or

receive bribes or 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)).

\61\ The Stark physician self-referral law, 42 U.S.C. 1395nn,

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.

\62\ The OIG has issued several advisory opinions applying the

Federal statutes to arrangements that affect nursing facilities. The

opinions are available on the Internet at http://www.hhs.gov/oig.

\63\ 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.

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Routinely waiving coinsurance or deductible amounts

without a good faith determination that the resident is in financial

need, or absent reasonable efforts to collect the cost-sharing

amount;\64\

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\64\ 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.

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Agreements between the facility and a hospital, home

health agency, or hospice that involve the referral or transfer of any

resident to or by the nursing home;\65\

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\65\ 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; (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.

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Soliciting, accepting or offering any gift or gratuity of

more than nominal value to or from residents, potential referral

sources, and other individuals and entities with which the nursing

facility has a business relationship; 66

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\66\ 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.

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Conditioning admission or continued stay at a facility on

a third-party guarantee of payment, or soliciting payment for services

covered by Medicaid, in addition to any amount

[[Page 58428]]

required to be paid under the State Medicaid plan; 67

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\67\ 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).

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Arrangements between a nursing facility and a hospital

under which the facility will only accept a Medicare beneficiary on the

condition that the hospital pays the facility an amount over and above

what the facility would receive through PPS; 68

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\68\ 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 HCFA Provider

Reimbursement Manual, Part I, section 2105.3).

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Financial arrangements with physicians, including the

facility's medical director; 69

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\69\ 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)).

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Arrangements with vendors that result in the nursing

facility receiving non-covered items (such as disposable adult diapers)

at below market prices or no charge, provided the facility orders

Medicare-reimbursed products; 70

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\70\ 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 No.99-2 (February 1999).

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Soliciting or receiving items of value in exchange for

providing the supplier access to residents' medical records and other

information needed to bill Medicare; 71

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\77\ 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 10(e)).

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Joint ventures with entities supplying goods or services;

72 and

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\72\ 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).

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Swapping.73

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\73\ ``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 (March 1999).

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In order to keep current with this area of the law, a nursing

facility should obtain copies of all relevant OIG and HCFA regulations,

Special Fraud Alerts, and Advisory Opinions that address the

application of the anti-kickback and Stark self-referral laws to ensure

that the policies reflect current positions and opinions. Further,

nursing facility policies should provide that all nursing facility

contracts and arrangements with actual or potential sources of

referrals are reviewed by counsel and comply with applicable statutes

and requirements.

3. Retention of Records

Nursing facilities that implement a compliance program should

provide for the development and implementation of a records retention

system. This system should establish policies and procedures regarding

the creation, distribution, retention, and destruction of documents. In

designing a records systems, privacy concerns and regulatory

requirements should be taken into consideration. In addition to

maintaining appropriate and thorough medical records on each resident,

the OIG recommends that the system should include the following types

of documents:

All records and documentation (e.g., billing and claims

documentation) required for participation in Federal State, and private

health care programs, including the resident assessment instrument, the

comprehensive plan of care and all corrective actions taken in response

to surveys;

All records and documentation required by private payors

and other governmental institutions;

All records, documentation, and audit data that support

and explain cost reports and other financial activity, including any

internal or external compliance monitoring activities; and

All records necessary to demonstrate the integrity of the

nursing facility compliance process and to confirm the effectiveness of

the program.74

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\74\ 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 between carriers,

fiscal intermediaries, private payor insurers, HCFA, and State

survey and certification agencies.

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While conducting its compliance activities, as well as its daily

operations, a nursing facility should document its efforts to comply

with applicable statutes, regulations, and Federal health care program

requirements. For example, where a nursing facility requests advice

from a Government agency (including a Medicare fiscal intermediary or

carrier) charged with administering a Federal health care program, the

nursing facility should document and retain a record of the request and

any written or oral response. This step is extremely important if the

nursing facility intends to rely on that response to guide it in future

decisions, actions, or claim reimbursement requests or appeals. A log

of oral inquiries between the nursing facility and third parties will

help the organization document its attempts at compliance. In addition,

these records may become relevant in a subsequent investigation to the

issue of whether the facility's reliance was ``reasonable'' and whether

it exercised due diligence in developing procedures and practices to

implement the advice.

In short, all nursing facilities, regardless of size, must retain

appropriate documentation. Further, the OIG recommends that the nursing

facility:

Secure this information in a safe place;

Maintain hard copies of all electronic or database

documentation; and

Limit access to such documentation to avoid accidental or

intentional fabrication or destruction of records.75

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\75\ 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 the

circumstances when late entries may be made in a record.

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As the Government increases its reliance on electronic data

interchange to conduct business and gather information more quickly and

efficiently, it is important that the nursing facility develops the

capacity to ensure that all informational systems maintained by the

facility are in working order, secured, and capable of accessing

Federal and State databases.

4. Compliance as an Element of Employee Performance

Compliance programs should require that the promotion of, and

adherence to, the elements of the compliance program be a factor in

evaluating the performance of all employees.

[[Page 58429]]

Employees should be periodically trained in new compliance policies and

procedures. In addition, policies should require that managers,

especially those involved in the direct care of residents and in claims

development and submission:

Discuss with all supervised employees and relevant

contractors the compliance policies and legal requirements applicable

to their function;

Inform all supervised personnel that strict compliance

with these policies and procedures is a condition of employment; and

Disclose to all supervised personnel that the nursing

facility will take disciplinary action up to and including termination

for violation of these policies or requirements.

Managers and supervisors should be disciplined for failing to

adequately instruct their subordinates or for failing to detect

noncompliance with applicable policies and legal requirements, where

reasonable diligence would have led to the discovery of any problems or

violations and given the nursing facility the opportunity to correct

them earlier. Conversely, those supervisors who have demonstrated

leadership in the advancement of the company's code of conduct and

compliance objectives should be singled out for recognition.

The OIG believes that all nursing facilities, regardless of

resources or size, should ensure that its employees understand the

importance of compliance with program requirements and the value the

company places on its compliance program. If the small nursing facility

does not have a formal employee evaluation system, it should informally

convey to employees their compliance responsibilities whenever the

opportunity arises. Positive reenforcement is generally more effective

than sanctions in conditioning behavior and managers should be given

mechanisms to reward employees who promote compliance.

C. Designation of a Compliance Officer and a Compliance Committee

1. Compliance Officer

Every nursing home provider should designate a compliance officer

to serve as the focal point for compliance activities. This

responsibility may be the individual's sole duty or added to other

management responsibilities, depending upon the size and resources of

the nursing facility and the complexity of the task. Designating a

compliance officer with the appropriate authority is critical to the

success of the program, necessitating the appointment of a high-level

official with direct access to the nursing facility's president or CEO,

governing body, all other senior management, and legal

counsel.76 The officer should have sufficient funding and

staff to perform his or her responsibilities fully.

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\76\ 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.

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Coordination and communication are the key functions of the

compliance officer with regard to planning, implementing, and

monitoring the compliance program.

The compliance officer's primary responsibilities should include:

Overseeing and monitoring implementation of the compliance

program; 77

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\77\ 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.

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Reporting on a regular basis to the nursing facility's

governing body, CEO, and compliance committee (if applicable) on the

progress of implementation, and assisting these components in

establishing methods to improve the nursing facility's efficiency and

quality of services, and to reduce the facility's vulnerability to

fraud, abuse, and waste;

Periodically revising the program in light of changes in

the organization's needs, and in the law and policies of Government and

private payor health plans;

Developing, coordinating, and participating in a

multifaceted educational and training program that focuses on the

elements of the compliance program, and seeking to ensure that all

relevant employees and management understand and comply with pertinent

Federal and State standards;

Ensuring that independent contractors and agents who

furnish physician, nursing, or other health care services to the

residents of the nursing facility are aware of the requirements of the

nursing facility's compliance program with respect to residents'

rights, billing, and marketing, among other things;

Coordinating personnel issues with the nursing facility's

Human Resources/Personnel office (or its equivalent) to ensure that (i)

the National Practitioner Data Bank 78 has been checked with

respect to all medical staff and independent contractors (as

appropriate) and (ii) the List of Excluded Individuals/Entities

79 has been checked with respect to all employees, medical

staff, and independent contractors; 80

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\78\ See note 60.

\79\ See note 61.

\80\ 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.

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Assisting the nursing facility's financial management in

coordinating internal compliance review and monitoring activities,

including annual or periodic reviews of departments;

Independently investigating and acting on matters related

to compliance, including the flexibility to design and coordinate

internal investigations (e.g., responding to reports of problems or

suspected violations) and any resulting corrective action (e.g., making

necessary improvements to nursing facility policies and practices,

taking appropriate disciplinary action, etc.) with all nursing facility

departments, subcontracted providers, and health care professionals

under the nursing facility's control;

Participating with facility's counsel in the appropriate

reporting of self-discovered violations of program requirements; and

Continuing the momentum of the compliance program after

the initial years of implementation.81

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\81\ 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.

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The compliance officer must have the authority to review all

documents and other information that are relevant to compliance

activities, including, but not limited to, medical and billing records,

and documents concerning the marketing efforts of the nursing facility

and its arrangements with other health care providers, including

physicians and independent contractors. This review authority enables

the compliance officer to examine contracts and obligations (seeking

the advice of legal counsel, where appropriate) that may contain

referral and payment provisions that could violate the anti-kickback

statute or regulatory requirements.

[[Page 58430]]

A small nursing facility may not have the resources to hire or

appoint a full time compliance officer. Multi-facility providers also

may consider appointing one compliance officer at the corporate level

and creating compliance liaisons officers at each facility. In any

event, each facility should have a person in its organization (this

person may have other functional responsibilities) who can oversee the

nursing facility's compliance with applicable statutes, rules,

regulations, and policies. The structure and comprehensiveness of the

facility's compliance program will help determine the responsibilities

of each individual compliance officer.

2. Compliance Committee

The OIG recommends that a compliance committee be established to

advise the compliance officer and assist in the implementation of the

compliance program.82 When developing an appropriate team of

people to serve as the nursing facility's compliance committee, a

facility should consider a variety of skills and personality traits

that are expected from those in such positions.83 Once a

nursing facility chooses the people that will accept the

responsibilities vested in members of the compliance committee, the

nursing facility needs to train these individuals on the policies and

procedures of the compliance program, as well as how to discharge their

duties.

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\82\ 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 nursing facility physician), 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.

\83\ 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.

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The committee's functions should include:

Analyzing the legal requirements with which the nursing

facility must comply, and specific risk areas;

Assessing existing policies and procedures that address

these risk areas for possible incorporation into the compliance

program;

Working with appropriate departments to develop standards

of conduct, and policies and procedures to promote compliance with

legal and ethical requirements;

Recommending and monitoring, in conjunction with the

relevant departments, the development of internal systems and controls

to carry out the organization's policies;

Determining the appropriate strategies and approaches to

promote compliance with program requirements and detection of any

potential violations, such as through hotlines and other fraud

reporting mechanisms;

Developing a system to solicit, evaluate, and respond to

complaints and problems; and

Monitoring internal and external audits and investigations

for the purpose of identifying deficiencies, and implementing

corrective action.

The committee may also undertake other functions as the compliance

concept becomes part of the overall nursing facility operating

structure and daily routine. The compliance committee is an extension

of the compliance officer and provides the organization with increased

oversight. The OIG recognizes that some nursing facilities may not have

the resources or the need to establish a compliance committee. However,

when potential problems are identified, the OIG recommends these

nursing facilities create a ``task force,'' to address the particular

problem. The members of the task force may vary depending upon the

issue. For example, if problems are identified as a result of a State

or Federal survey, the OIG recommends that a task force be created to

examine the deficiencies identified by the survey and to develop plans

of actions to correct the underlying causes of the deficiency.

D. Conducting Effective Training and Education

The proper education and training of corporate officers, managers

and health care professionals, and the continual retraining of current

personnel at all levels are critical elements of an effective

compliance program. These training programs should include sessions

summarizing the organization?s compliance program, fraud and abuse laws

and Federal and private payor health care program requirements. More

specific training on issues such as claims development and submission

processes, resident rights, and marketing practices should be targeted

at those employees and contractors whose job requirements make the

information relevant.84

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\84\ 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 its conditions of participation.

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The organization must take steps to communicate effectively its

standards and procedures to all affected employees, physicians,

independent contractors, and other significant agents by requiring

participation in such training programs and by other means, such as

disseminating publications that explain specific requirements in a

practical manner.85

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\85\ 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.

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Managers of specific departments or groups can assist in

identifying areas that require training and in carrying out such

training.86 Training instructors may come from outside or

inside the organization, but must be qualified to present the subject

matter involved and sufficiently experienced in the issues presented to

adequately field questions and coordinate discussions among those being

trained.

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\86\ 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.

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The nursing facility should train new employees soon after they

have started working.87 Training programs and materials

should be designed to take into account the skills, experience, and

knowledge of the individual trainees. The compliance officer should

document any formal training undertaken by the nursing facility as part

of the compliance program.

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\87\ 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 and survey and certification

procedures.

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A variety of teaching methods, such as interactive training, and

where a nursing facility has a culturally diverse staff, training in

different languages, should be implemented so that all affected

employees understand the institution's standards of conduct and

procedures for alerting senior management to problems and

concerns.88

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\88\ Post-training tests can be used to assess the success of

training provided and employee comprehension of the nursing

facility's policies and procedures.

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In addition to specific training in the risk areas identified in

section II.B.2, primary training for appropriate corporate officers,

managers, and facility staff should include such topics as:

Compliance with Medicare conditions of participation;

[[Page 58431]]

Appropriate and sufficient documentation;

Prohibitions on paying or receiving remuneration to induce

referrals;

Improper alterations to clinical or financial records;

Resident rights; and

The duty to report misconduct.

The OIG suggests that all relevant personnel participate in the

various educational and training programs of the nursing

facility.89 Employees should be required to have a minimum

number of educational hours per year, as appropriate, as part of their

employment responsibilities.90 For example, for certain

employees involved in the nursing facility admission functions,

periodic training in applicable reimbursement coverage and eligibility

requirements should be required. In nursing facilities with high

employee turnover, periodic training updates are critical.

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\89\ 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.

\90\ 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.

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The OIG recognizes that the format of the training program will

vary depending upon the resources of the nursing facility. For example,

a nursing facility with limited resources may want to create a

videotape for each type of training session so new employees can

receive training in a timely manner. If videos are used for compliance

training, the OIG suggests that a nursing facility make an individual

available to field questions from video trainees.

The OIG recommends that participation in training programs be made

a condition of continued employment and that failure to comply with

training requirements should result in disciplinary action, when such

failure is serious. Adherence to the training requirements as well as

other provisions of the compliance program should be a factor in the

annual evaluation of each employee. The nursing facility should retain

adequate records of its training of employees, including attendance

logs and material distributed at training sessions.

E. Developing Effective Lines of Communication

1. Access to the Compliance Officer

In order for a compliance program to work, employees must be able

to ask questions and report problems. The first line supervisors play a

key role in responding to employee concerns and it is appropriate that

they serve as a first line of communications. In order to encourage

communications, confidentiality and non-retaliation policies should be

developed and distributed to all employees.\91\

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\91\ 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)).

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Open lines of communication between the compliance officer and

nursing facility employees is equally important to the successful

implementation of a compliance program and the reduction of any

potential for fraud and abuse. In addition to serving as a contact

point for reporting problems, the compliance officer should be viewed

as someone to whom personnel can go to get clarification on the

facility's policies. Questions and responses should be documented and

dated and, if appropriate, shared with other staff so that standards

can be updated and improved to reflect any necessary changes or

clarifications.\92\

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\92\ Nursing facilities can also 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.

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2. Hotlines and Other Forms of Communication

The OIG encourages the use of hotlines,\93\ e-mails, newsletters,

suggestion boxes, and other forms of information exchange to maintain

open lines of communication.\94\ If the nursing facility establishes a

hotline, the telephone number should be made readily available to all

employees, independent contractors, residents, and family members by

circulating the number on wallet cards or conspicuously posting the

telephone number in common work areas.\95\ Employees should be

permitted to report matters on an anonymous basis. Matters reported

through the hotline or other communication sources that suggest

substantial violations of compliance policies or Federal health care

program statutes and regulations should be documented and investigated

promptly to determine their veracity. The compliance officer should

maintain a log that records such calls, including the nature of any

investigation and its results.\96\ Such information, redacted of

individual identifiers, should be included in reports to the governing

body, the CEO, and compliance committee.\97\ While the nursing facility

should always strive to maintain the confidentiality of an employee's

identity, it should also make clear that there may be a point where the

individual's identity may become known or may have to be revealed in

certain instances. The OIG recognizes that protecting anonymity may be

infeasible for small nursing facilities. However, the OIG believes all

facility employees, when seeking answers to questions or reporting

potential instances of fraud and abuse, should know to whom to turn for

attention and should be able to do so without fear of retribution.

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\93\ 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.

\94\ 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.

\95\ Nursing facilities should also post in a prominent area the

HHS-OIG Hotline telephone number, 1-800-447-8477 (1-800-HHS-TIPS).

\96\ 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/or any identified overpayments returned.

\97\ Information obtained over the hotline may provide valuable

insight into management practices and operations, whether reported

problems are actual or perceived.

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F. Auditing and Monitoring

The OIG believes that an effective program should incorporate

thorough monitoring of its implementation and an ongoing evaluation

process. The compliance officer should document this ongoing

monitoring, including reports of suspected noncompliance, and share

these assessments with the nursing facility's senior management and the

compliance committee. The extent and frequency of the compliance audits

may vary depending on variables such as the nursing facility's

available resources, prior history of

[[Page 58432]]

noncompliance, and the risk factors particular to the facility.\98\

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\98\ 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.

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Although many assessment techniques are available, one effective

tool is the performance of regular, periodic compliance audits by

internal or external evaluators who have expertise in Federal and State

health care statutes, regulations, and program requirements, as well as

private payor rules. These assessments should focus both on the nursing

facility's day-to-day operations, as well as its adherence to the rules

governing claims development, billing and cost reports, and

relationships with third parties. The reviews also should address the

nursing facility's compliance with the Medicare conditions of

participation and the specific rules and policies that have been the

focus of particular attention by the Medicare fiscal intermediaries or

carriers, survey agencies, and law enforcement.\99\

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\99\ See also section II.B.2.

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Monitoring techniques may include sampling protocols that permit

the compliance officer to identify and review variations from an

established performance baseline.\100\ Significant variations from the

baseline should trigger an inquiry to determine the cause of the

deviation. If the inquiry determines that the deviation occurred for

legitimate reasons, the compliance officer and nursing facility

management may want to take no action. If it is determined that the

deviation was caused by a departure from or misunderstanding of the

facility's policies, the nursing facility should take prompt steps to

correct the problem. Any overpayments discovered as a result of such

deviations should be returned promptly to the affected payor,\101\ with

appropriate documentation and a sufficiently detailed explanation of

the reason for the refund.\102\

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\100\ 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.

\101\ See Provider Reimbursement Manual 1, Sec. 2836(D)(3),

which sets out the MDS correction policy.

\102\ In addition, when appropriate, as referenced in section

H.2, below, reports of fraud or systemic problems should also be

made to the appropriate governmental authority.

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In addition to evaluating the facility's conformance with program

rules, an effective compliance program should also incorporate periodic

(at least annual) reviews of whether the program's compliance elements

have been satisfied, e.g., whether there has been appropriate

dissemination of the program's standards, ongoing educational programs,

and internal investigations of alleged non-compliance. This process

will assess actual conformance by all departments with the compliance

program and may identify areas for improvements in the program, as well

as the nursing facility's general operations.

The OIG requires a provider operating under a CIA to conduct an

annual assessment of its compliance with the elements of the CIA. A

compliance officer may want to review several CIAs in designing the

facility's self-audit protocol.\103\

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\103\ Examples of CIA audit protocols can be obtained from the

OIG by submitting a request pursuant to the Freedom of Information

Act. 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).

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As part of the review process, the compliance officer or reviewers

should consider techniques such as:

On-site visits to all facilities owned and/or operated by

the nursing home owner;

Testing the billing and claims reimbursement staff on its

knowledge of applicable program requirements and claims and billing

criteria;

Unannounced mock surveys and audits;

Examination of the organization's complaint logs and

investigative files;

Legal assessment of all contractual relationships with

contractors, consultants and potential referral sources;

Reevaluation of deficiencies cited in past surveys for

State requirements and Medicare conditions of participation;

Checking personnel records to determine whether

individuals who previously have been reprimanded for compliance issues

are now conforming to facility policies;

Questionnaires developed to solicit impressions of a broad

cross-section of the nursing facility's employees and staff;

Validation of qualifications of nursing facility

physicians and other staff, including verification of applicable State

license renewals;

Trend analysis, or longitudinal studies, that uncover

deviations in specific areas over a given period;

Analyzing past survey reports for patterns of deficiencies

to determine if the proposed corrective plan of action identified the

underlying problem and was undertaken within the assigned time limits.

The reviewers should:

Have the qualifications and experience necessary to

adequately identify potential issues with the subject matter that is

reviewed;

Be objective and independent of line management to the

extent reasonably possible;\104\

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\104\ 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.

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Have access to existing audit and health care resources,

relevant personnel, and all relevant areas of operation;

Present written evaluative reports on compliance

activities to the CEO, governing body, and members of the compliance

committee on a regular basis, but no less often than annually; and

Specifically identify areas where corrective actions are

needed.

The extent and scope of a nursing facility's compliance self-audits

will depend on the facility's identified risk areas, past history of

deficiencies and enforcement actions, and resources. If the facility

comes under Government scrutiny in the future, the Government will

assess whether the facility developed a reasonable audit plan based

upon identified risk areas and resources. If the Government determines

that the nursing facility failed to develop an adequate audit program,

the Government will be less likely to afford the nursing facility

favorable treatment under the Federal Sentencing Guidelines.

G. Enforcing Standards Through Well-Publicized Disciplinary Guidelines

1. Disciplinary Policy and Enforcement

An effective compliance program should include disciplinary

policies that set out the consequences of violating the nursing

facility's standards of conduct, policies and procedures. Intentional

noncompliance should subject transgressors to significant sanctions.

Such sanctions could range

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from oral warnings to suspension, termination, or financial penalties,

as appropriate. Disciplinary action may be appropriate where a

responsible employee's failure to detect a violation is attributable to

his or her negligence or reckless conduct. Each situation must be

considered on a case-by-case basis to determine the appropriate

response.

The written standards of conduct should elaborate on the procedures

for handling disciplinary problems and those who will be responsible

for taking appropriate action. Some disciplinary actions can be handled

by department or agency managers, while others may have to be resolved

by a senior administrator. The nursing facility should advise personnel

that disciplinary action will be taken on a fair and equitable basis.

Managers and supervisors should be made aware that they have a

responsibility to discipline employees in an appropriate and consistent

manner.

It is vital to publish and disseminate the range of disciplinary

standards for improper conduct and to educate employees regarding these

standards. The consequences of noncompliance should be consistently

applied and enforced, in order for the disciplinary policy to have the

required deterrent effect. All levels of employees should be

potentially subject to the same types of disciplinary action for the

commission of similar offenses, because the commitment to compliance

applies to all personnel within a nursing facility. This means that

corporate officers, managers, and supervisors should be held

accountable for failing to comply with, or for the foreseeable failure

of their subordinates to adhere to, the applicable standards, laws, and

procedures.

H. Responding to Detected Offenses and Developing Corrective Action

Initiatives

Violations of a nursing facility's compliance program, failures to

comply with applicable Federal or State law, and other types of

misconduct threaten a facility's status as a reliable, honest and

trustworthy provider of health care. Detected but uncorrected

misconduct can seriously endanger the reputation and legal status of

the nursing facility. Consequently, upon receipt of reports or

reasonable indications of suspected noncompliance, it is important that

the compliance officer or other management officials immediately

investigate the allegations to determine whether a material violation

of applicable law or the requirements of the compliance program has

occurred, and if so, take decisive steps to correct the problem.\105\

As appropriate, such steps may include a corrective action plan,\106\

the return of any overpayments, a report to the Government,\107\ and/or

a referral to criminal and/or civil law enforcement authorities.

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\105\ 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 services required by a plan of care are

not provided.

\106\ 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.

\107\ Nursing facilities are required to immediately report all

alleged incidents of mistreatment, neglect, abuse 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)). 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 the 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.

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Where potential fraud is not involved, the OIG recommends that the

nursing facility use normal repayment channels to return overpayments

as they are discovered. However, even if the nursing facility's billing

department is effectively using the overpayment detection and return

process, the OIG believes that the facility needs to alert the

compliance officer to those overpayments that may reveal trends or

patterns indicative of a systemic problem.

Depending upon the nature of the alleged violations, an internal

investigation will probably include interviews and a review of relevant

documents. Under some circumstances, the facility may need to consider

engaging outside counsel, auditors, or health care experts to assist in

an investigation. Records of the investigation should contain

documentation of the alleged violation, a description of the

investigative process (including the objectivity of the investigators

and methodologies utilized), copies of interview notes and key

documents, a log of the witnesses interviewed and the documents

reviewed, the results of the investigation, e.g., any disciplinary

action taken, and the corrective action implemented. While any action

taken as the result of an investigation will necessarily vary depending

upon the situation, nursing facilities should strive for some

consistency by using sound practices and disciplinary protocols.\108\

Further, the compliance officer should review the circumstances that

formed the basis for the investigation to determine whether similar

problems have been uncovered or modifications of the compliance program

are necessary to prevent and detect other inappropriate conduct or

violations.

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\108\ 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 it may be subject to

certain liability.

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If the nursing facility undertakes an investigation of an alleged

violation and the compliance officer believes the integrity of the

investigation may be at stake because of the presence of employees

under investigation, the facility should remove those individuals from

their current responsibilities until the investigation is completed

(unless there is an ongoing internal or Government-led undercover

operation known to the nursing facility). In addition, the compliance

officer should take appropriate steps to secure or prevent the

destruction of documents or other evidence relevant to the

investigation. If the nursing facility determines that disciplinary

action is warranted, it should be promptly imposed in accordance with

the facility's written standards of disciplinary action.

Reporting

Where the compliance officer, compliance committee, or a management

official discovers credible evidence of misconduct from any source and,

after a reasonable inquiry, has reason to believe that the misconduct

may violate criminal, civil or administrative law, the facility should

promptly report the existence of misconduct to the appropriate Federal

and State authorities\109\ within a reasonable period, but not more

than 60 days\110\ after determining that there is

[[Page 58434]]

credible evidence of a violation.\111\ Prompt voluntary reporting will

demonstrate the nursing facility's good faith and willingness to work

with governmental authorities to correct and remedy the problem. In

addition, reporting such conduct will be considered a mitigating factor

by the OIG in determining administrative sanctions (e.g., penalties,

assessments, and exclusion), if the reporting provider becomes the

target of an OIG investigation.\112\

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\109\ 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 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). See note 107.

\110\ 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. 31 U.S.C. 3729(a).

\111\ 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, civil

fraud, or criminal 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.

\112\ 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. 1 320a-7(b)(7) for violations of

various fraud and abuse laws. See 62 FR 67392 (December 24, 1997).

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When reporting to the Government, a nursing facility should provide

all evidence relevant to the alleged violation of applicable Federal or

State law(s) and potential cost impact. The compliance officer, under

advice of counsel and with guidance from the governmental authorities,

could be requested to continue to investigate the reported violation.

Once the investigation is completed, the compliance officer should

notify the appropriate governmental authority of the outcome of the

investigation, including a description of the impact of the alleged

violation on the operation of the applicable health care programs or

their beneficiaries. If the investigation ultimately reveals that

criminal, civil or OIG violations have occurred, the nursing facility

should immediately notify appropriate Federal and State authorities.

As previously stated, the nursing facility should take appropriate

corrective action, including prompt identification of any overpayment

to the affected payor. If potential fraud is involved, the nursing

facility should return any overpayment during the course of its

disclosure to the Government. Otherwise, the nursing facility should

use normal repayment channels for reimbursing identified

overpayments.\113\ A knowing and willful failure to disclose

overpayments within a reasonable period of time could be interpreted as

an attempt to conceal the overpayment from the Government, thereby

establishing an independent basis for a criminal violation with respect

to the nursing facility, as well as any individual who may have been

involved.\114\ For this reason, nursing facility compliance programs

should emphasize that overpayments should be promptly disclosed and

returned to the entity that made the erroneous payment.

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\113\ A nursing facility should consult with its Medicare fiscal

intermediary (FI) and the appropriate sections of the PRM for

additional guidance regarding refunds under Medicare Part A. See

note 101. 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 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

405.376.

\114\See 42 U.S.C. 1320a-7b(a)(3) and 18 U.S.C. 669.

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III. Assessing the Effectiveness of a Compliance Program

Considering the financial and human resources needed to establish

an effective compliance program, sound business principles dictate that

the nursing home's management evaluate the return on that investment.

In addition, a compliance program must be ``effective'' for the

Government to view its existence as a mitigating factor when assessing

culpability. How a nursing facility assesses its compliance program

performance is therefore integral to its success. The attributes of

each individual element of a compliance program must be evaluated in

order to assess the program's ``effectiveness'' as a whole. Examining

the comprehensiveness of policies and procedures implemented to satisfy

these elements is merely the first step. Evaluating how a compliance

program performs during the provider's day-to-day operations becomes

the critical indicator.\115\

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\115\ Evaluation may be accomplished through techniques such as

employee surveys, management assessments, and periodic review of

benchmarks established for audits, investigations, disciplinary

action, overpayments, and employee feedback. The nursing facility

should evaluate all elements of its compliance program, including

policies, training, practices, and compliance personnel.

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As previously stated, a compliance program should require the

development and distribution of written compliance policies, standards,

and practices that identify specific areas of risk and vulnerability.

One way to judge whether these policies, standards, and practices

measure up is to observe how an organization's employees react to them.

Do employees experience recurring pitfalls because the guidance on

certain issues is not adequately covered in company policies? Do

employees flagrantly disobey an organization's standards of conduct

because they observe no sincere buy-in from senior management? Do

employees have trouble understanding policies and procedures because

they are written in legalese or at difficult reading levels? Does an

organization routinely experience systematic billing failures because

of poor instructions to employees on how to implement written policies

and practices? Written compliance policies, standards, and practices

are only as good as an organization's commitment to apply them in

practice.

Every nursing facility needs to seriously consider whoever fills

the integral roles of compliance officer and compliance committee

members, and periodically monitor how the individuals chosen satisfy

their responsibilities. Does a compliance officer have sufficient

professional experience working with billing, clinical records,

documentation, and auditing principles to perform assigned

responsibilities fully? Has a compliance officer or compliance

committee been unsuccessful in fulfilling their duties because of

inadequate funding, staff, and authority necessary to carry out their

jobs? Did the addition of the compliance officer function to a key

management position with other significant duties compromise the goals

of the compliance program (e.g., chief financial officer who discounts

certain overpayments identified to improve the company's bottom line

profits)? Since a compliance officer and a compliance committee can

have a significant impact on how effectively a compliance program is

implemented, those functions should not be taken for granted.

As evidenced throughout this guidance, the proper education and

training of corporate officers, managers, health care professionals,

and other applicable employees of a provider, and the continual

retraining of current personnel at all levels, are significant elements

of an effective compliance program. Accordingly, such efforts should be

routinely evaluated. Are employees trained frequently enough? Do

employees fail post-training tests that evaluate knowledge of

compliance? Do training sessions and materials adequately summarize

important aspects of the organization's compliance program, such as

fraud and abuse laws,

[[Page 58435]]

Federal health care program and private payor requirements, and claims

development and submission processes? Are training instructors

qualified to present the subject matter and experienced enough to field

questions? When thorough compliance training is periodically conducted,

employees receive the reinforcement they need to ensure an effective

compliance program.

An open line of communication between the compliance officer and a

provider's employees is equally important to the success of a

compliance program. In today's intensive regulatory environment, the

OIG believes that a provider cannot possibly have an effective

compliance program if it receives minimal feedback from its employees

regarding compliance matters. For instance, if a compliance officer

does not receive appropriate inquiries from employees: Do policies and

procedures fail to adequately guide employees to whom and when they

should be communicating compliance matters? Do employees fear

retaliation if they report misconduct? Are employees reporting issues

not related to compliance through the wrong channels? Do employees have

bad-faith, ulterior motives for reporting? Regardless of the means that

a provider uses, whether it be telephone hotline, email, or suggestion

boxes, employees should seek clarification from compliance staff in the

event of any confusion or question dealing with compliance policies,

practices, or procedures.

An effective compliance program should include guidance regarding

disciplinary action for corporate officers, managers, health care

professionals, and other employees who have failed to adhere to an

organization's standards of conduct, Federal health care program

requirements, or Federal or State laws. The number and caliber of

disciplinary actions taken by an organization can be insightful. Have

appropriate sanctions been applied to compliance misconduct? Are

sanctions applied to all employees consistently, regardless of an

employee's level in the corporate hierarchy? Have double-standards in

discipline bred cynicism among employees? When disciplinary action is

not taken seriously or applied haphazardly, such practices reflect

poorly on senior management's commitment to foster compliance as well

as the effectiveness of an organization's compliance program in

general.

Another critical component of a successful compliance program is an

ongoing monitoring and auditing process. The extent and frequency of

the audit function may vary depending on factors such as the size and

available resources, prior history of noncompliance, and risk factors

of a particular nursing facility. The hallmark of effective monitoring

and auditing efforts is how an organization determines the parameters

of its reviews. Do audits focus on all pertinent departments of an

organization? Does an audit cover compliance with all applicable laws,

as well as Federal and private payor requirements? Are results of past

audits, pre-established baselines, or prior deficiencies reevaluated?

Are the elements of the compliance program monitored? Are auditing

techniques valid and conducted by objective reviewers? The extent and

sincerity of an organization's efforts to confirm its compliance often

proves to be a revealing determinant of a compliance program's

effectiveness.

It is essential that the compliance officer or other management

officials immediately investigate reports or reasonable indications of

suspected noncompliance. If a material violation of applicable law or

compliance program requirements has occurred, a provider must take

decisive steps to correct the problem. Nursing facilities that do not

thoroughly investigate misconduct leave themselves open to undiscovered

problems. When a provider learns of certain issues, does it knowingly

disregard associated legal exposure? Is there a correlation between

deficiency identified and the corrective action necessary to remedy?

Are isolated overpayment matters properly resolved through normal

repayment channels? Is credible evidence of misconduct that may violate

criminal, civil or administrative law promptly reported to the

appropriate Federal and State authorities? If the process of responding

to detected offenses is circumvented, such conduct would indicate an

ineffective compliance program.

Documentation is the key to demonstrating the effectiveness of a

nursing facility's compliance program. For example, documentation of

the following should be maintained: audit results; logs of hotline

calls and their resolution; corrective action plans; due diligence

efforts regarding business transactions; records of employee training,

including the number of training hours; disciplinary action; and

modification and distribution of policies and procedures. Because the

OIG encourages self-disclosure of overpayments and billing

irregularities, maintaining a record of disclosures and refunds to the

health care programs is strongly endorsed. A documented practice of

refunding of overpayments and self-disclosing incidents of non-

compliance with Federal and private payor health care program

requirements is powerful evidence of a meaningful compliance effort.

IV. Conclusion

Through this document, the OIG has attempted to provide a

foundation for the process necessary to develop an effective and cost-

efficient nursing facility compliance program. However, each program

must be tailored to fit the needs and resources of a particular

facility, depending upon its unique corporate structure, mission, and

employee composition. The statutes, regulations, and guidelines of the

Federal and State health insurance programs, as well as the policies

and procedures of the private health plans, should be integrated into

every nursing facility's compliance program.

The OIG recognizes that the health care industry in this country,

which reaches millions of beneficiaries and expends about a trillion

dollars annually, is constantly evolving. The time is right for nursing

facilities to implement a strong voluntary health care compliance

program. Compliance is a dynamic process that helps to ensure that

nursing facilities and other health care providers are better able to

fulfill their commitment to ethical behavior, as well as meet the

changes and challenges being placed upon them by Congress and private

insurers. Ultimately, it is the OIG's hope that a voluntarily created

compliance program will enable nursing facilities to meet their goals,

improve the quality of resident care, and substantially reduce fraud,

waste, and abuse, as well as the cost of health care to Federal, State,

and private health insurers.

Dated: October 22, 1999.

June Gibbs Brown,

Inspector General.

[FR Doc. 99-28094 Filed 10-28-99; 8:45 am]

BILLING CODE 4150-04-P