[Federal Register Volume 62, Number 41 (Monday, March 3, 1997)]
[Pages 9435-9441]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5192]


Office of Inspector General

Publication of the OIG Model Compliance Plan for Clinical 

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

ACTION: Notice.


SUMMARY: This Federal Register notice sets forth the recently issued 
model compliance plan for clinical laboratories developed by the Office 
of Inspector General in cooperation with, and input from, several 
provider groups and industry representatives. Many providers and 
provider organizations have expressed an interest in better protecting 
their operations from fraud through the adoption of compliance plans. 
We believe the development of this initial model compliance plan for 
clinical laboratories will serve as a positive step towards promoting a 
higher level of ethical and lawful conduct throughout the health care 

FOR FURTHER INFORMATION CONTACT: Joel J. Schaer, Office of Counsel to 
the Inspector General, (202) 619-0089.

SUPPLEMENTARY INFORMATION: The creation of model compliance plans has 
become a major initiative of the Office of Inspector General (OIG) in 
its effort to engage the private health care community in the fight to 
combat fraud and abuse. In developing these compliance plans, the OIG 
continues to work closely with the Health Care Financing Administration 
and various sectors of the health care industry.
    The clinical laboratory model compliance plan represents the OIG's 
initial effort to develop such a plan for use by the industry. The plan 
considers elements of the Federal Sentencing Guidelines and policy 
guidance given to major independent laboratories through corporate 
integrity agreements. Specifically, this model plan recommends that 
clinical laboratories implement a number of substantive changes, such 
as developing better requisition forms and policies that promote the 
physician's right to order only medically necessary tests.
    Adoption of the clinical laboratory model compliance plan set forth 
below, and future model compliance plans for other health care 
providers, will be voluntary. All future models will be similarly 
structured, that is, substantive policy recommendations resulting from 
our investigations and civil settlements combined with the elements of 
the Federal Sentencing Guidelines.
    A reprint of the OIG model compliance plan follows.



    The Office of Inspector General (OIG) of the Department of Health 
and Human Services (HHS) and other Federal agencies charged with 
responsibility for enforcement of Federal law have emphasized the 
importance of voluntarily developed and implemented compliance plans. 
In recent years, the OIG has been asked to supply guidance as to the 
elements of a model compliance plan. The purpose of this issuance, 
therefore, is to respond to those requests by providing some guidance 
to health care providers that supply clinical laboratory testing 
services for Medicare and Medicaid beneficiaries. Like other compliance 
plan models that will be issued for other areas of the health care 
community, this guidance is based upon the OIG's experience in fraud 
investigations of clinical laboratories, the Health Care Financing 
Administration's (HCFA) regulations and guidelines, requirements 
imposed on clinical laboratories in corporate integrity agreements 
negotiated by the OIG, and input from the clinical laboratory industry.
    The government, especially the OIG, has a zero tolerance policy 
towards fraud and abuse and will use its extensive statutory 
authorities to reduce fraud in Medicare and other federally funded 
health care programs. Compliance plans offer the health care provider 
an opportunity to participate in a nationwide effort to reduce fraud 
and abuse in our national health care programs. The OIG believes that 
through a partnership with the private sector, significant reductions 
in fraud and abuse can be accomplished. Compliance plans offer a 
vehicle to achieve that goal.
    This information is being supplied to assist laboratory providers 
in crafting and refining their own compliance plans. Elements of these 
guidelines can be used by all laboratories, regardless of size, to 
establish a compliance program. We are not suggesting that all 
laboratories must implement all of the compliance elements discussed in 
this document, nor do we suggest that a laboratory that does not 
incorporate all of these elements will be at a disadvantage when under 
the scrutiny of the OIG or other governmental agency. Rather, these 
guidelines represent the government's suggestions on how to correct and 
prevent fraudulent activity, and they can be tailored to fit the 
individual needs and financial realities of any clinical laboratory, be 
it an independent national laboratory, a hospital laboratory, or a 
small, regional laboratory. We expect variations reflecting the 
specific factual context in which each individual laboratory operates.
    This model compliance plan focuses on topic areas recently 
addressed in corporate integrity agreements with several players in the 
laboratory industry. Consequently, this model laboratory compliance 
plan is not all inclusive as to subject matter. We recognize that 
laboratories are accountable for complying with far more laws, 
regulations and guidelines than we have tried to cover in this model, 
and we believe that laboratories implementing compliance plans should 
address any and all areas where abuse may be prevalent in the industry. 
For example, the OIG suggests that laboratory compliance programs 
should include training on topics such as, the anti-kickback act, Stark 
self-referral issues and CLIA requirements. Depending on the nature of 
its business, a laboratory also may need to add specific measures 
covering areas such as ESRD testing and billing, which is governed by 
rules and regulations and which has been subject to abuse by many 
companies. Ultimately, each company bears the responsibility for

[[Page 9436]]

determining the appropriate topic areas and measures to be included in 
its compliance program.
    We see this model compliance plan as a dynamic document, and 
therefore, one that may be modified or expanded as we gather more 
information and knowledge about best practices and successful 
compliance plans. Through this document, we are attempting to provide 
guidance and structure to assist providers as they attempt to comply 
with our civil, criminal and health care laws. All providers should be 
aware that the development and implementation of compliance programs 
can raise a host of sensitive and complex legal issues. Nothing stated 
herein should substitute for or be used in lieu of legal advice from 
competent, experienced counsel. In addition, it should be noted that 
implementing a compliance program will not provide a laboratory with 
immunity from criminal, civil or administrative prosecution, but it may 
be a relevant factor in negotiations with the Office of Inspector 

Compliance Plan Elements

    Every laboratory adopting a compliance plan should develop a 
program and policies that ensure that the plan is implemented and 
enforced. Compliance plans that are merely cosmetic are not effective 
and, in the long run, may harm the laboratory. The OIG suggests that 
the comprehensive compliance program should include, at a minimum, the 
following elements: (1) Written standards of conduct for employees; (2) 
the development and distribution of written policies that promote the 
laboratory's commitment to compliance and that address specific areas 
of potential fraud, such as billing, marketing and claims processing; 
(3) the designation of a chief compliance officer or other appropriate 
high-level corporate structure or official who is charged with the 
responsibility of operating the compliance program; (4) the development 
and offering of education and training programs to all employees; (5) 
the use of audits and/or other evaluation techniques to monitor 
compliance and ensure a reduction in identified problem areas; (6) the 
development of a code of improper/illegal activities and the use of 
disciplinary action against employees who have violated internal 
compliance policies or applicable laws or who have engaged in 
wrongdoing; (7) the investigation and remediation of identified 
systemic and personnel problems; (8) the promotion of and adherence to 
compliance as an element in evaluating supervisors and managers; (9) 
the development of policies addressing the non-employment or retention 
of sanctioned individuals; (10) the maintenance of a hotline to receive 
complaints and the adoption of procedures to protect the anonymity of 
complainants; and (11) the adoption of requirements applicable to 
record creation and retention. These compliance program elements are 
spelled out in greater detail below.

A. Written Procedures and Policies

    Laboratory compliance plans should require the development and 
distribution of written compliance policies. These policies should be 
developed under the supervision and direction of the chief compliance 
officer or the equivalent and should, at a minimum, be provided to all 
individuals who are affected by the specific policy at issue. One 
convenient method of achieving this goal and maintaining policies is to 
create a three-ring compliance policy notebook. This format permits the 
filing of new and amended or revised compliance policies and ensures 
that affected individuals have easy access to the laboratory's written 
1. Standards of Conduct
    Laboratories should develop standards of conduct for all employees 
which clearly delineate the policies of the laboratory with regard to 
fraud, waste and abuse and adherence to all guidelines and regulations 
governing federally funded health care programs. These standards should 
be made available to and understandable by all employees (e.g., 
translated into other languages, if necessary) and regularly updated as 
the policies and regulations of these programs are modified.
2. Medical Necessity
    Laboratory compliance plans should ensure that claims are only 
submitted to federally funded health care programs for services that 
the laboratory has reason to believe are medically necessary. Upon 
request, a laboratory should be able to provide documentation, such as 
requisition forms containing diagnosis codes, supporting the medical 
necessity of a service the laboratory has provided and billed to a 
Federal program. We recognize that laboratories do not and cannot treat 
patients or make medical necessity determinations. However, there are 
steps that such facilities can and should take to help maximize the 
likelihood that they only bill federally funded health care programs 
for tests that meet the reimbursement rules for those programs.
    As a preliminary matter, the OIG recognizes that physicians must be 
able to order any tests, including screening tests, that they believe 
are appropriate for the treatment of their patients. However, we 
believe that physicians must be made aware that Medicare will only pay 
for tests that meet the Medicare definition of ``medical necessity'' 
and that Medicare may deny payment for a test that the physician 
believes is appropriate, such as a screening test, but which does not 
meet the Medicare definition of medical necessity. The laboratories 
themselves are in a unique position to deliver this information to 
their physician clients.
    In our opinion, laboratories can and should advise physicians that 
when they instruct the laboratory to seek Medicare reimbursement for 
tests ordered, they should only order those tests that they believe are 
medically necessary for the diagnosis and treatment of their patients. 
We recommend that laboratories implement the following steps through 
their compliance plans or some other appropriate mechanism to help 
ensure, as best they can, that the claims they submit to federally 
funded health care programs meet the appropriate program requirements:
    a. Requisition Design: Each laboratory (or laboratory company) 
should standardize its noncustomized test offerings and use common, 
uniform requisition forms that emphasize physician choice and encourage 
doctors to order, to the extent possible, only those tests that they 
believe are appropriate for each patient. In addition, the requisition 
forms should require physicians to document the need for each test 
ordered by inserting a diagnosis code for each such test. With respect 
to chemistry tests, requisition forms should be designed to require 
physicians to order such tests individually (i.e., separately) unless: 
(1) the test is specifically part of a CPT or HCPCS defined automated 
multichannel test series (e.g., 80002-80019, G0058-G0060 which will be 
amended to G0095-G0098); (2) the test is part of a CPT-defined 
``clinically relevant test grouping'' such as an organ or disease panel 
or profile (e.g., 80050-80099); or (3) the test is part of a profile 
that has been customized at the request of the physician. In addition, 
a printed statement should appear on every requisition form reiterating 
that when ordering tests for which Medicare reimbursement will be 
sought, physicians (or other individuals authorized by law to order 
tests ) should only order tests that are medically necessary for the 
diagnosis or treatment

[[Page 9437]]

of a patient, rather than for screening purposes.
    b. Notices to Physicians: All laboratories should provide all of 
their clients with annual written notices that set forth: (1) The 
Medicare medical necessity policy; (2) the individual components of 
every laboratory profile that includes a multichannel chemistry test or 
other automated multiple test result (e.g., 80002-80019, G0058-G0060); 
(3) the CPT or HCPCS codes that the laboratory uses to bill the 
Medicare program for each such profile; (4) the Medicare National 
Limitation Amount for each CPT or HCPCS code used to bill Medicare for 
each profile and its components; and (5) a description of how the 
laboratory will bill Medicare for each profile. If the laboratory 
engages a physician clinical consultant, the notice also should provide 
the phone number of the physician clinical consultant and advise of his 
or her availability to discuss appropriate testing and test ordering.
    In addition to the general notices above, laboratories offering 
clients the opportunity to create customized profiles should provide 
all clients who request customized profiles with annual notices that: 
(1) Explain the Medicare reimbursement paid for each component of each 
such profile; (2) encourage physicians who are ordering tests for which 
Medicare reimbursement will be sought to order only tests that are 
medically necessary for each patient; (3) inform physicians that using 
a customized profile may result in the ordering of tests for which 
Medicare may deny payment; and (4) inform physicians that the OIG takes 
the position that a physician who orders medically unnecessary tests 
for which Medicare reimbursement is claimed may be subject to civil 
penalties. Once again, if the laboratory engages a physician clinical 
consultant, the notice also should provide the phone number of the 
physician clinical consultant and advise of his or her availability to 
discuss appropriate testing and test ordering.
    c. Physician Acknowledgments: Laboratories that agree to customize 
profiles in response to physician requests should require such 
requesting physicians to sign a Physician Acknowledgment. By signing 
the Physician Acknowledgment, the physician would affirm that: (1) The 
physician has requested the creation of a custom profile that includes 
the tests listed on the acknowledgment; (2) the physician has been 
informed of the reimbursement amount that Medicare (and where 
appropriate, Medicaid) will pay for each test included in each 
customized profile; (3) the physician understands that when ordering 
tests for which Medicare reimbursement will be sought, the physician 
should only order those tests which the physician believes are 
medically necessary for each patient; (4) the physician knows that 
using a customized profile may result in the ordering of tests for 
which Medicare or other federally funded health care programs may deny 
payment; (5) the physician will order individual tests or a less 
inclusive profile when not all of the tests included in the customized 
profile are medically necessary for an individual patient; (6) the 
physician has been informed that the OIG takes the position that a 
physician who orders medically unnecessary tests may be subject to 
civil penalties; and (7) if appropriate, the physician is aware that 
the laboratory makes available the services of a clinical consultant to 
assist the physician in ensuring that appropriate tests are ordered.
    d. Test Utilization Monitoring: The OIG believes that laboratories 
can and should take the steps described above to help ensure that 
physicians will make a determination and document the medical necessity 
of tests billed to the Medicare program. We also believe that there are 
steps laboratories can take to determine whether physicians are being 
encouraged to order medically unnecessary tests. The OIG believes that 
a laboratory which has reason to believe that its clients are ordering 
medically unnecessary tests has a duty to determine why that behavior 
has occurred. More importantly, if the laboratory discovers that it has 
in some way caused that behavior, we believe the laboratory has the 
duty to correct the cause.
    Recognizing that there may be other ways to do so, the OIG suggests 
the following methodology for monitoring test utilization and detecting 
ordering abuses. We suggest that laboratories retain and analyze test 
utilization data from year to year, by CPT or HCPCS code, for the top 
30 tests they perform for Medicare beneficiaries. Laboratories could do 
this by keeping track of the number of tests performed by CPT or HCPCS 
code or of the number of claims submitted to Medicare for each test. 
The laboratories would then compute the percentage growth in claims 
submitted for each of the top 30 tests from one year to the next. We 
believe that if a test's utilization grew more than 10 percent, the 
laboratory should undertake a reasonable inquiry to ascertain the cause 
of such growth. If the laboratory determines that the increase in test 
utilization occurred for a benign reason, such as the acquisition of a 
new laboratory facility, then the laboratory need not take any action. 
However, if the laboratory determines that the increase in utilization 
was caused by the use of basic chemistry profiles or some other action 
on the part of the facility, the laboratory should take any steps that 
it deems reasonably necessary to address the issue and to insure that 
fraud is not being committed.
3. Billing
    Laboratory compliance policies should ensure that all claims for 
testing services submitted to Medicare or other federally funded health 
care programs are accurate and correctly identify the services ordered 
by the physician (or other individual authorized by law to order tests) 
and performed by the laboratory.
    a. Selection of CPT or HCPCS Codes: Laboratory compliance policies 
should ensure that the CPT or HCPCS code that is used to bill Medicare 
or Medicaid accurately describes the service that was ordered and 
performed. Laboratories should choose only the code that most 
accurately describes the ordered and performed test. To ensure code 
accuracy, laboratories may wish to include a requirement that the codes 
be reviewed by individuals with technical expertise in laboratory 
testing before such codes are approved for claims submissions. The OIG 
views intentional up coding (i.e., the selection of a code to maximize 
reimbursement when such code is not the most appropriate descriptor of 
the service) as raising false claims issues. If a laboratory continues 
to have questions about code selection, even after review by technical 
experts, the facility should direct its questions to its Medicare 
carrier or intermediary.
    b. Selection of ICD-9CM Codes: At the direction of the Health Care 
Financing Administration (HCFA), Medicare carriers and intermediaries 
have established lists of tests that must be accompanied by diagnostic 
information to establish medical necessity before Medicare coverage 
will be assumed (``limited coverage policy''). Such diagnostic 
information may be submitted either through the use of ICD-9CM codes or 
a narrative description. Laboratory compliance policies should direct 
that laboratories will only submit diagnostic information obtained from 
the test ordering physician. Laboratories should not: (1) Use 
diagnostic information provided by the physician from earlier dates of 
service (other than standing orders, as discussed below at paragraph 
(4)); (2) use ``cheat sheets'' that provide diagnostic information that 
has triggered reimbursement in the past; (3) use

[[Page 9438]]

computer programs that automatically insert diagnosis codes without 
receipt of diagnostic information from the physician; or (4) make up 
diagnostic information for claims submission purposes. Laboratories 
should: (1) Contact the ordering physician to obtain diagnostic 
information in the event that the physician has failed to provide such 
information; (2) provide services and diagnostic information supplied 
pursuant to a standing order executed in connection with an extended 
course of treatment; and (3) accurately translate narrative diagnoses 
obtained from the physician to ICD-9CM codes. Where diagnostic 
information is obtained from a physician or the physician's staff after 
receipt of the specimen and the requisition form, documentation of the 
receipt of such information should be created and maintained.
    c. Tests Covered by Claims for Reimbursement: Laboratory compliance 
policies should ensure that the laboratory only submits claims for 
tests that were both ordered and performed. If a laboratory receives a 
specimen without a test order or with an ambiguous test order that is 
subject to multiple interpretations, the facility should check with the 
doctor to determine what tests he or she wanted performed before 
submitting a claim for reimbursement to Medicare. Thus, if the 
laboratory performed a test that the doctor did not order, the 
laboratory will not erroneously bill for that test. Similarly, if a 
laboratory cannot perform an ordered test due to, for example, a 
laboratory accident or insufficient quantities of specimen, the 
laboratory should not submit a claim to Medicare. The OIG considers the 
submission of a claim for tests that were either not ordered or were 
not performed to be a potential false claim.
    d. Billing of Automated Multichannel Chemistry Tests: Laboratory 
compliance policies should ensure that the laboratory bills Medicare 
appropriately for automated multichannel chemistry tests. All tests 
appearing on HCFA's most recent list of automated multichannel 
chemistry tests should be billed using the appropriate CPT (80002-
80019) or HCPCS (G0058-G0060) codes. Tests appearing on this list 
should not be billed individually unless only one such analyte test is 
ordered and performed.
    e. Billing of Calculations: Since the OIG views compliance programs 
as a check and balance system to reduce error and improve quality, 
laboratory compliance policies should ensure that the laboratory does 
not bill for both calculations (e.g., calculated LDLs, T7s, indices, to 
name only a few) and the tests that are performed to derive such 
calculations. In many situations, physicians are not offered a choice 
about whether to receive such calculations, nor are they aware of the 
practice of some laboratories to bill Medicare for such calculations in 
addition to the underlying tests, as the physicians themselves are only 
billed for the underlying tests. At the current time, the OIG views 
billing for both the calculations and the underlying tests to be double 
billing which may subject a laboratory to criminal or civil penalties.
4. Reliance on Standing Orders
    Although standing orders are not prohibited in connection with an 
extended course of treatment, too often in the past they have led to 
fraudulent and abusive practices. Laboratories must be vigilant about 
this and take appropriate steps to prevent abuse. Thus, while 
laboratory compliance plans can permit the use of standing orders 
executed in connection with an extended course of treatment, the 
compliance plan should require the laboratory to monitor existing 
standing orders to ensure their continuing validity. We suggest that, 
consistent with State law requirements, a laboratory should contact all 
nursing homes from which the laboratory has received such standing 
orders and request that they confirm in writing the validity of all 
current standing orders. In addition, in accordance with State law, 
laboratories should verify standing orders relied upon at draw stations 
with the physician, physician's office staff, or such other persons 
authorized by law to order tests who have provided the standing orders 
to the laboratory. With respect to End Stage Renal Disease (ESRD) 
patients, at least once annually, laboratories should contact each ESRD 
facility or unit to request confirmation in writing of the continued 
validity of all existing standing orders.
5. Compliance with Applicable HHS OIG Fraud Alerts
    The HHS OIG periodically issues fraud alerts setting forth 
activities believed to raise legal and enforcement issues. Laboratory 
compliance plans should require that any and all fraud alerts issued by 
the OIG are carefully considered by the legal staff, chief compliance 
officer, or other appropriate personnel. Moreover, the compliance plans 
should require that a laboratory cease and correct any conduct 
criticized in such a fraud alert, if applicable to laboratories, and 
take reasonable action to prevent such conduct from recurring in the 
future. If appropriate, a laboratory should take the steps described in 
Section G regarding investigations, reporting and correction of 
identified problems.
6. Marketing
    Laboratory compliance plans should require honest, straightforward, 
fully informative and non-deceptive marketing. It is in the best 
interests of patients, physicians, laboratories and Medicare alike that 
physicians fully understand the services offered by the laboratory, the 
services that will be provided when tests are ordered, and the 
financial consequences for Medicare, as well as other payers, for the 
tests ordered. Accordingly, laboratories that market their services 
should ensure that their marketing information is clear, correct, non-
deceptive and fully informative.
7. Prices Charged Physicians for Profiles
    Laboratories are paid for their services by a variety of payers in 
addition to Medicare and other federally funded health care programs. 
Such payers often include health insurers, other health care providers, 
and physicians. The prices that laboratories charge, particularly to 
physicians and especially for profiles, raise compliance issues that 
should be addressed in a laboratory's written compliance policies. Such 
compliance policies should ensure that as tests are included in or 
added to profiles, the price for the enhanced profile increases and the 
overall price for the profile is never below cost. Laboratories that do 
not increase the price to a doctor for an enhanced profile or that 
charge below cost for an enhanced profile and then bill Medicare or 
another federally funded health care program the full third-party price 
for the profile components will be risking false claims and kickback 
enforcement actions.
8. Retention of Records
    Compliance programs should ensure that all records required either 
by Federal or State law or by the compliance plan are created and 
maintained. One of the best ways to confirm that a compliance plan is 
effective is through reports that reflect results. The creation of such 
documents will reach this goal, but it may also raise a variety of 
legal issues, such as patient privacy and confidentiality. These issues 
are best discussed with legal counsel.
9. Compliance As An Element of a Performance Plan
    To ensure that corporate integrity rises to the level of importance 
required of laboratories participating in Medicare

[[Page 9439]]

or other federally funded health care programs, compliance programs 
should require that the promotion of and adherence to compliance be an 
element in evaluating the performance of managers and supervisors. 
They, along with other employees, should be periodically trained in new 
compliance policies and procedures. In addition, all managers and 
supervisors involved in the sale, marketing, or billing of laboratory 
services, and those who oversee phlebotomists should: (1) Discuss with 
all supervised employees the compliance policies and legal requirements 
applicable to their function; (2) inform all supervised personnel that 
strict compliance with these policies and requirements is a condition 
of employment; and (3) disclose to all supervised personnel that the 
laboratory will take disciplinary action up to and including 
termination for violation of these policies or requirements. In 
addition to making performance of these duties an element in 
evaluations, the compliance officer or laboratory management may also 
choose to include in the laboratory's compliance plan a policy that 
managers and supervisors may be sanctioned for failure to adequately 
instruct their subordinates or for failing to detect non-compliance 
with applicable policies and legal requirements, where reasonable 
diligence on the part of the manager or supervisor would have led to 
the discovery of any problems or violations and given the laboratory 
the opportunity to correct them earlier.

B. Designation of a Compliance Officer (or Equivalent)

    Every laboratory compliance plan should require the designation of 
a chief compliance officer or an equivalent (e.g., committee). This 
individual should be responsible for developing compliance policies and 
standards, overseeing and monitoring the company's compliance 
activities, and achieving and maintaining compliance. The individual 
should be delegated sufficient authority by the Board of Directors (or 
other governing body) to undertake and comply with these 
responsibilities and should have open access to senior management and 
the governing body. Further, the chief compliance officer should 
develop and distribute to appropriate individuals all written 
compliance policies and procedures. These policies and procedures 
should be readily understandable by all employees (e.g., translated 
into other languages, if necessary) and at a minimum, should address 
the issues discussed herein.

C. Education and Training

    Laboratory compliance programs should require compliance and ethics 
training for all employees, especially personnel involved in billing, 
sales, marketing and specimen collection and/or test ordering. Such 
training should emphasize the company's commitment to compliance with 
all laws, regulations and guidelines of Federal and State programs. 
Training should be conducted at least annually and repeated at 
regularly scheduled times, using a variety of teaching methods and 
where appropriate, languages to ensure that all employees fully 
comprehend the implications of failing to comply with the laboratory's 
compliance plan and all applicable health care program requirements. 
The training and education program should cover the laboratory's 
compliance policies and should reinforce the fact that strict 
compliance with the law and laboratory policies is a condition of 
employment. Employees should be informed that failure to comply may 
result in disciplinary action, including termination. Training of sales 
and marketing personnel should highlight the prohibition against 
offering remuneration in return for referrals, and the fact that the 
laboratory will take appropriate disciplinary action up to and 
including termination for violations of the laws or failure to report a 
potential violation by another employee, supervisor or outside 
contractor or provider.
    In addition to compliance and ethics training, we believe that 
laboratory compliance plans also should address the need for periodic 
continuing education, which may be required by law or regulation for 
certain laboratory personnel, such as phlebotomists and laboratory 
technicians. Continuing education programs of this type will help 
ensure a knowledgeable and more productive staff.
    Laboratory compliance programs should leave no doubt in the minds 
of employees and others who are associated with the provider about the 
company's commitment to compliance with all laws, regulations and 
guidelines governing federally funded health care programs. Compliance 
should be one of the company's most important priorities. In addition 
to the compliance and ethics training and continuing education 
programs, a simple way to re-emphasize this message is to post in 
common work areas and other prominent places accessible to all 
employees a notice clearly reminding employees of the laboratory's 
commitment to compliance with all laws and regulations.

D. Communication

1. Access to the Compliance Officer
    An open line of communication between the compliance officer and 
his or her staff is critical to the successful implementation and 
operation of a compliance program. If fraud and abuse is going to be 
reduced, there should be an open door, complete anonymity, non-
retribution policy available to all employees to encourage 
communication. Working with or through the legal department can clarify 
the gray areas of interpretation of Medicare and Medicaid guidelines 
and regulations, but in all cases, the laboratory should encourage 
employees not to guess, but to ask if there is confusion or a question. 
Where appropriate, awards for reporting violations should be available.
2. Hotline
    There are many vehicles for developing a line of communication 
between the employee and the compliance office. Hotlines, e-mails, and 
written memoranda are examples of just a few. We suggest that 
laboratories make available to all employees a hotline telephone number 
which can be used to anonymously report suspected misconduct. 
Laboratories using a hotline should post in common work areas notices 
describing the hotline and providing the telephone number. Matters 
reported through the hotline that suggest violations of compliance 
policies or legal requirements should be investigated immediately to 
determine their veracity.

E. Auditing and Monitoring

    The OIG will be critical of compliance plans and programs that 
exist on paper but are not earnestly implemented or enforced. In 
addition to education and training programs, policies, and notices, a 
successful compliance program should require the thorough monitoring of 
its implementation and regular reporting to senior executives and 
members of the Board of Directors. Although many monitoring techniques 
are available, an effective tool to ensure enforcement is the 
performance of regular, periodic audits of the laboratory's operations, 
with particular attention paid to billing, sales, marketing, notices 
and disclosures to physicians, requisition forms, pricing, and 
activities of phlebotomists and others involved in the ordering of 
laboratory services. Such audits should be designed and implemented to 
ensure compliance with the laboratory's

[[Page 9440]]

compliance policies, the laboratory's compliance plan, and all 
applicable Federal and State laws. In addition, auditing should address 
issues related to contracts, competitive practices, marketing 
materials, CPT/HCPCS coding and billing, test information, reporting 
and record keeping.
    Quality assurance and zero tolerance of fraud and abuse should be 
the goal of the compliance division, and we believe that auditing is a 
good tool to use to reach that goal. Compliance audits should be 
conducted in accordance with pre-established comprehensive audit 
procedures and should include, at a minimum: (1) On-site visits; (2) 
interviews with personnel involved in management, operations, billing, 
sales, marketing, and other related activities; (3) reviews of written 
materials and documentation used by the laboratory; and (4) trend 
analysis studies. Formal audit reports should be prepared and submitted 
to the chief compliance officer and the Board of Directors or other 
governing body to ensure that laboratory management is aware of the 
results and can take whatever steps necessary to correct past problems 
and deter them from recurring. We suggest that the audit or other 
analytical reports specifically identify areas where corrective actions 
are needed. In certain cases, subsequent audits or studies would be 
advisable to ensure that the recommended corrective actions have been 
implemented and are successful.

F. Disciplinary Actions

    A viable compliance program must include the initiation of 
corrective and/or disciplinary action against individuals who have 
failed to comply with the laboratory's compliance policies and/or 
Federal or State laws or who have otherwise engaged in wrongdoing that 
has the potential of impairing the laboratory's status as a reliable, 
honest, trustworthy provider. The compliance program should include a 
written policy statement setting forth the degrees of disciplinary 
actions that can be imposed upon employees for failing to comply with 
the company's code of conduct, company policies, and the law. Employees 
must be advised and convinced that disciplinary action will be taken, 
and punishments enforced, for a discipline policy to have the required 
deterrent effect.

G. Corrective Action

1. Investigating, Reporting and Correcting Identified Problems
    a. Investigation: Violations of a laboratory's compliance program, 
failures to comply with Federal and/or State law, and other types of 
misconduct threaten a laboratory's status as a reliable, honest and 
trustworthy provider capable of participating in federally funded 
health care programs. Consequently, laboratory compliance programs 
should require that when the chief compliance officer or others 
involved in management of a laboratory learn of potential violations or 
misconduct, they promptly investigate the matter to determine whether a 
material violation has in fact occurred, so that if a violation has 
occurred, management can take steps to rectify it, report it to the 
government if necessary, and make any appropriate payments to the 
government. Depending on the nature of the allegations, the 
investigation into allegations of wrongdoing or misconduct will 
probably include interviews and review of relevant documents, such as 
submitted claims, test requisition forms, and laboratory test reports. 
Some laboratories may wish to engage outside auditors or counsel to 
assist them with the investigation.
    If an investigation of an alleged violation is undertaken and the 
compliance officer believes the integrity of the investigation may be 
at stake because of the presence of employees under investigation, the 
employee(s) allegedly involved in the misconduct probably should be 
removed from his/her current work activity until the investigation is 
completed. In addition, the laboratory should take steps to prevent the 
destruction of documents or other evidence relevant to the 
investigation. Once an investigation is completed, if disciplinary 
action is warranted, it should be immediate and imposed in accordance 
with the company's written standards of disciplinary action.
    b. Reporting: If management receives credible evidence of 
misconduct from any source and, after appropriate investigative 
inquiry, has reasonable grounds to believe that the misconduct either: 
(a) Violates criminal law, or (b) constitutes a material violation of 
the civil law, rules and regulations governing federally funded health 
care programs, then the laboratory should report the existence of the 
misconduct to the OIG as soon as possible. The OIG recommends that the 
laboratory give notice to the OIG of this type of misconduct within 
sixty (60) days after receipt of the credible evidence of misconduct. 
Such prompt reporting will demonstrate the laboratory's good faith and 
willingness to work with the government to correct and remedy the 
    When reporting misconduct to the government, a laboratory should 
give the OIG any evidence relating to the misconduct that the 
laboratory has, including evidence disclosed to the laboratory from 
another source. The laboratory then should continue to investigate the 
reported violation, and once finished, should notify DOJ and the OIG of 
the outcome of the investigation, including a description of the effect 
of the misconduct on the operation of federally funded health care 
programs or their beneficiaries. If the investigation ultimately 
reveals that criminal activity may have occurred, the appropriate State 
or Federal authorities should be notified immediately. As discussed 
below, the laboratory should also take appropriate corrective action, 
including prompt restitution of any damages to the government and the 
imposition of appropriate disciplinary action.
    c. Corrective Action: If the investigation reveals that misconduct 
did occur, corrective actions should be immediately initiated. For 
instance, if the investigation reveals that the laboratory has received 
overpayments, the laboratory should make prompt restitution of such 
sums to the appropriate federally funded health care program. Failure 
to repay the overpayment immediately could be interpreted as an 
intentional attempt to hide the overpayment from the government. For 
that reason, laboratory compliance programs and written policies and 
procedures should emphasize that monies to which the laboratory had no 
legal entitlement in the first place may not be legally retained and 
must be returned immediately. In addition to making prompt restitution 
and taking corrective action, the laboratory should take whatever 
disciplinary action is necessary to cure the problems identified by the 
investigation and prevent it from happening again.
2. Non-Employment or Retention of Sanctioned Individuals
    Compliance programs should prohibit the employment of individuals 
who have been convicted of a criminal offense related to health care or 
who are listed by a Federal agency as debarred, excluded or otherwise 
ineligible for participation in federally funded health care programs. 
In addition, until resolution of such criminal charges or proposed 
debarment or exclusion, individuals who are charged with criminal 
offenses related to health care or proposed for exclusion or debarment 
should be removed from direct responsibility for or involvement in any

[[Page 9441]]

federally funded health care program. If resolution results in 
conviction, debarment or exclusion of the individual, the laboratory 
should terminate its employment of that individual or company.


    These basic recommended elements coupled with other published 
regulations and guidelines are the foundation for a comprehensive 
compliance plan for clinical laboratories. On advice from in-house 
counsel and senior management, clinical laboratories should add to or 
modify these elements to better reflect the corporate structure of the 
laboratory, its mission, and its employee composition. The OIG believes 
that by implementing an effective compliance plan, a laboratory will 
achieve better quality control of claims submission and reduce the risk 
of future criminal and civil liabilities.

    Dated: February 24, 1997.
June Gibbs Brown,
Inspector General.
[FR Doc. 97-5192 Filed 2-28-97; 8:45 am]