[Federal Register Volume 64, Number 209 (Friday, October 29, 1999)]
[Notices]
[Pages 58419-58435]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28094]


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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

[[Page 58421]]

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

[[Page 58423]]

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

[[Page 58424]]

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:
---------------------------------------------------------------------------

    \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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

     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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

     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.
---------------------------------------------------------------------------

    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)).
---------------------------------------------------------------------------

    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

[[Page 58433]]

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