[Federal Register Volume 65, Number 52 (Thursday, March 16, 2000)]
[Notices]
[Pages 14289-14306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-6423]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General


Publication of the OIG Compliance Program Guidance for Nursing 
Facilities

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

ACTION: Notice.

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SUMMARY: This Federal Register notice sets forth the recently issued 
Compliance Program Guidance for Nursing Facilities developed by the 
Office of Inspector General (OIG). The OIG has previously developed and 
published compliance program guidance focused on several other areas 
and aspects of the health care industry. We believe that the 
development and issuance of this compliance program guidance for 
nursing facilities will continue to serve as a positive step toward 
promoting a higher level of ethical and lawful conduct throughout the 
entire health care industry.

FOR FURTHER INFORMATION CONTACT: Nicole C. Hall, Office of Counsel to 
the Inspector General, (202) 619-2078.

SUPPLEMENTARY INFORMATION:

Background

    The creation of compliance program guidances 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 guidances 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; hospices; and Medicare+Choice 
organizations offering coordinated care plans. The development of these 
types of compliance program guidances 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 web site at http://www.hhs.gov/oig.

Developing 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. We 
carefully considered those comments, as well as previous OIG 
publications, such as other compliance program guidances and Special 
Fraud Alerts, in developing a compliance program guidance for nursing 
facilities. In addition, we have 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. In an effort to ensure that all parties had a 
reasonable opportunity to provide input into a final product, the draft 
guidance for nursing facilities was published in the Federal Register 
on October 29, 1999 (64 FR 58419) for further comments and 
recommendations.

Elements for an Effective Compliance Program

    This compliance guidance for nursing facilities contains seven 
elements that the OIG has determined to be fundamental to an effective 
compliance program:
     implementing written policies, procedures and standards of 
conduct;
     designating a compliance officer and compliance committee;
     conducting effective training and education;
     developing effective lines of communication;
     enforcing standards through well-publicized disciplinary 
guidelines;
     conducting internal monitoring and auditing; 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 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.

Office of Inspector General's 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

[[Page 14290]]

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\ The OIG1 has issued compliance program guidances for the 
following seven industry sectors: hospitals, clinical laboratories, 
home health agencies, durable medical equipment suppliers, third-
party medical billing companies, hospices, and Medicare+Choice 
organizations offering coordinated care plans. Over the next year, 
the OIG plans to issue compliance guidances for ambulance companies 
and individual and small group physician practices.
    \2\ For the purpose of this guidance, the term ``nursing 
facility'' includes a skilled nursing facility (SNF) and a nursing 
facility (NF) that meet the requirements of sections 1819 and 1919 
of the Social Security Act (Act), respectively, 42 U.S.C. 1395i-3 
and 42 U.S.C. 1396r. Where appropriate, we distinguish between SNFs 
and other nursing facilities.
    \3\ The term ``Federal health care programs'' includes any plan 
or program that provides health benefits, whether directly, through 
insurance, or otherwise, which is funded directly, in whole or in 
part, by the United States Government (i.e., via programs such as 
Medicare, Federal Employees Health Benefits Act, Federal Employees' 
Compensation Act, Black Lung, or the Longshore and Harbor Worker's 
Compensation Act) or any State health plan (e.g., Medicaid, or a 
program receiving funds from block grants for social services or 
child health services). See 42 U.S.C. 1320a-7b(f). In this document, 
the term ``Federal health care program requirements'' refers to the 
statutes, regulations and other written directives governing 
Medicare, Medicaid, and all other Federal health care programs.
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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. 
For those nursing facilities that have an existing program or are 
already in the process of implementing a compliance program, these 
guidelines may serve as a benchmark against which to measure their 
ongoing efforts.
    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 likely will be ineffective and may expose the 
nursing facility to greater liability than if it had no 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 advance 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 Int'l Inc. Derivative Litig., 
698 A.2d 959, 970 (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 inquires concerning the application of the OIG's 
authorities and Special Fraud Alerts, setting forth activities that 
raise legal and enforcement issues. These documents, as well as 
reports from OAS and OEI can be obtained on the Internet at: http://www.hhs.gov/oig. We also recommend that nursing home providers 
regularly review the Health Care Financing Administration (HCFA) 
website on the Internet at: http://www.hcfa.gov, for up-to-date 
regulations, manuals, and program memoranda related to the Medicare 
and Medicaid programs.
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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, enhancing operational 
functions, improving the quality of health care services, and 
decreasing 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 payors, a nursing facility may gain numerous 
other benefits by voluntarily implementing a compliance program. The 
benefits may include:
     the formulation of effective internal controls to ensure 
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;
     an improvement in 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 prompt and 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\ For example, the OIG will consider the existence of an 
effective compliance program that pre-dated any governmental 
investigation when addressing the appropriateness of administrative 
sanctions. However, the burden is on the nursing facility to 
demonstrate the operational effectiveness of the compliance program. 
Further, the False Claims Act, 31 U.S.C. 3729-3733, provides that a 
person who has violated the Act, but who voluntarily discloses the 
violation to the Government within 30 days of detection, in certain 
circumstances will be subject to not less than double, as opposed to 
treble, damages. See 31 U.S.C. 3729(a). In addition, criminal 
sanctions may be mitigated by an effective compliance program that 
was in place at the time of the criminal offense. See note 11.
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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 revenues), number 
of locations, or corporate structure.

[[Page 14291]]

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 as others with more extensive 
resources. 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 occur in the statutes, 
regulations and rules of the Federal health care programs and private 
health plans. New 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 commitment \10\ 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 and ongoing operation of the 
compliance program.
    \11\ See United States Sentencing Commission Guidelines, 
Guidelines Manual, 8A1.2, Application Note 3(k). The Federal 
Sentencing Guidelines are detailed policies and practices for the 
Federal criminal justice system that prescribe the appropriate 
sanctions for offenders convicted of Federal crimes.
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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., 
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, and financial arrangements with 
physicians and outside contractors;
    (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 differences in the sizes and structures of nursing facilities 
may result in differences in the ways 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 to 
nursing facility residents and to ensure that deficiencies 
identified by surveyors are corrected should be incorporated into 
the compliance program's evaluation and monitoring functions.
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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, as 
applicable to those entities.\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 Sentencing Commission Guidelines, 
Guidelines Manual, 8A1.2, Application Note 3(d).

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[[Page 14292]]

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\ 
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.
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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 of conduct should be distributed to, and comprehensible 
by, all affected employees.\17\ Depending on 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, read, and will abide by the organization's 
code of conduct. These certifications, updated any time the code is 
revised or amended by the organization, should be 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 
the 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, summarize basic legal principles, and teach employees how 
to respond to practices that may violate the code of conduct. 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 and private payor 
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 many States require nursing facilities to 
have a policies and procedures manual and that most facilities have in 
place 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 
effectively 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 information on obtaining a set 
of all Medicare and Medicaid manuals.
    \20\ In addition, all providers should be aware of the 
enforcement priorities of Federal and State regulators and law 
enforcement agencies. OIG periodically issues Special Fraud Alerts 
and Special Advisory Bulletins that identify activities believed to 
raise enforcement concerns. These documents and other materials that 
provide insight into the nursing home enforcement priorities of the 
OIG are referenced throughout this guidance.
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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 record keeping 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 
problems identified. While there are many ways to accomplish this 
objective, comprehensive written 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

[[Page 14293]]

Nursing and the medical director. Inclusion and participation of direct 
care staff (e.g., nurses and nurses' aides who provide direct resident 
care) should be encouraged. This committee is best suited to establish 
measurable, outcome-based criteria that focus on vulnerabilities that 
adversely affect the care of residents. On a periodic basis, the 
committee should meet to identify 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 agegncies enter into agreements with DHHS 
under which they survey and make recommendations regarding whether 
providers meet the Medicare participation requirements or other 
requirements for SNFs and NFs. See 42 CFR 488.10, 488.12.
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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 
providing the care and services 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 that, at a minimum, must include Medicare 
requirements.\24\ In addition to these regulations, a facility should 
develop its own quality of care protocols and implement mechanisms for 
evaluating compliance with those protocols. As part of its ongoing 
commitment to quality care, the facility should implement a system that 
reviews each resident's outcomes and improves on those outcomes through 
analysis and modification of the delivery of care. After the care 
delivery protocols have been modified, the facility should re-analyze 
the residents' outcomes to assure that the modification had the desired 
result and has actually improved care. Although resident care protocols 
are a useful tool for maintaining or improving the quality of care, 
facilities should ensure that measurable resident outcomes are used to 
determine the adequacy of the care actually rendered.
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    \23\ 42 CFR 483.25. See OIG report OEI-02-98-00060 ``Quality of 
Care in Nursing Homes: An Overview,'' in which the OIG found that, 
although the overall number of deficiencies identified through the 
survey and certification process was decreasing, the number of 
``quality of care'' and other serious deficiencies was increasing.
    \24\ See 42 CFR part 483, which establishes requirements for 
long term care facilities. HCFA's regulations establish requirements 
that must be met for a nursing facility to qualify to participate in 
the Medicare and Medicaid programs. State licensure laws may impose 
additional requirements for the establishment and certification of a 
nursing facility.
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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 an annual State 
agency survey, Federal validation survey or complaint survey reflect 
noncompliance with the program requirements for nursing homes and can 
be the basis for enforcement actions.\25\ Those deficiencies identified 
by the State agency survey instrument must 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 ulcers, urinary incontinence and 
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 and timetables to meet the resident's 
medical, nursing, and 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 contraindicated. The Patient 
Self-Determination Act (Omnibus Budget Reconciliation Act of 1990, 
Pub. L. 101-508, sec. 4206 and 4751) requires health care 
institutions to educate patients about advance directives and to 
document their decision on life-sustaining treatments.
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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, 
malnutrition, and other clinical conditions. See http://www.hcfa.gov/medicaid/siq/siqhmpg.htm.
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     failure to accommodate individual resident needs and 
preferences; \28\
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    \28\ 42 CFR 483.15(e)(1).
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     failure to properly prescribe, administer and monitor 
prescription drug usage; \29\
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    \29\ The OIG has conducted a series of reviews that focused on 
prescription drug use in nursing homes. See OIG reports OEI-06-96-
00080, OEI-06-96-00081, OEI-06-96-00082--``Prescription Drug Use in 
Nursing Homes--Reports 1, 2 and 3.'' The OIG found that patients 
experienced adverse reactions to various drugs as a result of 
inappropriate prescribing and inadequate monitoring of medication 
usage. The reviews revealed serious concerns, including residents 
receiving drugs for which their medical records lacked evidence of a 
prescription and the prescription of drugs judged inappropriate for 
use by elderly persons. The studies also found that medication 
records were often incomplete and not readily accessible, making it 
difficult for a pharmacist to identify or confirm drug regimens or 
problems.
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     inadequate staffing levels or insufficiently trained or 
supervised staff to provide medical, nursing, and related services; 
\30\
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    \30\ For example, Federal regulations require that the medical 
care of each resident be supervised by a physician, who must see the 
resident at least once every 30 days for the first 90 days after 
admission and at least once every 60 days thereafter. See 42 CFR 
483.40(c). The facility also must retain the services of a 
registered nurse for at least 8 consecutive hours a day, 7 days a 
week (42 CFR 483.30), as well as a qualified dietitian (42 CFR 
483.35). In addition to these basic Federal requirements, the OIG 
strongly believes that the facility should conform to State-mandated 
staffing levels where they exist and, in addition, adopt its own 
minimum ``hours per patient'' (or acuity) staffing standards. A 
facility should ensure that it has a sufficient number of staff, 
including registered nurses (RNs), Licensed Practical Nurses (LPNs,) 
Certified Nurses Assistants (CNAs) and Nursing Assistants 
(collectively ``Nursing Staff'') and other health care professionals 
to fully meet the needs of all of its residents. Sufficient staff 
should be provided to ensure that residents receive nursing and 
other health care services on a 24-hour basis that allows each 
resident to attain or maintain the highest practicable physical, 
mental and psychosocial well-being as determined by individual 
resident assessments and plans of care. A facility should establish 
staffing standards on a facility-specific (or, often more 
appropriately, a unit-specific) basis that reflect the acuity level 
and needs of the residents. The use of an acuity level/staffing 
ratio model gives the facility the ability to adjust staffing levels 
as resident needs fluctuate, as well as a basis for conducting 
compliance audits. On an ongoing basis, the compliance officer 
should monitor the facility's compliance with the staffing ratios 
established by the quality assurance committee, to ensure that the 
facility maintains staffing levels sufficient to serve resident 
needs. At the heart of many quality of care deficiencies is a lack 
of adequate staff needed to provide basic nursing services.

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[[Page 14294]]

     failure to provide appropriate therapy services; \31\
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    \31\ See OIG report OEI-09-97-00120 ``Medical Necessity of 
Physical and Occupational Therapy in Skilled Nursing Facilities,'' 
which found a high rate of medically unnecessary therapies in a 
number of nursing facilities; such unnecessary services may lead to 
inappropriate care. See also OAS Report A-06-99-00058 ``Infusion 
Therapy Services Provided in Skilled Nursing Facilities,'' which 
found similar problems with unnecessary infusion therapy services. 
With the introduction of the prospective payment system, nursing 
facilities should ensure that financial pressures do not create 
incentives to underutilize medically necessary therapeutic services.
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     failure to provide appropriate services to assist 
residents with activities of daily living (e.g., feeding, dressing, 
bathing, etc.);
     failure to provide an ongoing activities program to meet 
the individual needs of all residents; and
     failure to report incidents of mistreatment, neglect, or 
abuse to the administrator of the facility and other officials as 
required by law.\32\
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    \32\ In addition to providing the facility's management 
important information about the state of care in the facility, the 
self-reporting of resident abuse, including injuries of unknown 
sources, is a condition of participation. See 42 CFR 483.13(c)(2). 
Although State surveyors conduct complaint surveys when they receive 
a complaint, these surveys can only occur if the surveyors are aware 
of the problem.
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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. The quality of life for nursing home residents can be improved 
most directly by effectively addressing these risk areas with written 
policies and procedures, which are then implemented through effective 
training programs and supervision.
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.\33\ In addition, many States have adopted specific 
lists of residents' rights.\34\ The nursing facility's policies should 
address the residents' right to a dignified existence that promotes 
freedom of choice, self-determination, and reasonable accommodation of 
individual needs. To protect the rights of each resident, the OIG 
recommends that a provider address the following risk areas as part of 
its compliance policies:
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    \33\ See generally, 42 U.S.C. 1395i-3 and 42 CFR part 483.
    \34\ In OIG report OEI-02-98-00350 ``Long Term Ombudsman 
Program: Complaint Trends,'' the OIG points out that complaints 
about resident care and resident rights have been increasing. 
Resident care concerns included complaints about personal care, such 
as pressure ulcers and hygiene, lack of rehabilitation, the 
inappropriate use of restraints, abuse and neglect, problems with 
admissions and eviction, and the exercise of personal rights. Some 
ombudsmen observed that the increasing number of complaints could be 
due to a greater presence of ombudsmen staff in nursing homes. 
However, a comparison of each State's staffing ratio and visitation 
rate to their complaint ratio found that States with more staff and 
more frequent visits did not necessarily have more complaints.
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     discriminatory admission or improper denial of access to 
care; \35\
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    \35\ Nursing facilities must offer care to all residents who are 
eligible in accordance with Federal and State laws governing 
admissions. See 42 CFR 483.12(d). The provider also must maintain 
identical policies regarding ``transfer, discharge, and provision of 
services under the State plan'' for all residents, regardless of 
payment source. See 42 CFR 483.12(c). See also OIG report OEI-02-99-
00401 ``Early Effects of the Prospective Payment System on Access to 
Skilled Nursing Facilities.'' It also is inappropriate to condition 
admission on a prospective resident's agreement to hold the facility 
harmless for injuries or poor care provided to the individual.
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     verbal, mental or physical abuse, corporal punishment and 
involuntary seclusion; \36\
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    \36\ See California Nursing Homes: Care Problems Persist Despite 
Federal and State Oversight, GAO/HEHS-98-202 (July 1998). As noted 
previously, the facility must establish a process by which the 
facility administrator and other officials in accordance with State 
law (including the State survey and certification agency) are 
informed of incidents of abuse and an investigation is conducted 
within 5 days of the incident. See 42 CFR 483.13(c)(4).
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     inappropriate use of physical or chemical restraints; \37\
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    \37\ 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 personal privacy and 
access to their personal records upon request and that the privacy and 
confidentiality of those records are protected; \38\
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    \38\ It is a violation of the Medicare participation 
requirements to make unauthorized disclosures from the resident's 
medical records. See 42 CFR 483.10(e). The facility also must 
establish policies that respect each resident's right to privacy in 
personal communications, including the right to receive mail that is 
unopened and to the use of a telephone where calls can be made in 
privacy. See 42 CFR 483.10(i) and (k).
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     denial of a resident's right to participate in care and 
treatment decisions; \39\ and
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    \39\ The right of self-determination includes the resident's 
right to choose a personal physician, to be fully informed of his or 
her health status, and participate in advance in treatment 
decisions, including the right to refuse treatment, unless adjudged 
incompetent or incapacitated. See 42 CFR 483.10(d).
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     failure to safeguard residents' financial affairs.\40\
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    \40\ This includes preserving the resident's right to manage his 
or her financial affairs or permit the facility to hold and manage 
personal funds. The resident must receive a full and complete 
accounting of personal funds held by the facility. See 42 CFR 
483.10(c). If misappropriation of a resident's property is 
uncovered, the facility administrator and other officials, in 
accordance with State law, must be notified immediately and an 
investigation conducted. Finally, the provider must take measures to 
ensure that personal funds have not been used to pay for items or 
services paid for by Medicare or Medicaid. Id.
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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. These types of 
abusive practices also have had an adverse financial impact on private 
health insurance plans and their subscribers. 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.\41\ These fraudulent billing 
practices, as well as abuses in other risk areas that are described in 
this compliance program guidance, 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 component of a nursing facility's 
compliance program.
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    \41\ See OIG report A-17-99-00099 ``Improper Fiscal Year 1998 
Fee-for-Service Payments,'' in which the OIG estimated that improper 
Medicare benefit payments made during fiscal year 1998 totaled $12.6 
billion in processed fee-for-service payments. SNF payment errors 
were a result of claims for services lacking medical necessity and 
represented 7 percent of the total estimated improper payments. The 
OIG could not and did not quantify what percentage of the improper 
payments was the result of fraud. Significantly, it was only through 
a review of medical records that the majority of these billing 
errors were detected, since when the claims were submitted to the 
Medicare contractor, they contained no visible errors.

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[[Page 14295]]

    The introduction of a prospective payments system (PPS) for 
Medicare SNFs, consolidated billing of all services furnished to a 
resident in a covered Part A stay and the forthcoming implementation of 
consolidated billing for SNF residents in a Part B stay create 
additional issues to be addressed when designing billing and cost 
reporting compliance policies and procedures.\42\ In the following 
discussion of billing risk areas, the OIG has attempted to identify 
issues that pose concerns under the current systems of reimbursement 
and 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:
     billing for items or services not rendered or provided as 
claimed;\43\
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    \42\ The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), 
established PPS for SNFs. Under PPS, all costs (routine, ancillary, 
and capital) related to services furnished to beneficiaries covered 
under Part A, including certain Part B services, are paid a 
predetermined per diem amount. This amount is based on the medical 
condition and needs of the resident, as reflected in the Resource 
Utilization Group (RUG) code assigned to that resident. The BBA also 
required consolidated billing for SNFs. Under consolidated billing, 
all services provided by the SNF, including those furnished under 
arrangements with an outside supplier, for a resident of a SNF in a 
covered Part A stay are included in the SNF's Part A bill. If a 
resident is not in a covered Part A stay, under consolidated 
billing, the SNF still bills for all services furnished to the 
resident (except for those services specifically excluded from 
consolidated billing). However, the implementation of consolidated 
billing with respect to services furnished to residents in a Part B 
stay has been delayed indefinitely, and various ancillary services 
continue to be reimbursed separately to outside suppliers until 
further notice. See HCFA Program Memorandum (PM) Transmittal No. AB-
98-35 (July 1998); PM Transmittal No. AB-98-45 (August 1998); and PM 
Transmittal No. AB-99-90 (Dec. 1999).
    \43\ For example, the OIG has investigated suppliers of 
ancillary services that improperly bill for an hour of therapy when 
only a few minutes were provided. Similarly, vendors that knowingly 
submit a claim for an expensive prosthetic device when the resident 
only received non-covered adult diapers have been the subject of 
enforcement actions. When consolidated billing is implemented, 
vendors will not submit bills directly to Medicare for such 
services. As the entity submitting the claim, the nursing facility 
will need to have any certifications or orders necessary to provide 
the service, as well as any required supporting documentation, to 
receive payment.
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     submitting claims for equipment, medical supplies and 
services that are medically unnecessary; \44\
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    \44\ Billing for medically unnecessary services, supplies and 
equipment involves seeking reimbursement for a service that is not 
warranted by a resident's documented medical condition. See 42 
U.S.C. 1395y(a)(1)(A) (``no payment may be made under part A or part 
B [of Medicare] for any expenses incurred for items or services 
which * * * are not reasonable and necessary for the diagnosis or 
treatment of illness or injury or to improve the functioning of the 
malformed body member''). At the same time, nursing facilities are 
required to provide the services necessary to attain or maintain the 
highest practicable physical, mental and psychosocial well-being of 
each resident. See 42 U.S.C. 1395i-3(b)(2) and 1396r(b)(2). In order 
to meet these obligations, nursing homes should formulate policies 
and procedures that include periodic clinical reviews, both prior 
and subsequent to billing for services, as a means of verifying that 
patients receive appropriate services.
    In the Special Fraud Alert ``Fraud and Abuse in the Provision of 
Services in Nursing Facilities'' (June 1996), the OIG identified 
several types of fraudulent arrangements through which health care 
providers inappropriately billed Medicare and Medicaid for 
unnecessary or non-rendered items and services. Under PPS, the 
provision of unnecessary services may take a different form. As 
discussed below, manipulation of the Minimum Data Set (MDS) to fit a 
resident into a higher RUG can result in the provision of medically 
unnecessary services. In addition, a nursing facility may not enter 
into arrangements with providers of ancillary services through which 
the facility overutilizes services reimbursed under Part B in return 
for an offset in the cost of items or services covered under Part A.
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     submitting claims to Medicare Part A for residents who are 
not eligible for Part A coverage; \45\
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    \45\ In order for a SNF stay to be covered by Medicare, the 
beneficiary must have a preceding three-day inpatient hospital stay. 
Observational stays and emergency room care do not qualify towards 
the 3-day hospital stay requirement. In addition, Medicare Part A 
benefits in skilled nursing facilities are limited to beneficiaries 
who require skilled services rendered by technical or professional 
personnel in a skilled nursing setting. See 42 CFR 409.31. Knowingly 
misrepresenting the nature or level of services provided to a 
Medicare beneficiary to circumvent the program's limitation is 
fraudulent.
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     duplicate billing; \46\
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    \46\ Duplicate billing occurs when the nursing facility bills 
for the same item or service more than once or when a vendor bills 
the Federal health care program for an item or service also billed 
by the facility. Although duplicate billing can occur due to simple 
error, the knowing submission of duplicate claims--which is 
sometimes evidenced by systematic or repeated double billing--can 
create liability under criminal, civil, or administrative law. A 
recent OIG survey of SNF PPS claims found a significant number of 
erroneous payments made by the Medicare carrier for services for 
which payments were already included in the SNF's PPS payment. As 
Medicare continues the implementation of consolidated billing, 
facilities should modify all agreements with vendors to require that 
the vendor bill the facility for those services covered under 
consolidated billing requirements and not submit bills directly to 
Medicare for such services. Communication mechanisms also should be 
established to ensure duplicative billings do not occur. For 
example, a facility may wish to flag a referral to an outpatient 
provider as a ``PPS resident'' and inform the provider that the 
nursing home will be responsible for billing Medicare for the 
ancillary services.
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     failing to identify and refund credit balances; \47\
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    \47\ A credit balance is an excess payment made to a health care 
provider as a result of patient billing or claims processing error. 
Nursing facilities should institute procedures to provide for the 
timely identification, accurate reporting and repayment of credit 
balances. In addition, the provider should promptly repay if a 
resident is also entitled to a credit. See OIG reports OEI-07-09-
00910 ``Medicare Credit Balances in Skilled Nursing Facility Patient 
Accounts'' and OEI-07-09-00911 ``Medicaid Credit Balances in Skilled 
Nursing Facility Patient Accounts,'' in which the OIG found that 
skilled nursing facilities were not accurately or completely 
adjusting and reporting credit balance amounts due to the Medicare 
and Medicaid programs. Significantly, the intentional concealment of 
a known overpayment may expose a provider to criminal sanctions (see 
42 U.S.C. 1320a-7b(a)(3)), and civil liability under the False 
Claims Act.
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     submitting claims for items or services not ordered; \48\
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    \48\ Billing for services or items not ordered involves seeking 
reimbursement for services provided but not ordered by the treating 
physician or other authorized person.
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     knowingly billing for inadequate or substandard care; \49\
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    \49\ See discussion on quality of care standards in nursing 
facilities in section II.B.2.a above and the accompanying notes. 
Although the OIG is not suggesting that each and every survey 
citation or failure to meet the applicable standard of care is a per 
se violation of the False Claims Act (or a criminal, other civil, or 
administrative violation), knowingly billing for nonexistent or 
substandard care, items, or services may give rise to criminal, 
civil, and/or administrative liability.
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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; \50\
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    \50\ Upcoding involves the selection of a billing code that is 
not the most appropriate descriptor of the service or condition, in 
order to maximize reimbursement. Under PPS, upcoding may take the 
form of ``RUG creep.'' RUG creep occurs when a provider falsely or 
fraudulently completes the MDS, which results in assigning a 
resident to a higher RUG category.
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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; \51\
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    \51\ A related risk area involves bill splitting schemes. This 
billing abuse usually takes the form of manipulating the billing for 
procedures to create the appearance that the services were rendered 
over a period of days when, in fact, all treatment occurred during 
one visit.
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     billing residents for items or services that are included 
in the per diem rate or otherwise covered by the third-party payor;
     altering documentation or forging a physician signature on 
documents used to verify that services were ordered and/or provided; 
\52\
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    \52\ The OIG has investigated a number of cases where signatures 
were forged, either to fabricate evidence that a physician ordered 
equipment or services or to create a paper trail in support of items 
or services that were never provided.

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[[Page 14296]]

     failing to maintain sufficient documentation to support 
the diagnosis, justify treatment, document the course of treatment and 
results, and promote continuity of care; and
     false cost reports.\53\
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    \53\ Nursing homes are required to submit various reports to 
Federal and State agencies in connection with facility operations 
and to receive reimbursement for the care provided to program 
beneficiaries. Because program payments are in part based on self-
reported operating costs, providers must implement procedures to 
ensure that these reports are prepared as accurately as possible. 
This should include measures to ensure that adequate documentation 
exists to support information provided in the report, non-allowable 
costs are appropriately identified and removed, and related party 
transactions are treated consistent with program requirements. See 
42 CFR part 413. If the provider intends to claim costs in non-
conformity with program rules, those items should be flagged in a 
letter accompanying the cost report.
    Prior enforcement actions involving nursing home cost reports 
have focused on nursing facilities that claimed salary expenses for 
employees who did not exist, inflated the number of residents 
served, included non-reimbursable costs with nursing home-related 
expenses, inappropriately shifted costs to cost centers that were 
below the reimbursement cap, and shifted non-Medicare related costs 
to Medicare cost centers.
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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. A key component of ensuring accurate 
information is the proper and ongoing training and evaluation of the 
staff responsible for coding diagnoses and regular internal audits of 
coding policies and procedures. With the arrival of consolidated 
billing and the next edition of the coding manuals, it will be even 
more critical that knowledgeable individuals are performing these 
coding tasks.
    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 have their Medicare 
payments suspended (42 CFR 405.371), be excluded from program 
participation (42 U.S.C. 1320a-7(b)), or, in lieu of exclusion, be 
required by the OIG to execute a corporate integrity agreement (CIA). 
\54\
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    \54\ The CIA imposes reporting requirements, independent audits, 
and other procedures on providers who have demonstrated an inability 
or unwillingness to independently adopt these measures. It is 
clearly in a provider's best interest to avoid the implementation of 
a CIA by instituting its own prevention, detection, and disclosure 
mechanisms.
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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.\55\ 
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(i); 
or exclusion from participation in the Federal health care programs. 
Because many of the services provided in nursing facilities are 
furnished under arrangement with non-employee personnel, including 
registry and personnel agency staff, the nursing facility also should 
require these individuals to be subject to the same scrutiny by their 
agency prior to placement in the facility.
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    \55\42 CFR 483.13(c)(1).
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    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, financial misconduct, or other offenses related to the 
particular job.\56\
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    \56\ In OIG report A-12-97-0003 ``Safeguarding Long Term Care 
Residents,'' it was noted that, although no Federal requirement 
exists for criminal background checks on nursing home staff, 33 
States currently require that such checks occur. However, there 
appears to be great diversity in the way States identify, 
investigate, and report suspected abuse of nursing home residents.
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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. \57\ In 
addition, if the facility has notice that an employee or contractor is 
currently charged with a criminal offense related to the delivery of 
health care services or is proposed for exclusion during his or her 
employment or contract, the facility should 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.\58\ If resolution of the matter results in 
conviction, debarment, or exclusion, the nursing facility should 
terminate its employment or contract arrangement with the individual.
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    \57\ The effect of an OIG exclusion from Federal health care 
programs is that no Federal health care program payment may be made 
for any items or services: (1) furnished by an excluded individual 
or entity; or (2) directed or prescribed by an excluded physician. 
See 42 CFR 1001.1901. An excluded individual or entity that submits 
a claim for reimbursement to a Federal health care program, or 
causes such a claim to be submitted, may be subject to a civil money 
penalty of $10,000 for each item or service furnished during the 
period that the person or entity was excluded. See 42 U.S.C. 1320a-
7a(a)(1)(D). The individual or entity also may be subject to treble 
damages for the amount claimed for each item or service. See 42 
U.S.C. 1320a-7a(a). See also OIG Special Advisory Bulletin ``The 
Effect of Exclusion From Participation in Federal Health Care 
Programs'' (September 1999).
    \58\ Likewise, the facility should establish standards 
prohibiting the execution of contracts with companies that recently 
have been convicted of a criminal offense related to health care or 
that are listed by a Federal agency as debarred, excluded, or 
otherwise ineligible for participation in Federal health care 
programs. Prospective employees or contractors that have been 
officially reinstated into the Medicare and Medicaid programs by the 
OIG may be considered for employment upon proof of such 
reinstatement.
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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 applicable licensing and certification authorities to verify that 
requisite licenses and certifications are in order; \59\
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    \59\ Among the sources of information on prospective employees 
are the State registry of nurses' aides, which provides a list of 
nurse aides that have successfully completed training and competency 
evaluations and the National Practitioner Data Bank (NPDB). The NPDB 
is a database that contains information about physicians subject to 
medical malpractice payments, sanctions by boards of medical 
examiners or State licensing boards, adverse clinical privilege 
actions, and adverse professional society membership actions. Health 
care entities can have access to this database to seek information 
about their own medical or clinical staff, as well as prospective 
employees or physician contractors.
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     require all potential employees to certify (e.g., on the 
employment application) 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;
     require temporary employment agencies to ensure that 
temporary staff assigned to the facility have undergone background 
checks that verify that they have not been convicted of an offense

[[Page 14297]]

that would preclude employment in the facility;
     check 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; \60\
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    \60\ The OIG ``List of Excluded Individuals/Entities'' provides 
information to health care providers, patients, and others regarding 
individuals and entities that are excluded from participation in 
Medicare, Medicaid, and other Federal health care programs. This 
report, in both an on-line searchable and downloadable database, can 
be located on the Internet at http://www.hhs.gov/oig. In addition, 
the General Services Administration maintains a monthly listing of 
debarred contractors, ``List of Parties Excluded From Federal 
Procurement and Nonprocurement Programs,'' at http://epls.arnet.gov.
    The OIG sanction information is readily available to users in 
two formats on over 15,000 individuals and entities currently 
excluded from program participation through action taken by the OIG. 
The on-line searchable database allows users to obtain information 
regarding excluded individuals and entities sorted by: (1) the legal 
bases for exclusions; (2) the types of individuals and entities 
excluded by the OIG; and (3) the States where excluded individuals 
reside or entities do business.
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     require current employees to report to the nursing 
facility if, subsequent to their employment, they are convicted of an 
offense that would preclude employment in a nursing facility or are 
excluded from participation in any Federal health care program; and
     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. \61\
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    \61\ The introduction of PPS and consolidated billing for 
Medicare Part B services means that vendors and their subcontractors 
no longer submit bills directly to Medicare for their services. 
Instead, the nursing facility will be submitting consolidated bills 
for certain services provided to residents. Because of the new 
responsibilities that are imposed on nursing facilities under these 
reimbursement schemes, the facility may be held responsible if it 
claims reimbursement for items or services provided by a contractor 
that has been excluded.
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    Regardless of the size or resources of the nursing facility, 
employee screening is critical. 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,\62\ the Stark physician 
self-referral law \63\ and other relevant Federal and State laws by 
providing guidance in situations that could lead to a violation of 
these laws.\64\ 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, in his or her roles as medical director and/or attending 
physician, a physician frequently can influence the utilization of 
ancillary services.\65\ 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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    \62\ The anti-kickback statute provides criminal penalties for 
individuals and entities that knowingly offer, pay, solicit or 
receive bribes, kickbacks, or other remuneration in order to induce 
business reimbursable by Federal health care programs. See 42 U.S.C. 
1320a-7b(b). Civil penalties and exclusion from participation in the 
Federal health care programs may also result from a violation of the 
prohibition. See 42 U.S.C. 1320a-7a(a)(5) and 1320a-7(b)(7).
    \63\ The Stark physician self-referral law prohibits a physician 
from making a referral to an entity with which the physician or any 
member of the physician's immediate family has a financial 
relationship, if the referral is for the furnishing of designated 
health services. See 42 U.S.C. 1395nn.
    \64\ The OIG has issued several advisory opinions applying the 
anti-kickback statute to arrangements that affect nursing 
facilities. The opinions are available on the Internet at http://www.hhs.gov/oig.
    \65\ Contracts between the facility and any entity in which the 
facility's medical director has a financial interest may be subject 
to the Stark law and should be reviewed and approved by legal 
counsel.
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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; 
\66\
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    \66\ In the OIG Special Fraud Alert ``Routine Waiver of Part B 
Co-payments/Deductibles'' (May 1991), the OIG describes several 
reasons why routine waivers of these cost-sharing amounts pose abuse 
concerns. The Alert sets forth the circumstances under which it may 
be appropriate to waive these amounts.
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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; \67\
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    \67\ In the Special Fraud Alert ``Fraud and Abuse in Nursing 
Home Arrangements with Hospices'' (March 1998), the OIG sets out the 
vulnerabilities in nursing home arrangements with hospices. The 
Alert provides several examples of questionable arrangements between 
hospices and nursing homes that could inappropriately influence the 
referral of patients. Examples include the offering of free goods or 
goods at below fair market value to induce a nursing home to refer 
patients to the hospice. Other examples demonstrating vulnerability 
to fraud and abuse include: (1) a hospice paying for room and board 
in excess of the amounts the nursing home would normally charge or 
receive from Medicaid; (2) a hospice paying for additional services 
that should be already included in the room and board payment; and 
(3) a hospice referring patients to the nursing home in return for 
the nursing home's referral to the hospice. While the Special Fraud 
Alert focused on arrangements with hospices, nursing facilities 
should adopt policies that prohibit similar questionable 
arrangements with all health care providers.
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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; \68\
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    \68\ Providers should establish clear policies governing gift-
giving, because such exchanges may be viewed as inducements to 
influence business decisions. Offering or providing any gift of more 
than nominal value to any beneficiary may be done with the intent to 
inappropriately influence health care decisions of the beneficiary 
or his or her family. Similarly, accepting gifts, hospitality, or 
entertainment from a source that is in a position to benefit from 
the referral of business, raises concerns that the gift may 
influence the employee's independent judgment. If the provider 
decides to allow employees to accept gifts or other gratuities below 
a certain nominal value or in an aggregate amount below an 
established amount per year, the provider should consider requiring 
employees to report those gifts.
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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 required to be paid 
under the State Medicaid plan; \69\
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    \69\ See 42 U.S.C. 1320a-7b(d)(2), which prescribes criminal 
penalties for knowingly and willfully charging for services provided 
to a Medicaid patient in excess of the rates established by the 
State. See also 42 CFR 483.12(d).
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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; \70\
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    \70\ Under PPS, the payment rates represent payment in full, 
subject to applicable coinsurance. This includes payment for all 
costs associated with furnishing covered SNF services to Medicare 
beneficiaries. It is impermissible for a hospital to pay for SNF 
services if it were to do so only for those residents who are 
Medicare beneficiaries discharged from that hospital. However, it 
would be permissible for a hospital to provide or pay for items or 
services that are furnished to SNF residents generally, if such 
payments are made without regard to the payment source for the 
individual resident. In addition, a hospital and a SNF can enter 
into a permissible bed reservation agreement. See Provider 
Reimbursement Manual, Part I, section 2105.3.

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[[Page 14298]]

     financial arrangements with physicians, including the 
facility's medical director; \71\
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    \71\ All physician contracts and agreements should be reviewed 
to avoid violation of the anti-kickback, self-referral, and other 
relevant Federal and State laws. The OIG has published safe harbors 
that define practices not subject to the anti-kickback statute, 
because such arrangements would be unlikely to result in fraud or 
abuse. Failure to comply with a safe harbor provision does not make 
an arrangement per se illegal. Rather, the safe harbors set forth 
specific conditions that, if fully met, would assure the entities 
involved of not being prosecuted or sanctioned for the arrangement 
qualifying for the safe harbor. One such safe harbor applies to 
personal services contracts. See 42 CFR 1001.952(d).
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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; \72\
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    \72\ See OIG Special Fraud Alert ``Fraud and Abuse in the 
Provision of Medical Supplies to Nursing Facilities'' (August 1995). 
As well as violating the anti-kickback statute, both the supplier 
and the nursing facility may be liable for false claims if the 
medically unnecessary items are billed to Federal health care 
programs. See also OIG Advisory Opinion 99-2 (February 1999).
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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; \73\
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    \73\ In addition to raising concerns related to the anti-
kickback statute, the unauthorized disclosure of confidential 
records violates the resident's rights. See 42 CFR 483.10(e).
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     joint ventures with entities supplying goods or services; 
\74\ and
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    \74\ See OIG Special Fraud Alert ``Joint Venture Arrangements'' 
(August 1989); OIG Special Fraud Alert ``Fraud and Abuse in the 
Provision of Services in Nursing Facilities'' (May 1996).
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     swapping.\75\
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    \75\ ``Swapping'' occurs when a supplier gives a nursing 
facility discounts on Medicare Part A items and services in return 
for the referrals of Medicare Part B business. With swapping, there 
is a risk that suppliers may offer a SNF an excessively low price 
for items or services reimbursed under PPS in return for the ability 
to service and bill nursing facility residents with Part B coverage. 
See OIG Advisory Opinion 99-2 (February 1999).
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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. Most of these 
documents are readily available on the Internet. 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. Creation and Retention of Records
    When implementing a compliance program, nursing facilities should 
provide for the development and implementation of a records system that 
ensures complete and accurate medical record documentation. This system 
should establish policies and procedures regarding the creation, 
distribution, retention, and destruction of documents. Policies should 
provide for the complete, accurate, and timely documentation of all 
nursing and therapy services, including subcontracted services, as well 
as MDS information. In designing a records systems, privacy concerns 
and regulatory requirements also 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; \76\
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    \76\ Medical record documentation should support the medical 
necessity of the services provided as well as the level of service 
billed.
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     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.\77\
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    \77\ Among the materials useful in documenting the compliance 
program are employee certifications relating to training and other 
compliance initiatives, copies of compliance training materials, and 
hotline logs and any corresponding reports of investigation, 
outcomes, and employee disciplinary actions. In addition, the 
facility should keep all relevant correspondence with carriers, 
fiscal intermediaries, private health insurers, HCFA, and State 
survey and certification agencies.
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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;
     limit access to such documentation to avoid accidental or 
intentional fabrication or destruction of records; \78\ and
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    \78\ In addition to prohibiting the falsification and backdating 
of records, the provider should have clear guidelines, consistent 
with applicable professional and legal standards, that set out those 
individuals with authority to make entries in the medical record and 
the circumstances when late entries may be made in a record.
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     conform document retention and destruction policies to 
applicable laws.
    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 work toward the 
goal of developing 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 the promotion of, and adherence 
to, the elements of the compliance program to be a factor in evaluating 
the performance of all employees. Employees should be periodically 
trained in new compliance policies and procedures. In addition, 
policies should require that managers, especially those

[[Page 14299]]

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.\79\ 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. \80\ 
The officer should have sufficient funding and staff to perform his or 
her responsibilities fully.
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    \79\ For multi-facility organizations, the OIG encourages 
coordination with each facility owned by the corporation through the 
use of a headquarter's compliance officer, communicating with 
parallel positions or compliance liaison in each facility or 
regional office, as appropriate.
    \80\ The OIG believes it is not advisable for the compliance 
function to be subordinate to the nursing facility's general 
counsel, or comptroller or similar financial officer. Free-standing 
compliance functions help to ensure independent and objective legal 
reviews and financial analysis of the institution's compliance 
efforts and activities. By separating the compliance function from 
the key management positions of general counsel or chief financial 
officer (where the size and structure of the nursing facility make 
this a feasible option), a system of checks and balances is 
established to more effectively achieve the goals of the compliance 
program.
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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. Particularly in a small facility, 
the compliance officer may need to rely on the expertise of several 
professionals within the facility to carry out all of his or her 
responsibilities. For example, the compliance officer may need the 
payment specialist to help with billing issues, the director of nursing 
to address quality of care issues, etc. At the same time, the 
compliance officer must retain the integrity and objectivity not to 
compromise the program in deference to one or more disciplines or 
departments.
    The compliance officer's primary responsibilities should include:
     overseeing and monitoring implementation of the compliance 
program;
     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 residents' rights as 
well as requirements of the nursing facility's compliance program 
applicable to the services they provide;
     coordinating personnel issues with the nursing facility's 
Human Resources/Personnel office (or its equivalent) to ensure that (i) 
the National Practitioner Data Bank \81\ has been checked with respect 
to all medical staff and independent contractors (as appropriate) and 
(ii) the OIG's List of Excluded Individuals/Entities \82\ has been 
checked with respect to all employees, medical staff, and independent 
contractors; \83\
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    \81\ See note 59.
    \82\ See note 60.
    \83\ The compliance officer may also have to ensure that the 
criminal backgrounds of employees have been checked depending upon 
State requirements or nursing facility policy.
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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.\84\
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    \84\ There are many approaches the compliance officer may enlist 
to maintain the vitality of the compliance program. Periodic on-site 
visits of nursing facility operations, bulletins with compliance 
updates and reminders, distribution of audiotapes or videotapes on 
different risk areas, lectures at management and employee meetings, 
and circulation of recent health care articles covering fraud and 
abuse are some examples of approaches the compliance officer can 
employ.
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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

[[Page 14300]]

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.
    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 designating compliance liaisons 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.\85\ 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.\86\ 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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    \85\ The compliance committee benefits from having the 
perspectives of individuals with varying responsibilities in the 
organization, such as operations, finance, audit, human resources, 
and clinical management (e.g., the medical director), as well as 
employees and managers of key operating units. The compliance 
officer should be an integral member of the committee as well. All 
committee members should have the requisite seniority and 
comprehensive experience within their respective departments to 
implement any necessary changes to policies and procedures as 
recommended by the committee.
    \86\ A health care provider should expect its compliance 
committee members and compliance officer to demonstrate high 
integrity, good judgment, assertiveness, and an approachable 
demeanor, while eliciting the respect and trust of employees of the 
nursing facility. These interpersonal skills are as important as the 
professional experience of each member of the compliance committee.
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    The committee's functions may 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 also may 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.

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 health care program and private payor requirements. 
More specific training on issues such as claims development and 
submission processes, residents' rights, and marketing practices should 
be targeted at those employees and contractors whose job requirements 
make the information relevant.\87\
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    \87\ Specific compliance training should complement any ``in-
service'' training sessions that a nursing facility may regularly 
schedule to provide an ongoing program for the training of employees 
as required by the Medicare program.
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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 or by other means, such as 
disseminating publications that explain specific requirements in a 
practical manner.\88\
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    \88\ Some publications, such as OIG's special Fraud Alerts, 
audit and inspection reports, and advisory opinions are readily 
available from the OIG and can provide a basis for educational 
courses and programs for appropriate nursing facility employees.
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    Managers of specific departments or groups can assist in 
identifying areas that require training and in carrying out such 
training.\89\ 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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    \89\ Significant variations in the functions and 
responsibilities of different departments or groups may create the 
need for training materials that are tailored to compliance concerns 
associated with particular operations and duties.
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    The nursing facility should train new employees soon after they 
have started working.\90\ Appropriate training for temporary employees 
should be provided by the facility before they are assigned 
responsibility for resident care. 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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    \90\ Certain positions, such as those that involve billing, 
coding and the submission of reimbursement data, create greater 
organizational legal exposure, and therefore require specialized 
training. Those hired to treat residents should undergo specialized 
training in residents' rights.
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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 (including temporary employees) understand the institution's 
standards of conduct and procedures for alerting senior management to 
problems and concerns.\91\
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    \91\ Post-training tests can be used to assess the success of 
training provided and employee comprehension of the nursing 
facility's policies and procedures.

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[[Page 14301]]

    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 participation requirements 
relevant to their respective duties and responsibilities;
     appropriate and sufficient documentation;
     prohibitions on paying or receiving remuneration to induce 
referrals;
     proper documentation in clinical or financial records;
     residents' 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.\92\ 
Employees should be required to have a minimum number of educational 
hours per year, as appropriate, as part of their employment 
responsibilities.\93\ 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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    \92\ In addition, where feasible, the OIG recommends that a 
nursing facility give vendors and outside contractors the 
opportunity to participate in the nursing facility's compliance 
training and educational programs. Such training is particularly 
important for facilities that rely on agencies to provide temporary 
direct care staff. The introduction of consolidated billing gives 
added importance to educating vendors about the facility's 
compliance policies and procedures.
    \93\ Currently, the OIG is monitoring a significant number of 
corporate integrity agreements that require many of these training 
elements. The OIG usually requires a minimum of one to three hours 
annually for basic training in compliance areas. Additional training 
is required for specialty fields such as claims development and 
billing.
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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 a knowledgeable 
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.\94\
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    \94\ In some cases, employees sue their employers under the 
False Claims Act's qui tam provisions out of frustration because of 
the company?s failure to take action when the employee brought a 
questionable, fraudulent, or abusive situation to the attention of 
senior corporate officials. Whistle blowers must be protected 
against retaliation, a concept embodied in the provisions of the 
False Claims Act. See 31 U.S.C. 3730(h).
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    Open lines of communication between the compliance officer and 
nursing facility employees is equally important to the successful 
implementation of a compliance program and the reduction of any 
potential for fraud and abuse. In addition to serving as a contact 
point for reporting problems, the compliance officer should be viewed 
as someone to whom personnel can go to get clarification on the 
facility's policies. Questions and responses should be documented and 
dated and, if appropriate, shared with other staff so that standards 
can be updated and improved to reflect any necessary changes or 
clarifications.\95\
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    \95\ Nursing facilities also may wish to consider rewarding 
employees for appropriate use of established reporting systems. 
After all, the employee who identifies and helps stop an abusive 
practice can benefit the corporation as much as one who identifies 
cost-savings measures or increases corporate revenues.
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2. Hotlines and Other Forms of Communication
    The OIG encourages the use of hotlines, \96\ e-mails, newsletters, 
suggestion boxes, and other forms of information exchange to maintain 
open lines of communication. \97\ 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. Nursing facilities also are 
required to post the names, addresses and telephone numbers of all 
pertinent State client advocacy groups such as the State survey and 
certification agency, State licensure office, State ombudsman program, 
the protection and advocacy network, and the State Medicaid Fraud 
Control Unit.\98\
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    \96\ The OIG recognizes that it may not be financially feasible 
for a smaller nursing facility to maintain a telephone hotline 
dedicated to receiving calls about compliance issues. These 
companies may want to explore alternative methods, e.g., outsourcing 
the hotline or establishing a written method of confidential 
disclosure.
    \97\ In addition, an effective employee exit interview program 
could be designed to solicit information from departing employees 
regarding potential misconduct and suspected violations of nursing 
facility policy and procedures.
    \98\ 42 CFR 483.10(b)(7)(iii). Nursing facilities also should 
post in a prominent area the HHS-OIG Hotline telephone number, 1-
800-447-8477 (1-800-HHS-TIPS).
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    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.\99\ Such 
information, redacted of individual identifiers, should be included in 
reports to the governing body, the CEO, and compliance committee.\100\ 
While the nursing facility should always strive to maintain the 
confidentiality of an employee's identity, it also should 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

[[Page 14302]]

should be able to do so without fear of retribution.

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 noncompliance, and the risk 
factors particular to the facility.\101\
    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 Medicare requirements 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.\102\
    Monitoring techniques may include sampling protocols that permit 
the compliance officer to identify and review variations from an 
established performance baseline.\103\ This performance baseline should 
include measurable patient outcomes, such as resident weight 
maintenance and pressure ulcers, established by the facility's Quality 
Assessment and Assurance Committee. 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,\104\ with 
appropriate documentation and a sufficiently detailed explanation of 
the reason for the refund.\105\
    In addition to evaluating the facility's conformance with program 
rules, an effective compliance program also should 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.
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    \99\ To efficiently and accurately fulfill such an obligation, 
the nursing facility should create an intake form for all compliance 
issues identified through reporting mechanisms. The form could 
include information concerning the date that the potential problem 
was reported, the results of the internal investigation, and, as 
appropriate, the corrective action implemented, the disciplinary 
measures imposed, and any identified overpayments returned.
    \100\ Information obtained over the hotline may provide valuable 
insight into management practices and operations, whether reported 
problems are actual or perceived.
    \101\ Even when a nursing facility or group of facilities is 
owned by a larger corporate entity, the regular auditing and 
monitoring of the compliance activities of an individual facility 
must be a key feature in any annual review. Appropriate reports on 
audit findings should be periodically provided and explained to a 
parent organization's senior staff and officers.
    \102\ See also section II.B.2.
    \103\ The OIG recommends that when a compliance program is 
established in a nursing facility, the compliance officer, with the 
assistance of department managers, should take a ``snapshot'' of 
their operations from a compliance perspective. This assessment can 
be undertaken by outside consultants or internal staff, provided 
they have knowledge of health care program requirements. This 
``snapshot'' can serve as a baseline for the compliance officer and 
other managers to judge the nursing facility's progress in reducing 
potential areas of vulnerability.
    \104\ See Provider Reimbursement Manual Part I, section 
2836(D)(3), which sets out the MDS correction policy.
    \105\ In addition, when appropriate, as referenced in section 
II.H.2, below, reports of fraud or systemic problems also should be 
made to the appropriate governmental authority.
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    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.\106\
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    \106\ Examples of CIA audit protocols can be obtained from the 
OIG by submitting a request pursuant to the Freedom of Information 
Act. The OIG recently has entered into CIAs with a number of nursing 
home providers that may be of particular relevance. In addition, the 
American Institute of Certified Public Accountants (AICPA) has 
issued a detailed guide for conducting an independent assessment of 
a health care provider's conformance to a CIA. See AICPA Statement 
of Position 99-1, ``Guidance to Practitioners in Conducting and 
Reporting on an Agreed-Upon Procedures Engagement to Assist in 
Evaluating Compliance with a Corporate Integrity Agreement'' (May 
1999).
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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 participation requirements;
     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 concerning 
adherence to the code of conduct and policies and procedures, as well 
as their work loads and ability to address the residents' activities of 
daily living;
     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; and
     analyzing past survey reports for patterns of deficiencies 
to determine if the proposed corrective plan of action identified and 
corrected the underlying problem.
    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; \107\
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    \107\ The OIG recognizes that nursing facilities that have 
limited resources may not be able to use internal reviewers who are 
not part of line management or hire outside reviewers.
---------------------------------------------------------------------------

     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

[[Page 14303]]

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 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 
deficiencies 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.\108\ 
As appropriate, such steps may include a corrective action plan,\109\ 
the return of any overpayments, a report to the Government,\110\ and/or 
a referral to criminal and/or civil law enforcement authorities.
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    \108\ Instances of noncompliance must be determined on a case-
by-case basis. The existence or amount of a monetary loss to a 
health care program is not solely determinative of whether the 
conduct should be investigated and reported to governmental 
authorities. In fact, there may be instances where there is no 
readily identifiable monetary loss, but corrective actions are still 
necessary to protect the integrity of the applicable program and its 
beneficiaries, e.g., where failure to comply with the facility's 
policies and procedures results in inadequate or inappropriate care 
being furnished to a facility resident.
    \109\ The nursing facility may seek advice from its in-house 
counsel or an outside law firm to determine the extent of the 
facility's liability and to plan the appropriate course of action.
    \110\ Nursing facilities are required to immediately report all 
alleged incidents of mistreatment, neglect, abuse (including 
injuries of unknown source), and misappropriation of resident 
property to both the facility administrator and other officials in 
accordance with State law. See 42 CFR 483.13(c)(2). This is the 
appropriate channel for reporting quality of care issues. The OIG 
also has established a provider self-disclosure protocol that 
encourages providers voluntarily to report suspected fraud. The 
concept of voluntary self-disclosure is premised on a recognition 
that the Government alone cannot protect the integrity of Medicare 
and other Federal health care programs. Health care providers must 
be willing to police themselves, correct underlying problems, and 
work with the Government to resolve these matters. The self-
disclosure protocol can be located on the OIG's web site at: http://www.hhs.gov/oig.
---------------------------------------------------------------------------

    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.
    Where there are indications of potential fraud, an internal 
investigation may be warranted and 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. The investigative file 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.\111\ 
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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    \111\ The parameters of a claims review subject to an internal 
investigation will depend on the circumstances surrounding the 
issues identified. By limiting the scope of an internal audit to 
current billing, a nursing facility may fail to discover major 
problems and deficiencies in operations, and may subject itself to 
liability.
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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.

[[Page 14304]]

1. 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 \112\ within a reasonable period, but not more 
than 60 days \113\ after determining that there is credible evidence of 
a violation.\114\ 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.\115\
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    \112\ Appropriate Federal and State authorities include the OIG, 
the Criminal and Civil Divisions of the Department of Justice, the 
U.S. Attorney in relevant districts, the Federal Bureau of 
Investigation, and the other investigative arms for the agencies 
administering the affected Federal or State health care programs, 
such as the State Survey Agency, the State Medicaid Fraud Control 
Unit, the Defense Criminal Investigative Service, the Department of 
Veterans Affairs, and the Office of Personnel Management (which 
administers the Federal Employee Health Benefits Program). State law 
may further specify types of misconduct and to whom a facility must 
report its findings. See note 110.
    \113\ In contrast, to qualify for the ``not less than double 
damages'' provision of the False Claims Act, the provider must 
provide the report to the Government within 30 days after the date 
when the provider first obtained the information. See 31 U.S.C. 
3729(a).
    \114\ Some violations may be so serious that they warrant 
immediate notification to governmental authorities prior to, or 
simultaneous with, commencing an internal investigation. By way of 
example, the OIG believes a provider should report misconduct that: 
(1) is a clear violation of OIG administrative authorities, or civil 
or criminal fraud laws; (2) has a significant adverse effect on the 
quality of care provided to residents (in addition to any other 
legal obligations regarding quality of care); or (3) indicates 
evidence of a systemic failure to comply with applicable laws or an 
existing corporate integrity agreement, regardless of the financial 
impact on Federal health care programs.
    \115\ The OIG has published criteria setting forth those factors 
that the OIG takes into consideration in determining whether it is 
appropriate to exclude a health care provider from program 
participation pursuant to 42 U.S.C. 1320a-7(b)(7) for violations of 
various fraud and abuse laws. See 62 FR 67392 (December 24, 1997).
---------------------------------------------------------------------------

    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 administrative 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 and return 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.\116\ 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.\117\ 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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    \116\ A nursing facility should consult with its Medicare fiscal 
intermediary (FI) and the appropriate sections of the Provider 
Reimbursement Manual for additional guidance regarding refunds under 
Medicare Part A. See note 104. The FI may require certain 
information (e.g., alleged violation or issue causing overpayment, 
description of the internal investigative process with methodologies 
used to determine any overpayments, and corrective actions taken, 
etc.) to be submitted with the return of any overpayments, and that 
such repayment information be submitted to a specific department or 
individual. When appropriate, interest may be assessed on the 
overpayment. See 42 CFR 405.378.
    \117\ See 42 U.S.C. 1320a-7b(a)(3) and 18 U.S.C. 669.
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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.\118\
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    \118\ 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

[[Page 14305]]

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. How frequently are employees trained? Are 
employees tested after training? Do the training sessions and materials 
adequately summarize the important aspects of the organization's 
compliance program? Are training instructors qualified to present the 
subject matter and 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 does not receive feedback from its employees 
regarding compliance matters. For instance, if a compliance officer 
does not receive appropriate inquiries from employees: Do policies and 
procedures adequately guide employees to whom and when they should be 
communicating compliance matters? Are employees confident that they can 
report compliance matters to management without fear of retaliation? 
Are employees reporting issues through the proper channels? Do 
employees have the proper motives for reporting compliance matters? 
Regardless of the means that a provider uses, whether it is 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, it should evaluate 
how it assesses its legal exposure. What is the correlation between the 
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 
Federal health care programs and private insurers 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 health care programs, as well as the policies and procedures of 
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.


[[Page 14306]]


    Dated: March 9, 2000.
June Gibbs Brown,
Inspector General.
[FR Doc. 00-6423 Filed 3-15-00; 8:45 am]
BILLING CODE 4150-04-P