[Federal Register Volume 73, Number 74 (Wednesday, April 16, 2008)]
[Notices]
[Pages 20680-20696]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-7993]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General


Draft OIG Supplemental Compliance Program Guidance for Nursing 
Facilities

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

ACTION: Proposed notice.

-----------------------------------------------------------------------

SUMMARY: This Federal Register proposed notice seeks the comments of 
interested parties on a draft supplemental compliance program guidance 
(CPG) for nursing facilities developed by the Office of Inspector 
General (OIG). When OIG publishes the final version of this guidance, 
it will supplement OIG's prior CPG for nursing facilities issued in 
2000. This proposed notice contains new compliance recommendations and 
an expanded discussion of risk areas. The proposed notice takes into 
account Medicare and Medicaid nursing facility payment systems and 
regulations, evolving industry practices, current enforcement 
priorities (including the Government's heightened focus on quality of 
care), and lessons learned in the area of nursing facility compliance. 
When published, the final supplemental CPG will provide voluntary 
guidelines to assist nursing facilities in identifying significant risk 
areas and in evaluating and, as necessary, refining ongoing compliance 
efforts.

DATES: To ensure consideration, comments must be delivered to the 
address provided below by no later than 5 p.m. on June 2, 2008.

ADDRESSES: When commenting, please refer to file code OIG-126-PN. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission. You may submit comments in one of three 
ways (no duplicates, please):
    1. Electronically. You may submit comments electronically on 
specific recommendations and suggestions through the Federal 
eRulemaking Portal at http://www.regulations.gov. (Attachments should 
be in Microsoft Word, if possible.)
    2. By regular, express, or overnight mail. You may send written 
comments to the following address: Office of Inspector General, 
Department of Health and Human Services, Attention: OIG-126-PN, Room 
5246, Cohen Building, 330 Independence Avenue, SW., Washington, DC 
20201. Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By hand or courier. If you prefer, you may deliver, by hand or 
courier, your written comments before the close of the comment period 
to Office of Inspector General, Department of Health and Human 
Services, Cohen Building, 330 Independence Avenue, SW., Washington, DC 
20201. Because access to the interior of the Cohen Building is not 
readily available to persons without Federal Government identification, 
commenters are encouraged to schedule their delivery with one of our 
staff members at (202) 358-3141.
    Inspection of Public Comments: All comments received before the end 
of the comment period are available for viewing by the public. All 
comments will be posted on http://www.regulations.gov as soon as 
possible after they have been received. Comments received timely will 
also be available for public inspection as they are received at Office 
of Inspector General, Department of Health and Human Services, Cohen 
Building, 330 Independence Avenue, SW., Washington, DC 20201, Monday 
through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an 
appointment to view public comments, phone (202) 619-0335.

FOR FURTHER INFORMATION CONTACT: Amanda Walker, Associate Counsel, 
Office of Counsel to the Inspector General, (202) 619-0335; or 
Catherine Hess, Senior Counsel, Office of Counsel to the Inspector 
General, (202) 619-1306.

Background

    Beginning in 1998, OIG embarked on a major initiative to engage the 
private health care community in preventing the submission of erroneous 
claims and in combating fraud and abuse in the Federal health care 
programs through voluntary compliance efforts. As part of that 
initiative, OIG has developed a series of CPGs directed at the 
following segments of the health care industry:

[[Page 20681]]

hospitals; clinical laboratories; home health agencies; third-party 
billing companies; the durable medical equipment, prosthetics, 
orthotics, and supply industry; hospices; Medicare Advantage (formerly 
known as Medicare+Choice) organizations; nursing facilities; ambulance 
suppliers; physicians; and pharmaceutical manufacturers.\1\ It is our 
intent that CPGs encourage the development and use of internal controls 
to monitor adherence to applicable statutes, regulations, and program 
requirements. The suggestions made in these CPGs are not mandatory, and 
nursing facilities should not view the CPGs as exhaustive discussions 
of beneficial compliance practices or relevant risk areas.
---------------------------------------------------------------------------

    \1\ Copies of the CPG's are available on our Web site at http://www.oig.hhs.gov/fraud/complianceguidance.html.
---------------------------------------------------------------------------

    OIG originally published a CPG for the nursing facility industry on 
March 16, 2000.\2\ Since that time, there have been significant changes 
in the way nursing facilities deliver, and are reimbursed for, health 
care services, as well as significant changes in the Federal 
enforcement environment and increased concerns about quality of care in 
nursing facilities. In response to these developments, and in an effort 
to receive initial input on this guidance from interested parties, OIG 
published a notice in the Federal Register on January 24, 2008 seeking 
stakeholder comments.\3\ We received four comments, primarily from 
trade associations, generally suggesting that any guidance recognize 
flexibility and ``scalability'' concerns due to variations in nursing 
facility sizes, and encouraging a focus on resident safety and employee 
screening. Some comments included legislative recommendations, which 
are beyond the authority of this office.
---------------------------------------------------------------------------

    \2\ See 65 FR 14289 (March 16, 2000), ``Publication of the OIG 
Compliance Program Guidance for Nursing Facilities,'' (2000 Nursing 
Facility CPG) available on our Web site at http://oig.hhs.gov/authorities/docs/cpgnf.pdf.
    \3\ See 73 FR 4248 (January 24, 2008), ``Solicitation of 
Information and Recommendations for Revising the Compliance Program 
Guidance for Nursing Facilities,'' available on our Web site at 
http://oig.hhs.gov/authorities/docs/08/CPG_Nursing_Facility_Solicitation.pdf.
---------------------------------------------------------------------------

    To ensure full and meaningful input from all interested parties, we 
are publishing this supplemental CPG in draft form with a 45-day 
comment period. We are soliciting comments on all aspects of the draft 
CPG. We are particularly interested in suggestions for section IV, 
relating to structural elements for nursing facility compliance 
programs, as well as self-assessment of compliance programs' 
effectiveness by nursing facilities.\4\ Specifically, we are interested 
in suggestions regarding whether our original recommendations for the 
basic elements of a compliance program should be updated, and, if so, 
how? \5\ We are also seeking suggestions regarding specific measures of 
compliance program effectiveness tailored to nursing facilities. For 
example, we are considering including measures similar to those in the 
Supplemental Hospital CPG and would like comments on the usefulness of 
that approach and on the specific effectiveness questions that might be 
included.
---------------------------------------------------------------------------

    \4\ See e.g., 70 FR 4858, 4874 (January 31, 2005), ``OIG 
Supplemental Compliance Program Guidance for Hospitals,'' 
(Supplemental Hospital CPG) available on our Web site at http://oig.hhs.gov/fraud/docs/complianceguidance/012705HospSupplementalGuidance.pdf.
    \5\ See 2000 Nursing Facility CPG, supra note 2.
---------------------------------------------------------------------------

    We will review comments received within the above-cited timeframe, 
incorporate recommendations as appropriate, and prepare a final version 
of the guidance for publication in the Federal Register. The final 
version of the guidance will also be available on our Web site.

Draft OIG Supplemental Compliance Program Guidance for Nursing 
Facilities

I. Introduction

    Continuing its efforts to promote voluntary compliance programs for 
the health care industry, the Office of Inspector General (OIG) of the 
Department of Health and Human Services (Department) publishes this 
Supplemental Compliance Program Guidance (CPG) for Nursing 
Facilities.\6\ This document supplements, rather than replaces, OIG's 
2000 Nursing Facility CPG, which addressed the fundamentals of 
establishing an effective compliance program for this industry. \7\
    Neither this supplemental CPG, nor the original 2000 Nursing 
Facility CPG, is a model compliance program. Rather, the two documents 
collectively offer a set of guidelines that nursing facilities should 
consider when developing and implementing a new compliance program or 
evaluating an existing one. We are mindful that many nursing facilities 
have already devoted substantial time and resources to compliance 
efforts. For those nursing facilities with existing compliance 
programs, this document may serve as a roadmap for updating or refining 
their compliance plans. For facilities with emerging compliance 
programs, this supplemental CPG, read in conjunction with the 2000 
Nursing Facility CPG, should facilitate discussions among facility 
leadership regarding the inclusion of specific compliance components 
and risk areas.
---------------------------------------------------------------------------

    \6\ For purposes of convenience in this guidance, the term 
``nursing facility'' or ``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) (42 U.S.C. 1395i-3, 1396r), respectively, as well as entities 
that own or operate such facilities. Where appropriate, we 
distinguish SNFs from NFs. While long-term care providers other than 
SNFs or NFs, such as assisted living facilities, should find this 
CPG useful, we recognize that they may be subject to different laws, 
rules, and regulations and, accordingly, may have different or 
additional risk areas and may need to adopt different compliance 
strategies. We encourage all long-term care providers to establish 
and maintain effective compliance programs.
    \7\See 2000 Nursing Facility CPG, supra note 2.
---------------------------------------------------------------------------

    In drafting this supplemental CPG, we considered, among other 
things, the public comments; relevant OIG and Centers for Medicare & 
Medicaid Services (CMS) statutory and regulatory authorities (including 
CMS's regulations governing long-term care facilities at 42 CFR part 
483, CMS transmittals, program memoranda, and other guidance, and the 
Federal fraud and abuse statutes, together with the anti-kickback safe 
harbor regulations and preambles); other OIG guidance (such as OIG 
advisory opinions, special fraud alerts, bulletins, and other public 
documents); experience gained from investigations conducted by OIG's 
Office of Investigations, the Department of Justice (DOJ), and the 
State Medicaid Fraud Control Units; and relevant reports issued by 
OIG's Office of Audit Services and Office of Evaluation and 
Inspections. We also consulted with CMS, DOJ, and nursing facility 
resident advocates.
A. Benefits of a Compliance Program
    A successful compliance program addresses the public and private 
sectors' common goals of reducing fraud and abuse, enhancing health 
care providers' operations, improving the quality of health care 
services, and reducing their overall cost. Meeting these goals benefits 
the nursing facility industry, the government, and residents alike. 
Compliance programs help nursing facilities fulfill their legal duty to 
provide quality care; to refrain from submitting false or inaccurate 
claims or cost information to the Federal health care programs; and to 
avoid engaging in other illegal practices.
    A nursing facility may gain important additional benefits by 
voluntarily implementing a compliance program, including:
     Demonstrating the nursing facility's commitment to honest 
and responsible corporate conduct;

[[Page 20682]]

     Increasing the likelihood of preventing unlawful and 
unethical behavior, or identifying and correcting such behavior at an 
early stage;
     Encouraging employees and others to report potential 
problems, which permits appropriate internal inquiry and corrective 
action and reduces the risk of False Claims Act lawsuits, and 
administrative sanctions (e.g., penalties, assessments, and exclusion), 
as well as State actions;
     Minimizing financial loss to the government and taxpayers, 
as well as corresponding financial loss to the nursing facility;
     Enhancing resident satisfaction and safety through the 
delivery of improved quality of care; and
     Improving the nursing facility's reputation for integrity 
and quality, increasing its market competitiveness and reputation in 
the community.
    OIG recognizes that implementation of a compliance program may not 
entirely eliminate improper or unethical conduct from nursing facility 
operations. However, an effective compliance program demonstrates a 
nursing facility's good faith effort to comply with applicable 
statutes, regulations, and other Federal health care program 
requirements, and may significantly reduce the risk of unlawful conduct 
and corresponding sanctions.
B. Application of Compliance Program Guidance
    Given the diversity of the nursing facility industry, there is no 
single ''best'' nursing facility compliance program. OIG recognizes the 
complexities of the nursing facility industry and the differences among 
facilities. Some nursing facilities are small and may have limited 
resources to devote to compliance measures; others are affiliated with 
well-established, large, multi-facility organizations with a widely 
dispersed work force and significant resources to devote to compliance.
    Accordingly, OIG does not intend this supplemental CPG to be a 
``one-size-fits-all'' guidance. OIG strongly encourages nursing 
facilities to identify and focus their compliance efforts on those 
areas of potential concern or risk that are most relevant to their 
organizations. Compliance measures adopted by a nursing facility to 
address identified risk areas should be tailored to fit the unique 
environment of the facility (including its structure, operations, 
resources, the needs of its resident population, and prior enforcement 
experience). In short, OIG recommends that each nursing facility adapt 
the objectives and principles underlying this guidance to its own 
particular circumstances.
    In section II below, for contextual purposes, we provide a brief 
overview of the reimbursement system. In section III, entitled ``Fraud 
and Abuse Risk Areas,'' we present several fraud and abuse risk areas 
that are particularly relevant to the nursing facility industry. Each 
nursing facility should carefully examine these risk areas and identify 
those that potentially affect it. Next, in section IV, ``Other 
Compliance Considerations,'' we offer recommendations for establishing 
an ethical culture and for assessing and improving an existing 
compliance program. Finally, in section V, ``Self-Reporting,'' we set 
forth the actions nursing facilities should take if they discover 
credible evidence of misconduct.

II. Reimbursement Overview

    We begin with a brief overview of Medicare and Medicaid 
reimbursement for nursing facilities as context for the subsequent risk 
areas section. This overview is intended to be a summary only. It does 
not establish or interpret any program rules or regulations. Nursing 
facilities are advised to consult the relevant program's payment, 
coverage, and participation rules, regulations, and guidance, which 
change frequently. Any questions regarding payment, coverage, or 
participation in the Medicare or Medicaid programs should be directed 
to the relevant contractor, carrier, CMS office, or State Medicaid 
agency.
A. Medicare
    Medicare reimbursement to SNFs and NFs depends on several factors, 
including the character of the facility, the beneficiary's 
circumstances, and the type of items and services provided. Generally 
speaking, SNFs are Medicare-certified facilities that provide extended 
skilled-nursing or rehabilitative care under Medicare Part A. They are 
typically reimbursed under Part A for the costs of most items and 
services, including room, board, and ancillary items and services. In 
some circumstances (discussed further below), SNFs may receive payment 
under Medicare Part B. Facilities that are not SNFs are not reimbursed 
under Part A. They may be reimbursed for some items and services under 
Part B.
    Medicare pays SNFs under a prospective payment system (PPS) for 
beneficiaries covered by the Part A extended care benefit.\8\ Covered 
beneficiaries are those who require skilled-nursing or rehabilitation 
services and receive the services from a Medicare certified SNF after a 
qualifying hospital stay of at least three days.\9\ The PPS rate is a 
fixed, per diem rate.\10\ The maximum benefit is 100 days per ``spell 
of illness.'' \11\
---------------------------------------------------------------------------

    \8\ Section 1888(e) of the Act (42 U.S.C. 1395yy(e)) (noting the 
PPS rate applied to services provided on or after July 1, 1998). See 
also CMS, ``Consolidated Billing,'' available on CMS's Web site at 
http://www.cms.hhs.gov/SNFPPS/05_ConsolidatedBilling.asp.
    \9\ Sections 1812(a)(2) and 1861(i) of the Act (42 U.S.C. 
1395d(a)(2), 1395x(i)).
    \10\ Section 1888(e) of the Act (42 U.S.C. 1395yy(e)).
    \11\ Section 1812(a)(2)(A) of the Act (42 U.S.C. 
1395d(a)(2)(A)).
---------------------------------------------------------------------------

    The PPS per diem rate is adjusted per resident to ensure that the 
level of payment made for a particular resident reflects the resource 
intensity that would typically be associated with that resident's 
clinical condition.\12\ This methodology, referred to as the Resource 
Utilization Group (RUG) classification system, currently in version 
RUG-III, uses beneficiary assessment data extrapolated from the Minimum 
Data Set (MDS) to assign beneficiaries to one of the RUG-III 
groups.\13\ The MDS is composed of data variables for each resident, 
including diagnoses, treatments, and an evaluation of the resident's 
functional status, which are collected via a Resident Assessment 
Instrument (RAI).\14\ Such assessments are conducted at established 
intervals throughout a resident's stay. The resident's RUG assignment 
and payment rate are then adjusted accordingly for each interval.\15\
---------------------------------------------------------------------------

    \12\ Section 1888(e)(4)(G)(i) of the Act (42 U.S.C. 
1395yy(e)(4)(G)(i)).
    \13\ Id.
    \14\ Sections 1819(b)(3) and 1919(b)(3) of the Act (42 U.S.C. 
1395i-3(b)(3), 1396r(b)(3)), and their implementing regulation, 42 
CFR 483.20, require nursing facilities participating in the Medicare 
or Medicaid programs to use a standardized RAI to assess each 
nursing facility resident's strengths and needs.
    \15\ See id.
---------------------------------------------------------------------------

    The PPS payments cover virtually all of the SNF's costs for 
furnishing services to Medicare beneficiaries covered under Part A. 
Under the ``consolidated billing'' rules, SNFs bill Medicare for most 
of the services provided to Medicare beneficiaries in SNF stays covered 
under Part A, including items and services that outside practitioners 
and suppliers provide under arrangement with the SNF.\16\ The SNF is 
responsible for paying the outside practitioners and suppliers for 
these services.\17\ Services covered by this consolidated billing

[[Page 20683]]

requirement include, by way of example, physical therapy, occupational 
therapy, and speech therapy services; certain non-self-administered 
drugs and supplies furnished ``incident to'' a physician's services 
(e.g., ointments, bandages, and oxygen); braces and orthotics; and the 
technical component of most diagnostic tests.\18\ These items and 
services must be billed to Medicare by the SNF.\19\
---------------------------------------------------------------------------

    \16\ Sections 1842(b)(6)(E) and 1862(a)(18) of the Act (42 
U.S.C. 1395u, 1395aa); Consolidated Billing, supra note 8.
    \17\ See id.
    \18\ Section 1888(e) of the Act (42 U.S.C. 1395yy); Consolidated 
Billing, supra note 8.
    \19\ Id.
---------------------------------------------------------------------------

    The consolidated billing requirement does not apply to a small 
number of excluded services, such as physician professional fees and 
certain ambulance services.\20\ These excluded services are separately 
billable to Part B, by the individual or entity furnishing the service. 
For example, professional services furnished personally by a physician 
to a Part A SNF resident are excluded from consolidated billing, and 
are billed by the physician to the Part B carrier.\21\
---------------------------------------------------------------------------

    \20\ Id.
    \21\ Id.
---------------------------------------------------------------------------

    Some Medicare beneficiaries reside in a Medicare-certified SNF, but 
are not eligible for Part A extended care benefits (e.g., a beneficiary 
who did not have a qualifying hospital stay of at least three days or a 
beneficiary who has exhausted his or her Part A benefit). These 
beneficiaries--sometimes described as being in ``non-covered Part A 
stays''--may still be eligible for Part B coverage of certain 
individual services. Consolidated billing would not apply to such 
individual services, with the exception of therapy services.\22\ 
Physical therapy, occupational therapy, and speech language pathology 
services furnished to SNF residents are always subject to consolidated 
billing.\23\ Claims for therapy services furnished during a non-covered 
Part A stay must be submitted to Medicare by the SNF itself.\24\ Thus, 
according to CMS guidance, the SNF is reimbursed under the Medicare fee 
schedule for the therapy services, and is responsible for reimbursing 
the therapy provider.\25\
---------------------------------------------------------------------------

    \22\ Section 1888(e)(2)(A) of the Act (42 U.S.C. 
1395yy(e)(2)(A)); CMS, ``MLN Matter SE0518,'' available on CMS's Web 
site at http://www.cms.hhs.gov/MLNMattersArticles/downloads/SE0518.pdf.
    \23\ Id.
    \24\ MLN Matter SE0518, supra note 22.
    \25\ Id.
---------------------------------------------------------------------------

    When a beneficiary resides in a nursing facility (or part thereof) 
that is not certified as an SNF by Medicare, the beneficiary is not 
considered an SNF resident for Medicare billing purposes.\26\ 
Accordingly, ancillary services, including therapy services, are not 
subject to consolidated billing.\27\ Either the supplier of the 
ancillary service or the facility may bill the Medicare carrier for the 
Part B items and services directly.\28\ In these circumstances, it is 
the joint responsibility of the facility and the supplier to ensure 
that only one of them bills Medicare.
---------------------------------------------------------------------------

    \26\ Id.
    \27\ Id.
    \28\ Id.
---------------------------------------------------------------------------

    Part B coverage for durable medical equipment (DME) presents 
special circumstances because the benefit extends only to items 
furnished for use in a patient's home.\29\ DME furnished for use in an 
SNF or in certain other facilities providing skilled care is not 
covered by Part B. Instead, such DME is covered by the Part A PPS 
payment or applicable inpatient payment.\30\ In some cases, NFs that 
are not SNFs can be considered a ``home'' for purposes of DME coverage 
under Part B.\31\
---------------------------------------------------------------------------

    \29\ Section 1861(n) of the Act (42 U.S.C. 1395x(n)).
    \30\ Section 1861(h)(5) of the Act (42 U.S.C. 1395x(h)(5)).
    \31\ Section 1861(n) of the Act (42 U.S.C. 1395x(n)).
---------------------------------------------------------------------------

B. Medicaid
    Medicaid provides another means for nursing facility residents to 
pay for skilled-nursing care, as well as room and board in a nursing 
facility certified by the Government to provide services to Medicaid 
beneficiaries. Medicaid is a State and Federal program that covers 
certain groups of low-income and medically-needy people. Medicaid also 
helps residents dually eligible for Medicare and Medicaid pay their 
Medicare premiums and cost-sharing amounts. Because Medicaid 
eligibility criteria, coverage limitations, and reimbursement rates are 
established at the State level, there is significant variation across 
the nation. Many States, however, offer a flat daily rate that covers 
room, board, and routine care for Medicaid beneficiaries.

III. Fraud and Abuse Risk Areas

    This section should assist nursing facilities in their efforts to 
identify areas of their operations that present potential risks of 
liability under several key Federal fraud and abuse statutes and 
regulations. This section focuses on areas that are currently of 
concern to the enforcement community and is not intended to address all 
potential risk areas for nursing facilities. The identification of a 
particular practice or activity in this section is not intended to 
imply that the practice or activity is necessarily illegal in all 
circumstances or that it may not have a valid or lawful purpose. This 
section addresses the following areas of significant concern for 
nursing facilities: quality of care; submission of accurate claims; 
Federal anti-kickback statute; other risk areas; and Health Insurance 
Portability and Accountability Act of 1996 (HIPAA) privacy and security 
rules.
    This guidance does not create any new law or legal obligations, and 
the discussions in this guidance are not intended to present detailed 
or comprehensive summaries of lawful or unlawful activity. This 
guidance is not intended as a substitute for consultation with CMS, a 
facility's fiscal intermediary or Program Safeguard Contractor, a State 
Medicaid agency, or other relevant State agencies with respect to the 
application and interpretation of payment, coverage, licensure, or 
other provisions that are subject to change. Rather, this guidance 
should be used as a starting point for a nursing facility's legal 
review of its particular practices and for development or refinement of 
policies and procedures to reduce or eliminate potential risk.
A. Quality of Care
    By 2030, the number of older Americans is estimated to rise to 71 
million,\32\ making the aging of the U.S. population ``one of the major 
public health challenges we face in the 21st century.'' \33\ In 
addressing this challenge, a national focus on the quality of health 
care is emerging.
---------------------------------------------------------------------------

    \32\ Centers for Disease Control and Prevention (CDC), ``The 
State of Aging and Health in America 2007,'' available on CDC's Web 
site at http://www.cdc.gov/aging/pdf/saha_2007.pdf.
    \33\ Id. (quoting Julie Louise Gerberding, M.D., MPH, Director, 
Centers for Disease Control and Prevention, U.S. Department of 
Health and Human Services).
---------------------------------------------------------------------------

    In cases that involve failure of care on a systemic and widespread 
basis, the nursing facility may be liable for submitting false claims 
for reimbursement to the Government under the Federal False Claims Act, 
the Civil Monetary Penalties Law (CMPL), or other authorities that 
address false and fraudulent claims or statements made to the 
Government.\34\ Thus,

[[Page 20684]]

compliance with applicable quality of care standards and regulations is 
essential for the lawful behavior and success of nursing facilities.
---------------------------------------------------------------------------

    \34\ ``Listening Session: Abuse of Our Elders: How We Can Stop 
It: Hearing Before the Senate Special Committee on Aging,'' 110th 
Congress (2007) (testimony of Gregory Demske, Assistant Inspector 
General for Legal Affairs, Office of Inspector General, U.S. 
Department of Health and Human Services ), available at http://aging.senate.gov/events/hr178gd.pdf; see also 18 U.S.C. 287 
(concerning false, fictitious or fraudulent claims); 18 U.S.C. 1001 
(concerning statements or entries generally); 18 U.S.C. 1035 
(concerning false statements relating to health care matters); 18 
U.S.C. 1347 (concerning health care fraud); 18 U.S.C. 1516 
(concerning obstruction of a Federal audit); the Federal False 
Claims Act (31 U.S.C. 3729-3733); section 1128A of the Act (42 
U.S.C. 1320a-7a) (concerning civil monetary penalties); section 
1128B(c) of the Act (42 U.S.C. 1320a-7b(c)) (concerning false 
statements or representations with respect to condition or operation 
of institutions). In addition to the Federal criminal, civil, and 
administrative liability for false claims and kickback violations 
outlined in this CPG, nursing facilities also face exposure under 
State laws, including criminal, civil, and administrative sanctions.
---------------------------------------------------------------------------

    Although many nursing facilities make quality a priority, 
facilities that fail to do so, and consequently fail to deliver quality 
health care, risk becoming the target of governmental investigations. 
Highlighted below are common risk areas associated with the delivery of 
quality health care to nursing facility residents that frequently arise 
in enforcement cases.
    These include sufficient staffing, comprehensive care plans, 
appropriate use of psychotropic medications, medication management, and 
resident safety. This list is not exhaustive. Moreover, nursing 
facilities should recognize that these issues are often inter-related. 
Nursing facilities that attempt to address one issue will often find 
that they must address other areas as well. The risk areas identified 
in sections III.B. (Submission of Accurate Claims), III.C. (Anti-
Kickback), and III.D. (Other Risk Areas) below are also intertwined 
with quality of care risk areas and should be considered as well.
    As a starting point, nursing facilities should familiarize 
themselves with 42 CFR part 483 (part 483), which sets forth the 
principal requirements for nursing facility participation in the 
Medicare and Medicaid programs. It is essential that key members of the 
organization understand these requirements and support their facility's 
commitment to compliance with these regulations. Targeted training for 
care providers, managers, administrative staff, officers, and directors 
on the requirements of part 483 will enable nursing facilities to 
ensure that they are fulfilling their obligation to provide quality 
health care.\35\
---------------------------------------------------------------------------

    \35\ The requirement to deliver quality health care is a 
continuing obligation for nursing facilities. As regulations change, 
so too should the training. Therefore, this recommendation envisions 
more than an initial employee ``orientation'' training on the 
nursing facility's obligations to provide quality health care. CMS 
has multiple resources available to assist nursing facilities in 
developing training programs. See CMS, ``Sharing Innovations in 
Quality, Resources for Long Term Care,'' available on CMS's Web site 
at http://siq.air.org/default.aspx; CMS, ``Skilled Nursing 
Facilities/Long-Term Care Open Door Forum,'' available on CMS's Web 
site at http://www.cms.hhs.gov/OpenDoorForums/25_ODF_SNFLTC.asp; 
CMS, State Operations Manual, available on CMS's Web site at http://www.cms.hhs.gov/Manuals/IOM/list.asp; see also Medicare Quality 
Improvement Community, ``Medicare Quality Improvement,'' available 
at http://www.medqic.org. Nursing facilities may also find it useful 
to review the CMS Quality Improvement Organizations Statement of 
Work, available at http://www.cms.hhs.gov/QualityImprovementOrgs/04_9thsow.asp.
---------------------------------------------------------------------------

1. Sufficient Staffing
    OIG is aware of facilities that have systematically failed to 
provide staff in sufficient numbers and with appropriate clinical 
expertise to serve their residents. Although most facilities strive to 
provide sufficient staff, nursing facilities must be mindful that 
Federal law requires sufficient staffing necessary to attain or 
maintain the highest practicable physical, mental, and psychosocial 
well-being of residents.\36\ Thus, staffing numbers and staff 
competency are critical.
---------------------------------------------------------------------------

    \36\ Sections 1819(b)(4)(A) and 1919(b)(4)(A) of the Act (42 
U.S.C. 1395i-3(b)(4)(A), 1396r(b)(4)(A)); 42 CFR 483.30.
---------------------------------------------------------------------------

    The relationship between staff ratios, staff competency, and 
quality of care is complex.\37\ No single staffing model will suit 
every facility. A staffing model that works in a nursing facility today 
may not meet the facility's needs in the future. Nursing facilities, 
therefore, are strongly encouraged to assess their staffing patterns 
regularly to evaluate whether they have sufficient staff who are 
competent to care for the unique acuity levels of their residents.
---------------------------------------------------------------------------

    \37\ For example, State nursing facility staffing standards, 
which exist for the majority of States, vary in types of regulated 
staff, the ratios of staff, and the facilities to which the 
regulations apply. See Jane Tilly, et al., ``State Experiences with 
Minimum Nursing Staff Ratios for Nursing Facilities: Findings from 
Case Studies of Eight States'' (November 2003) (joint paper by The 
Urban Institute and the Department), available at http://aspe.hhs.gov/daltcp/reports/8statees.htm.
---------------------------------------------------------------------------

    Important considerations for assessing staffing models include, 
among others, staff skill levels, staff-to-resident ratios, staff 
turnover,\38\ staffing schedules, disciplinary records, payroll 
records, timesheets, and adverse event reports (e.g., falls or adverse 
drug events), as well as interviews with staff, residents, and 
residents' family or legal guardians. Facilities should ensure that the 
methods used to assess staffing accurately measure actual ``on-the-
floor'' staff rather than theoretical ``on-paper'' staff. For example, 
payroll records that reflect actual hours and days worked may be more 
useful than prospectively generated staff schedules.
---------------------------------------------------------------------------

    \38\ Nursing facilities operate in an environment of high staff 
turnover where it is difficult to attract, train, and retain an 
adequate workforce. Turnover among nurse aides, who provide most of 
the hands-on care in nursing facilities, means that residents are 
constantly receiving care from new staff who often lack experience 
and knowledge of individual residents. Furthermore, research 
correlates staff shortages and insufficient training with 
substandard care. See OIG, OEI Report OEI-01-04-00070, ``Emerging 
Practices in Nursing Homes,'' March 2005, available on our Web site 
at http://oig.hhs.gov/oei/reports/oei-01-04-00070.pdf (reviewing 
emerging practices that nursing facility administrators believe 
reduce their staff turnover).
---------------------------------------------------------------------------

2. Comprehensive Resident Care Plans
    Development of comprehensive resident care plans is essential to 
reducing risk. Prior OIG reports revealed that a significant percentage 
of resident care plans did not reflect residents' actual care 
needs.\39\ Through its enforcement and compliance monitoring 
activities, OIG continues to see insufficient care plans and their 
impact on residents as a risk area for nursing facilities.
---------------------------------------------------------------------------

    \39\ See, e.g., OIG, OEI Report OEI-02-99-00040, ``Nursing Home 
Resident Assessment Quality of Care,'' January 2001, available on 
our Web site at http://oig.hhs.gov/oei/reports/oei-02-99-00040.pdf.
---------------------------------------------------------------------------

    Medicare and Medicaid regulations require nursing facilities to 
develop a comprehensive care plan for each resident that addresses the 
medical, nursing, and mental and psychosocial needs for each resident 
and includes reasonable objectives and timetables.\40\ Nursing 
facilities should ensure that care planning includes all disciplines 
involved in the resident's care.\41\ Perfunctory meetings or plans 
developed without the full clinical team may create less than 
comprehensive resident-centered care plans. Inadequately prepared plans 
make it less likely that residents will receive coordinated, 
multidisciplinary care. Insufficient plans jeopardize residents' well-
being and risk the provision of inadequate care, medically unnecessary 
care services, or medically inappropriate services.
---------------------------------------------------------------------------

    \40\ 42 CFR 483.20(k).
    \41\ 42 CFR 483.20(k)(2)(ii) (requiring an interdisciplinary 
team, including the physician, a registered nurse with 
responsibility for the resident, and other disciplines involved in 
the resident's care).
---------------------------------------------------------------------------

    To reduce these risks, nursing facilities should design measures to 
ensure an interdisciplinary and comprehensive approach to developing 
care plans. Basic steps, such as appropriately scheduling meetings to 
accommodate the full interdisciplinary team, completing all clinical 
assessments before the meeting is convened,\42\ opening lines of

[[Page 20685]]

communication between direct care providers and interdisciplinary team 
members, involving the resident and the residents' family members or 
legal guardian,\43\ and documenting the length and content of each 
meeting, may assist facilities with meeting this requirement.
---------------------------------------------------------------------------

    \42\ Nursing facilities with residents with mental illness or 
mental retardation should ensure that they have the Preadmission 
Screening and Resident Review (PASRR) screens for their residents. 
See 42 CFR 483.20(m). In addition, for residents who do not require 
specialized services, facilities should ensure that they are 
providing the ``services of lesser intensity'' as set forth in CMS 
regulations. See 42 CFR 483.120(c). Care plan meetings can provide 
nursing facilities with an ideal opportunity to ensure that these 
obligations are met.
    \43\ Where possible, residents and their family members or legal 
guardians should be included in the development of care and 
treatment plans. Unless the resident has been declared incompetent 
or otherwise found to be incapacitated under State law, the resident 
has a right to participate in his or her care planning and 
treatment, as well as in the changes in care or treatment. 42 CFR 
483.10(d)(3).
---------------------------------------------------------------------------

    Another risk area related to care plans includes the involvement of 
attending physicians in resident care. Although the role and 
responsibilities of attending physicians are governed by specific 
regulations,\44\ the nursing facility also has a critical role--
ensuring that a physician supervises each resident's care.\45\ 
Facilities must also include the attending physician in the development 
of the resident's care plan.\46\ To fulfill these requirements, 
facilities should develop processes to ensure physician involvement in 
resident care, including regular resident visits that involve a 
meaningful evaluation of the resident.\47\ In addition, facilities 
should develop systems to ensure that irregularities noted during drug 
regimen reviews are reported to attending physicians.\48\
---------------------------------------------------------------------------

    \44\ See, e.g., 42 CFR 483.40(b), (c), (e).
    \45\ 42 CFR 483.40(a).
    \46\ 42 CFR 483.20(k)(2)(ii).
    \47\ 42 CFR 483.40 (detailing physician services); 42 CFR 483.20 
(detailing facility's role in resident assessments and care plan 
coordination). Although physicians may delegate some tasks to 
physician assistants, nurse practitioners, or clinical nurse 
specialists, as permitted by regulations, facilities must still 
ensure that physicians supervise the care of residents. 42 CFR 
483.40.
    \48\ See 42 CFR 483.60(c).
---------------------------------------------------------------------------

3. Appropriate Use of Psychotropic Medications
    Based on our enforcement and compliance monitoring activities, OIG 
has identified inappropriate use of psychotropic medications for 
residents as a risk area in at least two ways--the prohibition against 
inappropriate use of chemical restraints and the requirement to avoid 
unnecessary drug usage.
    Facilities have affirmative obligations to ensure appropriate use 
of psychotropic medications. Specifically, nursing facilities must 
ensure that psychopharmacological practices comport with Federal 
regulations and generally accepted professional standards.\49\ The 
facility is responsible for the quality of drug therapy provided in the 
facility. Facilities are prohibited from using any medication as a 
means of chemical restraint for ``purposes of discipline or 
convenience, and not required to treat the resident's medical 
symptoms.'' \50\ In addition, resident drug regimens must be free from 
unnecessary drugs.\51\ For residents who specifically require 
antipsychotic medications, CMS regulations also require, unless 
contraindicated, that residents receive gradual dose reductions and 
behavioral interventions aimed at reducing medication use.\52\
---------------------------------------------------------------------------

    \49\ See, e.g., 42 CFR 483.20(k)(3) (requiring services that are 
``provided or arranged by the facility'' to comport with 
professional standards of quality); 42 CFR 483.25 (requiring 
facilities to provide necessary care and services, including the 
resident's right to be free of unnecessary drugs); 42 CFR 483.75(b) 
(requiring facilities to provide services in compliance ``with all 
applicable Federal, State, and local laws, regulations, and codes, 
and with accepted professional standards and principles * * *'').
    \50\ 42 CFR 483.13(a).
    \51\ 42 CFR 483.25(l)(1). An unnecessary drug includes any 
medication, including psychotropic medications, that is excessive in 
dose, used excessively in duration, used without adequate 
monitoring, used without adequate indications for its use, used in 
the presence of adverse consequences, or any combination thereof. 
Id.
    \52\ 42 CFR 483.25(l)(2).
---------------------------------------------------------------------------

    In light of these requirements, nursing facilities should ensure 
that there is an adequate indication for the use of the medication and 
should carefully monitor, document, and review the use of each 
resident's psychotropic drugs. Compliance measures could include 
educating care providers regarding appropriate monitoring and 
documentation practices and auditing drug regimen reviews \53\ and 
resident care plans to determine if they incorporate an assessment of 
the resident's ``medical, nursing, and mental and psychosocial needs,'' 
\54\ including the need for psychotropic medications for a specific 
medical condition.\55\ The care providers should analyze the outcomes 
of the provision of care with the results of the drug regimen reviews, 
progress notes, and monitoring of the resident's behaviors.
---------------------------------------------------------------------------

    \53\ 42 CFR 483.60(c).
    \54\ 42 CFR 483.20(k).
    \55\ 42 CFR 483.25(l)(2).
---------------------------------------------------------------------------

4. Medication Management
    The Act requires nursing facilities to provide ``pharmaceutical 
services (including procedures that assure accurate acquiring, 
receiving, dispensing, and administering of all drugs and biologicals) 
to meet the needs of each resident.'' \56\ Nursing facilities should be 
mindful of potential quality of care problems when adopting and 
implementing policies and procedures to provide these services. A 
failure to manage pharmaceutical services properly can seriously 
jeopardize resident safety, and even result in resident deaths.
---------------------------------------------------------------------------

    \56\ Sections 1819(b)(4)(A)(iii) and 1919(b)(4)(A)(iii) of the 
Act (42 U.S.C. 1395i-3(b)(4)(A)(iii) and 1396r(b)(4)(A)(iii)). In 
addition, under 42 CFR 483.60, SNFs and NFs must ``provide routine 
and emergency drugs and biologicals to [their] residents, or obtain 
them under an agreement described in [section] 483.75(h) * * *.'' 
Nursing facilities must meet this obligation even if a pharmacy 
charges a Medicare Part D copayment to a dual eligible beneficiary 
who cannot afford to pay the copayment. See CMS, Question & Answer 
ID 7042, available on CMS's Web site at http://questions.cms.hhs.gov.
---------------------------------------------------------------------------

    Nursing facilities can promote compliance by having in place proper 
medication management processes--including appropriate training of 
staff involved in all aspects of pharmaceutical care in the nursing 
facility--that advance patient safety, minimize adverse drug 
interactions, and ensure that irregularities in a resident's drug 
regimen are promptly discovered and addressed. These kinds of policies 
and procedures may also safeguard against potential tainting of 
pharmaceutical decisions by improper kickbacks.\57\
---------------------------------------------------------------------------

    \57\ For further discussion of the anti-kickback statute, see 
section III.C. below.
---------------------------------------------------------------------------

    CMS regulations require that nursing facilities employ or obtain 
the services of a licensed pharmacist to ``provide consultation on all 
aspects of the provision of pharmacy services in the facility.'' \58\ 
The drug regimen of each resident must be reviewed at least once a 
month by a licensed pharmacist, who must report any irregularities 
discovered in a resident's drug regimen to the attending physician and 
the director of nursing.\59\ Consultant pharmacists are also required 
to: (1) ``[e]stablish a system of records of receipt and disposition of 
all controlled drugs * * *;'' and (2) ``[d]etermine that drug records 
are in order and that an account of all controlled drugs is maintained 
and periodically reconciled.'' \60\
---------------------------------------------------------------------------

    \58\ 42 CFR 483.60(b)(1).
    \59\ 42 CFR 483.60(c).
    \60\ 42 CFR 483.60(b)(2), (3).
---------------------------------------------------------------------------

    In many cases, the consultant pharmacists working in nursing 
facilities are provided by long-term care pharmacies in arrangements to 
furnish drugs and supplies to the nursing facility, often on an 
exclusive basis. Long-term care pharmacies have purchasing agreements 
with pharmaceutical manufacturers and contracts with health plans. As a 
result of these agreements and contracts, long-term care pharmacies may 
prefer that nursing facility customers use some drugs over others. A 
consultant pharmacist provided by a long-term care

[[Page 20686]]

pharmacy may be in a position to influence prescriptions in a manner 
that benefits the long-term care pharmacy. The consultant pharmacist 
may face a potential conflict of interest if a drug prescribed for a 
resident is not one preferred by the long-term care pharmacy.
    To minimize these risks and improve compliance with CMS 
regulations, nursing facilities should commit to robust training and 
monitoring on a regular basis of all staff involved in prescribing, 
administering, and managing pharmaceuticals, including all consultant 
pharmacists. The training should familiarize staff with proper 
medication management techniques. It should also educate staff on the 
legal prohibition against accepting anything of value from a pharmacy 
or pharmaceutical manufacturer to influence the choice of a drug for a 
resident or to switch a resident from one drug to another. Nursing 
facilities should implement policies and procedures for maintaining 
accurate drug records and tracking medications. In addition, nursing 
facilities should consider monitoring drug records for patterns that 
may indicate inappropriate drug switching or steering.
    Nursing facilities should also review the total compensation paid 
to consultant pharmacists (whether under contract with a long-term care 
pharmacy or employed directly by the nursing facility) to ensure that 
the compensation is not structured in any manner that reflects the 
volume or value of particular drugs prescribed for, or administered to, 
patients. Nursing facilities should establish policies that make clear 
that all prescribing must be based principally on clinical efficacy and 
appropriateness \61\ and that drug switches should not be made by a 
pharmacist without authorization from the attending physician, medical 
director, or other licensed prescriber (except for generic 
substitutions where permitted by State law).
---------------------------------------------------------------------------

    \61\ The determination of clinical efficacy and appropriateness 
of the particular drugs should precede, and be paramount to, the 
consideration of costs.
---------------------------------------------------------------------------

5. Resident Safety
    Nursing facility residents have a legal right to be free from abuse 
and neglect.\62\ Facilities should take steps to ensure that they are 
protecting their residents from these risks.\63\ Of particular concern 
is harm caused by staff and fellow residents.\64\
---------------------------------------------------------------------------

    \62\ Sections 1819 and 1919 of the Act (42 U.S.C. 1351i-3 and 
1396r); 42 CFR 483.10; see also 42 CFR 483.15 and 483.25.
    \63\ See id.
    \64\ For an overview of research relating to resident abuse and 
neglect, see Catherine Hawes, Ph.D., ``Elder Abuse in Residential 
Long-Term Care Settings: What is Known and What Information is 
Needed?,'' in Elder Mistreatment: Abuse, Neglect, and Exploitation 
in an Aging America (National Research Council, 2003); U.S. 
Government Accountability Office (GAO), GAO Report GAO-02-312, 
``Nursing Homes: More Can Be Done to Protect Residents from Abuse,'' 
March 2002, available on GAO's Web site at http://www.gao.gov/new.items/d02312.pdf; Administration on Aging, Elder Abuse Web site, 
available at http://www.aoa.gov/eldfam/Elder_Rights/Elder_Abuse/Elder_Abuse.asp.
---------------------------------------------------------------------------

(a) Promoting Resident Safety
    Federal regulations mandate that nursing facilities develop and 
implement policies and procedures to prohibit mistreatment, neglect, 
and abuse of residents.\65\ Facilities must also thoroughly investigate 
and report incidents to law enforcement, as required by State laws.\66\ 
Although experts continue to debate the most effective systems for 
enhancing the reporting, investigation, and prosecution of nursing 
facility resident abuse, an effective compliance program recognizes the 
value of a demonstrated internal commitment to eliminating resident 
abuse.\67\ An effective compliance program will include policies, 
procedures, and practices to prevent, investigate, and respond to 
instances of potential resident abuse, neglect, or mistreatment, 
including injuries resulting from staff-on-resident abuse and neglect, 
resident-on-resident abuse, and abuse from unknown causes.
---------------------------------------------------------------------------

    \65\ 42 CFR 483.13(c); see also 42 CFR 483.13(a).
    \66\ Id.
    \67\ Under State mandatory reporting statutes, persons such as 
health care professionals, human service professionals, clergy, law 
enforcement, and financial professionals may have a legal obligation 
to make a formal report to law enforcement officials or a central 
reporting agency if they suspect that a nursing facility resident is 
being abused or neglected. To ensure compliance with these statutes, 
nursing facilities should consider training relating to compliance 
with their relevant States' laws. Nursing facilities can also assist 
by providing ready access to law enforcement contact information.
---------------------------------------------------------------------------

    Confidential reporting is a key component of an effective resident 
safety program. Such a mechanism enables staff, contractors, residents, 
family members, visitors, and others to report threats, abuse, 
mistreatment, and other safety concerns confidentially to senior staff 
empowered to take immediate action. Posters, brochures, and online 
resources that encourage readers to report suspected safety problems to 
senior facility staff are commonly used. Another commonly used 
compliance component for reporting violations is a dedicated hotline 
where staff, contractors, residents, family members, visitors, and 
others with concerns can report suspicions. Regardless of the reporting 
vehicle, ideally coverage for reporting and addressing resident safety 
issues would be on a constant basis (i.e., 24 hours per day/7 days per 
week). Moreover, nursing facilities should make clear to caregivers, 
facility staff, and residents that the facility is committed to 
protecting those who make reports from retaliation.
    Facilities may also want to consider a program to engage everyone 
who comes in contact with nursing facility residents--whether health 
care professionals, administrative, and custodial staff, family and 
friends, visiting therapists, or community members--in the mission of 
protecting residents. Such a program could include specialized training 
for everyone who interacts on a regular basis with residents on 
recognizing warning signs of neglect or abuse and on effective methods 
to communicate with potentially fearful residents in a way likely to 
induce candid self-reporting of neglect or abuse.\68\
---------------------------------------------------------------------------

    \68\ Facilities could explore partnering with the ombudsmen and 
other consumer advocates in sponsoring or participating in special 
training programs designed to prevent abuse. See ``Elder Justice: 
Protecting Seniors from Abuse and Neglect: Hearing Before the Senate 
Committee on Finance,'' 107th Congress (2002) (testimony of 
Catherine Hawes, Ph.D., titled ``Elder Abuse in Residential Long-
Term Care Facilities: What is Known About the Prevalence, Causes, 
and Prevention''), available at http://finance.senate.gov/hearings/testimony/061802chtest.pdf.
---------------------------------------------------------------------------

(b) Resident Interactions
    The nursing facility industry, resident advocacy groups, and law 
enforcement are becoming increasingly concerned about resident abuse 
committed by fellow residents. Abuse can occur as a result of the 
failure to properly screen and assess, or the failure of staff to 
monitor, residents at risk for aggressive behavior. Such failures can 
jeopardize both the resident with aggressive behaviors and the resident 
who may be victimized.
    Heightened awareness and monitoring for abuse are crucial to 
eradicating resident-on-resident abuse. Nursing facilities can advance 
their mission to provide a safe environment for residents through 
targeted education relating to resident-on-resident abuse (particularly 
for staff with responsibilities for admission evaluations). Thorough 
resident assessments, comprehensive care plans, periodic resident 
assessments, and proper staffing assignments, would also assist nursing

[[Page 20687]]

facilities in their mission to provide a safe environment for 
residents.
(c) Staff Screening
    Nursing facilities cannot employ individuals ``[f]ound guilty of 
abusing, neglecting, or mistreating residents,'' or individuals with 
``a finding entered into [a] State nurse aide registry concerning 
abuse, neglect, mistreatment of residents or misappropriation of their 
property.'' \69\ Effective recruitment, screening, and training of care 
providers are essential to ensure a viable workforce. Although no pre-
employment background screening can provide nursing facilities with 
absolute assurances that a job applicant will not commit a crime in the 
future, nursing facilities must make reasonable efforts to ensure that 
they have a workforce that will maintain the safety of their residents.
---------------------------------------------------------------------------

    \69\ 42 CFR 483.13(c)(1)(ii).
---------------------------------------------------------------------------

    Commonly, nursing facilities screen potential employees against 
criminal record databases. OIG is aware that there is a ``great 
diversity in the way States systematically identify, report, and 
investigate suspected abuse.'' \70\ Nonetheless, a comprehensive 
examination of a prospective employee's criminal record in all States 
in which the person has worked or resided may provide a greater degree 
of protection for residents.\71\
---------------------------------------------------------------------------

    \70\ OIG, Audit Report A-12-12-97-0003, ``Safeguarding Long-Term 
Care Residents,'' September 1998, available on our Web site at 
http://oig.hhs.gov/oas/reports/aoa/d9700003.pdf.
    \71\ Because there is no one central repository for criminal 
records, there is a significant limitation to searching the criminal 
record databases only for the State in which the facility is 
located. A better practice may be to search databases for all States 
in which the applicant resided or was employed.
---------------------------------------------------------------------------

    Verification of education, licensing, certifications, and training 
for care providers can also assist nursing facilities in their efforts 
to ensure patients are provided with qualified and skilled caregivers. 
Many States have requirements that nursing facilities conduct these 
checks for all professional care providers, such as therapists, medical 
directors, and nurses. Federal regulations require a nursing facility 
to check its State nurse aide registry to ensure that potential hires 
for nurse aide positions have met competency evaluation requirements or 
are otherwise excepted from registration requirements.\72\ In addition, 
the facility must also check every State nurse aide registry it 
``believes will include information'' on the individual.\73\ To ensure 
compliance with this requirement, facilities should have mechanisms in 
place to identify which State registries they must examine.
---------------------------------------------------------------------------

    \72\ 42 CFR 483.75(e)(5).
    \73\ 42 CFR 483.75(e)(6).
---------------------------------------------------------------------------

B. Submission of Accurate Claims
    Nursing facilities must submit accurate claims to Federal health 
care programs. Examples of false or fraudulent claims include claims 
for items not provided or not provided as claimed, claims for services 
that are not medically necessary, and claims when there has been a 
failure of care. Submitting false claims, or causing false claims to be 
submitted, to Medicare or Medicaid may subject the individual, the 
entity, or both to criminal prosecution, civil penalties including 
treble damages, and exclusion from participation in Federal health care 
programs.
    Common and longstanding risks associated with claims preparation 
and submission include duplicate billing, insufficient documentation, 
and false or fraudulent cost reports. While nursing facilities should 
continue to be vigilant with respect to these important risk areas, we 
believe these risk areas are relatively well-understood in the 
industry, and therefore they are not specifically addressed in this 
section.
    As reimbursement systems have evolved, OIG has uncovered other 
types of fraudulent transactions related to the provision of health 
care services to residents of nursing facilities reimbursed by Medicare 
and Medicaid. In this section, we will discuss some of these risk 
areas. This list is not exhaustive. It is intended to assist facilities 
in evaluating their own risk areas. In addition, section III.A. above 
outlines other regulatory requirements that, if not met, may subject 
nursing facilities to potential liability for submission of false or 
fraudulent claims.
1. Proper Reporting of Resident Case-Mix by SNFs
    We are aware of instances in which SNFs have improperly upcoded 
resident RUG assignments.\74\ The method of classifying a resident into 
the correct RUG, through resident assessments, requires accurate and 
comprehensive reporting about a resident's conditions and needs. 
Inaccurate reporting of data could result in the misrepresentation of 
the resident's status, the submission of false claims, and potential 
enforcement actions. Therefore, we have identified the assessment, 
reporting, and evaluation of resident case-mix data as a significant 
risk area for SNFs.\75\
---------------------------------------------------------------------------

    \74\ A 2006 OIG report found that 22 percent of claims were 
upcoded, representing $542 million in potential overpayments for FY 
2002. OIG, OEI Report OEI-02-02-00830, ``A Review of Nursing 
Facility Resource Utilization Groups,'' February 2006, available on 
our Web site at http://oig.hhs.gov/oei/reports/oei-02-02-00830.pdf.
    \75\ To the extent a State Medicaid program relies upon RUG 
classification, or a variation of this system, to calculate its 
reimbursement rate, nursing facilities, as defined in section 1919 
of the Act (42 U.S.C. 1396r), should be aware of this risk area as 
well.
---------------------------------------------------------------------------

    Because of the critical role resident case-mix data plays in 
resident care planning and reimbursement, training on the collection 
and use of case-mix data is important. An effective compliance program 
will include training of responsible staff to ensure that persons 
collecting the data and those charged with analyzing and responding to 
the data are knowledgeable about the purpose and utility of the data. 
Facilities must also ensure that data reported to the Federal 
Government is accurate. Both internal and external periodic validation 
of data may prove useful. Moreover, as authorities continue to 
scrutinize quality-reporting data,\76\ nursing facilities are well-
advised to review such data regularly to ensure its accuracy and to 
identify and address potential quality of care issues.\77\
---------------------------------------------------------------------------

    \76\ See, e.g., CMS, ``2007 Action Plan for (Further Improvement 
of) Nursing Home Quality,'' September 2006, available on CMS's Web 
site at http://www.cms.hhs.gov/SurveyCertificationGenInfo/downloads/2007ActionPlan.pdf.
    \77\ In addition to assisting facilities with ensuring that 
claims data is accurate, monitoring MDS data may assist facilities 
in recognizing common warning signs of a systemic care problem 
(e.g., increase in or excessive pressure ulcers or falls).
---------------------------------------------------------------------------

2. Therapy Services
    The provision of physical, occupational, and speech therapy 
services continues to be a risk area for nursing facilities. Potential 
problems include: (i) Improper utilization of therapy services to 
inflate the severity of RUG classifications and obtain additional 
reimbursement; (ii) overutilization of therapy services billed on a 
fee-for-service basis to Part B under consolidated billing; and (iii) 
stinting on therapy services provided to patients covered by the Part A 
PPS payment.\78\ These practices may result in the submission of false 
claims.\79\
---------------------------------------------------------------------------

    \78\ There may be additional risk areas for outside therapy 
suppliers.
    \79\ Additional risks related to the anti-kickback statute are 
discussed below in section III.C.
---------------------------------------------------------------------------

    In addition, unnecessary therapy services may place frail but 
otherwise functioning residents at risk for physical injury, such as 
muscle fatigue and broken bones, and may obscure a resident's true 
condition, leading to inadequate plans of care and inaccurate RUG 
classifications.\80\ Too few therapy

[[Page 20688]]

services may expose residents to risk of physical injury or decline in 
condition, resulting in potential failure of care problems.
---------------------------------------------------------------------------

    \80\ See 42 CFR 483.20(b) and (k).
---------------------------------------------------------------------------

    OIG strongly advises nursing facilities to develop policies, 
procedures, and measures to ensure that residents are receiving 
medically appropriate therapy services.\81\ Some practices that may be 
beneficial include: requirements that therapy contractors provide 
complete and contemporaneous documentation of each resident's services; 
regular and periodic reconciliation of the physician's orders and the 
services actually provided; interviews with the residents and family 
members to be sure services are delivered; and assessments of the 
continued medical necessity for services during resident care meetings 
at which the attending physician attends.
---------------------------------------------------------------------------

    \81\ See OIG, OEI Report OEI-09-99-00563, ``Physical, 
Occupational, and Speech Therapy for Medicare Nursing Home Patients: 
Medical Necessity and Quality of Care Based on Treatment 
Diagnosis,'' August 2001, available on our Web site at http://oig.hhs.gov/oei/reports/oei-09-99-00563.pdf.
---------------------------------------------------------------------------

3. Screening for Excluded Individuals and Entities
    No Federal health care program payment may be made for items or 
services furnished by an excluded individual or entity.\82\ This 
payment ban applies to all methods of Federal health care program 
reimbursement. Civil monetary penalties (CMPs) may be imposed against 
any person who arranges or contracts (by employment or otherwise) with 
an individual or entity for the provision of items or services for 
which payment may be made under a Federal health care program,\83\ if 
the person knows or should know that the employee or contractor is 
excluded from participation in a Federal health care program.\84\
---------------------------------------------------------------------------

    \82\ 42 CFR 1001.1901. Exclusions imposed prior to August 5, 
1997, cover Medicare and all State health care programs (including 
Medicaid), but not other Federal health care programs. See The 
Balanced Budget Act of 1997 (Pub. L. 105-33) (amending section 1128 
of the Act (42 U.S.C. 1320a-7) to expand the scope of exclusions 
imposed by OIG).
    \83\ Such items or services could include administrative, 
clerical, and other activities that do not directly involve patient 
care. See section 1128A(a)(6) of the Act (42 U.S.C. 1320a-7a(a)(6)).
    \84\ Id.
---------------------------------------------------------------------------

    To prevent hiring or contracting with an excluded person, OIG 
strongly advises nursing facilities to screen all prospective owners, 
officers, directors, employees, contractors,\85\ and agents prior to 
engaging their services against OIG's List of Excluded Individuals/
Entities (LEIE) on OIG's Web site,\86\ as well as the U.S. General 
Services Administration's Excluded Parties List System.\87\ In 
addition, facilities should consider implementing a process that 
requires job applicants to disclose, during the pre-employment process 
(or vendors during the request for proposal process), whether they are 
excluded. Facilities should strongly consider periodically screening 
their current owners, officers, directors, employees, contractors, and 
agents to ensure that they have not been excluded since the initial 
screening.
---------------------------------------------------------------------------

    \85\ A nursing facility that relies upon third-party agencies to 
provide temporary or contract staffing should consider including 
provisions in its contracts that require the vendors to screen staff 
against OIG's List of Excluded Individuals/Entities before 
determining that they are eligible to work at the nursing facility. 
Although a nursing facility would not avoid liability for violating 
Medicare's prohibition on payment for services rendered by the 
excluded staff person merely by including such a provision, 
requiring the vendors to screen staff may help a nursing facility 
avoid engaging the services of excluded persons, and could be taken 
into account in the event of a Government enforcement action.
    \86\ Available on our Web site at http://oig.hhs.gov/fraud/exclusions/listofexcluded.html.
    \87\ Available at http://www.epls.gov/.
---------------------------------------------------------------------------

    Providers should also take steps to ensure that they have policies 
and procedures that require removal of any owner, officer, director, 
employee, contractor, or agent from responsibility for, or involvement 
with, a provider's business operations related to the Federal health 
care programs if the provider has actual notice that such a person is 
excluded. Providers may also wish to consider appropriate training for 
human resources personnel on the effects of exclusion. Exclusion 
continues to apply to an individual even if he or she changes from one 
health care profession to another while excluded. That exclusion 
remains in effect until OIG has reinstated the individual, which is not 
automatic.\88\ A useful tool for the training is OIG's Special Advisory 
Bulletin, titled ``The Effect of Exclusion from Participation in 
Federal Health Care Programs.'' \89\
---------------------------------------------------------------------------

    \88\ Reinstatement of excluded entities and individuals is not 
automatic. Those wishing to again participate in the Medicare, 
Medicaid and all Federal health care programs must apply for 
reinstatement and receive authorized notice from OIG that 
reinstatement has been granted. Obtaining a provider number from a 
Medicare contractor, a State agency or a Federal health care program 
does not reinstate eligibility to participate in those programs. 
There are no provisions for retroactive reinstatement. See 42 CFR 
1001.1901.
    \89\ OIG, ``The Effect of Exclusion From Participation in 
Federal Health Care Programs,'' September 1999, available on our Web 
site at http://oig.hhs.gov/fraud/docs/alertsandbulletins/effected.htm.
---------------------------------------------------------------------------

4. Restorative and Personal Care Services
    Facilities must ensure that residents receive appropriate 
restorative and personal care services to allow residents to attain and 
maintain their highest practicable level of functioning.\90\ These 
services include, among others, care to avoid pressure ulcers, active 
and passive range of motion, ambulation, fall prevention, incontinence 
management, bathing, dressing, and grooming activities.\91\
---------------------------------------------------------------------------

    \90\ 42 CFR 483.25 (requiring facilities to provide care and 
services necessary to ensure a resident's ability to participate in 
activities of daily living do not diminish unless a clinical 
condition makes the decline unavoidable).
    \91\ Id.
---------------------------------------------------------------------------

    OIG is aware of facilities that have received payment from Federal 
health care programs for restorative and personal care services despite 
the fact that the services were not provided or were so wholly 
deficient that they amounted to no care at all. Federal health care 
programs do not reimburse for restorative and personal care services 
under these circumstances. Nursing facilities that fail to provide 
necessary restorative and personal care services risk billing for 
services not rendered as claimed, and therefore may be subject to 
liability under fraud and abuse statutes and regulations.
    To avoid this risk, nursing facilities are strongly encouraged to 
have comprehensive procedures in place to ensure that services are of 
an appropriate quality and level and that services are in fact 
delivered to nursing facility residents. To accomplish this, facilities 
may wish to engage in resident and staff interviews, medical record 
reviews,\92\ and personal observations of care delivery. Moreover, 
complete and contemporaneous documentation of services is critical to 
ensuring that services are rendered.
---------------------------------------------------------------------------

    \92\ Indicators to watch for include, but are not limited to, 
bedsores, falls, unexplained weight loss, and dehydration.
---------------------------------------------------------------------------

C. The Federal Anti-Kickback Statute
    The Federal anti-kickback statute, section 1128B(b) of the Act, 
\93\ places constraints on business arrangements related directly or 
indirectly to items or services reimbursable by Federal health care 
programs, including, but not limited to, Medicare and Medicaid. The 
anti-kickback statute prohibits the health care industry from engaging 
in some practices that are common in other business sectors, such as 
offering or receiving gifts to reward past or potential new referrals.
---------------------------------------------------------------------------

    \93\ 42 U.S.C. 1320a-7b.
---------------------------------------------------------------------------

    The anti-kickback statute is a criminal prohibition against 
remuneration (in any form, whether direct or indirect) made 
purposefully to induce or reward the referral or generation of Federal 
health care program business. The anti-

[[Page 20689]]

kickback statute prohibits offering or paying anything of value for 
patient referrals. It also prohibits offering or paying of anything of 
value in return for purchasing, leasing, ordering, or arranging for or 
recommending the purchase, lease, or order of any item or service 
reimbursable in whole or in part by a Federal health care program. The 
statute also covers the solicitation or acceptance of remuneration for 
referrals for, or the generation of, business payable by a Federal 
health care program. Liability under the anti-kickback statute is 
determined separately for each party involved. In addition to criminal 
penalties, violators may be subject to CMPs and exclusion from the 
Federal health care programs. Nursing facilities should also be aware 
that compliance with the anti-kickback statute is a condition of 
payment under Medicare and other Federal health care programs.\94\ As 
such, liability may arise under the False Claims Act if the anti-
kickback statute violation results in the submission of a claim for 
payment under a Federal health care program.
---------------------------------------------------------------------------

    \94\ See, e.g., CMS, Form 855A, ``Medicare Federal Health Care 
Provider/Supplier Application,'' Certification Statement at section 
15, paragraph A.3, available on CMS's Web site at http://www.cms.hhs.gov/CMSForms/downloads/CMS855a.pdf.
---------------------------------------------------------------------------

    Nursing facilities make and receive referrals of Federal health 
care program business. Nursing facilities need to ensure that these 
referrals comply with the anti-kickback statute. Nursing facilities may 
obtain referrals of Federal health care program beneficiaries from a 
variety of health care sources, including, for example, physicians and 
other health care professionals, hospitals and hospital discharge 
planners, hospices, home health agencies, and other nursing facilities. 
Physicians, pharmacists, and other health care professionals may 
generate referrals for items and services reimbursed to the nursing 
facilities by Federal health care programs. In addition, when 
furnishing services to residents, nursing facilities often direct or 
influence referrals to others for items and services reimbursable by 
Federal health care programs. For example, nursing facilities may refer 
patients to, or order items or services from, hospices, DME companies, 
laboratories, diagnostic testing facilities, long-term care pharmacies, 
hospitals, physicians, other nursing facilities, and physical, 
occupational and speech therapists. All of these circumstances call for 
vigilance under the anti-kickback statute.
    Although liability under the anti-kickback statute ultimately turns 
on a party's intent, it is possible to identify arrangements or 
practices that may present a significant potential for abuse. For 
purposes of identifying potential kickback risks under the anti-
kickback statute, the following inquiries are useful:
     Does the nursing facility (or its affiliates or 
representatives) provide anything of value to persons or entities in a 
position to influence or generate Federal health care program business 
for the nursing facility (or its affiliates) directly or indirectly?
     Does the nursing facility (or its affiliates or 
representatives) receive anything of value from persons or entities for 
which the nursing facility generates Federal health care program 
business, directly or indirectly?
     Could one purpose of an arrangement be to induce or reward 
the generation of business payable in whole or in part by a Federal 
health care program? Importantly, under the anti-kickback statute, 
neither a legitimate business purpose for an arrangement nor a fair-
market value payment will legitimize a payment if there is also an 
illegal purpose (i.e., inducing Federal health care program business).
    Any arrangement for which the answer to any of these inquiries is 
affirmative implicates the anti-kickback statute and requires careful 
scrutiny.
    Several potentially aggravating considerations are useful in 
identifying arrangements at greatest risk of prosecution. In 
particular, in assessing risk, nursing facilities should ask the 
following questions, among others, about any potentially problematic 
arrangements or practices they identify:
     Does the arrangement or practice have a potential to 
interfere with, or skew, clinical decision-making?
     Does the arrangement or practice have a potential to 
increase costs to Federal health care programs or beneficiaries?
     Does the arrangement or practice have a potential to 
increase the risk of overutilization or inappropriate utilization?
     Does the arrangement or practice raise patient safety or 
quality of care concerns?
    Nursing facilities should be mindful of these concerns when 
structuring and reviewing arrangements. An affirmative answer to one or 
more of these questions is a red flag signaling an arrangement or 
practice that may be particularly susceptible to fraud and abuse.
    Nursing facilities that have identified potentially problematic 
arrangements or practices can take a number of steps to reduce or 
eliminate the risk of an anti-kickback violation. Most importantly, the 
anti-kickback statute and the corresponding regulations establish a 
number of ``safe harbors'' for common business arrangements. The safe 
harbors protect arrangements from liability under the statute. The 
following safe harbors are of most relevance to nursing facilities:
     Investment interests safe harbor (42 CFR 1001.952(a));
     Space rental safe harbor (42 CFR 1001.952(b));
     Equipment rental safe harbor (42 CFR 1001.952(c));
     Personal services and management contracts safe harbor (42 
CFR 1001.952(d));
     Discount safe harbor (42 CFR 1001.952(h));
     Employee safe harbor (42 CFR 1001.952(i));
     Electronic health records items and services (42 CFR 
1001.952(y)); and
     Managed care and risk sharing arrangements (42 CFR 
1001.952(m), (t), and (u)).
    An arrangement must fit squarely in a safe harbor to be protected. 
Safe harbor protection requires strict compliance with all applicable 
conditions set out in the relevant regulation.\95\ Compliance with a 
safe harbor is voluntary. Failure to comply with a safe harbor does not 
mean an arrangement is illegal per se. Nevertheless, we recommend that 
nursing facilities structure arrangements to fit in a safe harbor 
whenever possible.
---------------------------------------------------------------------------

    \95\ Parties to an arrangement cannot obtain safe harbor 
protection by entering into a sham contract that complies with the 
written agreement requirement of a safe harbor and appears, on 
paper, to meet all of the other safe harbor requirements, but does 
not reflect the actual arrangement between the parties. In other 
words, in assessing compliance with a safe harbor, the question is 
not whether the terms in a written contract satisfy all of the safe 
harbor requirements, but whether the actual arrangement satisfies 
the requirements.
---------------------------------------------------------------------------

    Nursing facilities should evaluate potentially problematic 
arrangements with referral sources and referral recipients that do not 
fit into a safe harbor by reviewing the totality of the facts and 
circumstances, including the intent of the parties. Depending on the 
circumstances, some relevant factors include:
     Nature of the relationship between the parties. What 
degree of influence do the parties have, directly or indirectly, on the 
generation of business for each other?
     Manner in which participants selected. Were parties 
selected to participate in an arrangement in whole or in part because 
of their past or anticipated referrals?
     Manner in which the remuneration is determined. Does the 
remuneration take into account, directly or indirectly,

[[Page 20690]]

the volume or value of business generated? Is the remuneration 
conditioned in whole or in part on referrals or other business 
generated between the parties? Is the arrangement itself conditioned, 
directly or indirectly, on the volume or value of Federal health care 
program business? Is there any service provided other than referrals?
     Value of the remuneration. Is the remuneration fair-market 
value in an arm's-length transaction for legitimate, reasonable, and 
necessary services that are actually rendered? Is the nursing facility 
paying an inflated rate to a potential referral source? Is the nursing 
facility receiving free or below-market-rate items or services from a 
provider or supplier? Is compensation tied, directly or indirectly, to 
Federal health care program reimbursement? Is the determination of 
fair-market value based upon a reasonable methodology that is uniformly 
applied and properly documented?
     Nature of items or services provided. Are items and 
services actually needed and rendered, commercially reasonable, and 
necessary to achieve a legitimate business purpose?
     Potential Federal program impact. Does the remuneration 
have the potential to affect costs to any of the Federal health care 
programs or their beneficiaries? Could the remuneration lead to 
overutilization or inappropriate utilization?
     Potential conflicts of interest. Would acceptance of the 
remuneration diminish, or appear to diminish, the objectivity of 
professional judgment? Are there patient safety or quality-of-care 
concerns? If the remuneration relates to the dissemination of 
information, is the information complete, accurate, and not misleading?
     Manner in which the arrangement is documented. Is the 
arrangement properly and fully documented in writing? Are the nursing 
facilities and outside providers and suppliers documenting the items 
and services they provide? Is the nursing facility monitoring items and 
services provided by outside providers and suppliers? Are arrangements 
actually conducted according to the terms of the written agreements? It 
is the substance, not the written form, of an arrangement that is 
determinative.
    These inquiries--and appropriate follow-up inquiries--can help 
nursing facilities identify, address, and avoid problematic 
arrangements.
    Available OIG guidance on the anti-kickback statute includes OIG 
Special Fraud Alerts and advisory bulletins. OIG also issues advisory 
opinions to specific parties about their particular business 
arrangements.\96\ A nursing facility concerned about an existing or 
proposed arrangement may request a binding OIG advisory opinion 
regarding whether the arrangement violates the Federal anti-kickback 
statute or other OIG fraud and abuse authorities. Procedures for 
requesting an advisory opinion are set out at 42 CFR part 1008. The 
safe harbor regulations (and accompanying Federal Register preambles), 
fraud alerts and bulletins, advisory opinions (and instructions for 
obtaining them, including a list of frequently asked questions), and 
other guidance are available on our Web site at http://oig.hhs.gov.
---------------------------------------------------------------------------

    \96\ While informative for guidance purposes, an OIG advisory 
opinion is binding only with respect to the particular party or 
parties that requested the opinion. The analyses and conclusions set 
forth in OIG advisory opinions are fact-specific. Accordingly, 
different facts may lead to different results.
---------------------------------------------------------------------------

    The following discussion highlights several known areas of 
potential risk under the anti-kickback statute. The propriety of any 
particular arrangement can only be determined after a detailed 
examination of the attendant facts and circumstances. The 
identification of a given practice or activity as ``suspect'' or as an 
area of risk does not mean it is necessarily illegal or unlawful, or 
that it cannot be properly structured to fit in a safe harbor. It also 
does not mean that the practice or activity is not beneficial from a 
clinical, cost, or other perspective. Instead, the areas identified 
below are practices that have a potential for abuse and that should 
receive close scrutiny from nursing facilities.
1. Free Goods and Services
    OIG has a longstanding concern about the provision of free goods or 
services to an existing or potential referral source. There is a 
substantial risk that free goods or services may be used as a vehicle 
to disguise or confer an unlawful payment for referrals of Federal 
health care program business. For example, OIG gave the following 
warning about free computers in the preamble to the 1991 safe harbor 
regulations:

    A related issue is the practice of giving away free computers. 
In some cases the computer can only be used as part of a particular 
service that is being provided, for example, printing out the 
results of laboratory tests. In this situation, it appears that the 
computer has no independent value apart from the service being 
provided and that the purpose of the free computer is not to induce 
an act that is prohibited by the statute * * * In contrast, 
sometimes the computer that is given away is a regular personal 
computer, which the physician is free to use for a variety of 
purposes in addition to receiving test results. In that situation 
the computer has a definite value to the physician, and, depending 
on the circumstances, may well constitute an illegal inducement.\97\
---------------------------------------------------------------------------

    \97\ 56 FR 35952 and 35978 (July 29, 1991), ``Medicare and State 
Health Care Programs: Fraud and Abuse; OIG Anti-Kickback 
Provisions,'' available on our Web site at http://oig.hhs.gov/fraud/docs/safeharborregulations/072991.htm.

    Similarly, with respect to free services, OIG observed in a Special 
---------------------------------------------------------------------------
Fraud Alert that:

    While the mere placement of a laboratory employee in the 
physician's office would not necessarily serve as an inducement 
prohibited by the anti-kickback statute, the statute is implicated 
when the phlebotomist performs additional tasks that are normally 
the responsibility of the physician's office staff. These tasks can 
include taking vital signs or other nursing functions, testing for 
the physician's office laboratory, or performing clerical services. 
Where the phlebotomist performs clerical or medical functions not 
directly related to the collection or processing of laboratory 
specimens, a strong inference arises that he or she is providing a 
benefit in return for the physician's referrals to the laboratory. 
In such a case, the physician, the phlebotomist, and the laboratory 
may have exposure under the anti-kickback statute. This analysis 
applies equally to the placement of phlebotomists in other health 
care settings, including nursing homes, clinics and hospitals.\98\
---------------------------------------------------------------------------

    \98\ 59 FR 65372, 65377 (December 19, 1994), ``Publication of 
OIG Special Fraud Alerts,'' available on our Web site at http://oig.hhs.gov/fraud/docs/alertsandbulletins/121994.html.

    The principles illustrated by each of the above examples also apply 
in the nursing facility context. The provision of goods or services 
that have independent value to the recipient or that the recipient 
would otherwise have to provide at its own expense confers a benefit on 
the recipient. This benefit may constitute prohibited remuneration 
under the anti-kickback statute, if one purpose of the remuneration is 
to generate referrals of Federal health care program business.
    Examples of suspect free goods and services arrangements that 
warrant careful scrutiny include:
     Pharmaceutical consultant services, medication management, 
or supplies offered by a pharmacy;
     Infection control, chart review, or other services offered 
by laboratories or other suppliers;
     Equipment, computers, or software applications \99\ that 
have independent value to the nursing facility;
---------------------------------------------------------------------------

    \99\ There is a safe harbor for electronic health records 
software arrangements at 42 CFR 1001.952(y), which can be used by 
nursing facilities. The safe harbor is available if all of its 
conditions are satisfied. The safe harbor does not protect free 
hardware or equipment.

---------------------------------------------------------------------------

[[Page 20691]]

     DME or supplies offered by DME suppliers for patients 
covered by the SNF Part A benefit;
     A laboratory phlebotomist providing administrative 
services;
     A hospice nurse providing nursing services for non-hospice 
patients; and
     A registered nurse provided by a hospital.
    Nursing facilities should be mindful that, depending on the 
circumstances, these and similar arrangements may subject the parties 
to liability under the anti-kickback statute, if the requisite intent 
is present.
2. Services Contracts
(a) Non-Physician Services
    Often kickbacks are disguised as otherwise legitimate payments or 
are hidden in business arrangements that appear, on their face, to be 
appropriate. In addition to the provision of free goods and services, 
the provision or receipt of goods or services at non-fair-market value 
rates presents a heightened risk of fraud and abuse. Nursing facilities 
often arrange for certain services and supplies to be provided to 
residents by outside suppliers and providers, such as pharmacies, 
clinical laboratories, DME suppliers, ambulance providers, parenteral 
and enteral nutrition (PEN) suppliers, diagnostic testing facilities, 
rehabilitation companies, and physical, occupational, and speech 
therapists. These relationships need to be closely scrutinized under 
the anti-kickback statute to ensure that they are not vehicles to 
disguise kickbacks from the suppliers and providers to the nursing 
facility to influence the nursing facility to refer Federal health care 
program business to the suppliers and providers.
    To minimize their risk, nursing facilities should periodically 
review contractor and staff arrangements to ensure that: (i) There is a 
legitimate need for the services or supplies; (ii) the services or 
supplies are actually provided and adequately documented; (iii) the 
compensation is at fair-market value in an arm's-length transaction; 
and (iv) the arrangement is not related in any manner to the volume or 
value of Federal health care program business. Nursing facilities are 
well-advised to have all of the preceding facts documented 
contemporaneously and prior to payment to the provider of the supplies 
or services. To eliminate their risk, nursing facilities should 
structure services arrangements to comply with the personal services 
and management contracts safe harbor \100\ whenever possible.
---------------------------------------------------------------------------

    \100\ 42 CFR 1001.952(b)
---------------------------------------------------------------------------

(b) Physician Services
    Nursing facilities also arrange for physicians to provide medical 
director, quality assurance, and other services. Such physician 
oversight and involvement at the nursing facility contributes to the 
quality of care furnished to the residents. These physicians, however, 
may also be in a position to generate Federal health care program 
business for the nursing facility. For instance, these physicians may 
refer patients for admission. They may order items and services that 
result in an increased RUG or that are billable separately by the 
nursing facility. Physician arrangements need to be closely monitored 
to ensure that they are not vehicles to pay physicians for referrals. 
As with other services contracts, nursing facilities should 
periodically review these arrangements to ensure that: (i) There is a 
legitimate need for the services; (ii) the services are provided; (iii) 
the compensation is at fair-market value in an arm's-length 
transaction; and (iv) the arrangement is not related in any manner to 
the volume or value of Federal health care program business. In 
addition, prudent nursing facilities will maintain contemporaneous 
documentation of the arrangement, including, for example, the 
compensation terms, time logs or other accounts of services rendered, 
and the basis for determining compensation. Prudent facilities will 
also take steps to ensure that they have not engaged more medical 
directors or other physicians than necessary for legitimate business 
purposes. They will also ensure that compensation is commensurate with 
the skill level and experience reasonably necessary to perform the 
contracted services. To eliminate their risk, nursing facilities should 
structure services arrangements to comply with the personal services 
and management contracts safe harbor \101\ whenever possible.
---------------------------------------------------------------------------

    \101\ 42 CFR 1001.952(d).
---------------------------------------------------------------------------

3. Discounts
(a) Price Reductions
    Public policy favors open and legitimate price competition in 
health care. Thus, the anti-kickback statute contains an exception for 
discounts offered to customers that submit claims to the Federal health 
care programs, if the discounts are properly disclosed and accurately 
reported. However, to qualify for the exception, the discount must be 
in the form of a reduction in the price of the good or service based on 
an arm's-length transaction. In other words, the exception covers only 
reductions in the product's or service's price.
    In conducting business, nursing facilities routinely purchase items 
and services reimbursable by Federal health care programs. Therefore, 
they should familiarize themselves with the discount safe harbor at 42 
CFR 1001.952(h). In particular, nursing facilities should insure that 
all discounts--including any rebates--are properly disclosed and 
accurately reflected on their cost reports (and in any claims as 
appropriate) filed with a Federal program. In addition, some nursing 
facilities purchase products through group purchasing organizations 
(GPOs) to which they belong. Any discounts received from vendors who 
sell their products under a GPO contract should be properly disclosed 
and accurately reported on the nursing facility's cost reports. 
Although there is a safe harbor for administrative fees paid by a 
vendor to a GPO,\102\ that safe harbor does not protect discounts 
provided by a vendor to purchasers of products.
---------------------------------------------------------------------------

    \102\ 42 CFR 1001.952(d).
---------------------------------------------------------------------------

(b) Swapping
    Nursing facilities often obtain discounts from suppliers and 
providers on items and services that the nursing facilities purchase 
for their own account. In negotiating arrangements with suppliers and 
providers, a nursing facility should be careful that there is no link 
or connection, explicit or implicit, between discounts offered or 
solicited for business that the nursing facility pays for and the 
nursing facility's referral of business billable by the supplier or 
provider directly to Medicare or another Federal health care program. 
For example, nursing facilities should not engage in ``swapping'' 
arrangements by accepting a low price from a supplier or provider on an 
item or service covered by the nursing facility's Part A per diem 
payment in exchange for the nursing facility referring to the supplier 
or provider other Federal health care program business, such as Part B 
business excluded from consolidated billing, that the supplier or 
provider can bill directly to a Federal health care program. Such 
``swapping'' arrangements implicate the anti-kickback statute and are 
not protected by the discount safe harbor. Nursing facility 
arrangements with clinical laboratories, DME suppliers, and ambulance 
providers are some examples of arrangements that may be prone to 
``swapping'' problems.

[[Page 20692]]

    As we have previously explained in other guidance,\103\ the size of 
a discount is not determinative of an anti-kickback statute violation. 
Rather, the appropriate question to ask is whether the discount is tied 
or linked, directly or indirectly, to referrals of other Federal health 
care program business. When evaluating whether an improper connection 
exists between a discount offered to a nursing facility and referrals 
of Federal health care program business billed by a supplier or 
provider, suspect arrangements include below-cost arrangements or 
arrangements at prices lower than the prices offered by the supplier or 
provider to other customers with similar volumes of business, but 
without Federal health care program referrals. Other suspect practices 
include, but are not limited to, discounts that are coupled with 
exclusive provider agreements and discounts or other pricing schemes 
made in conjunction with explicit or implicit agreements to refer other 
facility business. In sum, if any direct or indirect link exists 
between a price offered by a supplier or provider to a nursing facility 
for items or services that the nursing facility pays for out-of-pocket 
and referrals of Federal business for which the supplier or provider 
can bill a Federal health care program, the anti-kickback statute is 
implicated.
---------------------------------------------------------------------------

    \103\ See, e.g., OIG's September 22, 1999 letter regarding 
``Discount Arrangements Between Clinical Laboratories and SNFs'' 
(referencing OIG Advisory Opinion No. 99-2 issued February 26, 
1999), available on our Web site at http://oig.hhs.gov/fraud/docs/safeharborregulations/rs.htm; 56 FR 35952 at the preamble (July 29, 
1991), ``Medicare and State Health Care Programs: Fraud and Abuse; 
OIG Anti-Kickback Provisions,'' available on our Web site at http://oig.hhs.gov/fraud/docs/safeharborregulations/072991.htm.
---------------------------------------------------------------------------

4. Hospices
    Hospice services for terminally ill patients are typically provided 
in the patients' homes. In some cases, however, a nursing facility is 
the patient's home. In such cases, nursing facilities often arrange for 
the provision of hospice services in the nursing facility if the 
resident meets the hospice eligibility criteria and elects the hospice 
benefit. These arrangements pose several fraud and abuse risks. For 
example, to induce referrals, a hospice may offer a nursing facility 
remuneration in the form of free nursing services for non-hospice 
patients; additional room and board payments; \104\ or inflated 
payments for providing hospice services to the hospice's patients.\105\ 
Nursing facilities should be mindful that requesting or accepting 
remuneration from a hospice may subject the nursing facility and the 
hospice to liability under the anti-kickback statute if the 
remuneration might influence the nursing facility's decision to do 
business with the hospice.\106\
---------------------------------------------------------------------------

    \104\ The Medicare reimbursement rate for routine hospice 
services provided in a nursing facility does not include room and 
board expenses, so payment for room and board may be the 
responsibility of the patient. CMS, Medicare Benefit Policy Manual, 
chapter 9, section 20.3, available on CMS's Web site at http://www.cms.hhs.gov/Manuals/. For Medicaid patients, the State will pay 
the hospice at least 95 percent of the State's Medicaid daily 
nursing facility rate, and the hospice is then responsible for 
paying the nursing facility for the beneficiary's room and board. 
Section 1902(a)(13)(B) of the Act (42 U.S.C. 1396a(a)(13)(B)).
    \105\ Under the regulations at 42 CFR 418.80, hospices must 
generally furnish substantially all of the core hospice service 
themselves. Hospices are permitted to furnish non-core services 
under arrangements with other providers or suppliers, including 
nursing facilities. 42 CFR 418.56; CMS, State Operations Manual, 
chapter 2, section 2082C, available on CMS's Web site at http://www.cms.hhs.gov/Manuals/IOM/list.asp.
    \106\ Under certain circumstances, a nursing facility that 
knowingly refers to a hospice patients who do not qualify for the 
hospice benefit may be liable for the submission of false claims. 
The Medicare hospice eligibility criteria are found at 42 CFR 
418.20.
---------------------------------------------------------------------------

    Some of the practices that are suspect under the anti-kickback 
statute include:
     A hospice offering free goods or goods at below fair-
market value to induce a nursing facility to refer patients to the 
hospice;
     A hospice paying room and board payments to the nursing 
facility in amounts in excess of what the nursing facility would have 
received directly from Medicaid had the patient not been enrolled in 
hospice. Any additional payment must represent the fair-market value of 
additional services actually provided to that patient that are not 
included in the Medicaid daily rate;
     A hospice paying amounts to the nursing facility for 
additional services that Medicaid considers to be included in its room 
and board payment to the hospice;
     A hospice paying above fair-market value for additional 
services that Medicaid does not consider to be included in its room and 
board payment to the nursing facility;
     A hospice referring its patients to a nursing facility to 
induce the nursing facility to refer its patients to the hospice;
     A hospice providing free (or below fair-market value) care 
to nursing facility patients, for whom the nursing facility is 
receiving Medicare payment under the SNF benefit, with the expectation 
that after the patient exhausts the SNF benefit, the patient will 
receive hospice services from that hospice; and
     A hospice providing staff at its expense to the nursing 
facility.
    For additional guidance on arrangements with hospices, nursing 
facilities should review OIG's Special Fraud Alert on Nursing Home 
Arrangements with Hospices.\107\ Whenever possible, nursing facilities 
should structure their relationships with hospices to fit in a safe 
harbor, such as the personal services and management contracts safe 
harbor.\108\
---------------------------------------------------------------------------

    \107\ OIG Special Fraud Alert on Fraud and Abuse in Nursing Home 
Arrangements with Hospices, March 1998, available on our Web site at 
http://oig.hhs.gov/fraud/docs/alertsandbulletins/hospice.pdf.
    \108\ 42 CFR 1001.952(d).
---------------------------------------------------------------------------

5. Reserved Bed Arrangements
    Sometimes hospitals arrange with nursing facilities to accept 
discharged Medicare patients. Under some reserved bed arrangements, 
hospitals provide remuneration to nursing facilities to keep certain 
beds available and open for the hospital's own patients.\109\ Payments 
from hospitals to nursing facilities to reserve a bed may pose risk 
under the anti-kickback statute if one purpose of the arrangement is to 
induce referrals to the hospital.
---------------------------------------------------------------------------

    \109\ The Provider Reimbursement Manual provides as follows:
    Providers are permitted to enter into reserved bed agreements, 
as long as the terms of that agreement do not violate the provisions 
of the statute and regulations which govern provider agreements 
which (1) Prohibit a provider from charging the beneficiary or other 
party for covered services; (2) prohibit a provider from 
discriminating against Medicare beneficiaries, as a class, in 
admission policies; or (3) prohibit certain types of payments in 
connection with referring patients for covered services. A provider 
may jeopardize its provider agreement or incur other penalties if it 
enters into a reserved bed agreement that violates these 
requirements.
    CMS, Provider Reimbursement Manual, section 2105.3(D), available 
on CMS's Web site at http://www.cms.hhs.gov/Manuals/PBM.
---------------------------------------------------------------------------

    These arrangements should be reviewed to ensure that the payment is 
not a disguised payment for referrals from the nursing facility to the 
hospital. Examples of some potentially problematic arrangements 
include: (1) Payments that are more than the actual cost to the nursing 
facility of holding an empty bed; (2) payments for ``lost opportunity'' 
or similar costs that are calculated based on a nursing facility's 
revenues for an occupied bed; and (3) payments for more beds than the 
hospital legitimately needs. Payments should be for the limited purpose 
of securing needed beds, not future referrals.

[[Page 20693]]

D. Other Risk Areas

1. Physician Self-Referrals
    Nursing facilities should familiarize themselves with the physician 
self-referral law (section 1877 of the Act),\110\ commonly known as the 
``Stark'' law. The physician self-referral law prohibits entities that 
furnish ``designated health services'' (DHS) from submitting--and 
Medicare from paying--claims for DHS if the referral for the DHS comes 
from a physician with whom the entity has a prohibited financial 
relationship. This is true even if the prohibited financial 
relationship is the result of inadvertence or error. Violations can 
result in refunding of the prohibited payment and, in cases of knowing 
violations, CMPs, and exclusion from the Federal health care programs. 
Knowing violations of the physician self-referral law can also form the 
basis for liability under the False Claims Act.
---------------------------------------------------------------------------

    \110\ 42 U.S.C. 1395nn.
---------------------------------------------------------------------------

    Nursing facility services, including SNF services covered by the 
Part A PPS payment, are not DHS for purposes of the physician self-
referral law. However, laboratory services, physical therapy services, 
and occupational services are among the DHS covered by the 
statute.\111\ Nursing facilities that bill Part B for laboratory 
services, physical therapy services, occupational therapy services, or 
other DHS pursuant to the consolidated billing rules are considered 
entities that furnish DHS.\112\ Accordingly, nursing facilities should 
review all financial relationships with physicians who refer or order 
such services to ensure compliance with the physician self-referral 
law.
---------------------------------------------------------------------------

    \111\ The complete list of DHS is found at section 1877(h)(6) of 
the Act (42 U.S.C. 1395nn(h)(6)) and 42 CFR 411.351.
    \112\ See 66 FR 856, 923 (January 4, 2001), ``Medicare and 
Medicaid Programs; Physicians' Referrals to Health Care Entities 
With Which They Have Financial Relationships,'' available on CMS's 
Web site at http://www.cms.hhs.gov/PhysicianSelfReferral/Downloads/66FR856.pdf.
---------------------------------------------------------------------------

    When analyzing potential physician self-referral situations, the 
following three part inquiry is useful:
     Is there a referral (including, but not limited to, 
ordering a service for a resident) from a physician for a designated 
health service? If not, there is no physician self-referral issue. If 
yes, then the next inquiry is:
     Does the physician (or an immediate family member) have a 
direct or indirect financial relationship with the nursing facility? A 
financial relationship can be created by ownership, investment, or 
compensation; it need not relate to the furnishing of DHS. If there is 
no financial relationship, there is no physician self-referral issue. 
If there is a financial relationship, the next inquiry is:
     Does the financial relationship fit in an exception? If 
not, the statute is violated.
    Detailed regulations regarding the italicized terms are set forth 
in regulations at 42 CFR 411.351 through 411.361 (substantial 
additional explanatory material appears in preambles to the final 
regulations: 66 FR 856 (January 4, 2001), 69 FR 16054 (March 26, 2004), 
and 72 FR 51012 (September 5, 2007)).\113\
---------------------------------------------------------------------------

    \113\ Available on CMS's Web site at http://www.cms.hhs.gov/PhysicianSelfReferral.
---------------------------------------------------------------------------

    Nursing facilities should pay particular attention to their 
relationships with attending physicians who treat residents and with 
physicians who are nursing facility owners, investors, medical 
directors, or consultants. The statutory and regulatory exceptions are 
key to compliance with the physician self-referral law. Exceptions 
exist for many common types of arrangements.\114\ To fit in an 
exception, an arrangement must squarely meet all of the conditions set 
forth in the exception. Importantly, it is the actual relationship 
between the parties, and not merely the paperwork, that must fit in an 
exception. Unlike the anti-kickback safe harbors, which are voluntary, 
fitting in an exception is mandatory under the physician self-referral 
law. Compliance with a physician self-referral law exception does not 
immunize an arrangement under the anti-kickback statute. Therefore, 
arrangements that implicate the physician self-referral law should also 
be analyzed under the anti-kickback statute.
---------------------------------------------------------------------------

    \114\ Section 1877(b)-(e) of the Act (42 U.S.C. 1395nn(b)-(e)). 
See also 42 CFR 411.351-411.357.
---------------------------------------------------------------------------

    In addition to reviewing particular arrangements, nursing 
facilities can implement several systemic measures to guard against 
violations. First, many of the potentially applicable exceptions 
require written, signed agreements between the parties. Nursing 
facilities should enter into appropriate written agreements with 
physicians. In addition, nursing facilities should review their 
contracting processes to ensure that they obtain and maintain signed 
agreements covering all time periods for which an arrangement is in 
place. Second, many exceptions require fair-market value compensation 
for items and services actually needed and rendered. Thus, nursing 
facilities should have appropriate processes for making and documenting 
reasonable, consistent, and objective determinations of fair-market 
value and for ensuring that needed items and services are furnished or 
rendered. Nursing facilities should also implement systems to track 
non-monetary compensation provided annually to referring physicians 
(such as free parking or gifts) and ensure that such compensation does 
not exceed limits set forth in the physician self-referral regulations.
    Further information about the physician self-referral law and 
applicable regulations can be found on CMS's Web site at http://www.cms.hhs.gov/PhysicianSelfReferral/. Information regarding CMS's 
physician self-referral advisory opinion process can be found at http://www.cms.hhs.gov/PhysicianSelfReferral/07_advisory_opinions.asp#TopOfPage.
2. Anti-Supplementation
    As a condition of its Medicare provider agreement and under 
applicable Medicaid regulations and a criminal provision precluding 
supplementation of Medicaid payment rates, a nursing facility must 
accept the applicable Medicare or Medicaid payment (including any 
beneficiary coinsurance or copayments authorized under those programs), 
respectively, for covered items and services as the complete 
payment.\115\ For covered items and services, a nursing facility may 
not charge a Medicare or Medicaid beneficiary, or another person in 
lieu of the beneficiary, any amount in addition to what is otherwise 
required to be paid under Medicare or Medicaid (i.e., a cost-sharing 
amount). For example, an SNF may not condition acceptance of a 
beneficiary from a hospital upon receiving payment from the hospital or 
the beneficiary's family in an amount greater than what the SNF would 
receive under the PPS. For Medicare and Medicaid beneficiaries, a 
nursing facility may not accept supplemental payments, including, but 
not limited to, cash and free or discounted items and services, from a 
hospital or other source merely because the nursing facility considers 
the Medicare or Medicaid payment to be inadequate (although a nursing 
facility may accept donations unrelated to the care of specific 
patients). The supplemental payment would be a prohibited charge 
imposed by the nursing facility on another party

[[Page 20694]]

for services that are already covered by Medicare or Medicaid.\116\
---------------------------------------------------------------------------

    \115\ Section 1866(a) of the Act (42 U.S.C. 1395cc(a)); 42 CFR 
489.20; section 1128B(d) of the Act (42 U.S.C. 1320a-7b(d)); 42 CFR 
447.15; 42 CFR 483.12(d)(3).
    \116\ See id.; see also CMS, Skilled Nursing Facility Manual, 
chapter 3, sections 317 and 318, available on CMS's Web site at 
http://www.cms.hhs.gov/Manuals/PBM/list.asp.
---------------------------------------------------------------------------

3. Medicare Part D
    Medicare Part D extends voluntary prescription drug coverage to all 
Medicare beneficiaries, \117\ including individuals who reside in 
nursing facilities. Like all Medicare beneficiaries, nursing facility 
residents who decide to enroll in Part D have the right to choose their 
Part D plans.\118\ Part D plans offer a variety of drug formularies and 
have arrangements with a variety of pharmacies to administer drugs to 
the plan's enrollees. Nursing facilities also enter into arrangements 
with pharmacies to administer drugs. Typically, these are exclusive or 
semi-exclusive arrangements designed to ease administrative burdens and 
coordinate accurate administration of drugs to residents. When a 
resident is selecting a particular Part D plan, it may be that the Part 
D plan that best satisfies a beneficiary's needs does not have an 
arrangement with the nursing facility's pharmacy. CMS has stated that 
it expects nursing facilities ``to work with their current pharmacies 
to assure that they recognize the Part D plans chosen by that 
facility's Medicare beneficiaries, or, in the alternative, to add 
additional pharmacies to achieve that objective.'' \119\ CMS also 
suggests that a nursing facility ``could contract exclusively with 
another pharmacy that contracts more broadly with Part D plans.'' \120\
---------------------------------------------------------------------------

    \117\ Section 1860D-1 of the Act (42 U.S.C. 1395w 101).
    \118\ Id.
    \119\ See CMS Survey and Certification Group's May 11, 2006 
letter to State Survey Agency Directors, available on CMS's Web site 
at http://www.cms.hhs.gov/SurveyCertificationGenInfo/downloads/SCLetter06-16.pdf.
    \120\ Id.
---------------------------------------------------------------------------

    Nursing facilities must be particularly careful not to act in ways 
that would frustrate a beneficiary's freedom of choice in choosing a 
Part D plan. CMS has stated that ``[u]nder no circumstances should a 
nursing home require, request, coach or steer any resident to select or 
change a plan for any reason,'' nor should it ``knowingly and/or 
willingly allow the pharmacy servicing the nursing home'' to do the 
same.\121\ Nursing facilities and their employees and contractors 
should not accept any payments from any plan or pharmacy to influence a 
beneficiary to select a particular plan. Beneficiary freedom of choice 
in choosing a Part D Plan is ensured by section 1860D-1 of the 
Act.\122\ Nursing facilities may not limit this choice in the Part D 
program.
---------------------------------------------------------------------------

    \121\ Id.
    \122\ 42 U.S.C. 1395w-101.
---------------------------------------------------------------------------

E. HIPAA Privacy and Security Rules
    As of April 14, 2003, all nursing facilities that conduct 
electronic transactions governed by HIPAA are required to comply with 
the Privacy Rule adopted under HIPAA.\123\ Generally, the HIPAA Privacy 
Rule addresses the use and disclosure of individuals' personally 
identifiable health information (called ``protected health 
information'' or PHI) by covered nursing facilities and other covered 
entities. The Privacy Rule also covers individuals' privacy rights to 
understand and control how their health information is used. The 
Privacy Rule also requires nursing facilities to disclose PHI to the 
individual who is the subject of the PHI or to the Secretary of the 
Department of Health and Human Services under certain circumstances. 
The Privacy Rule and helpful information about how it applies can be 
found on the Web site of the Department's Office for Civil Rights 
(OCR).\124\ Questions about the Privacy Rule should be submitted to 
OCR.\125\
---------------------------------------------------------------------------

    \123\ 45 CFR parts 160 and 164, subparts A and E; available at 
http://www.hhs.gov/ocr/hipaa/finalreg.html. In addition to the HIPAA 
Privacy and Security Rules, facilities should also take steps to 
adhere to the privacy and confidentiality requirements for 
residents' personal and clinical records, 42 CFR 483.10(e), and any 
applicable State privacy laws.
    \124\ OCR, ``Office of Civil Rights--HIPAA,'' available at 
http://www.hhs.gov/ocr/hipaa/.
    \125\ Nursing facilities can contact OCR by following the 
instructions on its Web site, available at http://www.hhs.gov/ocr/contact.html, or by calling the HIPAA toll-free number, (866) 627-
7748.
---------------------------------------------------------------------------

    The Privacy Rule gives covered nursing facilities and other covered 
entities some flexibility to create their own privacy procedures. Each 
nursing facility should make sure that it is compliant with all 
applicable provisions of the Privacy Rule, including standards for the 
use and disclosure of PHI with and without patient authorization and 
the provisions pertaining to permitted and required disclosures.
    The HIPAA Security Rule specifies a series of administrative, 
technical, and physical security safeguards for covered entities to 
ensure the confidentiality of electronic PHI.\126\ Nursing facilities 
that are covered entities were required to be compliant with the 
Security Rule by April 20, 2005. The Security Rule requirements are 
flexible and scalable, which allows each covered entity to tailor its 
approach to compliance based on its own unique circumstances. Covered 
entities may consider their organization and capabilities, as well as 
costs, in designing their security plans and procedures. Questions 
about the HIPAA Security Rule should be submitted to CMS.\127\
---------------------------------------------------------------------------

    \126\ 45 CFR parts 160 and 164, subparts A and C, available on 
CMS's Web site at http://www.cms.gov/SecurityStandard/02_Regulations.asp.
    \127\ Nursing facilities can contact CMS by following the 
instructions on its Web site, http://www.cms.hhs.gov/HIPAAGenInfo/.
---------------------------------------------------------------------------

IV. Other Compliance Considerations

A. An Ethical Culture
    Every effective compliance program begins with a formal commitment 
to compliance by the nursing facility's governing body and senior 
management. Evidence of that commitment includes active involvement of 
the organizational leadership; allocation of adequate resources; a 
reasonable timetable for implementation of the compliance measures; and 
the identification of a compliance officer and compliance committee 
vested with sufficient autonomy, authority, and accountability to 
implement and enforce appropriate compliance measures. A nursing 
facility's leadership should foster an organizational culture that 
values, and even rewards, the prevention, detection, and resolution of 
problems. Moreover, a nursing facility's leadership and management 
should ensure that policies and procedures, such as compensation 
structures, do not create undue pressure to pursue profit over 
compliance. The effectiveness of these policies and procedures should 
be periodically re-evaluated. In short, the nursing facility should 
endeavor to develop a culture that values compliance from the top down 
and fosters compliance from the bottom up. Such an organizational 
culture is the foundation of an effective compliance program.
    Although a clear statement of detailed and substantive policies and 
procedures--and the periodic evaluation of their effectiveness--are at 
the core of a compliance program, OIG recommends that nursing 
facilities also develop a general organizational statement of ethical 
and compliance principles to guide their operations. One common 
expression of this statement of principles is a code of conduct. The 
code should function as the nursing facility's constitution. It should 
be a document that details the fundamental principles, values, and 
framework for action within the organization. The code of conduct for a 
nursing facility should articulate a commitment to compliance by 
management, employees, and contractors. It should summarize the broad 
ethical and legal principles under which the nursing facility must 
operate.

[[Page 20695]]

The code of conduct should also include a requirement that 
professionals follow the ethical standards dictated by their respective 
professional organizations.
    The code of conduct should be brief, easily readable, and cover 
general principles applicable to all members of the organization. OIG 
strongly encourages broad participation in creating and implementing an 
organization's code of conduct and compliance program. This may 
include, as appropriate, the participation and involvement of the 
nursing facility's board of directors, officers (including the chief 
executive officer), members of senior management, quality assurance 
staff, compliance staff, representatives from the medical and clinical 
staffs, and other nursing facility personnel in the development of all 
aspects of the compliance program, especially the code of conduct. 
Management and employee involvement in this process communicates a 
strong and explicit commitment by management to foster compliance with 
applicable Federal health care program requirements. It also 
communicates the need for all directors, officers, managers, employees, 
contractors, and medical and clinical staff members to comply with the 
organization's code of conduct and policies and procedures.
B. Regular Review of Compliance Program Effectiveness
    Effective compliance requires effective systems and structures. The 
following elements are common to building effective compliance 
programs:
     Designation of a compliance officer and compliance 
committee;
     Development of compliance policies and procedures, 
including standards of conduct;
     Developing open lines of communication;
     Appropriate training and teaching;
     Internal monitoring and auditing;
     Response to detected deficiencies; and
     Enforcement of disciplinary standards.
    Nursing facilities should regularly review the implementation and 
execution of their compliance program systems and structures. This 
review should be conducted annually. It should include an assessment of 
each of the basic elements individually, as well as the overall success 
of the program. This review should help nursing facilities identify any 
weaknesses in their compliance programs and implement appropriate 
changes. Nursing facilities seeking guidance on setting up effective 
compliance operations should review OIG's 2000 Nursing Facility CPG, 
which explains in detail the fundamental elements of a compliance 
program.\128\ Nursing facilities may also wish to consult quality of 
care corporate integrity agreements (CIAs) entered into between OIG and 
parties settling specific matters.\129\
---------------------------------------------------------------------------

    \128\ 2000 Nursing Facility CPG, supra note 2, at 14289.
    \129\ OIG, ``Corporate Integrity Agreements,'' available on our 
Web site at http://oig.hhs.gov/fraud/cias.html.
---------------------------------------------------------------------------

C. Communication to Decisionmakers
    Good compliance practices may include the development of a 
mechanism, such as a ``dashboard,'' \130\ designed to communicate 
effectively appropriate compliance and performance-related information 
to a nursing facility's board of directors and senior officers. The 
dashboard or other communication tool should include quality of care 
information. Further information and resources about quality of care 
dashboards are available on our Web site.\131\
---------------------------------------------------------------------------

    \130\ Much like the dashboard of a car, a ``dashboard'' is an 
instrument that provides the recipient with a user-friendly (i.e., 
presented in an appropriate context) snapshot of the key pieces of 
information needed by the recipient to oversee and manage 
effectively the operation of an organization and forestall potential 
problems, while avoiding information overload.
    \131\ See, e.g., OIG, ``Driving for Quality in Long-Term Care: A 
Board of Director's Dashboard--Government-Industry Roundtable,'' 
available on our Web site at http://oig.hhs.gov/fraud/docs/complianceguidance/Roundtable013007.pdf
---------------------------------------------------------------------------

    When communication tools such as dashboards are properly 
implemented and include quality of care information, the directors and 
senior officers can, among other things: (1) Demonstrate a commitment 
to quality of care and foster an organization-wide culture that values 
quality of care; (2) improve the facility's quality of care through 
increased awareness of and involvement in the oversight of quality of 
care issues; and (3) track and trend quality of care data (e.g., State 
agency survey results, outcome care and delivery data, and staff 
retention and turnover data) to identify potential quality of care 
problems, identify areas in which the organization is providing high 
quality of care, and measure progress on quality of care initiatives. 
Each dashboard should be tailored to meet the specific needs and 
sophistication of the implementing nursing facility, its board members, 
and senior officers. OIG views the use of dashboards, and similar 
tools, as a helpful compliance practice that can lead to improved 
quality of care and assist the board members and senior officers in 
fulfilling, respectively, their oversight and management 
responsibilities.

V. Self-Reporting

    If the compliance officer, compliance committee, or a member of 
senior management discovers credible evidence of misconduct from any 
source and, after a reasonable inquiry, believes that the misconduct 
may violate criminal, civil, or administrative law, the nursing 
facility should promptly report the existence of the misconduct to the 
appropriate Federal and State authorities.\132\ The reporting should 
occur within a reasonable period, but not longer than 60 days,\133\ 
after determining that there is credible evidence of a violation.\134\ 
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, prompt reporting of misconduct 
will be considered a mitigating factor by OIG in determining 
administrative sanctions (e.g., penalties, assessments, and exclusion) 
if the reporting nursing facility becomes the subject of an OIG 
investigation.\135\
---------------------------------------------------------------------------

    \132\ Appropriate Federal and State authorities include OIG, 
CMS, the Criminal and Civil Divisions of the Department of Justice, 
the U.S. Attorney in relevant districts, the Food and Drug 
Administration, the Department's Office for Civil Rights, the 
Federal Trade Commission, the Drug Enforcement Administration, the 
Federal Bureau of Investigation, and the other investigative arms 
for the agencies administering the affected Federal or State health 
care programs, such as the State Medicaid Fraud Control Unit, the 
Defense Criminal Investigative Service, the Department of Veterans 
Affairs, the Health Resources and Services Administration, and the 
Office of Personnel Management (which administers the Federal 
Employee Health Benefits Program).
    \133\ To qualify for the ''not less than double damages'' 
provision of the False Claims Act, the provider must provide the 
report to the government within 30 days after the date when the 
provider first obtained the information. 31 U.S.C. 3729(a).
    \134\ 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, OIG believes a provider should immediately report 
misconduct that: (i) is a clear violation of administrative, civil, 
or criminal laws; (ii) poses an imminent danger to a patient's 
safety; (iii) has a significant adverse effect on the quality of 
care provided to Federal health care program beneficiaries; or (iv) 
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.
    \135\ OIG has published criteria setting forth those factors 
that OIG takes into consideration in determining whether it is 
appropriate to exclude an individual or entity from program 
participation pursuant to section 1128(b)(7) of the Act (42 U.S.C. 
1320a-7(b)(7)) for violations of various fraud and abuse laws. See 
62 FR 67392 (December 24, 1997), ``Criteria for Implementing 
Permissive Exclusion Authority Under Section 1128(b)(7) of the 
Social Security Act.''

---------------------------------------------------------------------------

[[Page 20696]]

    To encourage providers to make voluntary disclosures, OIG published 
the Provider Self-Disclosure Protocol.\136\ When reporting to the 
Government, a nursing facility should provide all relevant information 
regarding the alleged violation of applicable Federal or State law(s) 
and the potential financial or other impact of the alleged violation. 
The compliance officer, under advice of counsel and with guidance from 
governmental authorities, may be requested to continue to investigate 
the reported violation. Once the investigation is completed, and 
especially if the investigation ultimately reveals that criminal, 
civil, or administrative violations have occurred, the compliance 
officer should notify the appropriate governmental authority of the 
outcome of the investigation. This notification should include a 
description of the impact of the alleged violation on the applicable 
Federal health care programs or their beneficiaries.
---------------------------------------------------------------------------

    \136\ See 63 FR 58399 (October 30, 1998), ``Publication of the 
OIG's Provider Self-Disclosure Protocol,'' available on our Web site 
at http://oig.hhs.gov/authorities/docs/selfdisclosure.pdf.
---------------------------------------------------------------------------

VI. Conclusion

    In today's environment of increased scrutiny of corporate conduct 
and increasingly large expenditures for health care, it is imperative 
for nursing facilities to establish and maintain effective compliance 
programs. These programs should foster a culture of compliance and a 
commitment to delivery of quality health care that begins at the 
highest levels and extends throughout the organization. This 
supplemental CPG is intended as a resource for nursing facilities to 
help them operate effective compliance programs that decrease errors, 
fraud, and abuse and increase compliance with Federal health care 
program requirements for the benefit of the nursing facilities and 
their residents.

    Dated: April 10, 2008.
Daniel R. Levinson,
Inspector General.
[FR Doc. E8-7993 Filed 4-15-08; 8:45 am]
BILLING CODE 4152-01-P