[Federal Register Volume 70, Number 19 (Monday, January 31, 2005)]
[Notices]
[Pages 4858-4876]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-1620]
[[Page 4858]]
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of Inspector General
OIG Supplemental Compliance Program Guidance for Hospitals
AGENCY: Office of Inspector General (OIG), HHS.
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: This Federal Register notice sets forth the Supplemental
Compliance Program Guidance (CPG) for Hospitals developed by the Office
of Inspector General (OIG). Through this notice, the OIG is
supplementing its prior compliance program guidance for hospitals
issued in 1998. The supplemental CPG contains new compliance
recommendations and an expanded discussion of risk areas, taking into
account recent changes to hospital payment systems and regulations,
evolving industry practices, current enforcement priorities, and
lessons learned in the area of corporate compliance. The supplemental
CPG provides voluntary guidelines to assist hospitals and hospital
systems in identifying significant risk areas and in evaluating and, as
necessary, refining ongoing compliance efforts.
FOR FURTHER INFORMATION CONTACT: Darlene M. Hampton, Office of Counsel
to the Inspector General, (202) 619-0335.
SUPPLEMENTARY INFORMATION:
Background
Several years ago, the 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. In the last several
years, the OIG has developed a series of compliance program guidances
(CPGs) directed at the following segments of the health care industry:
hospitals; clinical laboratories; home health agencies; third-party
billing companies; the durable medical equipment, prosthetics,
orthotics, and supply industry; hospices; Medicare+Choice
organizations; nursing facilities; physicians; ambulance suppliers; and
pharmaceutical manufacturers. CPGs are intended to 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 the CPGs should
not be viewed as exhaustive discussions of beneficial compliance
practices or relevant risk areas. Copies of these CPGs can be found on
the OIG Web page at http://oig.hhs.gov.
Supplementing the Compliance Program Guidance for Hospitals
The OIG originally published a CPG for the hospital industry on
February 23, 1998. (See 63 FR 8987 (February 23, 1998), available on
our Web page at http://oig.hhs.gov/authorities/docs/cpghosp.pdf.) Since
that time, there have been significant changes in the way hospitals
deliver, and are reimbursed for, health care services. In response to
these developments, on June 18, 2002, the OIG published a notice in the
Federal Register, soliciting public suggestions for revising the
hospital CPG. (See 67 FR 41433 (June 18, 2002), available on our Web
page at http://oig.hhs.gov/authorities/docs/cpghospitalsolicitationnotice.pdf.) After consideration of the public
comments and the issues raised, the OIG published a draft supplemental
compliance program guidance for hospitals in the Federal Register on
June 8, 2004, to ensure that all parties had a reasonable and
meaningful opportunity to provide input into the final product. (See 69
FR 32012 (June 8, 2004), available on our Web page at http://oig.hhs.gov/authorities/docs/04/060804hospitaldraftsuppCPGFR.pdf.) The
OIG received comments from a variety of parties with interests in the
hospital industry and diverse points of view. These comments were
carefully considered during the development of this final supplemental
CPG. While some commenters preferred a replacement CPG, for efficiency
and to create a concise product of particular use to hospitals with
existing compliance programs, we have decided to supplement, rather
than replace, the 1998 guidance.
Many public commenters sought guidance on the application of
specific Medicare rules and regulations related to payment and
coverage, an area beyond the scope of this OIG guidance. Hospitals with
questions about the interpretation or application of payment and
coverage rules or regulations should contact their Fiscal
Intermediaries (FIs) or the Centers for Medicare & Medicaid Services,
as appropriate.
Supplemental Compliance Program Guidance for Hospitals
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 (the Department) publishes this
Supplemental Compliance Program Guidance (CPG) for Hospitals.\1\ This
document supplements, rather than replaces, the OIG's 1998 CPG for the
hospital industry (63 FR 8987; February 23, 1998), which addressed the
fundamentals of establishing an effective compliance program.\2\
Neither this supplemental CPG, nor the original 1998 CPG, is a model
compliance program. Rather, collectively the two documents offer a set
of guidelines that hospitals should consider when developing and
implementing a new compliance program or evaluating an existing one.
---------------------------------------------------------------------------
\1\ For purposes of convenience in this guidance, we use the
term ``hospitals'' to refer to individual hospitals, multi-hospital
systems, health systems that own or operate hospitals, academic
medical centers, and any other organization that owns or operates
one or more hospitals. Where applicable, the term ``hospitals'' is
also intended to include, without limitation, hospital owners,
officers, managers, staff, agents, and sub-providers. This guidance
primarily focuses on hospitals reimbursed under the inpatient and
outpatient prospective payment systems. While other hospitals 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 hospitals to establish and
maintain ongoing compliance programs.
\2\ The 1998 OIG Compliance Program Guidance for Hospitals is
available on our Web page at http://oig.hhs.gov/authorities/docs/cpghosp.pdf.
---------------------------------------------------------------------------
We are mindful that many hospitals have already devoted substantial
time and resources to compliance efforts. We believe that those efforts
demonstrate the industry's good faith commitment to ensuring and
promoting integrity. For those hospitals with existing compliance
programs, this document may serve as a benchmark or comparison against
which to measure ongoing efforts and as a roadmap for updating or
refining their compliance plans.
In crafting this supplemental CPG, we considered, among other
things, the public comments received in response to the solicitation
notice published in the Federal Register \3\ and the draft supplemental
CPG,\4\ as well as relevant OIG and Centers for Medicare & Medicaid
Services (CMS) statutory and regulatory authorities (including the
Federal anti-kickback statute, together with the safe harbor
regulations and
[[Page 4859]]
preambles,\5\ and CMS transmittals and program memoranda); other OIG
guidance (such as OIG advisory opinions, special fraud alerts,
bulletins, and other guidance); experience gained from investigations
conducted by the OIG's Office of Investigations, the Department of
Justice (DoJ), and the State Medicaid Fraud Units; and relevant reports
issued by the OIG's Office of Audit Services and Office of Evaluation
and Inspections.\6\ We also consulted generally with CMS, the
Department's Office for Civil Rights, and DoJ.
---------------------------------------------------------------------------
\3\ See 67 FR 41433 (June 18, 2002), ``Solicitation of
Information and Recommendations for Revising a Compliance Program
Guidance for the Hospital Industry,'' available on our Web page at
http://oig.hhs.gov/authorities/docs/cpghospitalsolicitationnotice.pdf.
\4\ See 69 FR 32012 (June 8, 2004), ``OIG Draft Supplemental
Compliance Program Guidance for Hospitals,'' available on our Web
page at http://oig.hhs.gov/authorities/docs/04/060804hospitaldraftsuppCPGFR.pdf.
\5\ See 42 U.S.C. 1320a-7b(b). See also 42 CFR 1001.952. The
safe harbor regulations and preambles are available on our Web page
at http://oig.hhs.gov/fraud/safeharborregulations.html#1.
\6\ The OIG's materials are available on our Web page at http://oig.hhs.gov.
---------------------------------------------------------------------------
A. Benefits of a Compliance Program
A successful compliance program addresses the public and private
sectors' mutual goals of reducing fraud and abuse; enhancing health
care providers' operations; improving the quality of health care
services; and reducing the overall cost of health care services.
Attaining these goals benefits the hospital industry, the government,
and patients alike. Compliance programs help hospitals fulfill their
legal duty to refrain from submitting false or inaccurate claims or
cost information to the Federal health care programs \7\ or engaging in
other illegal practices. A hospital may gain important additional
benefits by voluntarily implementing a compliance program, including:
---------------------------------------------------------------------------
\7\ The term ``Federal health care programs,'' as defined in 42
U.S.C. 1320a-7b(f), includes any plan or program that provides
health benefits, whether directly, through insurance, or otherwise,
which is funded directly, in whole or in part, by the United States
Government (other than the Federal Employees Health Benefit Plan
described at 5 U.S.C. 8901-8914) or any State health plan (e.g.,
Medicaid or a program receiving funds from block grants for social
services or child health services). In this document, the term
``Federal health care program requirements'' refers to the statutes,
regulations, and other rules governing Medicare, Medicaid, and all
other Federal health care programs.
---------------------------------------------------------------------------
Demonstrating the hospital's commitment to honest and
responsible corporate conduct;
Increasing the likelihood of preventing, identifying, and
correcting unlawful and unethical behavior at an early stage;
Encouraging employees to report potential problems to
allow for appropriate internal inquiry and corrective action; and
Through early detection and reporting, minimizing any
financial loss to government and taxpayers, as well as any
corresponding financial loss to the hospital.
The OIG recognizes that implementation of a compliance program may
not entirely eliminate improper or unethical conduct from the
operations of health care providers. However, an effective compliance
program demonstrates a hospital'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 hospital industry, there is no single
``best'' hospital compliance program. The OIG recognizes the
complexities of the hospital industry and the differences among
hospitals and hospital systems. Some hospital entities 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, this supplemental CPG is not intended to be one-size-
fits-all guidance. Rather, the OIG strongly encourages hospitals to
identify and focus their compliance efforts on those areas of potential
concern or risk that are most relevant to their individual
organizations. Compliance measures adopted by a hospital to address
identified risk areas should be tailored to fit the unique environment
of the organization (including its structure, operations, resources,
and prior enforcement experience). In short, the OIG recommends that
each hospital adapt the objectives and principles underlying this
guidance to its own particular circumstances.
In section II below, titled ``Fraud and Abuse Risk Areas,'' we
present several fraud and abuse risk areas that are particularly
relevant to the hospital industry. Each hospital should carefully
examine these risk areas and identify those that potentially impact the
hospital. Next, in section III, ``Hospital Compliance Program
Effectiveness,'' we offer recommendations for assessing and improving
an existing compliance program to better address identified risk areas.
Finally, in section IV, ``Self-Reporting,'' we set forth the actions
hospitals should take if they discover credible evidence of misconduct.
II. Fraud and Abuse Risk Areas
This section is intended to help hospitals identify areas of their
operations that present a potential risk 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 hospitals.
Importantly, 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 underlying it.
This section addresses the following areas of significant concern
for hospitals: (A) Submission of accurate claims and information; (B)
the referral statutes; (C) payments to reduce or limit services; (D)
the Emergency Medical Treatment and Labor Act (EMTALA); (E) substandard
care; (F) relationships with Federal health care beneficiaries; (G)
HIPAA Privacy and Security Rules; and (H) billing Medicare or Medicaid
substantially in excess of usual charges. In addition, a final section
(I) addresses several areas of general interest that, while not
necessarily matters of significant risk, have been of continuing
interest to the hospital community. 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
and unlawful activity. Nor is this guidance intended as a substitute
for consultation with CMS or a hospital's Fiscal Intermediary (FI) with
respect to the application and interpretation of Medicare payment and
coverage provisions, which are subject to change. Rather, this guidance
should be used as a starting point for a hospital's legal review of its
particular practices and for development or refinement of policies and
procedures to reduce or eliminate potential risk.
A. Submission of Accurate Claims and Information
Perhaps the single biggest risk area for hospitals is the
preparation and submission of claims or other requests for payment from
the Federal health care programs. It is axiomatic that all claims and
requests for reimbursement from the Federal health care programs--and
all documentation supporting such claims or requests--must be complete
and accurate and must reflect reasonable and necessary services ordered
by an appropriately licensed medical professional who is a
participating provider in the health care program from which the
individual or entity is seeking reimbursement. Hospitals must disclose
and return any overpayments that result from mistaken
[[Page 4860]]
or erroneous claims.\8\ Moreover, the knowing submission of a false,
fraudulent, or misleading statement or claim is actionable. A hospital
may be liable under the False Claims Act \9\ or other statutes imposing
sanctions for the submission of false claims or statements, including
liability for civil money penalties (CMPs) or exclusion.\10\ Underlying
assumptions used in connection with claims submission should be
reasoned, consistent, and appropriately documented, and hospitals
should retain all relevant records reflecting their efforts to comply
with Federal health care program requirements.
---------------------------------------------------------------------------
\8\ See 42 U.S.C. 1320a-7b(a)(3).
\9\ The False Claims Act (31 U.S.C. 3729-33), among other
things, prohibits knowingly presenting or causing to be presented to
the Federal government a false or fraudulent claim for payment or
approval, knowingly making or using or causing to be made or used a
false record or statement to have a false or fraudulent claim paid
or approved by the government, and knowingly making or using or
causing to be made or used a false record or statement to conceal,
avoid, or decrease an obligation to pay or transmit money or
property to the government. The False Claims Act defines ``knowing''
and ``knowingly'' to mean that ``a person, with respect to the
information--(1) has actual knowledge of the information; (2) acts
in deliberate ignorance of the truth or falsity of the information;
or (3) acts in reckless disregard of the truth or falsity of the
information, and no proof of specific intent to defraud is
required.'' 31 U.S.C. 3729(b).
\10\ In some circumstances, inaccurate or incomplete reporting
may lead to liability under the Federal anti-kickback statute. In
addition, hospitals should be mindful that many States have fraud
and abuse statutes--including false claims, anti-kickback, and other
statutes--that are not addressed in this guidance.
---------------------------------------------------------------------------
Common and longstanding risks associated with claims preparation
and submission include inaccurate or incorrect coding, upcoding,
unbundling of services, billing for medically unnecessary services or
other services not covered by the relevant health care program, billing
for services not provided, duplicate billing, insufficient
documentation, and false or fraudulent cost reports. While hospitals
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 generally addressed in this
section.\11\ Rather, the following discussion highlights evolving risks
or risks that appear to the OIG to be under-appreciated by the
industry. The risks are grouped under the following topics: Outpatient
procedure coding; admissions and discharges; supplemental payment
considerations; and use of information technology. By necessity, this
discussion is illustrative, not exhaustive, of risks associated with
the submission of claims or other information. In all cases, hospitals
should consult the applicable laws, rules, and regulations.
---------------------------------------------------------------------------
\11\ To review the risk areas discussed in the original hospital
CPG, see 63 FR 8987, 8990 (February 23, 1998), available on our Web
page at http://oig.hhs.gov/authorities/docs/cpghosp.pdf pdf.
---------------------------------------------------------------------------
1. Outpatient Procedure Coding
The implementation of Medicare's Hospital Outpatient Prospective
Payment System (OPPS) \12\ increased the importance of accurate
procedure coding for hospital outpatient services. Previously, hospital
coding concerns mainly consisted of ensuring accurate ICD-9-CM
diagnosis and procedure coding for reimbursement under the inpatient
prospective payment system (PPS). Hospitals reported procedure codes
for outpatient services, but were reimbursed for outpatient services
based on their charges for services. With the OPPS, procedure codes
effectively became the basis for Medicare reimbursement. Under the
OPPS, each reported procedure code is assigned to a corresponding
Ambulatory Payment Classification (APC) code. Hospitals are then
reimbursed a predetermined amount for each APC, irrespective of the
specific level of resources used to furnish the individual service. In
implementing the OPPS, CMS developed new rules governing the use of
procedure code modifiers for outpatient coding.\13\ Because incorrect
procedure coding may lead to overpayments and subject a hospital to
liability for the submission of false claims, hospitals need to pay
close attention to coder training and qualifications.
---------------------------------------------------------------------------
\12\ Congress enacted the OPPS in section 4523 of the Balanced
Budget Act of 1997. The OPPS became effective on August 1, 2001. CMS
promulgated regulations implementing the OPPS at 42 CFR part 419.
For more information regarding the OPPS, see http://www.cms.gov/providers/hopps/.
\13\ The list of current modifiers is listed in the Current
Procedural Terminology (CPT) coding manual. However, hospitals
should pay particular attention to CMS transmittals and program
memoranda that may introduce new or altered application of modifiers
for claims submission and reimbursement purposes. See chapter 4,
section 20.6 of the Medicare Claims Processing Manual at http://www.cms.gov/manuals/104_claims/clm104c04.pdf pdf.
---------------------------------------------------------------------------
Hospitals should also review their outpatient documentation
practices to ensure that claims are based on complete medical records
and that the medical records support the levels of service claimed.
Under the OPPS, hospitals must generally include on a single claim all
services provided to the same patient on the same day. Coding from
incomplete medical records may create problems in complying with this
claim submission requirement. Moreover, submitting claims for services
that are not supported by the medical record may also result in the
submission of improper claims.
In addition to the coding risk areas noted above and in the 1998
hospital CPG, other specific risk areas associated with incorrect
outpatient procedure coding include the following:
Billing on an outpatient basis for ``inpatient-only''
procedures--CMS has identified procedures for which reimbursement is
typically allowed only if the service is performed in an inpatient
setting.\14\
---------------------------------------------------------------------------
\14\ The list of ``inpatient-only'' procedures appears in the
annual update to the OPPS rule. For the 2004 final rule, the
``inpatient-only'' list is found in Addendum E. See http://www.cms.gov/regulations/hopps/2004f.
---------------------------------------------------------------------------
Submitting claims for medically unnecessary services by
failing to follow the FI's local policies--Each FI publishes local
policies, including local medical review polices (LMRPs) and local
coverage determinations (LCDs), that identify certain procedures that
are only reimbursable when specific conditions are present.\15\ In
addition to relying on a physician's sound clinical judgment with
respect to the appropriateness of a proposed course of treatment,
hospitals should regularly review and become familiar with their
individual FI's LMRPs and LCDs. LMRPs and LCDs should be incorporated
into a hospital's regular coding and billing operations.\16\
---------------------------------------------------------------------------
\15\ Effective December 7, 2003, FI's began issuing LCDs instead
of LMRPs, and FI's will convert all existing LMRPs into LCDs by
December 31, 2005.
\16\ A hospital may contact its FI to request a copy of the
pertinent LMRPs and LCDs, or visit CMS's Web page at http://www.cms.gov/mcd to search existing local and national policies.
---------------------------------------------------------------------------
Submitting duplicate claims or otherwise not following the
National Correct Coding Initiative guidelines--CMS developed the
National Correct Coding Initiative (NCCI) to promote correct coding
methodologies. The NCCI identifies certain codes that should not be
used together because they are either mutually exclusive or one is a
component of another. If a hospital uses code pairs that are listed in
the NCCI and those codes are not detected by the editing routines in
the hospital's billing system, the hospital may submit duplicate or
unbundled claims. Intentional manipulation of code assignments to
maximize payments and avoid NCCI edits constitutes fraud. Unintentional
misapplication of NCCI coding and billing guidelines may also give rise
to overpayments or civil liability for hospitals that have developed a
pattern of inappropriate billing. To minimize risk, hospitals
[[Page 4861]]
should ensure that their coding software includes up-to-date NCCI edit
files.\17\
---------------------------------------------------------------------------
\17\ More information regarding the NCCI can be obtained from
CMS's Web page at http://www.cms.gov/medlearn/ncci.asp.
---------------------------------------------------------------------------
Submitting incorrect claims for ancillary services because
of outdated Charge Description Masters--Charge Description Masters
(CDMs) list all of a hospital's charges for items and services and
include the underlying procedure codes necessary to bill for those
items and services. Outdated CDMs create significant compliance risk
for hospitals. Because the Healthcare Common Procedure Coding System
(HCPCS) codes and APCs are updated regularly, hospitals should pay
particular attention to the task of updating the CDM to ensure the
assignment of correct codes to outpatient claims. This should include
timely updates, proper use of modifiers, and correct associations
between procedure codes and revenue codes.\18\
---------------------------------------------------------------------------
\18\ For information relating to HCPCS code updates, see http://www.cms.gov/medicare/hcpcs/. For information relating to annual APC
updates, see http://www.cms.gov/providers/hopps/.
---------------------------------------------------------------------------
Circumventing the multiple procedure discounting rules--A
surgical procedure performed in connection with another surgical
procedure may be discounted. However, certain surgical procedures are
designated as non-discounted, even when performed with another surgical
procedure. Hospitals should ensure that the procedure codes selected
represent the actual services provided, irrespective of the discounting
status. They should also review the annual OPPS rule update to
understand more fully CMS's multiple procedure discounting rule.\19\
---------------------------------------------------------------------------
\19\ See http://www.cms.gov/medlearn/refopps.asp asp.
---------------------------------------------------------------------------
Improper evaluation and management code selection--
Hospitals should use proper codes to describe the evaluation and
management (E/M) services they provide. A hospital's E/M coding
guidelines should ensure that services are medically necessary and
sufficiently documented and that the codes accurately reflect the
intensity of hospital resources required to deliver the services.
Improperly billing for observation services--In certain
circumstances, Medicare provides a separate APC payment for observation
services for patients with diagnoses of chest pain, asthma, or
congestive heart failure. Claims for these observation services must
correctly reflect the diagnosis and meet certain other requirements.
Seeking a separate payment for observation services in situations that
do not satisfy the requirements is inappropriate and may result in
hospital liability. Hospitals should become familiar with CMS's
detailed policies for the submission of claims for observation
services.\20\
---------------------------------------------------------------------------
\20\ See CMS Program Transmittal A-02-026, available on CMS's
Web page at http://www.ems.gov/manuals/pm_trans/A02026.pdf.
---------------------------------------------------------------------------
2. Admissions and Discharges
Often, the status of patients at the time of admission or discharge
significantly influences the amount and method of reimbursement
hospitals receive. Therefore, hospitals have a duty to ensure that
admission and discharge policies are updated and reflect current CMS
rules. Risk areas with respect to the admission and discharge processes
include the following:
Failure to follow the ``same-day rule''--The OPPS rules
require hospitals to include on the same claim all OPPS services
provided at the same hospital, to the same patient, on the same day,
unless certain conditions are met. Hospitals should review internal
billing systems and procedures to ensure that they are not submitting
multiple claims for OPPS services delivered to the same patient on the
same day.\21\
---------------------------------------------------------------------------
\21\ See, e.g., chapter 1, section 50.2 of the Medicare Claims
Processing Manual, available on CMS's Web page at http://www.cms.gov/manuals/104_claims/clm104c01.pdf.
---------------------------------------------------------------------------
Abuse of partial hospitalization payments--Under the OPPS,
Medicare provides a per diem payment for specific hospital services
rendered to behavioral and mental health patients on a partial
hospitalization basis. Examples of improper billing under the partial
hospitalization program include, without limitation: reducing the range
of services offered; withholding services that are medically
appropriate; billing for services not covered; and billing for services
without a certificate of medical necessity.\22\
---------------------------------------------------------------------------
\22\ See chapter 4, section 260 of the Medicare Claims
Processing Manual, available on CMS's Web page at http://www.cms.gov/manuals/104_claims/clm104c04.pdf.
---------------------------------------------------------------------------
Same-day discharges and readmissions--Same-day discharges
and readmissions may indicate premature discharges, medically
unnecessary readmissions, or incorrect discharge coding. Hospitals
should have procedures in place to review discharges and admissions
carefully to ensure that they reflect prudent clinical decision-making
and are properly coded.\23\
---------------------------------------------------------------------------
\23\ See, e.g., OIG Audit Report A-03-01-00011, ``Review of
Medicare Same-Day, Same-Provider Acute Care Readmissions in
Pennsylvania During Calendar year 1998,'' August 2002, available on
our Web page at http://oig.hhs.gov/oas/reports/region 3/
30100011.pdf.
---------------------------------------------------------------------------
Violation of Medicare's post-acute care transfer policy--
The post-acute care transfer policy provides that, for certain
designated Diagnosis Related Groups (DRGs), a hospital will receive a
per diem transfer payment, rather than the full DRG payment, if the
patient is discharged to certain post-acute care settings.\24\ CMS may
periodically revise the list of designated DRGs that are subject to its
post-acute care transfer policy.\25\ To avoid improperly billing for
discharges, hospitals should pay particular attention to CMS's post-
acute care transfer policy and keep an accurate list of all designated
DRGs subject to that policy.
---------------------------------------------------------------------------
\24\ See 42 CFR 412.4(c). See, e.g., OIG Audit Report A-04-00-
01220 ``Implementation of Medicare's Postacute Care Transfer
Policy,'' October 2001, available on our Web page at http://oig.hhs.gov/oas/reports/region4/40001220.pdf.
\25\ The initial 10 designated DRGs were selected by the
Secretary, pursuant to section 1886(d)(5)(J) of the Social Security
Act (42 U.S.C. 1395ww(d)(5)(J)). With the 2004 fiscal year PPS rule,
CMS revised the list of DRGs paid under CMS's post-acute care
transfer policy, bringing the total number of designated DRGs to 29.
See 68 FR 45346 (August 1, 2003). Then, with the 2005 fiscal year
PPS rule, CMS revised the list again, bringing the current total
number of designated DRGs to 30. See 69 FR 48916 (August 11, 2004).
See also chapter 3, section 402.4 of the Medicare Claims Processing
Manual, available on CMS's Web page at http://www.cms.gov/manuals/104_claims/clm104c03.pdf.
---------------------------------------------------------------------------
Improper churning of patients by long-term care hospitals
co-located in acute care hospitals--Long term care hospitals that are
co-located within acute care hospitals may qualify for PPS-exempt
status if certain regulatory requirements are satisfied.\26\ Hospitals
should not engage in the practice of churning, or inappropriately
transferring, patients between the host hospital and the hospital-
within-a-hospital.
---------------------------------------------------------------------------
\26\ See 42 CFR 412.22(e).
---------------------------------------------------------------------------
3. Supplemental Payment Considerations
Under the Medicare program, in certain limited situations,
hospitals may claim payments in addition to, or in some cases in lieu
of, the normal reimbursement available to hospitals under the regular
payment systems. Eligibility for these payments depends on compliance
with specific criteria. Hospitals that claim supplemental payments
improperly are liable for fines and penalties under Federal law.
Examples of specific risks that hospitals should address include the
following:
Improper reporting of the costs of ``pass-through''
items--``Pass-through'' items are certain items of new technology and
drugs for which Medicare will reimburse the hospital
[[Page 4862]]
based on costs during a limited transitional period.\27\
---------------------------------------------------------------------------
\27\ For more information regarding CMS's APC ``pass-through''
payments, See http://www.cms.gov/providers/hopps/apc.asp.
---------------------------------------------------------------------------
Abuse of DRG outlier payments--Recent investigations
revealed substantial abuse of outlier payments by hospitals with
Medicare patients. Hospital management, compliance staff, and counsel
should familiarize themselves with CMS's new outlier rules and
requirements intended to curb abuses.\28\
---------------------------------------------------------------------------
\28\ See 42 CFR 412.84; 68 FR 34493 (June 9, 2003).
---------------------------------------------------------------------------
Improper claims for incorrectly designated ``provider-
based'' entities--Certain hospital-affiliated entities and clinics can
be designated as ``provider-based,'' which allows for a higher level of
reimbursement for certain services.\29\ Hospitals should take steps to
ensure that facilities or organizations are only designated as
provider-based if they satisfy the criteria set forth in the
regulations.
---------------------------------------------------------------------------
\29\ The criteria for determining whether a facility or
organization is provider-based can be found at 42 CFR 413.65. In
April 2003, CMS published Transmittal A-03-030, outlining changes to
the criteria for provider-based designation. See http://www.cms.gov/manuals/pm_trans/A03030.pdf.
---------------------------------------------------------------------------
Improper claims for clinical trials--Since September 2000,
Medicare has covered items and services furnished during certain
clinical trials, as long as those items and services would typically be
covered for Medicare beneficiaries, but for the fact that they are
provided in an experimental or clinical trial setting. Hospitals that
participate in clinical trials should review the requirements for
submitting claims for patients participating in clinical trials.\30\
---------------------------------------------------------------------------
\30\ To view Medicare's National Coverage Decision regarding
clinical trials, see http://www.cms.gov/coverage/8d2.asp. Specific
requirements for submitting claims for reimbursement for clinical
trials can be accessed on CMS's Web page at http://www.cms.gov/coverage/8d4.asp.
---------------------------------------------------------------------------
Improper claims for organ acquisition costs--Hospitals
that are approved transplantation centers may receive reimbursement on
a reasonable cost basis to cover the costs of acquisition of certain
organs.\31\ Organ acquisition costs are only reimbursable if a hospital
satisfies several requirements, such as having adequate cost
information, supporting documentation, and supporting medical
records.\32\ Hospitals must also ensure that expenses not related to
organ acquisition, such as transplant and post-transplant activities
and costs from other cost centers, are not included in the hospital's
organ acquisition costs.\33\
---------------------------------------------------------------------------
\31\ See 42 CFR 412.2(e)(4), 42 CFR 412.113(d), and 42 CFR
413.203. See generally 42 CFR part 413 (setting forth the principles
of reasonable cost reimbursement).
\32\ See Medicare's Provider Reimbursement Manual (PRM), Part I,
section 2304 and Part II, section 3610, available on CMS's Web page
at http://www.cms.gov/manuals/cmsfoc.asp.
\33\ See 42 CFR 412.100. See also, chapter 3, section 90 of the
Medicare Claims Processing Manual, available on CMS's Web page at
http://www.cms.gov/manuals/104_claims/clm104c03.pdf pdf.See, e.g., OIG Audit Report A-04-02-02017, ``Audit of Medicare
Costs for Organ Acquisitions at Tampa General Hospital,'' April
2003, available on our Web page at http://oig.hhs.gov/oas/reports/region4/40202017.pdf.
---------------------------------------------------------------------------
Improper claims for cardiac rehabilitation services--
Medicare covers reasonable and necessary cardiac rehabilitation
services under the hospital ``incident-to'' benefit, which requires
that the services of nonphysician personnel be furnished under a
physician's direct supervision. In addition to satisfying the
supervision requirement, hospitals must ensure that cardiac
rehabilitation services are reasonable and necessary.\34\
---------------------------------------------------------------------------
\34\ See section 35-25 of the Medicare Coverage Issues Manual.
See, e.g., OIG Audit Report A-01-03-00516, ``Review of Outpatient
Cardiac Rehabilitation Services at the Cooley Dickinson Hospital,''
December 2003, available on our Web page at http://oig.hhs.gov/oas/reports/region reports/region 1/10300516.pdf.
---------------------------------------------------------------------------
Failure to follow Medicare rules regarding payment for
costs related to educational activities\35\--Hospitals should pay
particular attention to these rules when implementing dental or other
education programs, particularly those not historically operated at the
hospital.
---------------------------------------------------------------------------
\35\ Payments for direct graduage medical education (GME) and
indirect graduate medical education (IME) costs are, in part, based
upon the number of full-time equivalent (FTE) residents at each
hospital and the proportion of time residents spend in training.
Hospitals that inappropriately calculate the number of FTE residents
risk receiving inappropriate medical education payments. Hospitals
should have in place procedures regarding: (i) Resident rotation
monitoring; (ii) resident credentialing; (iii) written agreements
with non-hospital providers; and (iv) the approval process for
research activities. For more information regarding medical
education reimbursement, see 42 CFR 413.75 et. seq. (GME
requirements) and 42 CFR 412.105 (IME requirements). See, e.g., OIG
Audit Report A-01-01-00547 ``Review of Graduate Medical Education
Costs Claimed by the Hartford Hospital for Fiscal Year Ending
September 30, 1999,'' October 2003, available on our Web page at
http://oig.hhs.gov/oas/reports/region 1/10100547.pdf.
---------------------------------------------------------------------------
4. Use of Information Technology
The implementation of the OPPS increased the need for hospitals to
pay particular attention to their computerized billing, coding, and
information systems. Billing and coding under the OPPS is more data
intensive than billing and coding under the inpatient PPS. When the
OPPS began, many hospitals' existing systems were unable to accommodate
the new requirements and required adjustments.
As the health care industry moves forward, hospitals will
increasingly rely on information technology. For example, HIPAA Privacy
and Security Rules (discussed below in section II.G), electronic claims
submission,\36\ electronic prescribing, networked information sharing
among providers, and systems for the tracking and reduction of medical
errors, among others, will require hospitals to depend more on
information technologies. Information technology presents new
opportunities to advance health care efficiency, but also new
challenges to ensuring the accuracy of claims and the information used
to generate claims. It may be difficult for purchasers of computer
systems and software to know exactly how the system operates and
generates information. Prudent hospitals will take steps to ensure that
they thoroughly assess all new computer systems and software that
impact coding, billing, or the generation or transmission of
information related to the Federal health care programs or their
beneficiaries.
---------------------------------------------------------------------------
\36\ For more information regarding Medicare's Electronic Data
Interchange programs, see http://www.cms.gov/providers/edi/.
---------------------------------------------------------------------------
B. The Referral Statutes: The Physician Self-Referral Law (the
``Stark'' Law) and the Federal Anti-Kickback Statute
1. The Physician Self-Referral Law
From a hospital compliance perspective, the physician self-referral
law (section 1877 of the Social Security Act (Act), commonly known as
the ``Stark'' law) should be viewed as a threshold statute. The statute
prohibits hospitals from submitting--and Medicare from paying--any
claim for a ``designated health service'' (DHS) if the referral of the
DHS comes from a physician with whom the hospital has a prohibited
financial relationship.\37\ This is true even if the prohibited
financial relationship is the result of inadvertence or error. In
addition, hospitals and physicians that knowingly violate the statute
may be subject to CMPs and exclusion from the Federal health care
programs. Furthermore, under certain circumstances, a knowing violation
of the Stark law may also give rise to liability under the False Claims
Act. Because all inpatient and outpatient hospital services furnished
to Medicare or Medicaid patients
[[Page 4863]]
(including services furnished directly by a hospital or by others
``under arrangements'' with a hospital) are DHS under the statute,\38\
hospitals must diligently review all financial relationships with
referring physicians for compliance with the Stark law. Simply put,
hospitals face significant financial exposure unless their financial
relationships with referring physicians fit squarely in statutory or
regulatory exceptions to the Stark law.
---------------------------------------------------------------------------
\37\ The statute also prohibits physicians from referring DHS to
entities, including hospitals, with which they have prohibited
financial relationships. However, the billing prohibition and
nonpayment sanction apply only to the DHS entity (e.g., the
hospital). See section 1877(a) of the Act. Section 1903(s) of the
Act extends the statutory prohibition to Medicaid-covered services.
\38\ The statute lists ten additional categories of DHS,
including, among others, clinical laboratory services, radiology
services, and durable medical equipment. See section 1877(h)(6) of
the Act. Hospitals and health systems that own or operate free-
standing DHS entities should be mindful of the ten additional DHS
categories. CMS has clarified that lithotripsy services furnished to
hospital inpatients are not DHS. See 69 FR 16054, 16106 (March 26,
2004).
---------------------------------------------------------------------------
For purposes of analyzing a financial relationship under the Stark
law, the following three-part inquiry is useful:
Is there a referral from a physician for a designated
health service? If not, then there is no Stark law issue (although
other fraud and abuse authorities, such as the anti-kickback statute,
may be implicated). If the answer is ``yes,'' the next inquiry is:
Does the physician (or an immediate family member) have a
financial relationship with the entity furnishing the DHS (e.g., the
hospital)? Again, if the answer is no, the Stark law is not implicated.
However, if the answer is ``yes,'' the third inquiry is:
Does the financial relationship fit in an exception? If
not, the statute has been violated.
Detailed definitions of the highlighted terms are set forth in
regulations at 42 CFR 411.351 through 411.361 (substantial additional
explanatory material appears in the regulatory preambles to the final
regulations: 66 FR 856 (January 4, 2001); 69 FR 16054 (March 26, 2004);
and 69 FR 17933 (April 6, 2004)). Importantly, a financial relationship
can be almost any kind of direct or indirect ownership or investment
relationship (e.g., stock ownership, a partnership interest, or secured
debt) or direct or indirect compensation arrangement, whether in cash
or in-kind (e.g., a rental contract, personal services contract,
salary, gift, or gratuity), between a referring physician (or immediate
family member) and a hospital. Moreover, the financial relationship
need not relate to the provision of DHS (e.g., a joint venture between
a hospital and a physician to operate a hospice would create an
indirect compensation relationship between the hospital and the
physician for Stark law purposes).
The statutory and regulatory exceptions are the key to compliance
with the Stark law. Any financial relationship between the hospital and
a physician who refers to the hospital must fit in an exception.
Exceptions exist in the statute and regulations for many common types
of business arrangements. 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 Stark law.
Compliance with a Stark law exception does not immunize an
arrangement under the anti-kickback statute. Rather, the Stark law sets
a minimum standard for arrangements between physicians and hospitals.
Even if a hospital-physician relationship qualifies for a Stark law
exception, it should still be reviewed for compliance with the anti-
kickback statute. The anti-kickback statute is discussed in greater
detail in the next subsection.
Because of the significant exposure for hospitals under the Stark
law, we recommend that hospitals implement systems to ensure that all
conditions in the exceptions upon which they rely are fully satisfied.
For example, many of the exceptions, such as the rental and personal
services exceptions, require signed, written agreements with
physicians. We are aware of numerous instances in which hospitals
failed to maintain these signed written agreements, often inadvertently
(e.g., a holdover lease without a written lease amendment; a physician
hired as an independent contractor for a short-term project without a
signed agreement). To avoid a large overpayment, hospitals should
ensure frequent and thorough review of their contracting and leasing
processes. The final regulations contain a new limited exception for
certain inadvertent, temporary instances of noncompliance with another
exception. This exception may only be used on an occasional basis.
Hospitals should be mindful that this exception is not a substitute for
vigilant contracting and leasing oversight. In addition, hospitals
should review the new reporting requirements at 42 CFR 411.361, which
generally require hospitals to retain records that the hospitals know
or should know about in the course of prudently conducting business.
Hospitals should ensure that they have policies and procedures in place
to address these reporting requirements.
In addition, because many exceptions to the Stark law require fair
market value compensation for items or services actually needed and
rendered, hospitals 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. Other areas that may require careful monitoring
include, without limitation, the total value of nonmonetary
compensation provided annually to each referring physician, the value
of medical staff incidental benefits, and the provision of professional
courtesy.\39\ As discussed further in the anti-kickback section below,
hospitals should exercise care when recruiting physicians. Importantly,
while the final regulations contain a limited exception for certain
joint recruiting by hospitals and existing group practices, the
exception strictly forbids the use of income guarantees that shift
group practice overhead or expenses to the hospital or any payment
structure that otherwise transfers remuneration to the group practice.
---------------------------------------------------------------------------
\39\ Hospitals affiliated with academic medical centers should
be aware that the regulations contain a special exception for
certain academic medical center arrangements. See 42 CFR 411.355(e).
Specialty hospitals should be mindful of certain limitations on new
physician-owned specialty hospitals contained in section 507 of the
Medicare Prescription Drug, Improvement and Modernization Act of
2003. See CMS's One-Time Notification regarding the 18-month
moratorium on physician investment in specialty hospitals, CMS
Manual System Pub. 100-20 One-Time Notification, Transmittal 26
(March 19, 2004), available on CMS's Web page at http://www.cms.gov/manuals/pm_trans/R62OTN.pdf.
---------------------------------------------------------------------------
Further information about the Stark law and applicable regulations
can be found on CMS's Web page at http://cms.gov/medlearn/refphys.asp.
Information regarding CMS's Stark advisory opinion process can be found
at http://cms.gov/physicians/aop/default.asp.
2. The Federal Anti-Kickback Statute
Hospitals should also be aware of the Federal anti-kickback
statute, section 1128B(b) of the Act, and the constraints it places on
business arrangements related directly or indirectly to items or
services reimbursable by any Federal health care program, including,
but not limited to, Medicare and Medicaid. The anti-kickback statute
prohibits in the health care industry some practices that are common in
other business sectors, such as offering gifts to reward past or
potential new referrals.
The anti-kickback statute is a criminal prohibition against
payments (in any form, whether the payments are direct
[[Page 4864]]
or indirect) made purposefully to induce or reward the referral or
generation of Federal health care program business. The anti-kickback
statute addresses not only the offer or payment of anything of value
for patient referrals, but also the offer or payment of anything of
value in return for purchasing, leasing, ordering, or arranging for or
recommending the purchase, lease, or ordering of any item or service
reimbursable in whole or in part by a Federal health care program. The
statute extends equally to the solicitation or acceptance of
remuneration for referrals or the generation of other 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. Hospitals should also be mindful
that compliance with the anti-kickback statute is a condition of
payment under Medicare and other Federal health care programs. See,
e.g., Medicare Federal Health Care Provider/Supplier Application, CMS
Form 855A, Certification Statement at section 15, paragraph A.3,
available on CMS's Web page at http://www.cms.gov/providers/enrollment/forms/ /. As such, liability may arise under the False
Claims Act where the anti-kickback statute violation results in the
submission of a claim for payment under a Federal health care program.
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 analyzing an arrangement or practice under the anti-
kickback statute, the following two inquiries are useful:
Does the hospital have any remunerative relationship
between itself (or its affiliates or representatives) and persons or
entities in a position to generate Federal health care program business
for the hospital (or its affiliates) directly or indirectly? Persons or
entities in a position to generate Federal health care program business
for a hospital include, for example, physicians and other health care
professionals, ambulance companies, clinics, hospices, home health
agencies, nursing facilities, and other hospitals.
With respect to any remunerative relationship so
identified, could one purpose of the remuneration be to induce or
reward the referral or recommendation 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 the
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).
Although any arrangement satisfying both tests implicates the anti-
kickback statute and requires careful scrutiny by a hospital, the
courts have identified several potentially aggravating considerations
that can be useful in identifying arrangements at greatest risk of
prosecution. In particular, hospitals 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, beneficiaries, or
enrollees?
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?
Hospitals 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. Detailed guidance relating to a number
of specific practices is available from several sources. Most
importantly, the anti-kickback statute and the corresponding
regulations establish a number of ``safe harbors'' for common business
arrangements. The following safe harbors are of most relevance to
hospitals:
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)),
Sale of practice safe harbor (42 CFR 1001.952(e)),
Referral services safe harbor (42 CFR 1001.952(f)),
Discount safe harbor (42 CFR 1001.952(h)),
Employee safe harbor (42 CFR 1001.952(i)),
Group purchasing organizations safe harbor (42 CFR
1001.952(j)),
Waiver of beneficiary coinsurance and deductible amounts
safe harbor (42 CFR 1001.952(k)),
Practitioner recruitment safe harbor (42 CFR 1001.952(n)),
Obstetrical malpractice insurance subsidies safe harbor
(42 CFR 1001.952(o)),
Cooperative hospital service organizations safe harbor (42
CFR 1001.952(q)),
Ambulatory surgical centers safe harbor (42 CFR
1001.952(r)),
Ambulance replenishing safe harbor (42 CFR 1001.952(v)),
and
Safe harbors for certain managed care and risk sharing
arrangements (42 CFR 1001.952(m), (t), and (u)).\40\
---------------------------------------------------------------------------
\40\ Importantly, the anti-kickback statute safe harbors are not
the same as the Stark law exceptions described above at section
II.B.1 of this guidance. An arrangement's compliance with the anti-
kickback statute and the Stark law must be evaluated separately.
---------------------------------------------------------------------------
Safe harbor protection requires strict compliance with all
applicable conditions set out in the relevant safe harbor.\41\ Although
compliance with a safe harbor is voluntary and failure to comply with a
safe harbor does not mean an arrangement is illegal per se, we
recommend that hospitals structure arrangements to fit in a safe harbor
whenever possible. Arrangements that do not fit in a safe harbor must
be evaluated on a case-by-case basis.
---------------------------------------------------------------------------
\41\ 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 OIG examines
not only whether the written contract satisfies all of the safe
harbor requirements, but also whether the actual arrangement
satisfies the requirements.
---------------------------------------------------------------------------
Other available guidance includes special fraud alerts and advisory
bulletins issued by the OIG identifying and discussing particular
practices or issues of concern and OIG advisory opinions issued to
specific parties about their particular business arrangements.\42\ A
hospital 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, using the procedures 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
[[Page 4865]]
available on the OIG Web page at http://oig.hhs.gov.
---------------------------------------------------------------------------
\42\ 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 very fact-specific. Accordingly,
hospitals should be aware that 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; nor
does it mean that the practice or activity is not beneficial from a
clinical, cost, or other perspective. Rather, the areas identified
below are areas of activity that have a potential for abuse and that
should receive close scrutiny from hospitals. The discussion highlights
potential risks under the anti-kickback statute arising from hospitals'
relationships in the following seven categories: (a) Joint ventures;
(b) compensation arrangements with physicians; (c) relationships with
other health care entities; (d) recruitment arrangements; (e)
discounts; (f) medical staff credentialing; and (g) malpractice
insurance subsidies. (In addition, the kickback risks associated with
gainsharing arrangements are discussed below in section II.C of this
guidance.)
Physicians are the primary referral source for hospitals, and,
therefore, most of the discussion below focuses on hospitals'
relationships with physicians. Notwithstanding, hospitals also receive
referrals from other health care professionals, including physician
assistants and nurse practitioners, and from other providers and
suppliers (such as ambulance companies, clinics, hospices, home health
agencies, nursing facilities, and other hospitals). Therefore, in
addition to reviewing their relationships with physicians, hospitals
should also review their relationships with nonphysician referral
sources to ensure that the relationships do not violate the anti-
kickback statute. The principles described in the following discussions
can be used to assess the risk associated with relationships with both
physician and nonphysician referral sources.
a. Joint Ventures
The OIG has a long-standing concern about joint venture
arrangements between those in a position to refer or generate Federal
health care program business and those providing items or services
reimbursable by Federal health care programs.\43\ In the context of
joint ventures, our chief concern is that remuneration from a joint
venture might be a disguised payment for past or future referrals to
the venture or to one or more of its participants. Such remuneration
may take a variety of forms, including dividends, profit distributions,
or, with respect to contractual joint ventures, the economic benefit
received under the terms of the operative contracts.
---------------------------------------------------------------------------
\43\ See 1989 Special Fraud Alert on Joint Venture Arrangements,
reprinted in the Federal Register (59 FR 65372; December 19,1994)
and available on our Web page at http://oig.hhs.gov/fraud/docs/alertsandbulletins/121994.html.
---------------------------------------------------------------------------
When scrutinizing joint ventures under the anti-kickback statute,
hospitals should examine the following factors, among others:
The manner in which joint venture participants are
selected and retained. If participants are selected or retained in a
manner that takes into account, directly or indirectly, the value or
volume of referrals, the joint venture is suspect. The existence of one
or more of the following indicators suggests that there might be an
improper nexus between the selection or retention of participants and
the value or volume of their referrals:
--A substantial number of participants are in a position to make or
influence referrals to the venture, other participants, or both;
--Participants that are expected to make a large number of referrals
are offered a greater or more favorable investment or business
opportunity in the joint venture than those anticipated to make fewer
referrals;
--Participants are actively encouraged or required to make referrals to
the joint venture;
--Participants are encouraged or required to divest their ownership
interest if they fail to sustain an ``acceptable'' level of referrals;
--The venture (or its participants) tracks its sources of referrals and
distributes this information to the participants; or
--The investment interests are nontransferable or subject to transfer
restrictions related to referrals.
The manner in which the joint venture is structured. The
structure of the joint venture is suspect if a participant is already
engaged in the line of business to be conducted by the joint venture,
and that participant will own all or most of the equipment, provide or
perform all or most of the items or services, or take responsibility
for all or most of the day-to-day operations. With this kind of
structure, the co-participant's primary contribution is typically as a
captive referral base.
The manner in which the investments are financed and
profits are distributed. The existence of one or more of the following
indicators suggests that the joint venture may be a vehicle to disguise
referrals:
--Participants are offered investment shares for a nominal or no
capital contribution;
--The amount of capital that participants invest is disproportionately
small, and the returns on the investment are disproportionately large,
when compared to a typical investment in a new business enterprise;
--Participants are permitted to borrow their capital investments from
another participant or from the joint venture, and to pay back the loan
through deductions from profit distributions, thus eliminating even the
need to contribute cash;
--Participants are paid extraordinary returns on the investment in
comparison with the risk involved; or
--A substantial portion of the gross revenues of the venture are
derived from participant-driven referrals.
In light of the obvious risk inherent in joint ventures, whenever
possible, hospitals should structure joint ventures to fit squarely in
one of the following safe harbors for investment interests:
The ``small entity'' investment safe harbor (42 CFR
1001.952(a)(2)), which applies to returns on investments as long as no
more than 40 percent of the investment interests are held by investors
who are in a position to make or influence referrals to, furnish items
or services to, or otherwise generate business for the venture
(interested investors), no more than 40 percent of revenues come from
referrals or business otherwise generated from investors, and all other
conditions are satisfied; \44\
---------------------------------------------------------------------------
\44\ There is also a safe harbor for investment interests in
large entities (i.e., entities with over fifty million dollars in
assets) (42 CFR 1001.952(a)(1)).
---------------------------------------------------------------------------
The safe harbor for investment interests in an entity
located in an underserved area (42 CFR 1001.952(a)(3)), which applies
to ventures located in medically underserved areas (as defined in
regulations issued by the Department and set forth at 42 CFR part 51c),
as long as no more than 50 percent of the investment interests are held
by interested investors and all other conditions are satisfied; or
The hospital-physician ambulatory surgical center (ASC)
safe harbor (42 CFR 1001.952(r)(4)). This safe harbor only protects
investments in Medicare-certified ASCs owned by hospitals and certain
qualifying physicians. Importantly, it does not protect
[[Page 4866]]
investments by hospitals and physicians in non-ASC clinical joint
ventures, including, for example, cardiac catheterization or vascular
laboratories, oncology centers, and dialysis facilities. Investors in
such clinical ventures should look to other safe harbors and to the
factors noted above.
These safe harbors protect remuneration in the form of returns on
investment interests (i.e., money paid by an entity to its owners or
investors as dividends, profit distributions, or the like). However,
they do not protect payments made by participating investors to a
venture or payments made by the venture to other parties, such as
vendors, contractors, or employees (although in some cases these
arrangements may fit in other safe harbors).
As we originally observed in our 1989 Special Fraud Alert on Joint
Venture Arrangements,\45\ joint ventures may take a variety of forms,
including a contractual arrangement between two or more parties to
cooperate in a common and distinct enterprise providing items or
services, thereby creating a ``contractual joint venture.'' We
elaborated more fully on contractual joint ventures in our 2003 Special
Advisory Bulletin on Contractual Joint Ventures.\46\ Contractual joint
ventures pose the same kinds of risks as equity joint ventures and
should be analyzed similarly. Factors to consider include, for example,
whether the hospital is expanding into a new line of business created
predominately or exclusively to serve the hospital's existing patient
base, whether a would-be competitor of the new line of business is
providing all or most of the key services, and whether the hospital
assumes little or no bona fide business risk. An example of a
potentially problematic contractual joint venture would be a hospital
contracting with an existing durable medical equipment (DME) supplier
to operate the hospital's newly formed DME subsidiary (with its own DME
supplier number) on essentially a turnkey basis, with the hospital
primarily furnishing referrals and assuming little or no business
risk.\47\
---------------------------------------------------------------------------
\45\ See 1989 Special Fraud Alert on Joint Venture Arrangements,
supra note 43.
\46\ This Special Advisory Bulletin is available on our Web page
at http://oig.hhs.gov/fraud/docs/alertsandbulletins/042303SABJointVentures.pdf.
\47\ Contractual ventures with existing clinical laboratories
and outpatient therapy providers, among others, are also potentially
problematic, particularly if the venture is functionally a turnkey
operation that enables a hospital to use its captive referrals to
expand into a new line of business with little or no contribution of
resources or assumption of real risk.
---------------------------------------------------------------------------
Hospitals should be aware that, for reasons described in our 2003
Special Advisory Bulletin on Contractual Joint Ventures,\48\ safe
harbor protection may not be available for contractual joint ventures,
and attempts to carve out separate contracts and qualify each
separately for safe harbor protection may be ineffectual and leave the
parties at risk under the statute.\49\
---------------------------------------------------------------------------
\48\ See 2003 Special Advisory Bulletin on Contractual Joint
Ventures, supra note 46.
\49\ The Medicare program permits hospitals to furnish services
``under arrangements'' with other providers or suppliers. Hospitals
frequently furnish services ``under arrangements'' with an entity
owned, in whole or in part, by referring physicians. Standing alone,
these ``under arrangements'' relationships do not fall within the
scope of problematic contractual joint ventures described in the
Special Fraud Alert; however, these relationships will violate the
anti-kickback statute if remuneration is purposefully offered or
paid to induce referrals (e.g., paying above-market rates for the
services to influence referrals or otherwise tying the arrangements
to referrals in any manner). These ``under arrangements''
relationships should be structured, when possible, to fit within an
anti-kickback safe harbor. They must fit within a Stark exception,
even if the service furnished ``under arrangements'' is not itself a
DHS. See 66 FR 856, 941-2 (January 4, 2001); 69 FR 16054, 16106
(March 26, 2004).
---------------------------------------------------------------------------
If a hospital is planning to participate, directly or indirectly,
in a joint venture involving referring physicians and the venture does
not qualify for safe harbor protection, the hospital should scrutinize
the venture with care, taking into account the factors noted above, and
consider obtaining advice from an experienced attorney. At a minimum,
to reduce (but not necessarily eliminate) the risk of abuse, hospitals
should consider (i) barring physicians employed by the hospital or its
affiliates from referring to the joint venture; (ii) taking steps to
ensure that medical staff and other affiliated physicians are not
encouraged in any manner to refer to the joint venture; (iii) notifying
physicians annually in writing of the preceding policy; (iv) refraining
from tracking in any manner the volume of referrals attributable to
particular referrals sources; (v) ensuring that no physician
compensation is tied in any manner to the volume or value of referrals
to, or other business generated for, the venture; (vi) disclosing all
financial interests to patients; \50\ and (vii) requiring that other
participants in the joint venture adopt similar steps.
---------------------------------------------------------------------------
\50\ While disclosure to patients does not offer sufficient
protection against Federal health care program abuse, effective and
meaningful disclosure offers some protection against possible abuses
of patient trust.
---------------------------------------------------------------------------
b. Compensation Arrangements With Physicians
Hospitals enter into a variety of compensation arrangements with
physicians whereby physicians provide items or services to, or on
behalf of, the hospital. Conversely, in some arrangements, hospitals
provide items or services to physicians. Examples of these compensation
arrangements include, without limitation, medical director agreements,
personal or management services agreements, space or equipment leases,
and agreements for the provision of billing, nursing, or other staff
services. Although many compensation arrangements are legitimate
business arrangements, compensation arrangements may violate the anti-
kickback statute if one purpose of the arrangement is to compensate
physicians for past or future referrals.\51\
---------------------------------------------------------------------------
\51\ As previously noted, a hospital should ensure that each
compensation arrangement with a referring physician fits squarely in
a statutory or regulatory exception to the Stark law.
---------------------------------------------------------------------------
The general rule of thumb is that any remuneration flowing between
hospitals and physicians should be at fair market value for actual and
necessary items furnished or services rendered based upon an arm's-
length transaction and should not take into account, directly or
indirectly, the value or volume of any past or future referrals or
other business generated between the parties. Arrangements under which
hospitals (i) provide physicians with items or services for free or
less than fair market value, (ii) relieve physicians of financial
obligations they would otherwise incur, or (iii) inflate compensation
paid to physicians for items or services pose significant risk. In such
circumstances, an inference arises that the remuneration may be in
exchange for generating business.
In particular, hospitals should review their physician compensation
arrangements and carefully assess the risk of fraud and abuse using the
following factors, among others:
Are the items and services obtained from a physician
legitimate, commercially reasonable, and necessary to achieve a
legitimate business purpose of the hospital (apart from obtaining
referrals)? Assuming that the hospital needs the items and services,
does the hospital have multiple arrangements with different physicians,
so that in the aggregate the items or services provided by all
physicians exceed the hospital's actual needs (apart from generating
business)?
Does the compensation represent fair market value in an
arm's-length transaction for the items and services? Could the hospital
obtain the services from a non-referral source at a cheaper rate or
under more favorable terms? Does the remuneration take into
[[Page 4867]]
account, directly or indirectly, the value or volume of any past or
future referrals or other business generated between the parties? Is
the 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? If fair market value is based on comparables, the hospital
should ensure that the market rate for the comparable services is not
distorted (e.g., the market for ancillary services may be distorted if
all providers of the service are controlled by physicians).
Is the compensation commensurate with the fair market
value of a physician with the skill level and experience reasonably
necessary to perform the contracted services?
Were the physicians selected to participate in the
arrangement in whole or in part because of their past or anticipated
referrals?
Is the arrangement properly and fully documented in
writing? Are the physicians documenting the services they provide? Is
the hospital monitoring the services?
In the case of physicians staffing hospital outpatient
departments, are safeguards in place to ensure that the physicians do
not use hospital outpatient space, equipment, or personnel to conduct
their private practices? In addition, physicians working in outpatient
departments must bill the appropriate site-of-service modifier. The
hospital should take reasonable steps to ensure that physicians are
aware of this requirement and should take appropriate action if it
identifies physicians engaging in improper site-of-service billing.
Whenever possible, hospitals should structure their compensation
arrangements with physicians to fit in a safe harbor. Potentially
applicable are the space rental safe harbor (42 CFR 1001.952(b)), the
equipment rental safe harbor (42 CFR 1001.952(c)), the personal
services and management contracts safe harbor (42 CFR 1001.952(d)), the
sale of practice safe harbor (42 CFR 1001.952(e)), the referral
services safe harbor (42 CFR 1001.952(f)), the employee safe harbor (42
CFR 1001.952(i)), the practitioner recruitment safe harbor (42 CFR
1001.952(n)), and the obstetrical malpractice insurance subsidies safe
harbor (42 CFR 1001.952(o)). An arrangement must fit squarely in a safe
harbor to be protected. Arrangements that do not fit in a safe harbor
should be reviewed in light of the totality of all facts and
circumstances. At minimum, hospitals should develop policies and
procedures requiring physicians to document, and the hospital to
monitor, the services or items provided under compensation arrangements
(including, for example, by using written time reports). In some cases,
particularly rentals, hospitals should consider obtaining an
independent fair market valuation using appropriate health care
valuation standards.
Arrangements between hospitals and traditional hospital-based
physicians (e.g., anesthesiologists, radiologists, and pathologists)
raise some different concerns.\52\ In these arrangements, it is
typically the hospitals that are in a position to influence the flow of
business to the physicians, rather than the physicians making referrals
to the hospitals.\53\ Such arrangements may violate the anti-kickback
statute if the hospital solicits or receives something of value--or the
physicians offer or pay something of value--in exchange for access to
the hospital's Federal health care program business. Illegal kickbacks
between hospitals and hospital-based physicians may take a variety of
forms, including, without limitation:
---------------------------------------------------------------------------
\52\ Arrangements between hospitals and hospital-based
physicians were the topic of a Management Advisory Report (MAR)
titled ``Financial Arrangements Between Hospitals and Hospital-Based
Physicians,'' OEI-09-89-00330, available on our Web page at http://oig.hhs.gov/oei/reports/oei-09-89-00330.pdf.
\53\ In this regard, arrangements between hospitals and
traditional hospital-based physicians generally do not pose the same
potential to cause the harms typically associated with kickback
schemes. Moreover, a hospital's attending medical staff's quality
expectations and a hospital's liability exposure for the malpractice
of hospital-based physicians constrain the hospital's choice of a
hospital-based physician or group. Finally, to the extent that any
qualified group can bid for hospital-based business and the request
for proposals clearly includes the entire arrangement, the
competition is not unfair. (Of course, an open, competitive bidding
process does not protect an otherwise illegal kickback arrangement.)
---------------------------------------------------------------------------
A hospital requiring physicians to pay more than the fair
market value for services provided to the hospital-based physicians by
the hospital; or
A hospital compensating physicians less than the fair
market value for goods or services provided to the hospital by the
physicians.
Accordingly, arrangements that require physicians to provide
Medicare Part A supervision and management services for token or no
payment in exchange for the ability to provide physician-billable
Medicare Part B services at the hospital potentially violate the anti-
kickback statute and should be closely scrutinized.
We are aware that hospitals have long provided for the delivery of
certain hospital-based physician services through the grant of an
exclusive contract to a physician or physician group, which includes
management, staffing, and other administrative functions, and in some
cases limited clinical duties. These exclusive arrangements affect the
cash and non-cash value of the overall arrangement to the respective
parties.
Depending on the circumstances, an exclusive contract can have
substantial value to the hospital-based physician or group, as well as
to the hospital, that may well have nothing to do with the value or
volume of business flowing between the hospital and the physicians. By
way of example only, an exclusive arrangement may reduce the costs a
physician or group would otherwise incur for business development and
may eliminate administrative costs otherwise incurred by the hospital.
In an appropriate context, an exclusive arrangement that requires a
hospital-based physician or physician group to perform reasonable
administrative or limited clinical duties directly related to the
hospital-based professional services at no or a reduced charge would
not violate the anti-kickback statute, provided that the overall
arrangement is consistent with fair market value in an arm's-length
transaction, taking into account the value attributable to the
exclusivity. Depending on the circumstances, examples of directly-
related administrative or clinical duties include, without limitation:
participation on hospital committees, tumor boards, or similar hospital
entities; participation in on-call rotation; and performance of quality
assurance and oversight activities. Notwithstanding, whether the scope
and volume of the required services in a particular arrangement
reasonably reflect the value of the exclusivity will depend on the
facts and circumstances of the arrangement.
Nothing in this supplemental CPG should be construed as requiring
hospital-based physicians to perform administrative or clinical
services at no or a reduced charge. Uncompensated or below-market
arrangements for goods or services will be subject to close scrutiny
for compliance with the statute.
c. Relationships With Other Health Care Entities
As addressed in the preceding subsection, hospitals may obtain
referrals of Federal health care program business from a variety of
health care professionals and entities. In addition, when furnishing
inpatient, outpatient, and related services, hospitals often direct or
influence referrals for items
[[Page 4868]]
and services reimbursable by Federal health care programs. For example,
hospitals may refer patients to, or order items or services from, home
health agencies,\54\ skilled nursing facilities, durable medical
equipment companies, laboratories, pharmaceutical companies, and other
hospitals. In cases where a hospital is the referral source for other
providers or suppliers, it would be prudent for the hospital to
scrutinize carefully any remuneration flowing to the hospital from the
provider or supplier to ensure compliance with the anti-kickback
statute, using the principles outlined above. Remuneration may include,
for example, free or below-market-value items and services or the
relief of a financial obligation.
---------------------------------------------------------------------------
\54\ When referring to home health agencies and skilled nursing
facilities, hospitals must comply with section 1861(ee)(2)(D) and
(H) of the Act, requiring that Medicare participating hospitals, as
part of the discharge planning process, (i) share with each
beneficiary a list of Medicare-certified home health agencies or
skilled nursing facilities, as applicable, that serve the
beneficiary's geographic area, and (ii) identify any home health
agency or skilled nursing facility in which the hospital has a
disclosable financial interest or that has a financial interest in
the hospital. See also 42 CFR 482.43.
---------------------------------------------------------------------------
Hospitals should also review their managed care arrangements to
ensure compliance with the anti-kickback statute. Managed care
arrangements that do not fit within one of the managed care and risk
sharing safe harbors at 42 CFR 1001.952(m), (t), or (u) must be
evaluated on a case-by-case basis.
d. Recruitment Arrangements
Many hospitals provide incentives to recruit a physician or other
health care professional to join the hospital's medical staff and
provide medical services to the surrounding community. When used to
bring needed physicians to an underserved community, these arrangements
can benefit patients. However, recruitment arrangements pose
substantial fraud and abuse risk.
In most cases, the recruited physician establishes a private
practice in the community instead of becoming a hospital employee.\55\
Such arrangements potentially implicate the anti-kickback statute if
one purpose of the recruitment arrangement is to induce referrals to
the recruiting hospital. Safe harbor protection is available for
certain recruitment arrangements offered by hospitals to attract
primary care physicians and practitioners to health professional
shortage areas (HPSAs), as defined in regulations issued by the
Department.\56\ The scope of this safe harbor is very limited. In
particular, the safe harbor does not protect (a) recruitment
arrangements in areas that are not designated as HPSAs, (b) recruitment
of specialists, or (c) joint recruitment with existing physician
practices in the area.
---------------------------------------------------------------------------
\55\ When paid pursuant to a properly structured employment
arrangement, payments to physicians who become hospital employees
may be protected by the employee safe harbor at 42 CFR 1001.952(i).
\56\ See 42 CFR 1001.952(n).
---------------------------------------------------------------------------
Because of the significant risk of fraud and abuse posed by
improper recruitment arrangements, hospitals should scrutinize these
arrangements with care. When assessing the degree of risk associated
with recruitment arrangements, hospitals should examine the following
factors, among others:
The size and value of the recruitment benefit. Does the
benefit exceed what is reasonably necessary to attract a qualified
physician to the particular community? Has the hospital previously
tried and failed to recruit or retain physicians?
The duration of payout of the recruitment benefit. Total
benefit payout periods extending longer than three years from the
initial recruitment agreement should trigger heightened scrutiny.
The practice of the existing physician. Is the physician a
new physician with few or no patients or an established practitioner
with a ready stream of referrals? Is the physician relocating from a
substantial distance so that referrals are unlikely to follow or is it
possible for the physician to bring an established patient base?
The need for the recruitment. Is the recruited physician's
specialty necessary to provide adequate access to medically necessary
care for patients in the community? Do patients already have reasonable
access to comparable services from other providers or practitioners in
or near the community? An assessment of community need based wholly or
partially on the competitive interests of the recruiting hospital or
existing physician practices would subject the recruitment payments to
heightened scrutiny under the statute.
Significantly, hospitals should be aware that the practitioner
recruitment safe harbor excludes any arrangement that directly or
indirectly benefits any existing or potential referral source other
than the recruited physician. Accordingly, the safe harbor does not
protect ``joint recruitment'' arrangements between hospitals and other
entities or individuals, such as solo practitioners, group practices,
or managed care organizations, pursuant to which the hospital makes
payments directly or indirectly to the other entity or individual.
These joint recruitment arrangements present a high risk of fraud and
abuse and have been the subject of recent government investigations and
prosecutions. These arrangements can easily be used as vehicles to
disguise payments from the hospital to an existing referral source--
typically an existing physician practice--in exchange for the existing
practice's referrals to the hospital. Suspect payments to existing
referral sources may include, among other things, income guarantees
that shift costs from the existing referral source to the recruited
physician and overhead and build-out costs funded for the benefit of
the existing referral source. Hospitals should review all ``joint
recruiting'' arrangements to ensure that remuneration does not inure in
whole or in part to the benefit of any party other than the recruited
physician.
e. Discounts
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.\57\ 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 price. Moreover, the regulation
provides that the discount must be given at the time of sale or, in
certain cases, set at the time of sale, even if finally determined
subsequent to the time of sale (i.e., a rebate).
---------------------------------------------------------------------------
\57\ See 42 U.S.C. 1320a-7b(b)(3)(A); 42 CFR 1001.952(h).
---------------------------------------------------------------------------
In conducting business, hospitals sell and purchase items and
services reimbursable by Federal health care programs. Therefore,
hospitals should thoroughly familiarize themselves with the discount
safe harbor at 42 CFR 1001.952(h). In particular, depending on their
role in the arrangement, hospitals should pay attention to the discount
safe harbor requirements applicable to ``buyers,'' ``sellers,'' or
``offerors.'' Compliance with the safe harbor is determined separately
for each party. In general, hospitals should ensure that all
discounts--including rebates--are properly disclosed and accurately
reflected on hospital cost reports. If a hospital offers a discount on
an item or service to a buyer, it should ensure that the discount is
properly disclosed on the invoice or other documentation for the item
or service.
[[Page 4869]]
The discount safe harbor does not protect a discount offered to one
payor but not to the Federal health care programs. Accordingly, in
negotiating discounts for items and services paid from a hospital's
pocket (such as those reimbursed under the Medicare Part A prospective
payment system), the hospital should ensure that there is no link or
connection, explicit or implicit, between discounts offered or
solicited for that business and the hospital's referral of business
billable by the seller directly to Medicare or another Federal health
care program. For example, a hospital should not engage in ``swapping''
by accepting from a supplier an unreasonably low price on Part A
services that the hospital pays for out of its own pocket in exchange
for hospital referrals that are billable by the supplier directly to
Part B (e.g., ambulance services). Suspect arrangements include below-
cost arrangements or arrangements at prices lower than the prices
offered by the supplier to other customers with similar volumes of
business, but without Federal health care program referrals.
Hospitals may also receive discounts on items and services
purchased through group purchasing organizations (GPOs). Discounts
received from a vendor in connection with a GPO to which a hospital
belongs should be properly disclosed and accurately reported on the
hospital cost reports. Although there is a safe harbor for payments
made by a vendor to a GPO as part of an agreement to furnish items or
services to a group of individuals or entities (42 CFR 1001.952(j)),
the safe harbor does not protect the discount received by the
individual or entity.\58\
---------------------------------------------------------------------------
\58\ To preclude improper shifting of discounts, the safe harbor
excludes GPOs that wholly own their members or have members that are
subsidiaries of the parent company that wholly owns the GPO.
Hospitals with affiliated GPOs should be mindful of these
limitations.
---------------------------------------------------------------------------
f. Medical Staff Credentialing
Certain medical staff credentialing practices may implicate the
anti-kickback statute.\59\ For example, conditioning privileges on a
particular number of referrals or requiring the performance of a
particular number of procedures, beyond volumes necessary to ensure
clinical proficiency, potentially raise substantial risks under the
statute. On the other hand, a credentialing policy that categorically
refuses privileges to physicians with significant conflicts of interest
would not appear to implicate the statute in most situations. Whether a
particular credentialing policy runs afoul of the anti-kickback statute
would depend on the specific facts and circumstances, including the
intent of the parties. Hospitals are advised to examine their
credentialing practices to ensure that they do not run afoul of the
anti-kickback statute. The OIG has solicited comments about, and is
considering, whether further guidance in this area is appropriate.\60\
---------------------------------------------------------------------------
\59\ In addition to the anti-kickback statute, hospitals should
make sure that their credentialing policies comply with all other
applicable Federal and State laws and regulations, some of which may
prohibit or limit economic credentialing.
\60\ See our ``Solicitation of New Safe Harbors and Special
Fraud Alerts'' (67 FR 72894; December 9, 2002), available on our Web
page at http://oig.hhs.gov/authorities/docs/solicitationannsafeharbor.pdf.
---------------------------------------------------------------------------
g. Malpractice Insurance Subsidies
The OIG historically has been concerned that a hospital's subsidy
of malpractice insurance premiums for potential referral sources,
including hospital medical staff, may be suspect under the anti-
kickback statute, because the payments may be used to influence
referrals. The OIG has established a safe harbor for medical
malpractice premium subsidies provided to obstetrical care
practitioners in health professional shortage areas.\61\ Depending on
the circumstances, premium support may also be structured to fit in
other safe harbors.
---------------------------------------------------------------------------
\61\ See 42 CFR 1001.952(o).
---------------------------------------------------------------------------
We are aware of the current disruption (i.e., dramatic premium
increases, insurers' withdrawals from certain markets, and/or sudden
termination of coverage based upon factors other than the physicians'
claims history) in the medical malpractice liability insurance markets
in some geographic areas.\62\ Notwithstanding, hospitals should review
malpractice insurance subsidy arrangements closely to ensure that there
is no improper inducement to referral sources. Relevant factors
include, without limitation:
---------------------------------------------------------------------------
\62\ See the OIG's letter on a hospital corporaiton's medical
malpractice insurance assistance program, available on our Web page
at http://oig.hhs.gov/fraud/docs/alertsandbulletins/MalpracticeProgram.pdf
---------------------------------------------------------------------------
Whether the subsidy is being provided on an interim basis
(e.g., until an unrelated insurer is commercially available) for a
reasonable fixed period in a geographic area experiencing severe access
or affordability problems;
Whether the subsidy is being offered only to current
active medical staff (or physicians new to the locality or in practice
less than a year, i.e., physicians with no or few established
patients);
Whether the criteria for receiving a subsidy is unrelated
to the volume or value of referrals or other business generated by the
subsidized physician or his practice;
Whether physicians receiving subsidies are paying at least
as much as they currently pay for malpractice insurance (i.e., are
windfalls to physicians avoided);
Whether physicians are required to perform services or
relinquish rights, which have a value equal to the fair market value of
the insurance assistance; and
Whether the insurance is available regardless of the
location at which the physician provides services, including, but not
limited to, other hospitals.
No one of these factors is determinative, and this list is
illustrative, not exhaustive, of potential considerations in connection
with the provision of malpractice insurance subsidies. Parties
contemplating malpractice subsidy programs that do not fit into one of
the safe harbors may want to consider obtaining an advisory opinion.
Parties should also be mindful that these subsidy arrangements also
implicate the Stark law.
C. Payments To Reduce or Limit Services: Gainsharing Arrangements
The CMP set forth in section 1128A(b)(1) of the Act prohibits a
hospital from knowingly making a payment directly or indirectly to a
physician as an inducement to reduce or limit items or services
furnished to Medicare or Medicaid beneficiaries under the physician's
direct care.\63\ Hospitals that make (and physicians that receive) such
payments are liable for CMPs of up to $2,000 per patient covered by the
payments.\64\ The statutory proscription is very broad. The payment
need not be tied to an actual diminution in care, so long as the
hospital knows that the payment may influence the physician to reduce
or limit services to his or her patients. There is no requirement that
the prohibited payment be tied to a specific patient or to a reduction
in medically necessary care. In short, any hospital incentive plan that
encourages physicians through payments to reduce
[[Page 4870]]
or limit clinical services directly or indirectly violates the statute.
---------------------------------------------------------------------------
\63\ The prohibition applies only to reductions or limitations
of items or services provided to Medicare and Medicaid fee-for-
service beneficiaries. See section 1128A(b)(1)(A) of the Act. See
also our August 19, 1999 letter regarding ``Social Security Act
sections 1128A(b)(1) and (2) and hospital-physician incentive plans
for Medicare or Medicaid beneficiaries enrolled in managed care
plans,'' available on our Web page at http://oig.hhs.gov/fraud/docs/alertsandbulletins/gsletter.htm.
\64\ See sections 1128A(b)(1)(B) and (b)(2) of the Act.
---------------------------------------------------------------------------
We are aware that a number of hospitals are engaged in, or
considering entering into, incentive arrangements commonly called
``gainsharing.'' While there is no fixed definition of a
``gainsharing'' arrangement, the term typically refers to an
arrangement in which a hospital gives physicians a percentage share of
any reduction in the hospital's costs for patient care attributable in
part to the physicians' efforts. We recognize that, properly
structured, gainsharing arrangements can serve legitimate business and
medical purposes, such as increasing efficiency, reducing waste, and,
thereby, potentially increasing a hospital's profitability. However,
the plain language of section 1128A(b)(1) of the Act prohibits tying
the physicians' compensation for services to reductions or limitations
in items or services provided to patients under the physicians'
clinical care.\65\
---------------------------------------------------------------------------
\65\ A detailed discussion of gainsharing can be found in our
July 1999 Special Advisory Bulletin titled ``Gainsharing
Arrangements and CMPs for Hospital Payments to Physicians to Reduce
or Limit Services to Beneficiaries,'' available on our Web page at
http://oig.hhs.gov/fraud/docs/altersandbulletins/gainsh.htm.
---------------------------------------------------------------------------
In addition to the CMP risks described above, gainsharing
arrangements can also implicate the anti-kickback statute if the cost-
savings payments are used to influence referrals. For example, the
statute is potentially implicated if a gainsharing arrangement is
intended to influence physicians to ``cherry pick'' healthy patients
for the hospital offering gainsharing payments and steer sicker (and
more costly) patients to hospitals that do not offer gainsharing
payments. Similarly, the statute may be implicated if a hospital offers
a cost-sharing program with the intent to foster physician loyalty and
attract more referrals. In addition, we have serious concerns about
overly broad arrangements under which a physician continues for an
extended time to reap the benefits of previously-achieved savings or
receives cost-savings payments unrelated to anything done by the
physician, whether work, services, or other undertaking (e.g., a change
in the way the physician practices).
Wherever possible, hospitals should consider structuring cost-
saving arrangements to fit in the personal services safe harbor.
However, in many cases, protection under the personal services safe
harbor is not available because gainsharing arrangements typically
involve a percentage payment (i.e., the aggregate fee will not be set
in advance, as required by the safe harbor). Finally, gainsharing
arrangements may also implicate the Stark law.
D. Emergency Medical Treatment and Labor Act (EMTALA)
Hospitals should review their obligations under EMTALA (section
1867 of the Act) to evaluate and treat individuals who come to their
emergency departments and, in some circumstances, other facilities.
Hospitals should pay particular attention to when an individual must
receive a medical screening exam to determine whether that individual
is suffering from an emergency medical condition. When such a screening
or treatment of an emergency medical condition is required, it cannot
be delayed to inquire about an individual's method of payment or
insurance status. If the hospital's emergency department (ED) is ``on
diversion'' and an individual comes to the ED for evaluation or
treatment of a medical condition, the hospital is required to provide
such services despite its diversionary status.
Generally, hospital emergency departments may not transfer an
individual with an unstable emergency medical condition unless a
physician certifies that the benefits outweigh the risks. In such
circumstances, the hospital must provide stabilizing treatment to
minimize the risks of transfer. Further, the hospital must ensure that
the receiving facility has available space and qualified personnel to
treat the individual and has agreed to accept transfer of that
individual. Moreover, certain medical records must accompany the
individual and a hospital that has specialized capabilities or
facilities must accept an appropriate transfer of an individual who
requires such specialized capabilities or facilities if the hospital
has the capacity to treat the individual.
A hospital must provide appropriate screening and treatment
services within the full capabilities of its staff and facilities. This
includes access to specialists who are on call. Thus, hospital policies
and procedures should be clear on how to access the full services of
the hospital, and all staff should understand the hospital's
obligations to individuals under EMTALA. In particular, on-call
physicians need to be educated as to their responsibilities under
EMTALA, including the responsibility to accept appropriately
transferred individuals from other facilities. In addition, all persons
working in emergency departments should be periodically trained and
reminded of the hospital's EMTALA obligations and hospital policies and
procedures designed to ensure that such obligations are met.
For further information about EMTALA, hospitals are directed to:
(i) The EMTALA statute at section 1867 of the Act; (ii) the EMTALA
statute's implementing regulations at 42 CFR part 489; (iii) our 1999
Special Advisory Bulletin on the Patient Anti-Dumping Statute (64 FR
61353; November 10, 1999), available on our Web page at http://oig.hhs.gov/fraud/docs/alertsandbulletins/frdump.pdf; and (iv) CMS's
EMTALA resource Web page located at http://www.cms.gov/providers/emtala/emtala.asp.
E. Substandard Care
The OIG has authority to exclude any individual or entity from
participation in Federal health care programs if the individual or
entity provides unnecessary items or services (i.e., items or services
in excess of the needs of a patient) or substandard items or services
(i.e., items or services of a quality which fails to meet
professionally recognized standards of health care).\66\ Significantly,
neither knowledge nor intent is required for exclusion under this
provision. The exclusion can be based upon unnecessary or substandard
items or services provided to any patient, even if that patient is not
a Medicare or Medicaid beneficiary.
---------------------------------------------------------------------------
\66\ See section 1128(b)(6)(B) of the Act, which is available
through the Internet at http://www4.law.cornell.edu/uscode/42/1320a-7.html.
---------------------------------------------------------------------------
We are mindful that the vast majority of hospitals are fully
committed to providing quality care to their patients. To achieve their
quality-related goals, hospitals should continually measure their
performance against comprehensive standards. Medicare participating
hospitals must meet all of the Medicare hospital conditions of
participation (COPs), including without limitation, the COP pertaining
to a quality assessment and performance improvement program at 42 CFR
482.21 and the hospital COP pertaining to the medical staff at 42 CFR
482.22. Compliance with the COPs is determined by State survey agencies
or accreditation organizations, such as the Joint Commission on
Accreditation of Healthcare Organizations or the American Osteopathic
Association. In addition, hospitals should develop their own quality of
care protocols and implement mechanisms for evaluating compliance with
those protocols.
In reviewing the quality of care provided, hospitals must not limit
their review to the quality of their nursing and other ancillary
services. Hospitals must monitor the quality of medical
[[Page 4871]]
services provided at the hospital by appropriately overseeing the
credentialing and peer review of their medical staffs.
F. Relationships With Federal Health Care Beneficiaries
Hospitals' relationships with Federal health care beneficiaries may
also implicate the fraud and abuse laws. In particular, hospitals
should be aware that section 1128A(a)(5) of the Act authorizes the OIG
to impose CMPs on hospitals (and others) that offer or transfer
remuneration to a Medicare or Medicaid beneficiary that the offeror
knows or should know is likely to influence the beneficiary to order or
receive items or services from a particular provider, practitioner, or
supplier for which payment may be made under the Medicare or Medicaid
programs. The definition of ``remuneration'' expressly includes the
offer or transfer of items or services for free or other than fair
market value, including the waiver of all or part of a Medicare or
Medicaid cost-sharing amount.\67\ In other words, hospitals may not
offer valuable items or services to Medicare or Medicaid beneficiaries
to attract their business. In this regard, hospitals should familiarize
themselves with the OIG's August 2002 Special Advisory Bulletin on
Offering Gifts and Other Inducements to Beneficiaries.\68\
---------------------------------------------------------------------------
\67\ See section 1128A(i)(6) of the Act.
\68\ The Special Advisory Bulletin on Offering Gifts and Other
Inducements to Beneficiaries (67 FR 55855; August 30, 2002) is
available on our Web page at http://oig.hhs.gov/fraud/docs/alertsandbulletins/SABGiftsandInducements.pdf.
---------------------------------------------------------------------------
1. Gifts and Gratuities
Hospitals should scrutinize any offers of gifts or gratuities to
beneficiaries for compliance with the CMP provision prohibiting
inducements to Medicare and Medicaid beneficiaries. The key inquiry
under the CMP is whether the remuneration is something that the
hospital knows or should know is likely to influence the beneficiary's
selection of a particular provider, practitioner, or supplier for
Medicare or Medicaid payable services. As interpreted by the OIG,
section 1128A(a)(5) of the Act does not apply to the provision of items
or services valued at less than $10 per item and $50 per patient in the
aggregate on an annual basis.\69\ A special exception for incentives to
promote the delivery of preventive care services is discussed below at
section II.I.2.
---------------------------------------------------------------------------
\69\ See id.
---------------------------------------------------------------------------
2. Cost-Sharing Waivers
In general, hospitals are obligated to collect cost-sharing amounts
owed by Federal health care program beneficiaries. Waiving owed amounts
may constitute prohibited remuneration to beneficiaries under section
1128A(a)(5) of the Act or the anti-kickback statute. Certain waivers of
Part A inpatient cost-sharing amounts may be protected by structuring
them to fit in the safe harbor for waivers of beneficiary inpatient
coinsurance and deductible amounts at 42 CFR 1001.952(k). In
particular, under the safe harbor, waived amounts may not be claimed as
bad debt; the waivers must be offered uniformly across the board
without regard to the reason for admission, length of stay, or DRG; and
waivers may not be made as part of any agreement with a third party
payer, unless the third party payer is a Medicare SELECT plan under
section 1882(t)(1) of the Act.\70\
---------------------------------------------------------------------------
\70\ The OIG has proposed a rule to extend this safe harbor to
protect waivers of Part B cost-sharing amounts pursuant to
agreements with Medicare SELECT plans. See 67 FR 60202 (September
25, 2002), available on our Web page at http://oig.hhs.gov/fraud/docs/safeharborregulations/MedicareSELECTNPRMFederalRegister.pdf.
However, the OIG is still considering comments on this rule, and it
has not been finalized.
---------------------------------------------------------------------------
In addition, hospitals (and others) may waive cost-sharing amounts
on the basis of a beneficiary's financial need, so long as the waiver
is not routine, not advertised, and made pursuant to a good faith,
individualized assessment of the beneficiary's financial need or after
reasonable collection efforts have failed.\71\ The OIG recognizes that
what constitutes a good faith determination of ``financial need'' may
vary depending on the individual patient's circumstances and that
hospitals should have flexibility to take into account relevant
variables. These factors may include, for example:
---------------------------------------------------------------------------
\71\ See section 1128A(i)(6)(A) of the Act.
---------------------------------------------------------------------------
The local cost of living;
A patient's income, assets, and expenses;
A patient's family size; and
The scope and extent of a patient's medical bills.
Hospitals should use a reasonable set of financial need guidelines
that are based on objective criteria and appropriate for the applicable
locality. The guidelines should be applied uniformly in all cases.
While hospitals have flexibility in making the determination of
financial need, we do not believe it is appropriate to apply inflated
income guidelines that result in waivers for beneficiaries who are not
in genuine financial need. Hospitals should consider that the financial
status of a patient may change over time and should recheck a patient's
eligibility at reasonable intervals sufficient to ensure that the
patient remains in financial need. For example, a patient who obtains
outpatient hospital services several times a week would not need to be
rechecked every visit. Hospitals should take reasonable measures to
document their determinations of Medicare beneficiaries' financial
need. We are aware that in some situations patients may be reluctant or
unable to provide documentation of their financial status. In those
cases, hospitals may be able to use other reasonable methods for
determining financial need, including, for example, documented patient
interviews or questionnaires.
In sum, hospitals should review their waiver policies to ensure
that the policies and the manner in which they are implemented comply
with all applicable laws. For more information about cost-sharing
waivers, hospitals should review our February 2, 2004 paper on
``Hospital Discounts Offered To Patients Who Cannot Afford To Pay Their
Hospital Bills,'' containing a section titled ``Reductions or Waivers
of Cost-Sharing Amounts for Medicare Beneficiaries Experiencing
Financial Hardship'' and available on our Web page at http://oig.hhs.gov/fraud/docs/alertsandbulletins/2004/FA021904hospitaldiscounts.pdf.\72\
---------------------------------------------------------------------------
\72\ See also the OIG's Special Fraud Alert on Routine Waiver of
Copayments or Deductibles Under Medicare Part B, issued May 1991,
republished in the Federal Register at 59 FR 65372, 65374 (December
19, 1994), and available on our Web page at http://oig.hhs.gov/fraud/docs/alertsandbulletins/121994.html.
---------------------------------------------------------------------------
3. Free Transportation
The plain language of the CMP prohibits offering free
transportation to Medicare or Medicaid beneficiaries to influence their
selection of a particular provider, practitioner, or supplier.
Notwithstanding, hospitals can offer free local transportation of low
value (i.e., within the $10 per item and $50 annual limits).\73\ Luxury
and specialized transportation, such as limousines or ambulances, would
exceed the low value threshold and are problematic, as are arrangements
tied in any manner to the volume or value of referrals and arrangements
tied to particularly lucrative treatments or medical conditions.
However, we have indicated that we are considering developing a
regulatory exception for some complimentary local transportation
provided to beneficiaries residing in a
[[Page 4872]]
hospital's primary service area.\74\ Accordingly, until such time as we
promulgate a final rule on complimentary local transportation under
section 1128A(a)(5) of the Act or indicate our intention not to proceed
with such rule, we have indicated that we will not impose
administrative sanctions for violations of section 1128A(a)(5) of the
Act in connection with hospital-based complimentary transportation
programs that meet the following conditions:
---------------------------------------------------------------------------
\73\ Our position on local transportation of nominal value is
more fully set forth in the preamble to the final rule enacting 42
CFR 1003.102(b)(13). See 65 FR 24400, 24411 (April 26, 2000).
\74\ See supra note 68.
---------------------------------------------------------------------------
The program was in existence prior to August 30, 2002, the
date of publication of the Special Advisory Bulletin on Offering Gifts
and Other Inducements to Beneficiaries.
Transportation is offered uniformly and without charge or
at reduced charge to all patients of the hospital or hospital-owned
ambulatory surgical center (and may also be made available to their
families).
The transportation is only provided to and from the
hospital or a hospital-owned ambulatory surgical center and is for the
purpose of receiving hospital or ambulatory surgical center services
(or, in the case of family members, accompanying or visiting hospital
or ambulatory surgical center patients).
The transportation is provided only within the hospital's
or ambulatory surgical center's primary service area.
The costs of the transportation are not claimed directly
or indirectly by any Federal health care program cost report or claim
and are not otherwise shifted to any Federal health care program.
The transportation does not include ambulance
transportation.
Other arrangements are subject to a case-by-case review under the
statute to ensure that no improper inducement exists.
G. HIPAA Privacy and Security Rules
As of April 14, 2003, all hospitals that conduct electronic
transactions for which standards have been adopted under the Health
Insurance Portability and Accountability Act of 1996 (HIPAA) were
required to comply with the Privacy Rule promulgated pursuant to HIPAA.
Generally, the HIPAA Privacy Rule addresses the use and disclosure of
individuals' identifiable health information (protected health
information or PHI) by covered hospitals and other covered entities, as
well as standards for individuals' privacy rights to understand and
control how their health information is used. The Privacy Rule (45 CFR
parts 160 and 164, subparts A and E) and other helpful information
about how it applies, including frequently asked questions, can be
found on the Web page of the Department's Office for Civil Rights (OCR)
at http://www.hhs.gov/ocr/hipaa/ hipaa/. Questions about the privacy rule
should be submitted to OCR. Hospitals can contact OCR by following the
instructions on its Web page, http://www.hhs.gov/ocr/contact.html, or
by calling the HIPAA toll-free number, (866) 627-7748.
To ease the burden of complying with the new requirements, the
Privacy Rule gives covered hospitals and other covered entities some
flexibility to create their own privacy procedures. Each hospital
should make sure that it is compliant with all applicable provisions of
the Privacy Rule, including provisions pertaining to required
disclosures (such as required disclosures to the Department when it is
undertaking a Privacy Rule investigation or compliance review) in
developing its privacy procedures that are tailored to fit its
particular size and needs.
The final HIPAA Security Rule (45 CFR parts 160 and 164, subparts A
and C) was published in the Federal Register on February 20, 2003. It
is available on CMS's Web page at http://www.cms.gov/hipaa/hipaa2. The
Security Rule specifies a series of administrative, technical, and
physical security safeguards for hospitals that are covered entities
and other covered entities to use to assure, among other provisions,
the confidentiality of electronic PHI. Hospitals that are covered
entities must 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 can 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. Hospitals can contact CMS by following the
instructions on its Web page, http://www.cms.gov/hipaa/hipaa2/contact,
or by calling the HIPAA toll-free number, (866) 627-7748.
H. Billing Medicare or Medicaid Substantially in Excess of Usual
Charges
Section 1128(b)(6)(A) of the Act provides for the permissive
exclusion from Federal health care programs of any provider or supplier
that submits a claim based on costs or charges to the Medicare or
Medicaid programs that is ``substantially in excess'' of its usual
charge or cost, unless the Secretary finds there is ``good cause'' for
the higher charge or cost. The exclusion provision does not require a
provider to charge everyone the same price; nor does it require a
provider to offer Medicare or Medicaid its ``best price.'' However,
providers cannot routinely charge Medicare or Medicaid substantially
more than they usually charge others. Hospitals have raised concerns
regarding the impact of the exclusion authority on hospital services,
and the OIG is considering those concerns in the context of the
rulemaking process.\75\ The OIG's policy regarding application of the
exclusion authority to discounts offered to uninsured and underinsured
patients is discussed below.
---------------------------------------------------------------------------
\75\ See Notice of Proposed Rulemaking regarding ``Clarification
of Terms and Application of Program Exclusion Authority for
Submitting Claims Containing Excessive Charges'' (68 FR 53939;
September 15, 2003), available on our Web page at http://oig.hhs.gov/authorities/docs/FRSIENPRM.pdf.
---------------------------------------------------------------------------
I. Areas of General Interest
Although in most cases the following areas do not pose significant
fraud and abuse risk, the OIG has received numerous inquiries from
hospitals and others on these topics. Therefore, we offer the following
guidance to assist hospitals in their review of these arrangements.
1. Discounts to Uninsured Patients
No OIG authority, including the Federal anti-kickback statute,
prohibits or restricts hospitals from offering discounts to uninsured
patients who are unable to pay their hospital bills.\76\ In addition,
the OIG has never excluded or attempted to exclude any provider or
supplier for offering discounts to uninsured or underinsured patients
under the permissive exclusion authority at section 1128(b)(6)(A) of
the Act. However, to provide additional assurance to the industry, the
OIG recently proposed regulations that would define key terms in the
statute.\77\ Among other things, the proposed regulations would make
clear that free or substantially reduced charges to
[[Page 4873]]
uninsured persons would not affect the calculation of a provider's or
supplier's ``usual'' charges, as the term ``usual charges'' is used in
the exclusion provision. The OIG is currently reviewing the public
comments to the proposed regulations. Until such time as a final
regulation is promulgated or the OIG indicates its intention not to
promulgate a final rule, it will continue to be the OIG's enforcement
policy that when calculating their ``usual charges'' for purposes of
section 1128(b)(6)(A) of the Act, individuals and entities do not need
to consider free or substantially reduced charges to (i) uninsured
patients or (ii) underinsured patients who are self-paying patients for
the items or services furnished. In offering such discounts, a hospital
should report full uniform charges, rather than the discounted amounts,
on its Medicare cost report and make the FI aware that it has reported
its full charges.\78\
---------------------------------------------------------------------------
\76\ Discounts offered to underinsured patients potentially
raise a more significant concern under the anti-kickback statute,
and hospitals should exercise care to ensure that such discounts are
not tied directly or indirectly to the furnishing of items or
services payable by a Federal health care program. For more
information, see our February 2, 2004 paper on ``Hospital Discounts
Offered To Patients Who Cannot Afford To Pay Their Hospital Bills,''
available on our Web page at http://oig.hhs.gov/fraud/docs/alertsandbulletins/2004/FA021904hospitaldiscounts.pdf, and CMS's
paper titled ``Questions On Charges For The Uninsured,'' dated
February 17, 2004, and available on CMS's Web page at http://www.cms.gov/FAQ_Uninsured.pdf.
\77\ See 68 FR 53939 (September 15, 2003), available on our Web
page at http://oig.hhs.gov/authorities/docs/FRSIENPRM.pdf.
\78\ For more information, see CMS's paper titled ``Questions On
Charges For The Uninsured,'' dated February 17, 2004, and available
on CMS's Web page at http://www.cms.gov/FAQ_Uninsured.pdf.
---------------------------------------------------------------------------
Under CMS rules, Medicare generally reimburses a hospital for a
percentage of its ``bad debt'' (i.e., uncollectible Medicare deductible
or coinsurance amounts), but only if the hospital bills the Medicare
patient for unpaid amounts first, and engages in reasonable, good faith
collection efforts that are consistent with the degree of effort
applied to collecting similar debts from non-Medicare patients.\79\
However, as explained in CMS's paper titled ``Questions On Charges For
The Uninsured,'' a hospital can forgo collection efforts aimed at a
Medicare patient, if the hospital, using its customary methods,
documents that the patient is indigent or medically indigent \80\ and
that no source other than the patient is legally responsible for the
unpaid deductibles and coinsurance.
---------------------------------------------------------------------------
\79\ See 42 CFR 413.89 and Medicare's Provider Reimbursement
Manual, Part I, Chapter 3, Section 310, available on CMS's Web page
at http://www.cms.hhs.gov/manuals/pub151/PUB_15_1.asp; see also
Provider Reimbursement Manual, Part II, chapter 11, section
1102.3.L, available on CMS's Web page at http://www.cms.gov/manuals/pub152/PUB_15_2.asp.
\80\ See ``Questions On Charges For The Uninsured,'' dated
February 17, 2004 and available on CMS's Web page at http://www.cms.gov/FAQ_Uninsured.pdf. In the paper, CMS further explains
that hospitals may, but are not required to, determine a patient's
indigency using a sliding scale. In this type of arrangement, the
provider would agree to deem the patient indigent with respect to a
portion of the patient's account (e.g., a flat percentage of the
debt based on the patient's income, assets, or the size of the
patient's liability relative to income). In the case of a Medicare
patient who is determined to be indigent using this method, the
amount the hospital decides, pursuant to its policy, not to collect
from the patient can be claimed by the provider as Medicare bad
debt. The hospital must, however, engage in a reasonable collection
effort to collect the remaining balance before claiming such balance
as reimbursable bad debt. Id.
---------------------------------------------------------------------------
CMS Medicare bad debt reimbursement guidelines provide that a
hospital should apply its customary indigency criteria to Medicare
patients; however, the hospital must document such determination for
such patients. To claim Medicare bad debt reimbursement, the hospital
must follow the guidance laid out in sections 310, 312, and 322 of the
Provider Reimbursement Manual.\81\ A hospital should examine a
patient's total resources, which could include, but are not limited to,
an analysis of assets, liabilities, income, expenses, and any
extenuating circumstances that would affect the determination. The
hospital should document the method by which it determined the
indigency and include all backup information used to substantiate the
determination. If, instead of making such a determination, a hospital
attempts to collect the outstanding amounts from the Medicare
beneficiary, such efforts must be documented in the patient's file with
copies of the bill(s), follow-up letters, and reports of telephone and
personal contacts. In the case of a dually-eligible patient (i.e., a
patient entitled to both Medicare and Medicaid), the hospital should
document the bad debt claim by including a denial of payment from the
State.
---------------------------------------------------------------------------
\81\ See Medicare's Provider Reimbursement Manual, Part I,
chapter 3, available on CMS's Web page at http://www.cms.hhs.gov/manuals/pub151/PUB_15_1.asp.
---------------------------------------------------------------------------
2. Preventive Care Services
Hospitals frequently participate in community-based efforts to
deliver preventive care services. The Medicare and Medicaid programs
encourage patients to access preventive care services. The prohibition
against beneficiary inducements at section 1128A(a)(5) of the Act does
not apply to incentives offered to promote the delivery of certain
preventive care services, if the programs are structured in accordance
with the regulatory requirements at 42 CFR 1003.101. Generally, to fit
within the preventive care exception, a service must be a prenatal
service or post-natal well-baby visit or a specific clinical service
described in the current U.S. Preventive Services Task Force's Guide to
Clinical Preventive Services \82\ that is reimbursed by Medicare or
Medicaid. Obtaining the service may not be tied directly or indirectly
to the provision of other Medicare or Medicaid services. In addition,
the incentives may not be in the form of cash or cash equivalents and
may not be disproportionate to the value of the preventive care
provided. From an anti-kickback perspective, the chief concern is
whether an arrangement to induce patients to obtain preventive care
services is intended to induce other business payable by a Federal
health care program. Relevant factors in making this evaluation would
include, but not be limited to: the nature and scope of the preventive
care services; whether the preventive care services are tied directly
or indirectly to the provision of other items or services and, if so,
the nature and scope of the other services; the basis on which patients
are selected to receive the free or discounted services; and whether
the patient is able to afford the services.
---------------------------------------------------------------------------
\82\ Available on the Internet at http://www.ahrq.gov/clinic/cps3dix.htm.
---------------------------------------------------------------------------
3. Professional Courtesy
Although historically ``professional courtesy'' referred to the
practice of physicians waiving the entire professional fee for other
physicians, the term is variously used in the industry now to describe
a range of practices involving free or discounted services (including
``insurance only'' billing) furnished to physicians and their families
and staff. Some hospitals have used the term ``professional courtesy''
to describe various programs that offer free or discounted hospital
services to medical staff, employees, community physicians, and their
families and staff. Although many professional courtesy programs are
unlikely to pose a significant risk of abuse (and many may be
legitimate employee benefits programs eligible for the employee safe
harbor), some hospital-sponsored ``professional courtesy'' programs may
implicate the fraud and abuse statutes.
In general, whether a professional courtesy program runs afoul of
the anti-kickback statute turns on whether the recipients of the
professional courtesy are selected in a manner that takes into account,
directly or indirectly, any recipient's ability to refer to, or
otherwise generate business for, the hospital. Also relevant is whether
the physicians have solicited the professional courtesy in return for
referrals. With respect to the Stark law, the key inquiry is whether
the arrangement fits in the exception for professional courtesy at 42
CFR 411.357(s). Finally, hospitals should evaluate the method by which
the courtesy is granted. For example, ``insurance only'' billing
offered to a Federal program beneficiary potentially implicates the
anti-kickback statute, the False Claims Act, and the CMP
[[Page 4874]]
provision prohibiting inducements to Medicare and Medicaid
beneficiaries (discussed in section II.F above). Notably, the Stark law
exception for professional courtesy requires that insurers be notified
if ``professional courtesy'' includes ``insurance only'' billing.
III. Hospital Compliance Program Effectiveness
Hospitals with an organizational culture that values compliance are
more likely to have effective compliance programs and, thus, are better
able to prevent, detect, and correct problems. Building and sustaining
a successful compliance program rarely follows the same formula from
organization to organization. However, such programs generally include:
The commitment of the hospital's governance and management at the
highest levels; structures and processes that create effective internal
controls; and regular self-assessment and enhancement of the existing
compliance program. The 1998 CPG provided guidance for hospitals on
establishing sound internal controls.\83\ This section discusses the
important roles of corporate leadership and self-assessment of
compliance programs.
---------------------------------------------------------------------------
\83\ Among other things, the 1998 hospital CPG includes a
detailed discussion of the structure and processes that make up the
recommended seven elements of a compliance program. The seven basic
elements of a compliance program are: Designation of a compliance
officer and compliance committee; development of compliance policies
and procedures, including standards of conduct; development of open
lines of communication; appropriate training and education; response
to detected offenses; internal monitoring and auditing; and
enforcement of disciplinary standards.
---------------------------------------------------------------------------
A. Code of Conduct
Every effective compliance program necessarily begins with a formal
commitment to compliance by the hospital's governing body and senior
management. Evidence of that commitment should include 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 hospital's leadership should foster an organizational
culture that values, and even rewards, the prevention, detection, and
resolution of problems. Moreover, hospitals' leadership and management
should ensure that policies and procedures, including, for example,
compensation structures, do not create undue pressure to pursue profit
over compliance. In short, the hospital 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--is at
the core of a compliance program, the OIG recommends that hospitals
also develop a general organizational statement of ethical and
compliance principles that will guide the entity's operations. One
common expression of this statement of principles is a code of conduct.
The code should function in the same fashion as a constitution, i.e.,
as a document that details the fundamental principles, values, and
framework for action within an organization. The code of conduct for a
hospital should articulate a commitment to compliance by management,
employees, and contractors, and should summarize the broad ethical and
legal principles under which the hospital must operate. The Code of
Conduct should also include a requirement that professionals follow the
ethical standards dictated by their respective professional
organizations. Unlike the more detailed policies and procedures, the
code of conduct should be brief, easily readable, and cover general
principles applicable to all members of the organization.
As appropriate, the OIG strongly encourages the participation and
involvement of the hospital's board of directors, officers (including
the chief executive officer (CEO)), members of senior management,
representatives from the medical and clinical staffs, and other
personnel from various levels of the organizational structure 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
Hospitals should regularly review the implementation and execution
of their compliance program elements. This review should be conducted
at least annually and should include an assessment of each of the basic
elements individually, as well as the overall success of the program.
This review should help the hospital identify any weaknesses in its
compliance program and implement appropriate changes.
A common method of assessing compliance program effectiveness is
measurement of various outcomes indicators (e.g., billing and coding
error rates, identified overpayments, and audit results). However, we
have observed that exclusive reliance on these indicators may cause an
organization to miss crucial underlying weaknesses. We recommend that
hospitals examine program outcomes and assess the underlying structure
and process of each compliance program element. We have identified a
number of factors that may be useful when evaluating the effectiveness
of basic compliance program elements. Hospitals should consider these
factors, as well as others, when developing a strategy for assessing
their compliance programs. While no one factor is determinative of
program effectiveness, the following factors are often observed in
effective compliance programs.
1. Designation of a Compliance Officer and Compliance Committee
The compliance department is the backbone of the hospital's
compliance program. The compliance department should be led by a well-
qualified compliance officer, who is a member of senior management, and
should be supported by a compliance committee. The purpose of the
compliance department is to implement the hospital's compliance program
and to ensure that the hospital complies with all applicable Federal
health care program requirements. To ensure that the compliance
department is meeting this objective, each hospital should conduct an
annual review of its compliance department. Some factors that the
organization may wish to consider in its evaluation include the
following:
Does the compliance department have a clear, well-crafted
mission?
Is the compliance department properly organized?
Does the compliance department have sufficient resources
(staff and budget), training, authority, and autonomy to carry out its
mission?
Is the relationship between the compliance function and
the general counsel function appropriate to achieve the purpose of
each?
Is there an active compliance committee, comprised of
trained
[[Page 4875]]
representatives of each of the relevant functional departments, as well
as senior management?
Are ad hoc groups or task forces assigned to carry out any
special missions, such as conducting an investigation or evaluating a
proposed enhancement to the compliance program?
Does the compliance officer have direct access to the
governing body, the president or CEO, all senior management, and legal
counsel?
Does the compliance officer have independent authority to
retain outside legal counsel?
Does the compliance officer have a good working
relationship with other key operational areas, such as internal audit,
coding, billing, and clinical departments?
Does the compliance officer make regular reports to the
board of directors and other hospital management concerning different
aspects of the hospital's compliance program?
2. Development of Compliance Policies and Procedures, Including
Standards of Conduct
The purpose of compliance policies and procedures is to establish
bright-line rules that help employees carry out their job functions in
a manner that ensures compliance with Federal health care program
requirements and furthers the mission and objective of the hospital
itself. Typically, policies and procedures are written to address
identified risk areas for the organization. As hospitals conduct a
review of their written policies and procedures, some of the following
factors may be considered:
Are policies and procedures clearly written, relevant to
day-to-day responsibilities, readily available to those who need them,
and re-evaluated on a regular basis?
Does the hospital monitor staff compliance with internal
policies and procedures?
Have the standards of conduct been distributed to all
directors, officers, managers, employees, contractors, and medical and
clinical staff members?
Has the hospital developed a risk assessment tool, which
is re-evaluated on a regular basis, to assess and identify weaknesses
and risks in operations?
Does the risk assessment tool include an evaluation of
Federal health care program requirements, as well as other
publications, such as the OIG's CPGs, work plans, special advisory
bulletins, and special fraud alerts?
3. Developing Open Lines of Communication
Open communication is essential to maintaining an effective
compliance program. The purpose of developing open communication is to
increase the hospital's ability to identify and respond to compliance
problems. Generally, open communication is a product of organizational
culture and internal mechanisms for reporting instances of potential
fraud and abuse. When assessing a hospital's ability to communicate
potential compliance issues effectively, a hospital may wish to
consider the following factors:
Has the hospital fostered an organizational culture that
encourages open communication, without fear of retaliation?
Has the hospital established an anonymous hotline or other
similar mechanism so that staff, contractors, patients, visitors, and
medical and clinical staff members can report potential compliance
issues?
How well is the hotline publicized; how many and what
types of calls are received; are calls logged and tracked (to establish
possible patterns); and is the caller informed of the hospital's
actions?
Are all instances of potential fraud and abuse
investigated?
Are the results of internal investigations shared with the
hospital governing body and relevant departments on a regular basis?
Is the governing body actively engaged in pursuing
appropriate remedies to institutional or recurring problems?
Does the hospital utilize alternative communication
methods, such as a periodic newsletter or compliance intranet website?
4. Appropriate Training and Education
Hospitals that fail to train and educate their staff adequately
risk liability for the violation of health care fraud and abuse laws.
The purpose of conducting a training and education program is to ensure
that each employee, contractor, or any other individual that functions
on behalf of the hospital is fully capable of executing his or her role
in compliance with rules, regulations, and other standards. In
reviewing their training and education programs, hospitals may consider
the following factors:
Does the hospital provide qualified trainers to conduct
annual compliance training for its staff, including both general and
specific training pertinent to the staff's responsibilities?
Has the hospital evaluated the content of its training and
education program on an annual basis and determined that the subject
content is appropriate and sufficient to cover the range of issues
confronting its employees?
Has the hospital kept up-to-date with any changes in
Federal health care program requirements and adapted its education and
training program accordingly?
Has the hospital formulated the content of its education
and training program to consider results from its audits and
investigations; results from previous training and education programs;
trends in hotline reports; and OIG, CMS, or other agency guidance or
advisories?
Has the hospital evaluated the appropriateness of its
training format by reviewing the length of the training sessions;
whether training is delivered via live instructors or via computer-
based training programs; the frequency of training sessions; and the
need for general and specific training sessions?
Does the hospital seek feedback after each session to
identify shortcomings in the training program, and does it administer
post-training testing to ensure attendees understand and retain the
subject matter delivered?
Has the hospital's governing body been provided with
appropriate training on fraud and abuse laws?
Has the hospital documented who has completed the required
training?
Has the hospital assessed whether to impose sanctions for
failing to attend training or to offer appropriate incentives for
attending training?
5. Internal Monitoring and Auditing
Effective auditing and monitoring plans will help hospitals avoid
the submission of incorrect claims to Federal health care program
payors. Hospitals should develop detailed annual audit plans designed
to minimize the risks associated with improper claims and billing
practices. Some factors hospitals may wish to consider include the
following:
Is the audit plan re-evaluated annually, and does it
address the proper areas of concern, considering, for example, findings
from previous years' audits, risk areas identified as part of the
annual risk assessment, and high volume services?
Does the audit plan include an assessment of billing
systems, in addition to claims accuracy, in an effort to identify the
root cause of billing errors?
Is the role of the auditors clearly established and are
coding and audit personnel independent and qualified, with the
requisite certifications?
[[Page 4876]]
Is the audit department available to conduct unscheduled
reviews and does a mechanism exist that allows the compliance
department to request additional audits or monitoring should the need
arise?
Has the hospital evaluated the error rates identified in
the annual audits?
If the error rates are not decreasing, has the hospital
conducted a further investigation into other aspects of the hospital
compliance program in an effort to determine hidden weaknesses and
deficiencies?
Does the audit include a review of all billing
documentation, including clinical documentation, in support of the
claim?
6. Response to Detected Deficiencies
By consistently responding to detected deficiencies, hospitals can
develop effective corrective action plans and prevent further losses to
Federal health care programs. Some factors a hospital may wish to
consider when evaluating the manner in which it responds to detected
deficiencies include the following:
Has the hospital created a response team, consisting of
representatives from the compliance, audit, and any other relevant
functional areas, which may be able to evaluate any detected
deficiencies quickly?
Are all matters thoroughly and promptly investigated?
Are corrective action plans developed that take into
account the root causes of each potential violation?
Are periodic reviews of problem areas conducted to verify
that the corrective action that was implemented successfully eliminated
existing deficiencies?
When a detected deficiency results in an identified
overpayment to the hospital, are overpayments promptly reported and
repaid to the FI?
If a matter results in a probable violation of law, does
the hospital promptly disclose the matter to the appropriate law
enforcement agency? \84\
---------------------------------------------------------------------------
\84\ For more information on when to self-report, see section
IV, below.
---------------------------------------------------------------------------
7. Enforcement of Disciplinary Standards
By enforcing disciplinary standards, hospitals help create an
organizational culture that emphasizes ethical behavior. Hospitals may
consider the following factors when assessing the effectiveness of
internal disciplinary efforts:
Are disciplinary standards well-publicized and readily
available to all hospital personnel?
Are disciplinary standards enforced consistently across
the organization?
Is each instance involving the enforcement of disciplinary
standards thoroughly documented?
Are employees, contractors and medical and clinical staff
members checked routinely (e.g., at least annually) against government
sanctions lists, including the OIG's List of Excluded Individuals/
Entities (LEIE) \85\ and the General Services Administration's Excluded
Parties Listing System.
---------------------------------------------------------------------------
\85\ See http://oig.hhs.gov/fraud/exclusions.html. The OIG also
makes available Monthly Supplements for Standard LEIE, which can be
compared to existing hospital personnel lists.
---------------------------------------------------------------------------
In sum, while no single factor is conclusive of an effective
compliance program, the preceding seven areas form a useful starting
point for developing and maintaining an effective compliance program.
IV. Self-Reporting
Where 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 hospital should
promptly report the existence of misconduct to the appropriate Federal
and State authorities \86\ within a reasonable period, but not more
than 60 days,\87\ after determining that there is credible evidence of
a violation.\88\ Prompt voluntary reporting will demonstrate the
hospital's good faith and willingness to work with governmental
authorities to correct and remedy the problem. In addition, reporting
such conduct will be considered a mitigating factor by the OIG in
determining administrative sanctions (e.g., penalties, assessments, and
exclusion), if the reporting hospital becomes the subject of an OIG
investigation.\89\ To encourage providers to make voluntary
disclosures, the OIG published the Provider Self-Disclosure
Protocol.\90\
---------------------------------------------------------------------------
\86\ Appropriate Federal and State authorities include the 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).
\87\ In contrast, to qualify for the ``not less than double
damages'' provision of the False Claims Act, the provider must
provide the report to the government within 30 days after the date
when the provider first obtained the information. See 31 U.S.C.
3729(a).
\88\ Some violations may be so serious that they warrant
immediate notification to governmental authorities prior to, or
simultaneous with, commencing an internal investigation. By way of
example, the OIG believes a provider should immediately report
misconduct that: (i) Is a clear violation of administrative, civil,
or criminal laws; (ii) has a significant adverse effect on the
quality of care provided to Federal health care program
beneficiaries; or (iii) 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.
\89\ The OIG has published criteria setting forth those factors
that the OIG takes into consideration in determining whether it is
appropriate to exclude an individual or entity from program
participation pursuant to 42 U.S.C. 1320a-7(b)(7) for violations of
various fraud and abuse laws. See 62 FR 67392 (December 24, 1997).
\90\ See 63 FR 58399 (October 30, 1998), available on our Web
page at http://oig.hhs.gov/authorities/docs/selfdisclosure.pdf.
---------------------------------------------------------------------------
When reporting to the government, a hospital should provide all
information relevant to 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 the governmental authorities, could 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, including a description of the
impact of the alleged violation on the applicable Federal health care
programs or their beneficiaries.
V. Conclusion
In today's environment of increased scrutiny of corporate conduct
and increasingly large expenditures for health care, it is imperative
for hospitals to establish and maintain effective compliance programs.
These programs should foster a culture of compliance that begins at the
highest levels and extends throughout the organization. This
supplemental CPG is intended as a resource for hospitals 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 hospitals and public alike.
[FR Doc. 05-1620 Filed 1-27-05; 8:45 am]
BILLING CODE 4150-01-P