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On September 30, 2008, the United States Department of Health and Human Services (HHS) Office of Inspector General (OIG) published OIG Supplemental Compliance Program Guidance for Nursing Facilities (the "Supplemental Guidance"). The Supplemental Guidance contains new compliance recommendations and an expanded discussion of risk areas that should be addressed in nursing facility compliance programs. The Supplemental Guidance should be reviewed not only by nursing facilities, but also by providers in a similar line of business (assisted living and continuing care communities), and providers who do business with nursing facilities.

Background

The OIG first published a compliance program guidance for nursing facilities on March 16, 2000. The original guidance addressed the fundamentals of establishing an effective compliance program in the nursing industry. The Supplemental Guidance takes into account new nursing facility payment systems, evolving industry practices, current government enforcement priorities, and the government's heightened focus on quality of care.

Fraud and Abuse Risk Areas

The Supplemental Guidance should assist nursing facilities in their efforts to "identify operational areas that present potential liability risks under several key Federal fraud and abuse statutes and regulations." Each facility should carefully examine these risk areas and identify those that potentially affect its operations.

1. Quality of Care

Compliance with applicable quality of care standards and regulations is essential for the lawful behavior and success of nursing facilities. In cases where failure to maintain required quality of care levels is systemic and widespread, a nursing facility may be liable for submitting false claims for reimbursement under the False Claims Act, the Civil Monetary Penalties Law, a variety of additional federal authorities that address false and fraudulent claims or statements made to the government, and similar state laws, including criminal, civil, and administrative sanctions. The five sub-risk areas on quality of care identified in the supplemental guidance are addressed below.

• Sufficient staffing: Federal law requires a facility to provide sufficient staffing necessary to attain or maintain the highest practicable physical, mental, and psychosocial well-being of its residents. Many state laws, including California, require specific, higher nursing staff ratios. The OIG strongly encourages nursing facilities to assess their staffing patterns regularly to evaluate staff skill levels, resident case-mix, staff-to-resident ratios, staff turnover, staffing schedules, disciplinary records, payroll records, timesheets, adverse event reports, and interviews with staff, residents, and resident's family or legal guardians.
• Comprehensive resident care plans: Medicare and Medicaid regulations require nursing facilities to develop a comprehensive care plan for each resident that addresses the medical nursing and mental and psychosocial needs for each resident and includes all disciplines involved in the resident's care. Nursing facilities must design and implement an interdisciplinary and comprehensive approach to developing care plans. The attending physician should participate in the development of the care plan and facilities should ensure the physician actually supervises each resident's care.
• Medication management: Nursing facilities must employ or obtain the services of a licensed pharmacist and provide pharmaceutical services to meet the needs of each resident. Each facility should implement policies and procedures for maintaining accurate drug records and tracking medications. Nursing facilities should provide appropriate medication management training on a regular basis to familiarize all staff involved in the pharmaceutical care of residents.
• Appropriate use of psychotropic medications: Nursing facilities have affirmative obligations to ensure appropriate use of psychotropic medications. Facilities should ensure there is adequate indication for the use of medications and should carefully monitor, document, and review resident use of psychotropic drugs.
• Resident safety: Nursing facility residents have a legal right to be free from abuse and neglect. Facilities should develop and implement policies and procedures to prohibit mistreatment, neglect and abuse of residents. Facilities must also thoroughly investigate and report incidents to law enforcement, as required by state laws. Facilities should promote resident safety through internal, confidential reporting systems, hotlines, posters, and by communicating a clear commitment to protecting from retaliation those people who make reports. Policies and procedures to prevent, investigate and respond to instances of potential resident abuse, neglect or mistreatment, are essential to ensure resident safety.

2. Submission of Accurate Claims

Accurate claim submission is another risk area identified in the supplemental guidance. The OIG identified four sub-risk areas, each of which is addressed below.

• Proper reporting of resident case-mix: Assessment, reporting, and evaluation of resident case-mix data is a significant risk area. The OIG stated that facilities must ensure that data reported to the federal government are accurate, and that they are "well-advised to review such data regularly to ensure its accuracy and to identify and address potential quality of care issues." Nursing facility compliance programs should include training of responsible staff to ensure that persons collecting the data and those charged with analyzing and responding to the data are knowledgeable about the purpose and utility of the data.
• Therapy services: The provision of physical, occupational, and speech therapy services continues to be a risk area for facilities, including improper utilization of therapy services to generate higher reimbursement, over-utilization of fee-for-service therapy billed to Part B under consolidated billing, and stinting on therapy services covered by the Part A Prospective Payment System (PPS) payment. These practices may result in the submission of false claims and the OIG advises nursing facilities develop policies and procedures to ensure residents receive medically appropriate therapy services.
• Screening for excluded individuals: The OIG strongly advises nursing facilities to screen against the OIG's list of excluded individuals, all prospective owners, officers, directors, employees, contractors, and agents prior to engaging their services and periodically for current officers, directors, employees, contractors or agents. The OIG also recommends that nursing facilities consider implementing a process that requires job applicants to disclose, during the pre-employment process (or for vendors, during the request for proposal process), whether they are excluded. Facilities should have policies and procedures that require removal of any owner, officer, director, employee, contractor, or agent from responsibility for, or involvement with, a Facility's business operations related to the Federal health care programs if the Facility has actual notices that such a person is excluded. The Supplemental Guidance reminds nursing facilities that exclusion does not automatically end; it remains in effect until the OIG reinstates the excluded individual.
• Restorative and personal care services: Nursing facilities must ensure that residents receive appropriate restorative and personal care services to allow residents to attain and maintain their highest practicable level of functioning. Facilities that fail to provide necessary restorative and personal care services as claimed can face risk under false claims and fraud and abuse laws. The OIG encourages facilities to implement comprehensive procedures to ensure that appropriate quality and amount of services are actually delivered to residents. Resident and staff interviews; consultations with attending physicians, the medical director or pharmacist; personal observations of care delivery, and a written documentation requirement related thereto may reduce risk in this area.

3. The Federal Anti-Kickback Statute

The Anti-Kickback statute remains a significant risk area for nursing facilities. The Supplemental Guidance discusses the eight safe harbors most relevant to nursing facilities, and lists a number of factors/questions facilities should consider when evaluating contractual arrangements. The OIG identified six sub-risk areas, each of which is addressed below.

• Free goods and services to an existing or potential referral source: There is a substantial risk that the free goods or services are being used as a vehicle to disguise or confer an unlawful payment to the referral source. The OIG provided the following examples of this risk area: consulting services or supplies offered by a pharmacy, laboratory or other supplier; equipment, computers, and software applications that have an independent value to the facility; Durable Medical Equipment (DME) or supplies for patients covered by Part A; a laboratory phlebotomist providing administrative services; a hospice nurse providing nursing services for non-hospice residents; and a registered nurse provided by a hospital.
• Services contracts: To minimize the risk of disguised kickbacks in physician and non-physician services contracts, a facility should periodically review arrangements to ensure: (1) a legitimate need for services or supplies; (2) services or supplies were actually provided and adequately documented; (3) compensation is at fair-market value in an arm's-length transaction; and (4) the arrangement is not related in any manner to the volume or value of federal health care program business. To eliminate risk, the OIG advises facilities structure their services arrangements to comply with the personal services and management contracts safe harbor. Nursing facilities should also adopt and implement policies, procedures and staff training programs to minimize the risk of improper pharmaceutical decisions tainted by kickbacks, and consider implementing policies and procedures to monitor drug records for patterns that may indicate inappropriate drug switching or steering.
• Price Reduction Discounts: Although the Anti-Kickback statute contains an exception for discounts, to qualify for it 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. Nursing facilities should ensure that all discounts (including any rebates) are properly disclosed and accurately reflected on their claims and costs reports.
• Swapping Discounts: Nursing facilities should not engage in swapping arrangements by accepting a low price from a supplier or provider on an item or service covered by the Part A per diem, in exchange for the facility referring other federal health care program business such as Part B business excluded from consolidated billing, for which the supplier can directly bill Medicare or Medicaid. Such swapping arrangements, the OIG stated, implicate the Anti-Kickback statute and are not protected by the discount safe harbor.
• Hospices: Facilities should be aware that requesting or accepting benefits from a hospice may subject the facility and the hospice to liability under the Anti-Kickback statute if those benefits might influence the facility's decision to do business with the hospice. Whenever possible, nursing facilities should structure their relationships with hospices to fit in a safe harbor, such as the personal services and management contracts safe harbor.
• Reserved bed arrangements: Payments from a hospital to a nursing facility to reserve beds may pose a risk under the Anti-Kickback statute if one purpose of the arrangement is to induce referrals to the hospital. Payments should not be determined in any manner that reflects the volume or value of existing or potential referrals of Federal health care program business from the nursing facility to the hospital.

4. Physician Self Referrals

Nursing facilities should familiarize themselves with the current Stark law and prohibited physician financial relationships. The OIG advises nursing facilities to review all financial relationships with physicians who refer or order designated health services for nursing home patients to ensure compliance with the Stark law. Facilities should pay particular attention to relationships with attending physicians and physicians who are owners, investors, medical directors or consultants to the facility. Facilities should also implement systems to track non-monetary compensation provided annually to referring physicians to ensure that such compensation does not exceed limits set forth in the Start regulations.

5. Anti-Supplementation

Medicare Conditions of Participation prohibit a facility from charging a beneficiary (or someone else in lieu of the beneficiary) for covered services in excess of the Medicare or Medicaid amount. Facilities should implement mechanisms to ensure residents and their families are not billed supplemental charges.

6. Medicare Part D

Nursing facilit residents who decided to enroll in Part D have the right to choose their Part D plans. The OIG advised facilities, not to frustrate a beneficiary's freedom of choice when choosing a Part D plan. Under no circumstances should a nursing home require, request, coach or steer any resident to select or change a plan for any reason, nor should it "knowingly and/or willingly allow the pharmacy servicing the nursing home" to do the same.

7. HIPAA Privacy and Security Rule

Each nursing facility must take steps to ensure that it is compliance with all applicable provisions of the HIPAA Privacy and Security Rules.

Other Compliance Considerations

The OIG recommends that nursing facilities develop a general statement of ethical and compliance principles. A compliance program charter and code of conduct, signed and approved by the governing body, is important to give the program sufficient authority, autonomy and resources to implement compliance measures. Nursing facilities should also periodically review the implementation, execution and effectiveness of their compliance program.

Self-Reporting

If the compliance officer, compliance committee, or a member of 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 facility should promptly report the misconduct to the appropriate federal and state authorities. The reporting should occur within a reasonable period of time, and no longer than 60 days after determining there is credible evidence of a violation.

Nursing Facilities Should Act Now

Nursing facilities must evaluate whether they have sufficiently integrated quality of care review and the other identified risk areas into their operations and compliance programs. A nursing facility can establish internal quality controls and identify areas of potential quality breakdowns through an external assessment for quality of care and legal risks.

Conclusion

The Supplemental Guidance emphasizes that it is meant to offer, along with the March 2000 Compliance Program Guidance for nursing facilities, "a set of guidelines that nursing facilities should consider when developing and implementing a new compliance program or evaluating an existing one." Given the current environment of increased scrutiny of corporate conduct and increasing expenditures for nursing facility care, the development and implementation of effective compliance programs is essential for nursing facilities. While a compliance program is not mandatory for nursing facilities, adoption and implementation of compliance programs may give a nursing facility an operational advantage, increased reputation in the community, and reduce the potential liability for fraud and abuse violations. Nursing facilities should update and implement compliance programs based on the Supplemental Guidance.

If you have any questions about the OIG Supplemental Compliance Program Guidance for Nursing Facilities, please contact Michael Dowell at mdowell@tocounsel.com or the lawyer in the firm who generally handles your health care law legal matters.