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On June 8, 2004, the Department of Health and Human Services' Office of Inspector General ("OIG") published a draft supplemental compliance program guidance for hospitals. The supplement to the prior compliance program guidance issued in 1998 focuses on areas of current concern and future OIG enforcement activity. The OIG suggests that hospitals foster organizational commitment to compliance and regularly review the effectiveness of their compliance programs.

Fraud and Abuse Risk Areas

The supplement identifies eight areas as presenting particular risk for liability: (1) submission of claims and information: (2) physician self-referral and anti-kickback statutes; (3) payments to reduce or limit services (e.g., "gainsharing" arrangements); (4) Emergency Medical Treatment and Labor Act ("EMTALA"); (5) substandard care; (6) relationships with federal health care program beneficiaries; (7) HIPAA Privacy and Security Rules; and (8) billing Medicare or Medicaid in excess of usual charges.

Submission of Accurate Claims and Information. The OIG observes that the greatest current risks in this area fall into four general categories: outpatient procedure coding; admissions and discharges; supplemental payment considerations; and the use of information technology.

• Outpatient Procedure Coding: Risk areas include billing on an outpatient basis for "inpatient-only" procedures, proper use of procedure code modifiers, documentation that supports the level of service claimed, failure to follow fiscal intermediary local medical review policies, submitting claims for medically unnecessary services, submitting duplicate claims, circumventing the multiple procedure discounting rules, incorrect charges due to outdated chargemasters, improper selection of evaluation and management codes, and improperly billing for observation services
• Admissions and Discharges: Risk areas include failure to follow the "same-day" rule, abuse of partial hospitalization payments, same-day discharges and re-admissions, violation of post-acute care transfer policies, and inappropriate transfers of patients between long-term care and acute care hospital components by long-term care hospitals co-located in acute care hospitals
• Supplemental Payment Considerations: Risk areas include improper reporting of the cost of "pass-through" items, abuse of DRG outlier payments, improper claims for incorrectly designated "provider-based" entities, improper claims for clinical trials, improper claims for organ acquisition costs, improper claims for cardiac rehabilitation services, and failure to follow Medicare rules regarding payment for costs related to educational activities
• Use of Information Technology: Information technology presents new challenges to ensuring the accuracy of claims and the information used to generate claims. Hospitals are advised to monitor their information systems to ensure accurate coding, billing and transmission of information.

Fraud and Abuse Laws (Physician Self-Referral and Anti-Kickback Statute). Hospitals face significant financial exposure if their financial relationships with referring physicians do not comport with the physician self-referral law ("Stark") and federal anti-kickback statute.

• Stark Law: Due to the significant exposure raised by Stark, hospitals are encouraged to implement systems to ensure that all conditions in the Stark exceptions on which they rely are satisfied. Hospitals are cautioned to ensure that otherwise permissible relationships with physicians do not fall out of compliance simply because written agreements are allowed to lapse.
• Anti-Kickback Statute: The OIG recommends that hospitals pay special attention to seven particular areas – joint ventures, compensation arrangements with physicians, relationships with other health care entities, recruitment arrangements, discounts, medical staff credentialing, and malpractice insurance subsidies – to ensure these vehicles are not disguised methods of payment for past or future referrals

Payments to Reduce or Limit Services (Gainsharing Arrangements). The OIG reiterates its position that the prohibition on hospital payments made to a physician in order to induce the physician to limit hospital services provided to Medicare and Medicaid beneficiaries is very broad and does not permit "gainsharing arrangements" between hospitals and physicians even when those arrangements serve legitimate business and medical purposes. The OIG suggests that whenever possible, hospitals should consider structuring cost-saving arrangements to fit in the personal services safe harbor.

Emergency Treatment and Labor Act ("EMTALA"). The OIG suggests that hospitals review their EMTALA obligations, particularly the obligation to provide a medical screening to determine whether a patient suffers from an emergency medical condition. The guidance additionally recommends that all relevant staff receive training so they understand the hospital's obligations to patients under EMTALA, and that policies and procedures clearly reflect how to access the hospital's full services (including access to specialists who are on call).

Substandard Care. The OIG notes that it has authority to exclude a hospital from participation in federal health care programs if the hospital provides substandard or unnecessary medical care to any patient, and suggests that hospitals demonstrate their commitment to providing quality care by continually measuring performance against comprehensive standards established by federal and state governments, accrediting agencies and the hospital's own internal protocols.

Relationships with Federal Health Care Beneficiaries. The OIG cautions hospitals that offering valuable items or services to Medicare and Medicaid beneficiaries to attract their business could implicate the federal prohibition on inducements to beneficiaries. The OIG counsels hospitals to closely scrutinize any gifts or gratuities to Medicare or Medicaid patients, review their cost-sharing waiver policies for compliance with all applicable laws, and ensure that the provision of any free transportation is not meant to influence the patient's selection of a provider. The guidance additionally notes that until the OIG promulgates a rule on complimentary local transportation, it will not impose administrative sanctions if free patient transportation meets certain prescribed conditions.

HIPAA Privacy and Security Rules. The OIG reminds hospitals that they must comply with all applicable provisions of the Privacy and Security Rules and that their approach to compliance should be tailored to fit their particular size and needs.

Billing Medicare or Medicaid Substantially in Excess of Usual Charges. The OIG reminds hospitals that they may be excluded from federal health care programs for routinely charging Medicare or Medicaid substantially more than they charge others. The OIG states that it will adhere to the interpretation that hospitals do not need to consider free or substantially reduced charges to uninsured or underinsured patients when calculating their "usual charges."

In addition to the eight risk areas referenced above, the OIG supplemental guidance addresses three areas of general concern that in most cases do not pose a significant fraud and abuse risk, but regarding which the OIG has received numerous inquiries: (1) discounts to uninsured patients (no OIG authority prohibits or restricts hospitals from offering discounts to uninsured patients who are unable to pay their hospital bills); (2) preventive health care (certain preventive care services or incentives to obtain preventive care services may be provided under federal fraud and abuse laws if not provided to induce patients to obtain other services reimbursable under federal health care programs); and (3) professional courtesy (the key consideration in assessing professional courtesy programs offered by hospitals is 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).

Self-Reporting

The OIG generally encourages hospitals to promptly report, to the applicable governmental authority, any misconduct within a reasonable time after finding credible evidence of a violation. The OIG asserts that prompt reporting will demonstrate good faith by the hospital and the hospital's willingness to work with the OIG to remedy the problem, and will serve as a mitigating factor in determining administrative sanctions. Notwithstanding the OIG's position on this issue, however, hospitals should consult with competent legal counsel before electing to self-report potential or probable misconduct.

The OIG encourages all hospitals to review their existing code of conduct, compliance plan and internal controls. Hospitals should review the guidance as a benchmark against their current compliance plan, and update or refine their compliance programs in light of the guidance. Further, hospitals should also consider compliance audits that focus on the particular areas of concern that the OIG has identified.

If you require our assistance or have any questions please contact Michael Dowell at mdowell@tocounsel.com or the lawyer in the firm who generally handles your health care legal matters.