December 2000 Bulletin

OIG issues compliance program guidance

Stresses flexible step-by-step approach for individual, small group practices

By Mark Fitzgerald

On September 25, the Office of the Inspector General (OIG) of the Department of Health and Human Services issued compliance program guidance for individual and small group physician practices. First proposed in June of this year, the guidance elicited great concern about the demands it would place on small physician practices. In response to that concern, the OIG has stressed a flexible step-by-step approach that it believes is less resource-intensive.

As a first step, the OIG recommends that a practice review its standards and procedures and perform a sample "benchmark" claims audit to identify weaknesses. The audit can consist of a review of a small sample of completed claims prior to their submission. The OIG states that a basic guide is five or more medical records per federal payer (i.e., Medicare and Medicaid) or five to 10 medical records per physician.

From the sample claims audit, the practice can determine the areas in which additional training is required and develop responsive policies and procedures. The practice should then reaudit its claims periodically and compare the results to its benchmark audit to assess its performance.

The compliance guidance identifies specific risk areas as including coding and billing; meeting the Medicare definition of reasonable and necessary services; documentation; and improper inducements, kickbacks and self-referrals. Not surprisingly, coding and billing is perhaps the area with the highest risk. To reduce errors, the OIG recommends that practices adopt a policy that the coder, or the attending physician, or both, review all rejected claims pertaining to diagnostic and procedure codes.

With respect to kickbacks, the OIG cites arrangements with hospitals, DME suppliers, and pharmaceutical manufacturers, among others, as being areas of potential concern. Generally, the OIG recommends that all business arrangements wherein physician practices refer business to, or order services or items from, an outside entity should be on a fair market value basis. The OIG states that adhering to the fair market value test is not a guarantee of legality, but is a highly useful, general rule.

Procedurally, the OIG believes it is important for a physician practice to designate specific individuals who are responsible for compliance functions. To minimize cost, a physician practice may designate "compliance contacts" who are each responsible for different parts of the compliance program, rather than a single compliance officer. At least one of these individuals should be responsible for compliance training, which should focus on the operation and importance of the compliance program, the consequences of violating the standards and procedures set forth in the program, and the role of each employee in the operation of the compliance program.

Lastly, the OIG emphasizes that the compliance program should include provisions to ensure that a violation is not compounded once discovered. In other words, there should be full internal assessment of all reports of detected violations and appropriate corrective action taken, including employee discipline, additional training, repayment and self-reporting of violations where appropriate.

The OIG’s guidance is completely voluntary, and the adoption of a compliance plan is not likely to provide significant protection to a practice that ultimately gets into trouble with the OIG. Nevertheless, the adoption of a compliance program is good preventive medicine, and the OIG’s guidelines provide a useful framework to help physicians ensure that the claims they submit are true and accurate.

As a cautionary note, it is important that a practice follow any compliance standards that it adopts because those standards may constitute evidence of knowledge of the requirements of the law. As a result, a practice’s own compliance standards can form the basis for a claim of a knowing violation of the law if those standards are ignored in the practice’s operations. On the other hand, a diligent effort to implement a compliance plan will reduce billing errors and help establish a good faith defense to a false claims allegation should a problem arise.

Mark Fitzgerald is a partner at the Washington, D.C. law firm of Gardner, Carton & Douglas.

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