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Overview of OIG’s MD compliance guidance

By Michael R. Burke, Esq.

On September 25, 2000, the Department of Health and Human Services’ Office of Inspector General (OIG) issued its final “Compliance Program Guidance for Individual and Small Group Physician Practices” (Final Guidance) to assist physicians in developing compliance programs for their practices to prevent fraud and abuse against government health care programs. This article will provide a general overview of the OIG’s Final Guidance and highlight some of the key differences between the Final Guidance and the draft guidance that was issued by the OIG on June 7, 2000 (Draft Guidance).

The OIG did not issue a “compliance plan” that could be copied by physician practices and placed on a bookshelf. Rather, the OIG noted that there is no “one size fits all” compliance program (especially for physician practices) and therefore elected to issue a set of “guidelines” that physician practices can consider if they choose to develop a compliance program.

The OIG notes in the Final Guidance that physician practices are not required to develop and implement compliance programs. Rather, the OIG attempts to entice physicians into doing so by laying out some of the benefits that can be achieved through a well-designed compliance program. The OIG declares that “patient care is, and should be, the first priority of a physician practice.” The OIG asserts that patient care can be enhanced by the adoption of a voluntary compliance program; e.g., better documentation required by a compliance program also enhances patient care. Other benefits that can be gained through a well-designed compliance program are optimizing proper payment of claims, minimizing billing mistakes, reducing the chances of a government audit and avoiding violations of the federal Anti-Kickback Statute and the Stark II Legislation. The OIG believes that compliance plans should be viewed as preventive medicine that will prevent problems from occurring in the future.

The OIG declined to define the difference between a “small group” and a “large group” physician practice. The Final Guidance was focused on those small physician practices whose financial and staffing resources would not allow them to develop and implement a compliance program similar to ones implemented by larger providers (such as hospitals). Larger practices may need to use guidance published by the OIG for other entities (such as billing companies and clinical laboratories) in conjunction with the Final Guidance to implement a truly useful compliance program because of their size and greater resources.

The OIG believes that one way for physician practices to keep costs down is by allowing physician practices to rely on outside resources in connection with developing and implementing their compliance programs. These options include, among other things, tailoring compliance programs prepared by others to a particular physician’s practice, utilizing education sessions scheduled by hospitals and utilizing a third party compliance officer who serves several different physicians or groups. The OIG notes, however, that physicians must be careful to ensure that a third party provider does not furnish compliance program services to a physician practice at low or no cost in order to increase referrals or the generation of Federal health care program business to the provider, which may run afoul of the Anti-Kickback Statute and/or Stark II. In addition to using outside resources, physician practices can use the internal policies that they have established over the years as a starting point for developing practice standards and procedures that follow the Final Guidance.

The OIG attempts to explain in the Final Guidance the difference between “erroneous” and “fraudulent” claims made to Federal health care programs. Physicians do not want to live under the fear of civil or criminal penalties when they make innocent billing mistakes. The OIG attempted to respond to these concerns with the following points.

Physicians are not subject to criminal, civil or administrative penalties for innocent errors or even negligence. There is a difference between innocent errors (that constitute erroneous claims) and reckless or intentional conduct (that constitutes fraudulent claims).

The OIG recognizes that even ethical physicians will make occasional billing mistakes and errors through inadvertence or negligence, and that when such errors are discovered, the physician or practice should refund monies that were erroneously claimed. There will be no penalties to the physician unless there is a violation of civil, criminal or administrative law.

The Final Guidance differed significantly from the Draft Guidance by stating that a small physician practice does not need to implement all seven elements of a compliance program. The OIG acknowledges that this may not be feasible for all physician practices. As such, the OIG recommends that physician practices begin their compliance efforts by adopting only those components of a compliance program that are most likely to provide an identifiable benefit based on the practice’s history with billing problems and other compliance issues. Because there is no one right way for a small group physician practice to implement a compliance program, each of the components of a compliance plan may be adopted by a small group physician practice in a manner that best suits the practice. Larger group physician practices may have the means to incorporate all of the elements in a more systematic manner as is more fully discussed in compliance guidance that has been issued by the OIG to billing companies and other health care providers.

Since the OIG asserted that a small physician group does not need to implement all of the components of a compliance program, it listed the seven elements of a compliance program in order of their relative priority and usefulness in developing a compliance program.

While the OIG has indicated that not all of the seven steps have to be implemented, it appears to me that in order for a compliance program to be useful, steps one through seven will have to be implemented in some fashion. From doing the initial audit through publishing policies for disciplining employees for failure to comply with the program, each step seems to be necessary to have an “effective compliance” program. As such, while the OIG’s Guidance does set forth some useful recommendations as to the ability to combine a physician’s efforts with others to produce cost savings, it appears that all seven steps are intertwined in a manner that makes implementing all of them (even in a limited fashion) more reasonable.

I will now set forth some of the key differences between the Draft Guidance and the Final Guidance as it relates to each of the seven steps.

Auditing and Monitoring

If it is too burdensome to perform an audit of all payors, the OIG specifically encourages the review of claims paid by Federal health care programs.

The OIG removed the recommended 60-day time period in the Draft Guidance for taking appropriate action based on the results of an internal audit. Rather, this response must now be taken “as soon as possible.” Removal of time-related deadlines is a constant in the Final Guidance, as will be noted further below.

Establish Practice Standards and Procedures

This was the “first step” in the Draft Guidelines, but now the OIG asserts that this step can be implemented after an initial audit is done to identify a physician practice’s risk areas.

In the Final Guidance, the OIG focuses more on obtaining standards and procedures from outside third party sources and tailoring them to meet a physician practice’s needs. This includes a statement that the OIG and Health Care Financing Administration (HCFA) are working to compile a list of basic documents issued by both entities that a practice could add to a binder that also contains a physician practice’s written standards and procedures as overall policy guidelines for a practice.

The OIG addresses in Step Two specific risk areas applicable to smaller physician practices and documentation requirements that should be met by these practices. In addition to the risk areas listed in the Draft Guidance, which among other things included billing for items or services not rendered or submitting claims for services that are not reasonable and necessary, the OIG added a caution against “clustering.” The OIG describes “clustering” as the practice of charging one or two middle levels of service codes exclusively, under the philosophy that some will be higher, and some will be lower, and the charges will average out over an extended period of time. This is an important statement, as some physicians erroneously believe that using a clustering methodology in their billing will avoid audit difficulties.

Designation of a Compliance Officer/Contact(s)

The OIG removed from the suggested duties of a compliance officer ensuring that employees and physicians know and comply with pertinent federal and state regulations, statutes and standards. This requirement (contained in the Draft Guidance) was a significant duty that was almost impossible for a compliance officer to satisfy.

In the Final Guidance, the OIG continues to assert its flexibility on having different people supply all of the duties that one compliance officer/contact may otherwise supply.

Conducting Appropriate Training and Education

As was the case in Step One involving auditing, the OIG removed a time-related guideline that new employees should be trained within 60 days of their start date, now stating that these employees should be trained as soon as possible.

In addition, the OIG eliminated from the Final Guidance the recommendation that all employees should be made familiar with the key risk areas contained in the Final Guidance and those set forth in the yearly OIG Work Plan. This is a realistic recognition by the OIG that not all employees are involved in the practice’s inner workings to the extent that others are; e.g., an office manager may need to know of these risk areas, but a receptionist probably does not.

Responding to Detected Offenses and Developing Corrective Action Initiatives

The OIG modifies the Draft Guidance by stating that practices may wish to develop their own sets of warning indicators to indicate when billing problems may be present. These might include significant changes in the number and/or types of claims rejections and/or reductions, correspondence from carriers or insurers challenging medical necessity, etc. These warning indicators would then be used to highlight areas where the practice would follow-up under the compliance program. These warning indicators also might demonstrate to the practice that their compliance policies need to be changed to address certain problem situations more quickly.

The OIG also eliminated the recommendation that self-reporting a violation should be done within 90 days of the discovery of a violation. No specific time limit replaces the former 90-day standard.

Developing Open Lines of Communication

The OIG continues to focus on its “open door” policy for encouraging employees to report compliance program violations and focuses on retaining the anonymity of these individuals where possible.

OIG also adds that, where a physician group uses a billing company, communication should be made to coordinate billing and compliance activities of the practice and its billing company.

Enforcing Disciplinary Standards Through Well Publicized Guidelines

The OIG makes no real substantive changes in this section, but rather continues to assert that a physician group must have consequences for an employee’s failure to follow the compliance program in order to add credibility and integrity to the compliance program and in order to make the compliance program work.

While not part of the seven steps listed above, it is important to note that the OIG added an additional risk area for physician relationships with hospitals. This risk area involves recruitment or retention incentives provided to physicians by hospitals. The OIG states its concern that the intent behind these incentives may not be merely to recruit or retain physicians, but rather to offer the physicians an inducement to refer services to the hospital.

As you can see from the foregoing, the OIG has attempted to be flexible in the Final Guidance and allow physicians to develop compliance programs that “fit” their practice. The OIG states the compliance programs do not need to be costly or resource intensive and can be tailored to fit the individual nature of a small group physician practice.

Michael R. Burke, Esq., is a shareholder with the health care law firm of Kalogredis, Sansweet, Dearden and Burke, Ltd. in Wayne, Pennsylvania.

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