HIPAA “minimum necessary” - Health Care Compliance Association

Volume TenNumber FourApril 2008Published MonthlyMeetCynthia CooperFormer WorldCom Chief Audit Executive andauthor of Extraordinary Circumstances– The Journey of a CorporateWhistleblowerpage 14Also:Complianceand the rise inuncompensated carepage 28Earn CEU creditsee i n s e rtRegulatory reviewof recruiting andrelocationpage 4Feature Focus:Code RACpage 24

Regulatory review of recruiting and relocation ...continued from page 5Other organizations simply pay a lump sum, leaving the details to theperson moving. This is a simple approach that makes it easy to dealwith “grossing-up” expenses. There are, however, several potentiallynegative operational impacts. First, a preset amount doesn’t work forall hires and their often unique circumstances. This process may savemoney with one candidate, but waste time and money on another. Inthe simplest example, one physician may be single, but another mayhave five dependants. Additionally, there is no control over the actualexpenses versus “additional compensation” that could skew the parametersof the arrangement.Furthermore, an inconsistent application of the organization’s policy(lump-sum method or allocation of resources for hands-on assistancein the relocation process) can create political disparities betweenindividuals in the same group or between competitor physician groups.Most executives who have applied this approach are moderately satisfiedwith the results, but acknowledge that they cannot provide themuch needed real time responses, reliable oversight, savings, and consistencythat the dedicated departments enjoy. The lack of consistencymay become problematic under increased regulatory scrutiny.Another approach that is often implemented involves the candidatemoving themselves and providing their expense receipts upon arrival.This process is actually used by more organizations than one would think.The initial problem with this approach is the inability to control expensesand the impact that denying an expense after it is incurred may have onthe new hire. After-the-fact payments, even for large sums, are easier forthe organization’s employees to pay than to deny or question an expense,therby incurring the wrath of an influential physician group or executive.Although the previous examples are not exhaustive, they do illustratethe various difficulties that may occur when relocating a physician.Situations like these can create an uncomfortable relationship betweenthe new employee and the organization when expenses have beenincurred without proper, prior authorization and when the new hirebelieves the reimbursement is reasonable and necessary. This often leadsto “the squeaky wheel” getting greased, even if it is not in keeping withthe specifics of the policy. This approach is also subject to after-the-factapprovals and the political sensitivities of other applicable approaches.The end result is a process that increases stress on a system that was neverdesigned to meet compliance needs. This systemic shortfall increases thelikelihood that recruiters will fund problematic relocation packages.ONLINE WITH RESIDENCIESIN ALEXANDRIA, VAGraduate Certificate inHealthcareCorporateComplianceAcquire the compliance officerknowledge in demand today.Unique Format. Seven-month,12 credit program, with two shortresidencies and online distancelearning between residencies.Master the key concepts ofhigh-priority healthcare lawsincluding federal fraud andabuse law, governance andcorporate responsibility, HIPAA,federal tax law, and more.Enjoy unparalleled access.Learn from a world-class facultyteamed with senior regulators,legislators, patient advocates andlegal experts.Stackable Credentials. Applythis certificate toward a Master’sof Public Health degree.Program offered by the Collegeof Professional Studies andSchool of Public Health &Health Services, in partnershipwith the law firm of FeldesmanTucker Leifer Fidell LLP.Information SessionsThursday, April 241:00 pm ETOnlineMonday, May 121:00 pm ETOnlineRsvp Today!1.800.JoinGWUnearyou.gwu.edu/hccCCBHCCBAccreditedApril 20086Furthermore, the impact of the relocation process can affect thereasonableness of the compensation package. Establishing a properlywww.gwu.edu/gradinfoTHE GEORGE WASHINGTON UNIVERSITY IS AN EQUAL OPPORTUNITY/32663 AFFIRMATIVE ACTION INSTITUTION CERTIFIED TO OPERATE IN VA BY SCHEV.Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

documented system of incurred expenses isessential for the Compliance department. Theincreased scrutiny involved in the review offinancial relationships (including recruitmentand relocation expenses) between a hospitalorganization and physician candidatesrequires the Compliance department’s inputin developing a relocation system. Governmentalinquiries, whistleblowers, competitors,envious employees, or other groups necessitatea system of policies, processes, andmonitoring for real time activities–even ifindividual situations require subtle changesto comport with the individual facts inherentwith each transaction.Many organizations have a relocation policy,but the problem for many is that the departmentsand processes were not designed tooperate in a synchronized manner on a realtime basis. A properly implemented documentationand tracking system for all recruitmentand relocation expenses, along withproper consultation, can help mitigate thesescenarios by introducing a fresh perspective indeveloping a strong monitoring system.Thus, it is essential that organizations developa system that tracks all expenses, detectsexpense outliers, and captures payments thatare inconsistent with policy or appear to beunrelated to the intent and purpose of thetransaction. Additionally, having a well-documentedrelocation package will better assistthe compliance department in determiningwhether the arrangement is consistentwith fair market value standards. Properlydocumented and vetted moving expenses aremore easily defended and justified accordingto fair market value and reasonablenessstandards than moving costs without apaper trail. The failure to implement such asystem may also cause governmental entitiesto question whether good faith efforts weremade to ensure the compensation package isreasonable, fair, and was conducted at armslength dealings.Organizations that do not have the resourcesto dedicate a department to a full-time relocationteam are looking for acceptable solutions.Many are rewriting policies to set appropriatemaximum limits on total expenditures anddefining the disallowed expenses categories.Still others are adopting the answer that theirfor-profit peers and other industry counterpartshave been using for years. Following theadage “…outsource areas that are non-core toyour operation but necessary to execute…,”they are beginning to outsource their executiveand physician relocations.When outsourced, the relocation vendormanages the entire process on a real timebasis and incorporates the organization’spolicy under the organization’s direction.The average relocation management fee canbe modest. In fact, the amount is usuallywell below the lost revenue of just one day ofin-patient referral or outpatient clinic work.Health care executives can anticipate engaginghealth care-centric relocation services withfees in the range of approximately $1,000 forexecutives/physicians. 2If an organization chooses to use a relocationvendor, the vendor should possess specificknowledge of health care industry operationsand the regulatory requirements. It is alsoimportant that the partner know and be ableto advise its client on health care relocationpolicies and best practices as it relates togeography and specific venues. If the clientorganization is reviewed or audited, thevendor should be able to provide fair marketvaluations regarding relocation comparables.It is also essential that the client be able tomonitor all expenses on a real time basis. Nopanacea exists for the increased compliancescrutiny of the impact of the relocation process,but many have found that outsourcingthis complex, but relatively important task,can provide a reliable solution.The changing landscape of the health care industry,including the increased scrutiny by thegovernment regarding financial relationshipsbetween a healthcare organization and itsphysicians, necessitates the need for organizationsto re-evaluate their policies and practicesthat impact physician recruitment and relocation.As a more time-sensitive, formalized approachto recruitment and relocation becomesthe norm, compliance professionals shouldassess the ways in which they can work withrecruiters to enhance policies and real timemanagement solutions. n1 Stark Phase III2 Merritt Hawkins & Associates Physician Inpatient/Outpatient RevenueSurvey (http://www.merritthawkins.com/pdf/mha2004_inpatient.pdf)versus Relocation Fee Averages (http://www.inspiredrelo.com)Be Sure to GetYour CHC CEUsInserted in this issue of ComplianceToday is a quiz related to this article:“Regulatory review of recruiting andrelocation” by William Harriger, Esq,CHC, FACHE; and Val Aubourg, Esq.beginning on page 4.To obtain your CEUs, take the quiz andprint your name at the top of the form.Fax it to Liz Hergert at 952/988-0146,or mail it to Liz’s attention at HCCA,6500 Barrie Road, Suite 250,Minneapolis, MN 55435. Questions?Please call Liz Hergert at 888/580-8373.Compliance Today readers taking theCEU quiz have one year from thepublished date of the CEU article to submittheir completed quiz.Health Care Compliance Association • 888-580-8373 • www.hcca-info.org7April 2008

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Quality of care incardiac casesEditor’s note: Myla Reizen is Special Counsel atJones, Walker, Waechter, Poitevent, Carrere &Denegre, LLP in Miami, Florida. She may becontacted at (305) 679-5716.Quality of care is critical to ourpatient-centered health care deliverysystem. What is quality of care?The Institute of Medicine (IOM) definesquality of care as the degree to which healthservices for individuals and populationsincrease the likelihood of desired health outcomesand are consistent with current professionalknowledge. The IOM has identifiedsix factors defining quality of care: 1) safe;2) timely; 3) effective; 4) efficient; 5) equitable;and 6) patient-centered. Cardiac casesinclude cardiac catheterizations, angioplasty,angiograms, and open heart surgery.Events over the past five years have highlightedquality-of-care issues in cardiac cases.Some of the cases include:n In 2003, a California hospital agreed topay $54 million to the United States toresolve allegations of performing unnecessarycardiac services from 1997 through2002. The accusation related to unnecessarycardiac catheterizations, angioplasty,and open heart surgeries. In an effort toavoid exclusion from federal health careprograms, the hospital’s parent organizationagreed to ultimately divest thehospital. The director of cardiology andthe chief heart surgeon each paid fines of$1.4 million to avoid criminal prosecution.A third cardiologist agreed to pay$250,000 over a period of 10 years.n In August 2006, a Louisiana hospitalagreed to pay United States $3.8 millionfor allegations concerning medicallyunnecessary elective angiogram, medicallyBy Myla Reizen, Esq.unnecessary angioplasty, and medicallyunnecessary elective stenting proceduresperformed at the hospital between 1999and 2003. The cardiologist was chargedwith 94 counts of health care fraud forallegedly performing unnecessary cardiacprocedures. The trial is scheduled forAugust 2008.n In October 2007, an Ohio cardiologistpleaded guilty to one count of conspiracyfor his part in a scheme to defraud Medicaid/Medicareand other federal health programsby causing cardiology tests that werenot medically necessary to be administeredto patients between 1998 and 2006. As acondition of the guilty plea, the cardiologistagreed to a $7.8 million settlement,permanent exclusion from participation infederal health programs, and forfeiture ofhis medical license.As noted from the examples of quality-of-carecases above, depending on the facts of thecase, the government has pursued providerscriminally, civilly, and administratively.The providers under scrutiny have includedboth hospitals and physicians. Results haveincluded, but are not limited to, civil penalties,criminal fines, exclusion from federalprograms, loss of medical license, and entryinto Corporate Integrity Agreements with asignificant number of requirements.A host of federal and state licensure, certification,and accredited agency requirementsconcern provisions of quality care for cardiacmatters, the nature and applicability of whichis generally determined by the type of provideror services provided. However, regardless of thetype of provider and services provided, thereare some key questions one may ask. As notedfrom the questions below, numerous key departmentsand functions are involved in assistingwith these types of quality of care matters.Examples of some key questions to pose are:Internal Controlsn Does the hospital have an effective credentialprocess?n Does the hospital have an effective peerreview process?n Does the hospital have an effective utilizationmanagement process?n Is there an effective Investigational ReviewBoard?n Does the hospital have an effective qualityassurance and management function,including follow-up for adverse clients?Information Processn Does the hospital have an effective employeecomplaint process?n Does the hospital have an effective patientreporting process?n Is there effective communication between themedical staff and hospital administration?n Is there effective communication between thehospital administration and governing body?Desire to take actionn Are medical staff, hospital administration,and governing board able to identifyissues, and if so, are they willing to takeaction?n Does the hospital offer rewards for highqualityperformance?Compliance Programn Is quality part of the overall complianceprogram, such as training, education, andauditing?n Does the hospital have clear policies andprocedures defined which outline theabove areas, including compliance withfederal and state licensing, certification,and accreditation requirements?April 200810Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

Connection among Departmentsn Does the hospital offer a link to communicationbetween quality of care issues andbilling processes?n Is there effective communication betweenthe compliance officer and other departmentsinvolved with quality of care matters?certified inCHChealthcarecomplianceThe ComplianceProfessional’s CertificationThe Compliance Certification Board (CCB) compliance certificationexamination is available in all 50 states. Join your peers and becomeCertified in Healthcare Compliance (CHC).Immediate response to quality-of-care mattersin the cardiac arena is paramount. Providersshould consult highly experienced counselto assist in responding to any quality-of-carematters, as well as creating an infrastructureto minimize the risks of any future quality-ofcarematters in the cardiac setting. nContact Us! www.hcca-info.orginfo@hcca-info.orgFax: 952/988-0146HCCA6500 Barrie Road, Suite 250Minneapolis, MN 55435Phone: 888/580-8373To learn how to place an advertismentin Compliance Today, contactMargaret Dragon:e-mail: margaret.dragon@hcca-info.orgphone: 781/593-4924CHC certification benefits:n Enhances the credibility of thecompliance practitionern Enhances the credibility of thecompliance programs staffed bythese certified professionalsn Assures that each certifiedcompliance practitioner has thebroad knowledge base necessaryto perform the compliancefunctionn Establishes professionalstandards and status forcompliance professionalsn Facilitates compliance workfor compliance practitioners indealing with other professionalsin the industry, such asphysicians and attorneysn Demonstrates the hard work anddedication necessary to performthe compliance taskSince June 26, 2000, when CHCcertification became available,hundreds of your colleagues havebecome Certified in HealthcareCompliance. Linda Wolverton,CHC, says she sought CHCcertification because “manyknowledgeable people work incompliance and I wanted my peers torecognize me as one of their own.”For more information aboutCHC certification, please call888/580-8373, e-mail ccb@hcca-info.org or click on the CCBCertification button on the HCCAWeb site at www.hcca-info.org. nCongratulations on achieving CHC status! TheCompliance Certification Board announces thatthe following individuals have recently successfullycompleted the Certified in Healthcare Complianceexamination, earning CHC designation:Michele E. AkbariJessica C. AkersRufina Kelly AlvarezGeorge B. ApterMary Frances ArseneauNikisha L. BaileyMargo BeattieMarcella J. ChandlerDenisia L. ChenStephen G. ChongCherry F. Clavette-ArnoldSusan Ann CodegaCeleste R. CollinsSusan ColvinAndrew GeorgeConkovichPatricia A. CurranNancy Ann DeanAnita DelucioMichael PatrickFletcherMary Alice GarciaBonny Garcia-MorlaElissa GiaimoDonna P. HarperMillicent Brown HunterDonald K. InderliedLynn A. IngrahamKelly InsignaresVicky Lee Kirby-MartinNoela KokomaniMartha Maria LasseterKari Alene LidbeckMalia L. LyonsLarry MalmRenee Ennus McgeeCatherine MoriarityMalini NagpalSusan Emily NanceAna-Cristina NavarroCarol S. NovakTracie D. PaivaTaunya Jayne PetersLouise B. ReistNancy RepiceNancy Jean RicciLucy RogersChristine L. RoughJanice Kay SawyerSheryl Lynn SchuitemaGretchen ShenfieldKali A. SternFrancine TinocoRegina Marie TiptonJerry Joseph TrammelJoy L. UpdegroveKathy VancampDonna G. WheatMelissa Ann WilburnCarrie Lynn YoungHealth Care Compliance Association • 888-580-8373 • www.hcca-info.org11April 2008

“Red flags” and compliance programs ...continued from page 9New information technology. Replacingor upgrading billing and electronic medicalrecord (EMR) systems is one of the mostdaunting tasks faced by revenue cycle andmedical records professionals, and certainlyincreases risk of compliance failure.A well-planned and executed transition maystill create problems and a staff learningcurve. A disastrous transition (and there aremany) creates management and complianceissues. Plan for every contingency, plan tomonitor and test every major routine withinthe system, and then plan for the possibilityof major and minor failures. And then planmore testing. The stakes are very high.Contract and program changes. Majorchanges by third-party payers, or adding amajor new payer, creates a risk of billing errors.These changes beg for increased vigilance asbilling staff work through new procedures andlearn to communicate with the payer’s servicereps. For at least a three to six month window,increased vigilance should be directed at thearea of change. A high error rate should bringeven further training and monitoring.Uncomfortable statistical trends. Under theassumption (sometimes incorrect) that yourorganization has a customized and accuratestatistical reporting program, any majordeviations from trend lines should be thesubject of suspicion. If your organization doesnot have a robust, customized program forgathering and analyzing statistics, it is timeto begin. Many organizations buy billingsoftware with numerous compilation andanalytical tools and then never use the tools.Many statistical issues will point to operationalissues, and those should be addressedpromptly, but some will point to complianceissues (e.g., chronic up-coding or a newservice being improperly billed).Disgruntled or impaired providers. Providerswho are unhappy with contract terms orwith profit splits may decide to improve theircompensation with their coding, probablyby chronic up-coding. An impaired providermay ignore documentation or create sloppyor inaccurate documentation. A disgruntledprovider may attempt to “game” a productivitycompensation system for personal benefitor throw errors into the system for spite.Disgruntled staff. A disgruntled memberof the billing department can quietly createchaos within the billing system. By puttingclaims on hold, deleting claims, or simplyfiling incomplete claims, a huge hole can bedug into your revenue cycle.In addition to monitoring monthly trendsfor the organization, management and thecompliance team must monitor individualperformance and give special attention to anyemployee who has expressed a problem orwho has been observed as being disgruntled.Falling cash collections. Detailed cashbudgeting and cash flow forecasting allowan anticipation of monthly collections. Anymajor deviation from these forecasts callsfor an immediate review. The problem maybe external (e.g., a payer with computerproblems) or internal (e.g., new billing staffcreating billing errors). An external problemmay have no direct solution; an internal problemrequires prompt attention. If the problemcannot be fixed immediately, managementmust have time to arrange for alternate cashflow sources, often a line of credit.VigilanceCompliance programs exist to lower the riskof enforcement actions and bad management.Red flags can provide warnings of potentialcompliance risks, and allow us to target compliancework toward the greatest threats.No system can eliminate all risks, but heedingred flags can allow us to lower the risk ofcompliance failures. nMaterials in this paper are excerpted from a presentationby Prof. Ealey at the 2007 PhysicianCompliance Conference in Philadelphia.1 Consideration of Fraud in a Financial Statement Audit, © AmericanInstitute of Certified Public Accountants, 2007Full Name:Title:Organization:Address:City/State/Zip:Telephone:Fax:E-mail:Complete this coupon to order Compliance Today (CT)HCCA individual membership costs $295; corporate membership(includes 4 individual memberships, and more) costs $2,500.CT subscription is complimentary with membership.HCCA non-member subscription rate is $295/year.Payment enclosedPay by charge: AmEx MasterCard VisaCard #:Exp. Date:Signature:Please bill my organization: PO#Please make checks payable to HCCA and return subscription coupon to: HCCA,6500 Barrie Road, Suite 250, Minneapolis, MN 55435Health Care Compliance Association • 888-580-8373 • www.hcca-info.org13April 2008

feature articleMeet Cynthia CooperFormer WorldCom Chief Audit Executive and author ofExtraordinary Circumstances – The Journey of a Corporate WhistleblowerEditor’s note: Roy Snell, CEO of the HealthCare Compliance Association, conducted thisinterview in March 2008. Cynthia Cooper maybe contacted by e-mail atccooper@cynthiacooper.net.RS: Please tell us about the book yourecently published about WorldCom, one ofthe largest accounting scandals in U.S. history.CC: I have written ExtraordinaryCircumstances in autobiographical styleand tried to tell the story of the WorldComfraud from a human perspective that looksbeyond the accounts and numbers. I alsowrote it in present tense to help readers experiencethe events in real time, along with myteam and me. I was fortunate to work witha group of well-qualified auditors who heldsteady in the face of tremendous pressure.Readers will see the important role that eachauditor played and why it is so critical tohave auditors on staff with diverse skill sets.As I write in the book, my team and I wereordinary people who found ourselves facedwith extraordinary circumstances.The book takes readers behind the scenes byplacing them in the meetings and buildings andsettings where the fraud occurred. It allows readersto experience the rise and fall of WorldComand think about what decisions they may havemade along the way. Through the story, readerswill be able to answer questions such as: Whatwent wrong at WorldCom? How was the fraudperpetrated? Why did some employees chooseto participate in the fraud? What did employeesdo to hide the fraud from auditors andanalysts? What happens to someone when heor she becomes a whistleblower? What is itlike to testify in a federal criminal trial? Whatwere key points presented by the prosecutionand defense in former WorldCom CEO BernieEbbers’ trial? Why did the jury ultimatelydecide to convict him and why did he receivea 25-year sentence?RS: What was the purpose for writing thebook and who is the intended audience?CC: My purpose in writing the book wasto share my experiences and some of the lessonslearned, not only with professionals, butwith the next generation. I wanted people,regardless of their background, to be able toread the book and gain something that theycould not only apply in their own lives, butshare with their children and grandchildren.A lot of the readers don’t have business backgrounds.RS:What feedback have you receivedabout the book?CC: People from many different backgroundshave been very supportive. Manyprofessors are telling me they will use thebook in the classroom, and a number ofbusiness professionals have purchased booksfor their staff. One of the most rewardingthings for me has been to hear from peoplewho have shared how this story has touchedtheir lives in some way, provided encouragement,and helped them weather their ownpersonal challenges and adversity. While thishas been one of the most difficult things I’vebeen through in my lifetime, we all face life’sstorms sooner or later, whether it is divorce,loss of a job, illness, or death of a loved one.In the book, I share what helped me getthrough the tough times.RS: What have you learned from writingthe book?CC: I have discovered how challengingit is to write a book. I am not a professionalwriter and had to learn how the publishingindustry works. It took thousands of hours toApril 200814Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

complete Extraordinary Circumstances.Writing can be very isolating and difficult,but it can also be rewarding. I think thatsharing the story with others has in manyways helped me to move forward. As I wroteand relived the story, there were times when Ilaughed and times when I cried. Living theseevents and writing about my experiences hascaused me to reflect on my own priorities inlife and what matters most, as well as issues ofjustice, forgiveness, empathy, and compassion.RS: Besides speaking before professionalaudiences, I understand you speak to collegeand high school students. Your experienceoffers a number of important lessons, whichyou offer in the book’s epilogue “10 Stepsto Sorting Through Tough Decisions andMaking the Right Choice.” Would you tell ushow your student audience responds to yourstory and share with us some of the mostinteresting questions you are asked from yourstudent audiences?CC: Going through the events atWorldCom has caused me to become moreaware of the importance of making sure Iinstill strong ethical values in my own daughterswho are now 18 and 6 years old. I havea passion for sharing this story with studentsand began the book tour by talking to highschool juniors and seniors. I feel strongly thatwe should be including ethics education inthe core curriculum, and that we must startearly, at the elementary school level.Student audiences have been very attentive.I believe hearing a true story about realpeople who decided to commit fraud, andthe pressures they felt, brings ethics to life foryoung people. It encourages students to thinkabout the pressures and ethical decisions theyface every day in their own lives. Studentsoften want to know what they should do ifthey identify wrongdoing or feel pressuredto do something they don’t feel is right. Thatis why I have devoted the epilogue to stepsyoung people can take to help ensure thatthey recognize an ethical dilemma, stop, stepback, think it through, and make the rightdecision.Students sometimes ask, “What are thechances I would ever face something likewhat you faced at WorldCom?” My responseis that hopefully they will not, but we allface ethical dilemmas every day—whetherto cheat, drink and drive, fudge an expensereport or tax return. The foundation of ourcharacter is laid brick by brick, formed decisionby decision throughout our lives. Mychallenge to students is to draw clear ethicalboundaries and think about the decisionsthey make every day.RS: Please tell us about your professionalbackground—your education and your pastemployment history.CC: I received an undergraduate degree inaccounting from Mississippi State Universityand a graduate degree in accounting fromthe University of Alabama. I began my careerin public accounting and have worked forboth PriceWaterhouseCoopers and Deloitte& Touche in Atlanta. After serving as anassistant controller for a fast-growth publiccompany, I moved back home to Mississippiand worked in internal audit for twoJackson-based telecommunications companies—Skytel and then LDDS, which eventuallychanged its name to WorldCom.RS: Sarbanes Oxley was passed after theWorldCom fraud. Do you think Sarbox hashad a beneficial impact and could it haveprevented the WorldCom fraud?CC: I feel very positive about manyaspects of Sarbanes Oxley. Internal Auditdepartments are getting more support.External auditors have adjusted their auditmethodologies so that they are more gearedtoward fraud detection. Public companiesRoy Snellhave implemented hotlines. Boards are moreindependent and becoming more focused onunderstanding not just financial reportingrisk, but broader business risks. We’ll alwayshave fraud, but I think the combination ofmany of the governance improvements willhave a positive impact on fraud preventionand detection.One of the most significant benefitsof Section 404 of Sarbanes Oxley is thatexecutives and Board members have a greaterappreciation for the importance of having astrong internal control framework. I’m oftenasked whether Section 404 could have preventedthe WorldCom fraud. I think someof the entity-level controls, such as havingan effective ethics office and fraud hotline,will have a positive impact on preventingfraud. It’s important to recognize that manyof the recent financial statement frauds haveinvolved collusion at the highest levels of thecompany. In these cases, most of the basicinternal controls can be bypassed. For auditors,over-reliance on internal controls inlieu of detailed substantive testing is risky.In the case of WorldCom, Arthur Andersenvouched less than ten capital additions basedon their reliance on internal controls.Internal controls are important, but thecosts shouldn’t outweigh the benefits. I thinkthe pendulum simply swung too far. TheContinued on page 16Health Care Compliance Association • 888-580-8373 • www.hcca-info.org15April 2008

Meet Cynthia Cooper ...continued from page 15April 200816results were that companies and auditorsspent too much time implementing andtesting detailed transactional controls thataren’t likely to prevent or detect these highlevelcollusive frauds. I’m hopeful that withthe SEC’s new guidance and the PCAOB’sAS5—which is scalable, less prescriptive, andencourages a top-down risk based approach—we are headed towards a better balance. Weneed adequate controls to protect the capitalmarkets without weighing down the economyor quashing innovation and entrepreneurialrisk taking.RS: Please briefly outline your reportingstructure, duties, and responsibilities atWorldCom.CC: I managed the company’s InternalAudit department and reported functionallyto the Audit Committee Chair and administrativelyto the chief financial officer (CFO).Our team focused on operational auditing,reviewing the efficiency and effectiveness ofprocess, procedures, and internal controls.RS: What did you uncover in the springof 2002?CC: When companies perpetrate financialstatement fraud, they often do it in more thanone area and begin by manipulating areas thatrequire judgment. During an internal auditof the wireless division, a senior vice presidentexpressed concern that while accountantsreporting to him were booking entries toincrease the division’s allowance for doubtfulaccounts (amounts set aside for bad debt customers),accountants reporting to the CFOwere reversing the entries. He said the CFOassured him that the total company allowancewas adequate. After investigating, we determinedthat the allowance appeared low by asmuch as several hundred million dollars. Bygoing into the accounting system, we identifieda number of allowance accounts with balancesgoing in the wrong direction and tracedthe entries that were being reversed throughthe system. Extraordinary Circumstancesalso discusses how Internal Audit uncoveredfraud related to amounts that should havebeen expensed each period as normal operatingexpenses, but were instead moved to thebalance sheet and accounted for as assets,thereby making the company appear to bemore profitable.RS: When you began to uncover theaccounting irregularities, did you have supportin the company from anyone? Did youhave anyone on the Audit Committee toback you?CC: I had the support of my team. Inaddition, I went to the Audit Committee as Iwas becoming increasingly suspicious aboutsome unusual entries we had identified anduncomfortable with the reactions I was gettingfrom the CFO and other finance staff.The Audit Committee Chair believed thatthe CFO would have a good explanation forthe entries and asked me to delay asking forsupport. Of course, no one wants to believethat people they have worked with for years,trusted and respected, would perpetrate afraud. The Audit Committee Chair is the personwho ultimately called an audit committeemeeting where he confronted the CFO.RS: Did WorldCom have a complianceofficer? If so, did you enlist the help ofWorldCom’s compliance officer when identifyingthe fraud?CC: WorldCom did not have an employeewith the title of chief compliance officer.I followed my chain of command by goingto the Audit Committee Chair to whom Ireported functionally.RS: Do you see any similarities betweenwhat is going on with the current sub-primecrises and what happened in the telecommunicationsindustry?Health Care Compliance Association • 888-580-8373 • www.hcca-info.orgCC: I think there are a number of parallelsbetween what happened in the telecomindustry and the recent sub-prime crises:excessive risk taking, massive market bubbles,and inadequate regulation to protect investorsand consumers. In telecom, the excessiverisk taking took the form of companiesborrowing billions to expand networks.Warren Buffett once said, “It’s only whenthe tide goes out that you learn who’s beenswimming naked.” When the dot-com andtelecom bubbles burst, the industry excessesquickly became apparent. When the housingbubble burst, it exposed excessive risk takingby mortgage companies that lowered lendingstandards and gave loans to high-credit riskbuyers.As with Enron and WorldCom, some ofthe Wall Street investment banks are again atthe center of the storm, writing off billions insub-prime loans. Investment banks purchasedmortgage loan portfolios, securitized them,and sold the investments to the public. TheNew York attorney general has launched aninvestigation into why credit rating agenciesgave strong ratings on some of these riskyportfolios and whether investment banksproperly disclosed information regarding risksassociated with mortgage loans backing securitiessold to the public. This may well be thetip of the iceberg.While it is true that our capital markets areresilient and that there will always be economiccycles, we can’t afford to continue down apath of inadequate regulation. Just as balancedcontrols are important within companies, wemust have a more appropriate balance betweenregulation to protect the capital markets andenough freedom to spur innovation and promotehealthy economic growth.Some experts believe that deregulation oftelecom, energy, and banking played a role inthe crises within each of those industries. Forexample, the portion of the Glass-Steagall Act(passed in the 1930s after the stock market

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The complexities of laboratory compliance ...continued from page 231. Verification that the ordering physician has not been excluded from participationin federal health care programs;2. Test requisitions are properly designed;3. Adherence to AMA-approved disease-oriented panels or profiles;4. Only physician-requested custom panels are created and such panels arerestricted to the requesting physician only;5. The appropriate creation and execution of ABNs;6. Only tests ordered and performed as ordered are billed;7. Billed tests are medically necessary and supported by proper ICD-9 codes;8. Tests are not unbundled;9. Orders are not ambiguous or medically unbelievable;10. Selection of AMA CPT (Current Procedural Terminology) codes accuratelyreports the methodologies employed by the laboratory;11. Billing for tests that were not performed due to biological or technicalreasons is avoided;12. Checking to avoid duplicate billing; and13. Tests submitted to external reference laboratories are billed as “passthrough”tests without additional fees.For example, in some situations, multiple tests are ordered simultaneouslyand, potentially, even by different physicians on the same patient. AMAapprovedpanels could be “buried” within the sum total of all the tests orderedand may have been ordered as individual tests. When auditing clinical pathologyclaims, unless a state-of-the-art lab billing editing software is in place, amanual and complex review must be conducted to ensure that the panels arerecognized for what they are.Or further, for microbiology testing, many codes exist for the same type oftesting, depending on the type of culture and technology used. Such nuancesare often completely missed in internal coding efforts.ConclusionI’ll dive further into the details of how and what to audit in this regard infuture articles, but it’s important to start with the premise that laboratorycompliance is an under-appreciated and significant risk area, particularly giventhe volume and dollars involved for many medical groups, hospitals, andintegrated health systems. Please stay tuned for further exploration of thischallenging and interesting topic in the coming months. nHealth Care Compliance Association • 888-580-8373 • www.hcca-info.org25April 2008

focusfeatureCode RACIs your hospital response teamready?By Nancy Jessee and Chrissy RenshawEditor’s note: Nancy Jessee is the Director of Audit and Compliance andChrissy Renshaw is a Decision Support Analyst, both at at Winter HavenHospital in Winter Haven, Florida. Nancy can be contacted by e-mail atNancy.jessee@mfms.com or by phone at 863/293-1121 ext. 1322. Chrissycan be contacted by e-mail at Chrissy.renshaw@mfms.com or by phone at863/293-1121 ext. 1697.The Recovery Audit Contractors (RAC) Program is wrappingup the three-year pilot project and is now expanding to afull blown nationwide program. Between March 2008 andJanuary 2009, virtually all CMS hospitals will be affected by RAC. Inan effort to avoid reinventing the wheel, the who, what, when, andwhere of RAC are detailed below, in hopes of surviving with a minimumamount of blood, sweat, and tears.WHO needs to be included on the response team?To respond quickly and effectively, various areas of expertise should becalled upon to serve on the response team. Several professions will beinvolved by the time the entire RAC process is complete.Defining each step from start to finish, as well as the responsible party,is critical to success. A-well rounded response team should includerepresentation from Health Information Management (HIM), Compliance,Accounting, Patient Financial Services (PFS), Care Management(CM) and Utilization Review (UR).Some claims are deemed to be billed incorrectly simply by review ofthe submitted claim (e.g., incorrect discharge disposition) and a recordwill not be requested. The first notification the hospital will have isa notice of takeback via a remittance advice. However, for the mostpart, the process will begin with a medical record request.pulled, copied, and then finally sent out (via Fed Ex or other securedand trackable method). Within 60 days of RAC’s receipt of the medicalrecord, the hospital will receive a determination letter.Determinations will come in three varieties. (The party having primaryresponsibility for tracking is given in paretheses.)n Overpaymento Takeback will occur thru remittance advice (PFS)o Considerations/followup of ramifications of takebackon secondary payers (PFS)o Log to be updated (designated analyst)o Medical record to be reviewed (UR/CM)o Hospital determines action – appeal/not appeal(UR/CM)n Underpaymento Additional payment will occur thru remittance advice(PFS)o Log to be updated (designated analyst)n Closed Accounto Log to be updated (designated analyst)If the hospital decides to appeal an overpayment decision, the claimmust be reviewed and rebutted to the RAC, or later, to the FiscalIntermediary (FI). All actions should be noted on the logging system.WHAT information is important to track?The logging system will quickly become the information center for theresponse team. When it has been set up correctly, this log will becomea useful tool in the time-sensitive RAC arena. An analyst who is experiencedin Microsoft Office can query, sort, and/or calculate the loggedinformation to track various items of interest for the hospital. Belowis a sample of log descriptions and the reason for tracking.April 200826When RAC requests medical records, the request will be logged,Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

DescriptionAccount numberCodeClaim #Date request receivedFaxed to HIMDate info due to RACDate sent to RACFEDEX tracking #Audit IDDiagnosis-related group (DRG)Dates of serviceTracking resultsFindings dateAppeal due dateDate appealedDate appealed + 90 DaysResult of appealDate of appeal result2nd-level appeal due date(appeal result +180 Days)Date 2nd-level appeal sentAmount taken backTakeback datePart B additional paymentPart B additional payment dateSystem balanceRefund amountRefund dateDate checkedReason for LoggingHospital Account NumberCode to distinguish status of claimActual claim numberDate request received by hospitalRequest for Medical RecordDeadline for submission of recordDate actually sent outTracking number for verification ofreceipt to RACRAC system of trackingDRG on claim for trackingDates of serviceTracking of Fed Ex shippingDate receipt of RAC decisionDate the appeal is dueDate appeal submittedDate decision due back from RACResult of appealDate of result receivedDate of second level appeal dueDate of second level appeal sentAmount taken back via remittance noticeDate of takebackIf claim was filed as inpatient (IP) butshould have been outpatient (OP), PartB charges may be recouped. This is theamount recouped.Date of receipt of Part B reimbursementBalance on account for General Ledgerallowance purposesAmount due as a result of underpaymentDate of refundCheck on Patient Account system toverify takebackThis log is meant to be a guideline for data elements to track. Hospitalsmay find that more or fewer fields are needed to suit their unique needs.It is important to note that takebacks that result from automatedreview (no medical records are requested) should be logged to keep anaccurate record of the total takebacks. A notification process will haveto be built into the system between the remittance processing area ofPFS and the logging analyst.WHEN should the hospital call a Code RAC?The sooner a team can be pulled together and educated the better.Numerous resources are available for education; however, each RACis a little different and the rules may vary from state to state. Forexample, Webinars, state/federal associations, the American MedicalAssociation, and various Web sites are all helpful in gaining pertinentinformation. Communication between response team members andneighboring healthcare providers will prove invaluable for keeping upto date on the latest developments.Under the RAC pilot project, the requests were not sent out toproviders immediately; however, this may not be the case the secondtime around. Although the deadline to submit the medical record is45 days, do not wait until the last minute. Considering the numberof records requested, copying these documents is time intensive. Inaddition, be sure that the complete record is sent. If not, denials willfollow for incomplete documentation. Then, the burden of proofshifts to you, the provider.It is essential that each response team member understands the processand allows for flexibility. Ideally, each record would be reviewedbefore it is sent to RAC; however, with the vast number of requests,streamlining the review may be necessary. Once a denial has beenissued, review of records is mandatory and a strongly written appealletter should be issued. Again, be aware of the deadline for submissionof appeals as well. Each responsible party will have ebbs and flows ofactivity. Have no fear – everyone will get a chance to participate!HOW do you keep track of all this?An organized, detailed logging system is essential to RAC survival.Depending on the end user, this log will need to be sliced and dicedin numerous ways. Microsoft Excel lends itself to the needed sorting,trending, and calculating that will become imperative for reporting.Whatever system is chosen, remember the three C’s – code, color andcategory:Code – A code is assigned to each record depending on the currentstatus of the account in the RAC process. This will aid in sortingfor various reporting purposes. The code is also tied to the colorand financial impact. This will change several times during the RACprocess.Color – The code of each claim (see next page) is assigned a differentcolor. This makes it easy to distinguish groups of accounts at a glance.Continued on page 29Health Care Compliance Association • 888-580-8373 • www.hcca-info.org27April 2008

April 200828Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

Code RAC: Is your hospital response team ready?...continued from page 27Category – A category allows an end user who is not familiar with theentire RAC process to see a narrative description of the RAC stage foreach group of accounts. These categories are useful when analyzingfinancial activity for groups of accounts.Color Code Description CategoryPale Green 0 BeingReviewedYellow 1 Will notappealPink 2 PossibleAppealRecord sent,awaiting RACdecisionRecord sent andhospital agrees withdecisionRecord submittedand hospitalreviewing forappeal decisionPurple 3 Appealed Record submittedand appeal sent,hospital waiting onappeal decisionBrightGreen4 AppealDeniedOrange 5 AppealOverturnedBlue 6 Reviewed &OKTan 7 UnderpaymentRecord appeal anddenied, review forsecond level appealRecord appealed,denial overturnedRecord sent anddeemed billedcorrectlyRecord sent and determinedto be anunderpaymentFinancialImpactNo financialimpactTakeback hasoccurredTakeback hasoccurredTakeback hasoccurredTakeback hasoccurredTakebackoccurred/refund to bereceived orreceivedNo financialimpactAdditionalreimbursementto beor has beenreceivedIs your rehabilitation program readyto face the auditor’s microscope?Inpatient and outpatient rehab providers areexperiencing increased scrutiny from theirfiscal intermediaries and others. The 75%Rule, the Recovery Audit Contractor (RAC)project, and focused reviews for medicalnecessity have changed the way rehabilitationproviders operate.Most rehab providers have not establishedeffective mechanisms to assure the integrityof their operating and billing practices whenviewed by a third party. The full consequencesmay only be apparent when it is too late.Following the who, what, when, and how may not make the RAC processpainless. However, these helpful hints may save some time, avoidreinventing the process, and help you learn from those who have comebefore you. Having the right professionals at the table, open communication(both internally and externally), and an organized and thoroughtracking system is sure to ease the burden. nNoblis provides solutions-focused servicesacross the post-acute care continuum and wecan help solve the IRF compliance puzzle andhelp you face the future of rehab.Contact Noblis’ Center for Health InnovationPost-Acute Strategy experts (404.231.4422)to discuss customized solutions to yourcompliance needs. We will help you to climbout from under the auditor’s microscope.www.noblis.org/healthcare • 404.231.4422Health Care Compliance Association • 888-580-8373 • www.hcca-info.org29April 2008

Complianceand the rise inuncompensated careEditor’s note: Wes Jackson is an associate andMatthew Roberts is a member of the NexsenPruet, LLC in Columbia, SC. They practice inthe firm’s health care group. Wes may be reachedby telephone at 803/540-2128 or by e-mail atwjackson@nexsenpruet.com. Matthew can bereached by telephone at 803/771-8900 or bye-mail at mroberts@nexsenpruet.com.The current landscape of the healthcare industry presents many dauntingchallenges to hospitals. Providingcare to an escalating number of uninsuredpatients is perhaps the greatest challenge confrontinghospitals.The rising number of uninsured and underinsuredpatients has caused the levels of uncompensatedhospital care to skyrocket. Thisfree care presents a bleak financial picture formany hospitals that have historically been operatingon thin margins. Hospital emergencydepartments are the primary care providerfor many patients; the fact that many of thesepatients are underinsured or uninsured iscausing hospitals to reassess how they providecare to patients and how they charge forthese services. This challenge appears to beparticularly true for tax-exempt communityand non-profit hospitals.Related to the financial challenges that risinguncompensated care imposes on hospitalsare compliance issues associated with dealingwith patients who use the hospital but do notor can not pay for theses services. These issuesinclude the Emergency Medical Treatmentand Labor Act (EMTALA) 1 , other laws applicableto charitable and tax-exempt hospitals,By Wes Jackson and Matthew Robertsand issues regarding the mission or purposeof hospitals.The plight of America’s uninsured or underinsuredpatients is well documented. Recentmedia reports estimate that the number ofuninsured Americans is roughly 45 million.Even more troubling, the number ofuninsured children is close to 8.3 million.America’s health care crisis is a high profilepolitical issue in the upcoming 2008 presidentialelection. Health care is also the focalpoint of popular and other media, includingMichael Moore’s latest political documentary,“Sicko,” 2 which is generating high levels ofmedia coverage. According to the AmericanHospital Association (AHA), since 1996,community hospitals have seen the costs ofuncompensated care rise from $18 billion to$28.8 billion. 3There are two components of “uncompensatedcare” which the AHA defines as:[A]n overall measure of hospital careprovided for which no payment wasreceived from the patient or insurer. It isthe sum of a hospital’s “bad debt” and thecharity care it provides. Charity care iscare for which hospitals never expected tobe reimbursed. A hospital incurs bad debtwhen it cannot obtain reimbursementfor care provided. This happens when patientsare unable to pay their bills, but didnot apply for charity care, or are unwillingto pay their bills. Uncompensated careexcludes other unfunded costs of care,such as underpayment from Medicaid andMedicare. 4There is appropriate focus on the plight of theuninsured and their access to care, but therehas not been as much coverage on the impactthat treating the uninsured for no reimbursementis having on hospitals. This issue israpidly becoming a crisis scenario for hospitals,because of their perceived obligation totreat everyone who presents to their hospital,regardless of their ability to pay.Contrary to media assertions and some popularbelief, patients appear to benefit when hospitalsbecome more profitable. Studies haveshown that as hospital profits decline, adversepatient safety events increase for both nursingand surgical patients. 5 Without healthrevenue and ultimately, sufficient profit,hospitals cannot afford to provide charity careto uninsured patients. The late Sister IreneKraus of the Daughters of Charity put it bestwith her famous “No Margin, No Mission”statement. Balancing this obligation to meetthe mission and to have necessary marginsis difficult, and the existence of complianceobstacles further exacerbates this problem.The spike in bad debt and charity care haveboth contributed to diminishing hospital revenues,but the provision of increased charitycare in particular has also created complex legalissues that deal with how hospitals bill andcollect from the uninsured. In recent years,charity care class-action lawsuits and intensescrutiny from the federal government regardingthe legitimacy of tax-exempt hospitalshave emerged as related challenges. In 2004,numerous class-action lawsuits were filedagainst nonprofit hospitals, which alleged thatthe hospitals overcharged uninsured patients.Dozens of federal and state copycat lawsuitsfollowed. The vast majority of these lawsuitshave been dismissed, but their legacy, particularlythose of the state court actions, couldhave a lasting impact on nonprofit health caredelivery systems. Unfortunately, these casesApril 200830Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

have had little to no impact on improvedcharity care and have been viewed more as ameans to hold hospitals hostage for legal feesfor plaintiff lawyers.In addition to these lawsuits for the uninsured,the federal government has nowsquarely set its sights on charity care as itrelates to a hospital’s tax-exempt status. OnJuly 19, 2007, Senator Grassley posted apress release and a minority staff discussionthat called for, among many other things,minimum charity care requirements andmaximum charges for medically indigent,uninsured patients. Further, theIRS is due to release its final report onTax-Exempt Hospitals and CommunityBenefit in September 2008. Thatreport will include numerous actionitems, including recommendations forIRS administrative actions and/or investigations.6 This will only heightenpublic scrutiny on hospitals, whichcould cause further reductions inpatient revenue and increase hospitalexpenses if new legislation is passed todeal with the perceived problem.Over the last decade, one thing has becomeclear: As health care consumers, we are goingto have to pay more out of pocket for ourhealth care. This will mean that hospitals willbe forced to collect more from individuals.Hospitals are facing ever-increasing scrutinyof their charges to the uninsured and howthey collect those charges, but hospitals alsohave to weigh their legal obligations whenassessing methods to mitigate decliningrevenues due to uninsured and underinsuredpatients. One of the laws that hospitals mustcomply with in this context is EMTALA. 7Hospitals often mistakenly believe thatEMTALA requires them to treat allpatients who present at their hospital, irrespectiveof the patient’s ability to pay. Thisis not true. The Centers for Medicare andMedicaid Services (CMS) has succinctlylaid out EMTALA’s general requirements asthe following:Medicare-participating hospitals mustprovide a medical screening exam to anyindividual who comes to the emergencydepartment and requests examination ortreatment for a medical condition. If ahospital determines that an individual hasan emergency medical condition, it mustthen stabilize the condition or provide forHospitals can comply withEMTALA while also takingvarious steps to stabilizepatient revenues bybecoming more aggressiveabout collecting moneyfrom the uninsured for theprovision of health careservices.an appropriate transfer. The hospital is obligatedto provide these services regardlessof the individual’s ability to pay and withoutdelay to inquire about the individual’smethod of payment or insurance status.Hospitals may transfer unstable patientsonly if a physician determines that thebenefits of the transfer outweigh the risksor if requested by a patient who has beeninformed of both the hospital’s EMTALAobligations and the risks of transfer. Hospitalswith specialized care facilities, suchas burn units, must, within their capacity,accept requests for appropriate transfers ofpatients who require such specialized care. 8It is important to note that EMTALA mayapply, even if the person does not actuallyHealth Care Compliance Association • 888-580-8373 • www.hcca-info.orgmake a request for treatment. If a personpresents without making an actual request,a request for treatment is deemed to exist ifa prudent layperson observer would believe,based upon the individual’s appearance or behavior,that the individual needs treatment fora medical condition or an emergency medicalcondition at that time.CMS has clarified that the “prudent layperson”standard applies in any situation inwhich an individual has come to the hospitaland a prudent layperson observer wouldbelieve the individual may have amedical condition or emergency medicalcondition (as applicable) and thatthe individual would request examinationor treatment if he or she were ableto do so, whether or not the individualis unaccompanied. The policy does notrequire hospitals to maintain emergencymedical screening or treatmentcapabilities in each department oranywhere else on hospital property,other than the dedicated emergencydepartment. 9In regard to the uninsured, EMTALA isrelevant because it establishes the basicguidance on how hospitals treat patients,regardless of their ability to pay. Hospitalscan comply with EMTALA while also takingvarious steps to stabilize patient revenues bybecoming more aggressive about collectingmoney from the uninsured for the provisionof health care services. The following optionsare examples of legal strategies hospitals canconsider. These strategies are designed to attemptto increase revenue, decrease costs, andcomply with federal law. 10 We will providea general overview and discuss the pros andcons of each example, focusing on regulatoryand statutory compliance, including laws applicableto tax-exempt hospitals.Continued on page 3531April 2008

HCCA Regional ConferencesJoin us at HCCA’s 2008 Regional ConferencesHCCA’s regional conferences take place throughout the year, all over the United States.You’re sure to find one that works for you!2008 Regional ConferencesGrand Rapids, MI.................. May 2New York, NY....................... May 16Seattle, WA........................... June 6Los Angeles, CA................. June 27Anchorage, AK............. July 10 - 11Boston, MA.................September 5Minneapolis, MN......September 12Kansas City, MO.......September 26Chicago, IL.......................October 3Pittsburgh, PA................October 10Honolulu, HI............. October 16-17Denver, CO.....................October 24Nashville, TN................November 7Louisville, KY.............November 14Visit www.hcca-info.org for registration informationApril 200832Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

Upcoming Regional ConferencesJune 6Seattle, WASeptember 12Minneapolis, MNMay 2Grand Rapids, MIMay 16New York, NYSeptember 5Boston, MAOctober 24Denver, COOctober 3Chicago, ILOctober 10Pittsburgh, PAJune 27Los Angeles, CASeptember 26Kansas City, MONovember 7Nashville, TNNovember 14Louisville, KYJuly 10 - 11Anchorage, AKOctober 16-17Honolulu, HIHealth Care Compliance Association • 888-580-8373 • www.hcca-info.org33April 2008

April 200834

Compliance and the rise in uncompensated care ...continued from page 31Due to its aggressiveness, this policy also the full charges the patient incurs. This option A third option would be to provide medicalexposes hospitals to the greatest amount of presents less EMTALA risk because the hospital assessment, stabilizing treatment, and anyrisk. The hospital would have to vigilantly would not initiate registration or inquiries regardingrequired follow-up care without requiring anydocument that its inquiries and registrationpayment during the medical assessment prior up-front payment, and provide financialprocess did not delay, in any manner, the pro-or stabilizing treatment, nor refuse to provideContinued on page 37Health Care Compliance Association • 888-580-8373 • www.hcca-info.orgPay when stabilized optionOne option is to initiate payment inquiriesafter the initial medical assessment (if noother emergency treatment is required) orafter the patient is stabilized. When thepatient is stabilized or it is determined thatthe patient is stable for transfer, the hospitalcan refuse any further medical care, ifpayment ability is not confirmed or actualpayment (or some portion thereof) is notrendered. EMTALA does not prohibit initiatingthe patient registration process, includinginquiring about payment ability, duringmedical assessments and stabilizing treatment;however, such inquiries and processes maynot delay the assessment or treatment. Followingstabilizing treatment or determinationthat no emergency medical condition exists,EMTALA does not impose upon the hospitalany further obligation to provide medical careto a patient. Consequently, under EMTALA,once the patient is stabilized or it is determinedthat no emergency medical conditionexists, the hospital may require an uninsuredpatient to pay a “deposit” in order to receivefurther medical care. The hospital may refuseto provide further care if the patient cannotpay or verify the ability to pay.vision of a medical assessment or stabilizingtreatment. In addition, even if the hospitalfollows its policies, there is a risk under thisoption that the hospital would be subjectto complaints and investigations related toEMTALA compliance, and would have tospend the time and money responding tosuch complaints or investigations.Under this strategy, it is imperative for a hospitalto develop specific policies for the processand document compliance with these policiesevery step of the way. All hospital staff mustbe fully educated on the reasons such a policyis needed and trained that patient care willnot be compromised. Perhaps the greatest riskassociated with this strategy is that if a hospitalis a charitable, tax-exempt or governmentalhospital, it could potentially expose itself toallegations that the hospital is not fulfilling itscharitable or governmental purpose. Becausea hospital’s tax-exempt status is predicated onits charitable activities, these allegations couldlead to a question by the IRS or state regulatorybodies regarding the hospital’s tax-exemptstatus. Finally, if patients complain about thehospital’s refusal to provide care and its aggressivecollection efforts, the hospital could facenegative publicity within its community as aongoing care once the assessment or stabilizationhas been achieved.A potential advantage to this strategy is that byaggressively pursuing collection efforts againstthese patients, it may be possible to increasethe amounts collected from uninsured patients.Currently, many tax-exempt hospitals do notaggressively pursue collections, which wouldinclude taking people to court for unpaidmedical bills. If this policy is implementedover time, people could become accustomedto consequences for not paying for health careservices, and this could possibly reduce theemergency department volume.This option does expose the hospital to greaterrisk of failing to collect for services rendered,because collecting money for services afterthey have been provided is more difficult.Further, because of the aggressive collectionefforts against these patients under this option,tax-exempt hospitals could still face allegationsthat they are failing to provide quantifiableand material charitable care. Consequently,questions could be raised regarding their taxexemptstatus. Finally, as with the previous option,if patients complain about the hospital’saggressive collection efforts, the hospital couldThe advantages of this option are that, ifexecuted properly, it would satisfy the minimumrequirements of EMTALA, albeit withsome potential risk, and would be the mostaggressive in terms of limiting the hospital’sexposure to non-paying patients. This strategymay deter use of the emergency departmentas a private physician office, thereby reducingthe emergency department volume and correspondingcosts.result of this option.This could include complaints being broughtto the hospital’s Board, hospital administration,and media outlets. Ultimately, the hospital’sperception in the community could suffer.Collection optionAnother option is to provide medical assessment,stabilizing treatment, and any other follow-upface negative publicity and questions aboutcompliance with their applicable mission orpurpose as a result of this option. The hospitalwould also have to establish policies to ensurethat it complies with all existing debt collectionlaws in their state.Failure to comply with these laws can resultin fines and other penalties.care, but aggressively pursue collection efforts for Financial counseling option35April 2008

HCCA Training ResourcesGuidebooks & Videos to Train Your Health care WorkforceCompliance and Ethics:An Introduction forHealth Care ProfessionalsThis 23-minute video and Trainer’sGuide covers seven common compliancetopics and provides everythingyou need to conduct new employeeorientations and staff refreshers.Compliance Conscienceand ConductThis 17-minute video plus sessionleader guide offers an easy wayto train employees in compliancebasics. Seven dramatized scenarioscover key topics, includingcoding accuracy, workplace conduct,gifts and gratuities, patientinformation, patient charts, vendorrelationships, and vendor gifts.A Supplement to YourDeficit Reduction ActCompliance TrainingProgramThis 13-page handbook offersan easy way to educate youremployees about the basics ofMedicare and Medicaid, theFederal False Claims Act, and thewhistleblower protections that helphealth care workers fight fraud.Guide to ResidentCompliance TrainingThis guide offers a completetraining program designed tointroduce resident physicians tokey compliance concepts, includingethics, coding and reimbursement,conflicts of interest,HIPAA and confidentiality, humansubject research, fraud and abuse,and more.HIPAA SecurityComplianceThis 15-minute video plus 10participant handbooks show howto meet the requirements of theHIPAA Security Rule. The programcovers security basics, includingprotection from malicious software,device and media controls, log-inmonitoring, technical safeguards,physical and facility access controlsand more.HIPAA PrivacyComplianceThis 19-minute video plus 10participant handbooks offer anin-depth review of the HIPAAPrivacy Rule. Viewers will learnthe importance of protecting patientprivacy and confidentiality,including the use and disclosureof protected health information;patient consent and authorization;administrative requirements, andmore.Healthcare Compliance:Code of ConductThis 18-minute video plus 10participant handbooks give anoverview of compliance and itsimportance in today’s healthcare environment. Topics includecodes of conduct, compliancebest practices, monitoringand auditing, education and training,enforcement and discipline, and more.EMTALA 911: On Call!This 15-minute video plus 10participant handbooks reviewEMTALA requirements for anyfacility that has walk-in patientswith urgent care needs. It explainsa facility’s legal obligations toprovide health care for patientswith an inability to pay, properprocedures for asking aboutfinancial status or health insurance,and more.April 200836Visit the HCCA store at www.hcca-info.org, or call 888-580-8373.

Compliance and the rise in uncompensated care ...continued from page 35counseling to patients, including: (a) assistingthe patient in investigating any available insurance,government programs, or grants andassisting the patient in applying for any suchbenefits and/or (b) setting up payment plansfor the patient.If the hospital follows its policies and proceduresunder this option, the hospital faces thelowest risk of violating EMTALA or otherapplicable laws. Again, although there can beno guarantee that complaints or investigationswill not be filed or initiated, the riskof such occurrences is substantially reducedunder this option. By focusing on counselingthe patient regarding financial options and alternatives,the hospital increases the potentialfor the patient to find a way to pay at least aportion of the charges incurred. This optionappears to be consistent with the hospital’scharitable mission and reduces the likelihoodthat the hospital could face negative publicity.Because this option is the least aggressive interms of collection activity, however, it maybe the least aggressive in dealing with the uninsuredissue. Many hospitals already followsome variation of this option. The possibilityexists, however, that by aggressively assistingpatients with finding payment sources followingtreatment and offering payment options,the hospital could find that its collection ofmoney from uninsured patients will increaseunder this proposal. This option also involvesa lot of administrative effort that may notresult in affecting a positive change in thecurrent problem.Charity discount optionA fourth option is to offer charity discountsto the patient’s charges. Many tax exempthospitals currently offer some type of charitydiscount. Despite the prevalence of thesepolicies, this option by itself does not appearto be very effective in negating the impact ofthe increasing number of uninsured patients.The focus of this article is on the changesimpacting how hospitals deal with uninsuredand underinsured patients, but changes arealso occurring in the way patients are insured.Many patients these days either have highdeductible,low-cost insurance or have healthcare savings accounts. Technically, thesepatients have insurance, but most would fallwithin the underinsured designation. Offeringcharity discounts to these patients andthose without insurance can have multiplebenefits.By offering a discount, the hospital mayincrease revenues by having more patientswho pay, thus reducing collection actionsand costs and decreasing costly accountsreceivable balances. The federal governmenthas addressed discounts on numerous occasionsand has approved their use, as long asthe patient has a documented financial need.Further, by itself, offering discounts does notimplicate EMTALA or jeopardize a hospital’stax-exempt status. This option further reducesthe likelihood that the hospital could facenegative publicity and actually creates theopportunity for the hospital to highlight itscharitable efforts to the community. The risksassociated with this option are limited as well.Without combining discounts with anothermechanism, it is unclear if discounts will actuallyincrease revenue. Thus, a hospital couldinstitute charity discounts, yet see a decreasein revenue.Combination optionIn addition to implementing one option atone time, hospitals may want to considercombining elements of various options andsimultaneously or contemporaneouslyimplementing the various elements of theseoptions. Ultimately, the option each hospitalchooses will depend on the particular situationit faces and its organizational structure.Regardless of the reasons for implementingsuch a policy, however, it is imperative thatthe hospital evaluate their potential strategiesto ensure compliance with the applicablelaws.ConclusionIn this age of increasing numbers of uninsuredpatients and reduced private andgovernment reimbursement, it is importantfor hospitals to implement strategies to ensurefinancial viability. All of the options listedabove set forth efforts that any hospital canundertake to potentially increase collectionswhile complying with the requirements ofEMTALA. The hospital can also positionitself to comply with all other federal andstate requirements, such as the tax-exemptlaws. In light of the breadth of the uninsuredproblem, these options are not permanentsolutions, but rather are mitigating strategiesdesigned to lessen the overall impact onhospitals. Until there is systemic change thataddresses the underlying lack of insurance,providing care to the uninsured and underinsuredwill continue to be a financial andcompliance challenge for hospitals. nThe authors acknowledge research assistancefrom Kristin Baylis.1 Emergency Medical Treatment and Active Labor Act, 42 U.S.C. § 1395(1965), 42 C.F.R. § 489.24 et seq.2 Sicko (Dog Eat Dog Films 2007).3 Uncompensated Hospital Care Cost Fact Sheet, American HospitalAssociation (2006) (citing Health Forum, AHA Annual Survey Data,1980-2005).4 Interim Report on Tax-Exempt Hospitals and Community Benefit,Internal Revenue Service (July 23, 2007) (reporting that 56% of hospitalsreported they did not include bad debt expense as uncompensatedcare. Therefore, the number reported by the AHA could be significantlylower than it should be).5 Didem M. Bernard, William E. Encinosa, “Hospital Finances andPatient Safety Outcomes,” 42 Inquiry, 60-72 (2005) (See also “PatientSafety Problems Increase When Hospital Profit Margins Decline OverTime,” Nursing Economics (July-August 2006); Lee Bowman, “HospitalProfitability Affects Patient Care, Study Finds,” Scripps Howard NewsService (June 7, 2005)).6 See Supra note 2 (The IRS released its interim report on July 23, 2007.The report discussed numerous issues but the most striking figure wasthat about one half of the hospitals reported community benefit expendituresof less than 5% of total revenue. This statistic will undoubtedlybe an area the IRS dedicates significant time to in its final report nextyear).7 42 U.S.C. § 1395; 42 C.F.R. 489.24 et seq.8 The Emergency Medical Treatment and Labor Act: The EnforcementProcess, Department of Health and Human Services, Office of theInspector General (January 2001), available at http://oig.hhs.gov/oei/reports/oei-09-98-00221.pdf(page 3) (The interpretive guidelines make itclear that EMTALA also applies if a person presents to a hospital outsideof its emergency department and requests treatment for an emergencymedical condition).9 Interpretive Guidelines to EMTALA, 42 U.S.C. § 1395, 42 C.F.R §489.24 et seq.10 This article does not analyze the potential impact of state law but itclearly bears on the situations and option presented herein. Beforeimplementing any of these options, hospitals should have knowledgeablecounsel review all applicable state laws.Health Care Compliance Association • 888-580-8373 • www.hcca-info.org37April 2008

Winds of change inReimbursement, Part IIEditor’s note: Joy King of Joy King Consulting,LLC is a consultant with more than 13 years ofinpatient coding and speaking experience. Shecan be reached at 205/612-4471 or by e-mailat jkinginc@charter.net.Winds of Change in Reimbursement, PartI was published in the March 2008 issue ofCompliance Today.The first installment of this article coveredthe Final Rule for the InpatientProspective System (IPPS) FY 2007and its two-part reform. This installmentwill focus CMS’ plan to transition from thecurrent Diagnosis-Related Group (DRG)system, in effect since 1983, to a severityadjustedDRG system effective October 10,2007. A great deal of public comment wasgenerated from the proposed rule about theAll-Patient Refined Diagnosis-Related Group(APR-DRG) system developed by 3M. CMSreceived thousands of public commentsregarding implementation of a modified versionof APR-DRGs. The concerns centeredaround the cost and lack of transparencyof a proprietary system. As a result, CMShired an independent contractor (RANDCorporation) to assist in reviewing severalother severity-adjusted systems before makinga final decision. Five systems were evaluatedby RAND, and their final report was dueSeptember 1, 2007. However, the ProposedRule for IPPS came out in April with anew proposal from CMS, the MedicareSeverity DRGs (MS-DRGs), scheduled tobe implemented October 1, 2007. Despitethe fact that the final RAND report was notyet released, the Final Rule was publishedBy Joy King, RHIA, CCSAugust 2, 2007, indicating CMS’ intentionto adopt their own non-proprietary system,the MS-DRGs, as the final severity-adjustedsystem.The original DRGs were basically resourcedriven.They compared types of patientillnesses treated with costs and resources consumed.The basic premise was that resourceconsumption correlated to severity/complexity.The age of the patient and the presenceof a complication/comorbidity (CC) alsoimpacted the DRG assignment and reimbursementfor a particular case. In the previousDRG system, only one CC got “credit” interms of impacting reimbursement.A case mix index (CMI) is assigned to eachfacility, representing a numerical indicatorof the overall severity/complexity of patientstreated compared with other facilities in thestate or country. A higher CMI indicatesthat more resources were used, but doesn’tnecessarily equate to increased severity/mortalityrisk, because of issues (see Part 1 of thisarticle) regarding high markups for ancillaryservices and high-cost devices. The CMI isvery dependent on physician documentationand accurate coding of that documentation.In fact, MedPAC proposed that CMS projectthe effect of improved documentation/codingon total payments and make an off-settingadjustment to the national average base ratewhen the severity-adjusted system was implemented.Their argument was that improvementsin documentation/coding don’t necessarilyreflect real changes in case mix. Theproposed rule included a –2.4% offsettingadjustment factor that would be levied for FY2008 and for FY 2009. In the Final Rule, theoffsetting adjustment was revised to –1.2%for FY 2008, and –1.8% for FY’s 2009 and2010. Legislation (HR 3668) was signed byPresident Bush on September 29, 2007 thatlowered the offsetting adjustment for FY2008 to –0.6% and for FY 2009 to –0.9%.The –1.8% for FY 2010 remains unchangedat this time. The American Hospital Associationestimates this law will restore $2.5 billionto hospitals over the next two years.CMS had already begun the transition toseverity-adjusted DRGs over the past twofiscal years, by subdividing some of the previousDRGs to more accurately reflect severity.In 2007, for example, DRGs 475 (vent) and416 (sepsis) were eliminated and replaced bytwo DRGs each, subdivided by the length oftime the patient was on a ventilator. CMSfeels that a severity-adjusted system more appropriatelyreflects the complexity of patientstreated and costs incurred, more accuratelypredicts expected outcomes, and identifiespotential quality problems.The MS-DRGs that went into effect on October1, 2007 include 745 DRGs to replace theprevious 538 DRGs. They included 20 newDRGs and 32 modified DRGs. The systemwas developed by reviewing 13,549 ICD-9codes and assigning them to a Major CC list(MCC), a CC list (CC), or a non-CC list,based on their impact on length of stay andcost when present as a secondary diagnosis.This represents the first major revision of theCC list since it was implemented in 1983.The MS-DRGs include up to three severitylevels for each DRG, based on the presence ofan MCC, a CC, or no CC.A comparison of the CHF DRG (DRG 127)using FY 2007 relative weight follows:April 200840Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

(POA) for all diagnoses, effective October 1,Congestive Heart Failure2007. Please note that hospitals filing claimsCMS DRGMS-DRGselectronically were not able to submit POA127, r.w. 1.0485 291 Heart Failure with MCC 1.2585information electronically until January 1,292 Heart Failure with CC 1.01342008. The POA information is the forerunnerof the value-based purchasing program293 Heart Failure w/o CC 0.8765Acute diseases, acute exacerbation of chronicdiseases, advanced or end-stage chronicdiseases, and chronic diseases with extensivedebility were retained on the MCC and CClists. MCCs include diagnoses such as sepsis,accute miocardial infarction (AMI), pneumonia,respiratory failure, acute renal failure, etc.One of the major surprises, however, was thatCHF unspecified (428.0) and atrial fibrillation(427.31), in addition to some other wellknownprevious CC diagnoses, were deletedfrom the CC list. Please note also that inmany of the MS-DRGs, the relative weightsfor the mid and lower levels are lower thanthe previous relative weights that were used toreimburse hospitals for patients in 2007. Fortunately,the MS-DRG system is much morelike the system we have been using since 1983and is much less complex than the systemproposed last year based on APR-DRGs.A severity-adjusted system will have a majorimpact in terms of documentation and coding.For a coder who is assigning a comprehensivelist of codes to reflect a hospitalization,the discharge summary, which recapsthe entire hospital stay, will become evenmore critical. Coders also will require greaterclinical knowledge of the diseases and proceduresthey are coding to fully understandhow to translate those into code numbersor when to generate a physician query. Thenumber of physician queries will increase, asexperienced in Maryland. Because the averagebill drop time frame in many states is threedays post-discharge and most medical staffbylaws allow 30 days to complete a record,the need will be even greater for a timely dischargesummary and more concurrent queriesto obtain the needed physician documentation.Coders will also need to ensure thatsequencing of the most significant diagnosesand procedures in the nine diagnosis fieldsand six procedure fields is done appropriatelyto most effectively reflect severity. Providersshould evaluate the following factors:n new documentation requirements,n need for additional physician and codereducation,n the impact on productivity of additionaltime to code records, andn increased physician queries.These factors, coupled with the additionalcosts of training, software, and the potentiallydecreased revenue as CMS transitions fromcharge-based to cost-based reimbursement,will have a major impact on the revenuestream that hospitals have been accustomedto receiving. Hospitals really need to developand implement a Clinical DocumentationImprovement Program to obtain accurateand comprehensive documentation, while thepatient is still in the hospital, to effectivelymanage the changes in reimbursement thatwill occur over the next few years.CMS is implementing the severity-adjustedsystem over a two-year period, starting withFY 2008 (October 1, 2007). The first year,the relative weights of the MS-DRGs will bea 50/50 blend of the previous DRG relativeweights and the proposed MS-DRG relativeweights plus a 2/3 cost to 1/3 charge-basedratio. In FY 2009, the relative weights willbe 100% MS-DRG, 100% cost-based. Inaddition, coders will have to deal with thenew designation of “present on admission”discussed in Part 1 of this article. The POAreporting will cause some slowdown in coderproductivity in addition to the slowdowncaused by the new MS-DRG system, as wellas delays caused by an additional layer ofphysician queries to obtain clear documentationabout diagnoses that were present onadmission.Several issues remain to be resolved with a severity-adjustedpayment system, including itsimpact on cost outliers and how to incorporaterecognition of technologies that impactcost but don’t necessarily reflect increased severityof illness. The American Health InformationManagement Association (AHIMA)has also expressed concern over CMS’ refusalto read more than nine diagnoses, rather thanthe full eighteen included on the new UB-04,the uniform bill for hospital claims submittedon paper. Their belief is that nine diagnosesdo not give an accurate reflection of severity.AHIMA also feels it is counter-productive toimplement a severity-adjusted system basedon an antiquated coding classification (ICD-9-CM), rather than implementing ICD-10first, because it better captures the granularityneeded to truly reflect severity of illness. nHealth Care Compliance Association • 888-580-8373 • www.hcca-info.org41April 2008

Implications of PPSreform for home careprovidersEditor’s note: Lisa Silveria is a Home CareCompliance Officer with Catholic HealthcareWest in San Francisco. She may be reached bye-mail at Lisa.Silveria@chw.edu.CMS has finalized a ProspectivePayment System (PPS) reform forthe home care industry with thechanges effective January 2008. This reformhas managed to create, and continues tocreate, as much confusion along with manychallenges, as the last changes to the HomeHealth Care payment system that went intoeffect October 2000.The reform was the result of intensive reviewof cost reports, Outcome and AssessmentInformation Set—payment structure (OASIS)data, and quality outcomes and claims findings.What CMS discovered was multifold.They saw an increase in “case-mix creep”resulting from improved OASIS scoringand accuracy, higher costs for later episodesof care, increases in therapy utilization andtherapy-specific home care agencies, andlosses for the agencies in the areas of low utilizationpayment adjustments (LUPAs), partialepisode payments (PEPs), and significantchange in conditions (SCICs) – usually theresult of a hospitalization during home healthcare (HHC) services – and finally, outliers.More importantly, one of CMS’s goals of PPS2000 was to be able to achieve a predictivemodeling for resources utilization. This didnot come to fruition.As a result, the refinement of PPS was necessaryand, ultimately, inevitable. CMS took thetime to listen to the home care industry andBy Lisa Silveria, RN, BSNsolicited input as to what was working or notworking with the current system. Significantchanges to the reimbursement methodologyand system resulted. These changes mostly liein the OASIS scoring, with additional questionsadded, and weighting value of existingOASIS questions. We also saw the additionof non-routine supply (NRS) dollars and theremoval of the SCIC payment implication.How changes impact your agencyAs indicated in the first published OASISmanual, there indeed will be a learning curvenecessary to assure accuracy of assessmentcompletion per Abt Associates Inc., a privateresearch firm that is under contract withCMS. Since October 2000, several CMS andAbt Associates updates to the interpretationof the OASIS questions and guidance havebeen modified. The 2008 PPS will also havea learning curve.Additionally, internal agency processesshould be reviewed and updated regardingedit checking and data correction functionsas needed, especially in the area of OASISreview in coordination with clinical recordreview. Both CMS and the home care industryinformation technology (IT) vendors havehad challenges putting in place the necessarysoftware changes promptly and completely,so that the products are producing accuratescoring.We can safely say that PPS 2000 was workin progress, and probably only in the lastfew years have the majority of agencies feltthey were accurately completing the OASISassessment and understanding the billingrequirements. Literature demonstrates thatunderpayment opportunities were significantuntil a full understanding of the PPS systemwas achieved. Now we change again.Staff education is critical to the changes tothe OASIS tool itself and to the expectations,interpretations and implications. This willimpact clinician behavior and extend thelearning curve. Accuracy in monitoring mayalso impact the learning curve and requireadditional training sessions with staff. Asnoted with PPS 2000 over time, as accuracyimproved, so did the scoring, thus the casemixcreep impact. I would venture to guessthat we shall also see this over the next severalyears.All of this results in an immediate financialimpact to your agency. There are noguarantees that CMS has its systems readyto handle the changes of PPS 2008. We havealready been notified of potential paymentdelays due to software issues. The IT vendorsthemselves have had little time to produce theprogramming changes required, based uponlast minute releases of the specs from CMS.Agencies will need to evaluate opportunitiesfor ongoing cash flow. Can requests foranticipated payment (RAPs) be submittedright away? Is the new software in place andfunctioning without glitches? Did the agencydo a review of existing cases to new case mixgrouper? What training has been provided toboth the clinical and billing staff? What internalreview processes have been put in place toidentify potential errors and inaccuracies?Where to focus your attentionAgencies will have to focus their attention inmany areas. This is not a one-time venture.Prioritization will be dependent upon agencycurrent practices, results of reviews above, andstaff learning needs. Top on the list are thefollowing areas:April 200842Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

HM-MDaudit_1_08.qxd 1/25/08 4:10 PM Page 1n ICD9-CM coding education; significant changes in scoringof MO230 MO245 OASIS questions. Streamline codingexpertise and review. Include not only conditions that areactively being treated on plan of care, but also co-morbiditiesthat often affect patient response.n Staff review and education of new/deleted/modified impactOASIS questions. Plan to repeat education several times inthe first year.n Focus on therapy question supported by physician orders;develop or refine internal agency practices centered aroundtimelines of therapy assessment on multi-discipline cases foraccuracy of response. Don’t leave it for the nurse to guess.n Develop clinical record reviews at all OASIS assessment timeperiods to assure clinical record documentation supportsOASIS assessment, rather than contradicts the assessment ordoes not address it at all.n If not already in place, assure charge structure is developedand implemented surrounding NRS. CMS data onlyreflected a 10% usage, or at least charges for supplies, onclaims noted in their review process. We know this is not anaccurate reflection of care provided.n Redesign audit tools to reflect the OASIS changes, specificallythose that impact payment scoring accuracy.n Establish who has accountability for early/late episode determination.New OASIS questions will impact scoring. Yourclinicians rely upon the intake and front office staff to assurecomplete and accurate referral intake information. Trainthem to know what counts as an episode by a payer.n Re-evaluate and update Policy and Procedures manual andcommunicate changes and expectations to staff.ConclusionThe worst thing an agency can do is sit back and take the “waitand see” attitude. Hopefully we have all learned from the initialPPS reform in 2000. Many external resources are available toagencies to assist with PPS education, evaluation of agency practices,and even financial assistance/review. Agencies also need toidentify internal experts in OASIS, ICD9-CM coding, QualityManagement for reviews, and staff education. Resources andtime need to be allocated to assure the proper understandingof PPS reform and claims submission as a result of the OASISassessment completion. nManageyour risk.Protect your revenue.Seven of the top 15 healthcare organizations as ranked byUS News & World Report are using MDaudit to automatethe administrative tasks of compliance auditing. Usingstrategic, risk-based audit methodology, they:• Increase audit productivity: More providers areaudited in less time, allowing your staff to focus onchanging provider behavior.• Quickly target risk areas: Risk-based audit schedulinghelps you easily target non-conforming providers.• Improve reporting capabilities and consistency:Professional reports quickly illustrate areas of concern.• Monitor audit status across departments:Audit status and productivity is assessed at a glance.• Allow staff to focus on value-added activities:With more time and actionable information, your staff canfocus on provider education to eliminate incorrect coding.To find out more and to schedule a free ROI analysis, callHayes’ MDaudit team at 617-559-0404 or send an email tomdaudit@hayesmanagement.com.www.HayesManagement.comHealth Care Compliance Association • 888-580-8373 • www.hcca-info.org43April 2008

Refocusing thecompliance paradigmEditor’s note: William C. Moran is SeniorVice President with Strategic Management inits Chicago office. Mr. Moran may be reachedby e-mail at wmoran@strategicm.com or bytelephone at 847/828-3515.Nisha Shajahan is Vice President with StrategicManagement in Alexandra, VA. Ms. Shajahanmay be reached telephone at 703/683-9600,ext. 412 and by e-mail atnshajahan@strategicm.com.By William Moran and Nisha Shajahan, MPHThe U.S. Sentencing Commission performeda great service for corporateAmerica when they laid out sevenelements of an effective compliance program.These seven elements have been a fundamentalcomponent of the Federal SentencingGuidelines since its introduction in 1991, andthroughout the years, have become an integralpart of the health care culture. In 2004, theFederal Sentencing Guidelines were amendedto include more detailed and stringent requirements,which further emphasized the importanceof the seven elements when designingand implementing an effective complianceprogram. 1 The Department of Health andHuman Services’ Office of Inspector General(OIG) has used these seven elements as thebasis for their compliance guidances issued forvarious health care entities that conduct businesswith the federal government. The sevenelements have become the backbone for aneffective compliance program and the benchmarkagainst which health care organizationsevaluate their compliance programs.Based on our experience working within OIGand through numerous consulting engagements,including various clients ranging fromsmall skilled nursing facilities to large hospitalsystems, we observe firsthand the importanceof the seven elements. However, we have alsoobserved the need for the seven elements tobe framed in a slightly refocused paradigm.In this article, we will discuss why we believethere should be a refocus and lay out how thisnew paradigm should be structured.Need for refocusOur perceived need for refocus is primarilybased on our years of experience with healthcare clients who have indicated that they needa clearer, more practical path in order to successfullyaccomplish the seven elements. OIGprovides guidance to help health care entitiesidentify significant risk areas and evaluate theircompliance efforts. However, many of our clientshave voiced their questions and concernsabout implementing the information availablein the various guidances.n Clients Overwhelmed/ConfusedWe hear from compliance officers on adaily basis that it is almost impossible tokeep up with all the regulatory risks withintheir facilities. The 100 to 200-plus riskcategories that are identified by reviewingOIG and other federal agency issueddocuments and through canvassing theirown health care staff, need to be reviewed,prioritized, and mitigated.o How do we begin to put allthese risks in some workableformat that makes sense?o How then do we remediate,audit, and report on the risks?n Categories and Priorities Not ClearCompliance officers frequently ask if,instead of the 100-200 risk areas, thereare10-15 risk categories that can subsumeall the other risk areas.o Do some areas have more prioritythan others?o Are all the risk areas of equalweight or do some have moreweight than others?o Each facility will have its ownunique risks, but are theresome OIG/CMS areas that arepriorities?n Chronology Not ApparentThe various written guidances outline sevenseparate elements, and many clients havequestions about the chronology of those elements,especially what should be done first.o Do the seven elements flow inchronological order?o Why is risk assessment mentionedunder developing policiesand procedures? Don’t wehave to assess our risks beforewriting policies and procedures?o Isn’t conducting a risk assessmentdifferent than developinga policy for cost reports?In discussing these types of questions withclients and working with them to providepractical advice on how to solve these issues,we have come up with a slightly refocusedcompliance paradigm. We have taken theseven elements of an effective complianceprogram and matched them against twomajor functions, namely (1) the appropriatestructure of the compliance program and (2)an effective compliance process.Structure of compliance programFrom both a rational and practical standpoint,a compliance program needs to beappropriately structured in order for thecompliance process to run efficiently andeffectively. Thus, the designation of a complianceofficer and compliance committee, thefirst compliance element as outlined in theOIG Supplemental Compliance ProgramGuidance for Hospitals, 2 is a prerequisite forthe other six elements to function optimally.This structure includes:April 200844Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

n Board oversight committee that meetsregularly with the chief compliance officerand asks questions as outlined in the threedocuments included in a series of educationalresources co-sponsored by the OIG andAmerican Health Lawyers Association oncorporate compliance and health care qualityn Corporate compliance committee representedby all the various department headsn Chief compliance officer and staff whohave sufficient resources and authority tocarry out their responsibilitiesThe structure of the compliance programaligns well with the first element (Designationof a compliance officer and compliance committee).With this type of structure in place,the other six elements, related to the complianceprocess, are much more obtainable.Compliance processThe remaining six elements, as laid out inthe supplemental guidance for hospitals, arebest incorporated as part of a cyclical processfor compliance that is developed around riskareas and consists of four functional steps:n Step 1: Risk assessmentThis function is discussed within the secondelement (Development of compliancepolicies and procedures), but we believe it isquite different from developing a policy fora given risk area and deserves specific attention.Thus, we believe that a risk assessmentis the first necessary step in the complianceprocess that subsequently identifies the risksthat need to be remediated, audited, andreported on for that year. A risk assessmentshould lead organizations to create an attainablerisk auditing and remediation plan.In order to effectively manage the countlessrisks, we have found it is best to firstorganize the risks into fairly broad categories,such as anti-kickback, claims development,EMTALA, etc. Therefore, we identify 10-12broad risk categories and then select targetedareas within those categories. Otherwise, itis very difficult and overwhelming to try todeal with 100-200 separate risk areas.n Step 2: Risk remediationWe identify the second (Development ofcompliance policies and procedures), third(Developing open lines of communication),and fourth (Appropriate training and education)elements of compliance effectiveness aspart of risk remediation. After the risks havebeen identified in the risk assessment process,necessary steps need to be taken to installthe proper internal controls to mitigate theorganization’s vulnerability to those risks.The primary internal controls are usuallyclear, well-written policies and procedures.We urge clients to employ a criteria/conditionmatrix that compares all the applicablelaws and regulations to a given risk area (e.g.,EMTALA), and compares the requirementswith policies in place at the client’s facility.Sometimes there is a perfect match and atother times, polices need to be amendedor new policies need to be developed. Inaddition to facilitating risk remediation, thisprocess also helps in evaluating your organization’spolicies and procedures.Risks are also identified and remediatedthrough the reporting hotline, other internalcommunication mechanisms, and investigations.Additionally, risks are considerably lessenedwhen staff are trained and educated oncompliance risks and on the proper protocolsfor identifying and alleviating those risks.n Step 3: Risk auditingThis function, which is congruent withthe fifth element (Internal monitoring andauditing), requires an effective monitoringand auditing function that verifies whetherthe internal controls, established as a resultof risk remediation efforts, are workingproperly in reducing vulnerabilities.The results of these audits should also bereviewed during the next risk assessmentprocess. Furthermore, any detected deficienciesbrought to light through this stepshould be appropriately handled throughthe next step of the compliance process.n Step 4: Risk response and reportingJust as with risk assessment, this last step hasnot received the kind of attention it deserves.Part of the reason for this inattention is thatthis step encompasses a part of multiple elements:(1) The first element, when the compliancestaff provides necessary and continuousfeedback to the Board so they may takeappropriate action, (2) the third element,when suspected wrong-doing is reportedthrough the hotline or through other communicationchannels in good faith, (3) thesixth element, (Response to detected deficiencies),when potential issues are promptlyinvestigated and corrective action plans aredeveloped, and (4) the seventh element (Enforcementof disciplinary standards), whendisciplinary action is taken when it should beand enforced consistently throughout the organization.We view this function as criticalin responding to problems as they arise, andan important prevention measure to mitigatepotential compliance violations.The guidance provided by the U.S. SentencingCommission, OIG, and other federal agencieshas been invaluable in assisting clients withtheir compliance programs. The seven elementsare particularly instructive and provide a greatframework for health care entities. Nevertheless,clients have difficulty accomplishing theseven elements and have expressed the need fora clearer process to follow. We believe that afterestablishing a solid compliance structure, healthcare entities can follow a logical, four-step processthat will assist them in meeting the sevenelements of an effective compliance program. n1 United States Sentencing Commission Organizational Guidelineshttp://www.ussc.gov/orgguide.htm2 OIG Supplemental Compliance Program Guidance for Hospitals www.oig.hhs.gov/fraud/docs/complianceguidance/012705HospSupplementalGuidance.pdfHealth Care Compliance Association • 888-580-8373 • www.hcca-info.org45April 2008

April 200846Compliance pitfallsin behavioral healthprograms: What towatch for from thestartBy Kenneth P. MarionEditor’s note: Kenneth Marion is the principalat New York Compliance Planning in AtlanticBeach, New York. He can be reached by e-mailat kmarion@nycomplianceplanning.com.It is surprising and overwhelming when themanagement team at a behavioral health providerlearns that requirements for a complianceprogram previously limited to hospitals(they thought) are now required of them.Where do they start? What have others done?What mistakes can be avoided?This discussion is targeted at the free-standingbehavioral health program. Programs thatare part of a hospital-based health system arealready well into corporate compliance. However,even those of us in the thick of it mayfind a pitfall they have not yet identified.The Deficit Reduction Act of 2005 (DRA)brought many organizations to the realizationthat a compliance program is a necessity. We nowfind ourselves operating in jurisdictions that havetheir own False Claims Act, and those jurisdictionsare learning to use it as a recovery tool.The basic principles of compliance programsare universal. Regardless of the size of thesetting, the seven pieces of the complianceprogram puzzle, found in Federal SentencingCOMPLIANCEGuidelines and guidances offered by theOffice of the Inspector General (OIG) of theDepartment of Health and Human Services(HHS), are your starting point:1. Policies and procedures, especially acode of conduct2. A compliance officer3. Education and training4. Monitoring and auditing5. Reporting and investigating6. Discipline and enforcement7. Response and preventionAll the pieces of the compliance puzzle for behavioralhealth have to be derived from othersources, because our programs do not haveguidance like that for hospitals, physicianpractices, etc. Therefore, everything we do isbased on our understanding and extrapolationof requirements for others.The value to the organization of a clear code ofconduct and a clear code of ethics may not beobvious to the workforce. The codes become apowerful disciplinary tool, when the workforcehas documented knowledge of these corporatestandards. Right from the start, you will meetthe questions/objections of the social workprofessionals who want to know how this codeinteracts with the code of their national association.And you should receive similar queriesfrom the psychologists and others as well. Thisis a minefield that is fairly easy to navigate.Specific requirements should be limited toyour organizational code of conduct, ratherthan your code of ethics. With this arrangement,there is little to conflict.What is the difference between a code of ethicsand a code of conduct? A code of conductcontains the “thou shalt nots,” but the code ofethics contains the “thou shalts.”The most difficult and complicated pitfall inbehavioral health compliance is caused by101Health Care Compliance Association • 888-580-8373 • www.hcca-info.orgthe medical model of treatment. Medicareand Medicaid are medical programs. Theinclusion of the allied professions found inbehavioral health is unique and begrudging atbest. Herein lay denials and take backs whichare avoidable if behavioral health staff “get it.”The medical model we’re talking about is theassessment of a patient, followed by a diagnosisbased on the assessment results, whichyields a plan of treatment that is executed,and results in a return of function or theneed to reassess for additional problems. Thecommon disconnects in behavioral healthare between diagnosis and treatment and thedetermination of return of function.The physician in behavioral health doesnot fall prey to this pitfall, because it is his/her model of treatment. The social workerand other providers of the mainstay of ourindustry, verbal therapies, are the ones vexedwhen trying to apply this concrete, measurablemodel of care.Failure to achieve clarity about the model willyield denials and take backs. The patient whois diagnosed with schizophrenia, paranoidtype with both positive and negative symptomatology,is very often not a good candidatefor individual therapy, and auditors willwant to see documentation of the therapeuticapproach and the results of this treatment. Atthe same time, when there is a “best practice”followed, treatment will be standardized and,hopefully, focused.In behavioral health, where a very smallnumber of CPT® (AMA Current ProceduralTerminology) and HCPCS® (CMS HealthcareCommon Procedure Coding System)codes are routinely in use, it is very importantto keep up with changes that do occur. TheCPT “Changes” volume and each annualHCPCS manual require review. And keep

a look out for the World Health OrganizationInternational Statistical Classification ofDiseases and Related Health Problems-10thRevision (ICD-10).Other training pitfalls abound. The way inwhich the enforcement process works is commonlymisunderstood. It is the antithesis of thebasic concept “innocent until proven guilty.”Teaching the typical enforcement effort (whichidentifies a potential problem, investigates, andthen requires payback) leaves many concerned,if not outraged. Some will never recover.With others, an opportunity presents itself toenlighten them to the importance of attentionto detail and adherence to the rules.The Recovery Audit Contractor (RAC)programs, which are coming online now, areanother problem. Although we would expectthat big fish will get fried first, because this isa program where the contractor gets a piece ofthe recovery, we find that it is our documentation,which is often not concrete, that maycause us many take backs.Behavioral health operations face huge risks.Paramount is the potential for fraud in fieldoperations. Often, case management services ortherapeutic services are needed outside of theoffice. Fraught with risk regarding the actualdelivery of service and the length of service, administratorsneed to watch carefully and to putrestrictions in place. If you don’t start with thesecontrols, they can be difficult to put in place.What was provided and to whom and for howlong are the questions that will be asked.The question of how long the service was providedis a common one and easily becomes aproblem. The standard requirements foundin the CPT environment include “up to 20minutes” or “less than 20 minutes” or “20 to30 minutes.” The code set used in a Medicaidplan may expect “15 minutes” or “15 to 30minutes,” etc. These multiple requirements,not found in the purely medical setting whereCPT is exclusive, create additional confusionand potential for error, as does the structureof the work — the 30 minute session, the 50minute hour, etc.Identifying the targets of OIG is the easiestpart. Each year, the OIG proffers its WorkPlan for the coming year and literally tells uswhat is on the target range. The risk, however,does not lie here, but in our organizations. Itis the employee who files a complaint or blowsthe whistle who can cause serious problems.Continued on page 63Want to include a Stark review in your audit plan this year,but don’t know how to get started?Consider our new STARK COMPLIANCE - GUIDED SELF ASSESSMENTWe provide your staff with classroom training on theStark law and regulations and on what to look forwhen conducting a Stark audit; We supply audit toolsthat allow your staff to review the most commonfinancial relationships with physicians; and we makeour experts available to answer questions as youconduct your self-assessment, and to help with orconduct review of unique financial relationships thatyou discover. Package pricing starts at $7,500.For more information visit www.meaderoach.com orcall Steve Ortquist at 312-285-4850.Steve OrtquistPartner, Meade & Roach, LLP312.285.4850SOrtquist@MeadeRoach.comHealth Care Compliance Association • 888-580-8373 • www.hcca-info.org47April 2008

April 200848Medicare Advantageand Part D Final RuleEditor’s note: Timothy Nugent is a ManagingDirector in the Pharmaceuticals and HealthPlan Practice for Huron Consulting Group inits New York City office. Mr. Nugent can bereached at tnugent@huronconsultinggroup.com.Richard Merino is a Manager of Pharmaceuticalsand Health Plan Practice for HuronConsulting Group in its Charlotte, NC. office.Mr. Merino can be reached at rmerino@huronconsultinggroup.comOn December 5, 2007, the Centersfor Medicare and Medicaid Services(CMS) issued its long-awaited FinalRule related to the Medicare Advantage (MA)and Part D program. 1 This Final Rule withcomment period provides Medicare Part D plansponsors with further insight and guidance intothe way that CMS will view their complianceplans over the next couple of years, assigns specificresponsibilities to plan sponsors to ensuretransparency of subcontract relationships, andsolidifies its commitment to enacting a comprehensiveself reporting protocol.The real impact of the Final Rule is that itprovides another opportunity for plan sponsorsto make sure that their Medicare complianceprograms are in good order, as most ofthe substantive compliance requirements havean implementation date of January 1, 2009.This date may seem far in the future, but therequirements set forth in the Final Rule makeit incumbent upon plans to make sure thatspecific aspects of their compliance programshave been addressed or developed.This article will summarize the Final Rulechanges to the existing MA and Part Dprograms and provide plan sponsors withoperational and compliance solutions to helpBy Richard Merino and Timothy Nugentthem adequately prepare for a future reviewby CMS or a MEDIC.Areas of focusThe Final Rule sets forth four major areasof focus that relate to compliance that plansponsors will be required to address in eithertheir compliance programs or compliancerelatedoperational policies and procedures.These areas include:n Access to records of subcontractors andfirst-tier entities,n Revised compliance program requirements,including “the eighth element” – the eliminationof fraud, waste, and abuse (FWA),n Intermediate sanctions and civil monetarypenalties (CMP), andn Potential for mandatory self-reportingfraud or misconduct.Plan sponsors may choose how to implementthe Final Rule in their compliance programsbased upon their particular circumstances,but there must be full adherence with thesechanges (and any subsequent clarificationsof the rule based on comment) to successfullywithstand increased regulatory scrutiny,which will surely follow as a result of theissuance of the Final Rule.Sounds easy? For many plans, this may not bethe case. Below we will explore the intricaciesof the four areas of focus and provide considerationsfor plans when evaluating their owncompliance programs.Access to records of subcontractors andfirst-tier entitiesIn the past, CMS has always maintained thatplan sponsors are responsible for the performanceof their subcontracted, first-tier, anddownstream entities in the allocation of MAHealth Care Compliance Association • 888-580-8373 • www.hcca-info.organd Part D tasks. The Final Rule reiterates thisposition and includes a requirement that thesedelegated entities must be “contractually boundto produce pertinent records to CMS and othergovernment entities” and that “the contractspecify how such records must be produced—toCMS directly or through the plan sponsor.”What this means for plan sponsors is thatall of their delegated subcontracts must bereviewed to ensure that there is language thatbinds the subcontractor to provide pertinentrecords to CMS or to the plan sponsor forsubsequent submission to CMS upon request.Many subcontracts currently in place fordelegated entities, including pharmacy benefitmanagers (PBMs), may not include suchexplicit disclosure clauses.As it relates to PBMs specifically, the FinalRule reiterates the standing CMS position thatfull disclosure and transparency into any priceconcessions and rebates negotiated betweenthe PBM and pharmaceutical manufacturersrelated to Part D drug utilization must bemaintained. Documentation, such as rebatecontracts and price concession agreements betweenPBMs and drug manufacturers, must bemade available regardless of the fact that neitherCMS nor the Part D sponsor are parties tothe agreement. This is an especially importantdevelopment due to many long-held PBMaxioms that vehemently prohibit and restrictthe release of any pricing or rebate informationbecause of competitive considerations.CMS maintains in the Final Rule that allrestrictions limiting the use of the pricingand rebate information would be maintained,but it is unlikely that this level of disclosureand transparency has been included in PBM– Plan agreements currently in force. Plansshould work with their PBMs to insure thatthis documentation is maintained and providedin compliance with the Final Rule.

The implementation date of this portion ofthe Final Rule is January 1, 2009, but it isimperative that plans evaluate their delegatecontracts, negotiate, and add disclosure provisionswhere necessary, given the various termsof these agreements. No subcontract withterms beginning in 2009 should be drafted,negotiated, or renegotiated without such aprovision. PBM contracts should be especiallyspecific about the required access to all pertinentrebate and price concession documentsand data, without exception.Compliance program changesA major development in MA and Part Dcompliance was the advent of the fraud,waste and abuse (FWA) program requirementfor plan sponsors. Detailed in Chapter 9 ofthe Prescription Drug Benefit Manual, thisrequirement (also called the eighth elementof an effective compliance program), setsforth that plan sponsors must have a detailedplan to detect, correct, and prevent instancesof FWA related to the administration of theMA and Part D program. Plans were given achoice to have a stand-alone FWA program orintegrate the program requirements into theirexisting compliance structure.In the Final Rule, CMS has eliminated theeighth element for compliance plans. CMSdetermined that a truly effective complianceprogram would achieve the same goals fordetecting, correcting, and reporting FWA andthat requiring a separate program would beduplicative and burdensome. This aspect ofthe Final Rule eliminates the specific requirementfor a separate FWA program, however, itdoes imply that the core compliance programmaintained by plan sponsors must contain thesame capabilities set forth in Chapter 9.This creates yet another opportunity andrequirement for plan sponsors to perform athorough evaluation of their existing complianceprograms to insure that the core elementscan support the detection, correction, andreporting requirement. If not, compliance planimprovements must be made. Plan sponsorsshould review their existing FWA programdocument (developed in response to Chapter9), compare the provisions with the existingcompliance program, and revamp the complianceprogram where deficiencies are noted.Other aspects of compliance programs thatare addressed in the Final Rule relate to the“effective training and education” and “effectivelines of communication” elements.Specifically, CMS has broadened the reach ofthese elements to include the subcontracted,first-tier, and downstream entities.The Final Rule serves as clarification and reiteratesCMS’ expectation that plan sponsors willensure that all of their delegates have completedand attested to compliance training. The ultimateresponsibility for ensuring that delegatesreceive adequate compliance training and educationrests solely with the plan sponsor. There hasbeen considerable confusion in the past concerningthe plan sponsors’ role in making sureeven downstream contractors have compliancetraining and education. CMS has sufficientlyclarified this requirement and plan sponsorsmust implement efforts to monitor compliancetraining and education for delegates and be ableto document adherence to the requirement.These efforts should include the maintenanceof training logs, certifications, and attestationsfrom delegated entities similar to the plan’s owninternal compliance training documentation.CMS also clarifies that plan sponsors themselvesneed not specifically train all of theircontracted pharmacies and other providers,but may instead delegate this responsibility.CMS also promised to issue further complianceguidance in the form of a manual similarto the Chapter 9 guidance released last year.This manual will surely provide additional detailon the requirements for Part D complianceprograms and solidify all of CMS’ expectationsof what a plan sponsor’s program shouldcontain and how it is to function. Medicarecompliance officers should be cognizant of therelease of this guidance and take appropriatesteps to review their programs for adherence.Again, this portion of the Final Rule willnot be implemented until January 1, 2009;however, plan sponsors must remain vigilantin the monitoring and evaluation of theirprograms, and make sure that any subsequentissuance of guidance from CMS is heeded.Intermediate sanctions and civil monetarypenaltiesThe Final Rule formalizes many aspects ofthe processes for imposing intermediate sanctionsand civil monetary penalties (CMP).Specifically, CMS has formal procedures forreconsideration of intermediate sanctionsand allows plan sponsors a hearing to appealan intermediate sanction. Specifically, plansponsors may “present information that mayaffect the decision to impose an intermediatesanction prior to the sanction taking effect.”In this regard, plan sponsors will have the opportunityto “submit a written rebuttal statementin response to the initial determinationof an intermediate sanction.”Plan sponsors should have established policiesand procedures to address such instances, becausethe time period to provide a written rebuttal toan intermediate sanction is 10 calendar days fromthe date the plan sponsor receives notice of thesanction. Therefore, any delay in the plan sponsor’sresponse, due to confusion or lack of processto develop the rebuttal, may preempt any attemptto reverse the intermediate sanction.Continued on page 51Health Care Compliance Association • 888-580-8373 • www.hcca-info.org49April 2008

Online Compliance Trainingauthored byDeveloped by eHealthcareITauthored and updated byCORPORATE COMPLIANCE (76 COURSES)HIPAA COMPLIANCE (13 COURSES)Admissions & Registration (3)Coding & Pricing in the LaboratoryAllied Health Services (6) Processing Laboratory Orders (3)Patient RelationshipsManagement Responsibilities inHIM Coding Compliance (2) the Health Care Environment (4)HIM General Compliance (2) Nursing Documentation (4)HIM Compliance Management (3) Patient Financial Services (3)Home Care (3) Physician Coding (2)Home Health (3) Physician Documentation (9)Hospice (4) Skilled Nursing (5)Home Medical Equipment (2)Medical Necessity RequirementsIntro to the Regulatory Environment (3) in the Laboratory (2)Laboratory Administration (2) EMTALA (9)HIPAA (13)CUSTOM COURSES (Organizational General Compliance, Code of Conduct,DRA, Ethics, etc)CLIENTS RECEIVE:• Customization to all courses including introductory pagesfrom your compliance department.• Interactive Courseware with Compliance Case Studies & Scenarios• Option to utilize your facilities current eLearning system oreHealthcareIT's award winning eLearning system that featuresdiscussion forums, compliance alerts, multiple communicationtools and automatic reports.• Subject matter experts with functional and operational expertise:PricewaterhouseCoopers.• Custom Corporate Compliance Administrators manualCOURSEWARE DESIGNED FOR THEFOLLOWING AUDIENCES:Coders • Billing/Financial Services • Pharmacy • Admitting • Home CareNurses/Patient Care Providers • Finance • Physicians-Employed • DischargePlanning • Compliance/Audit Laboratory • HospiceER Support Staff • Cardiac Services • ER Nursing • TherapiesRegistration • HIM • Physicians-Not Employed • Volunteers • Board MembersSkilled Nursing/Long Term Care • Nursing ManagementAdditional online training curriculums available include:HFMA: Billing, Finance, Avoiding Claims Denials, & Cost Control, Coding,Reimbursement, Disaster Preparedness, Clinical CE’s & Joint CommissioneHealthcareITeLearning & IT SolutionsFor further information or to arrangea product demonstration pleaseemail: info@ehealthcareit.comor call 1-800-806-0874.www.ehealthcareit.com

Medicare Advantage and Part D Final Rule: ...continued from page 49The Final Rule also serves to clarify theresponsibilities of CMS and the Office of InspectorGeneral (OIG) to impose and enforceintermediate sanctions and CMPs. CMS hasthe authority to impose CMPs for violationsrelated to actions and behavior by plan sponsorsthat are determined to be inconsistentwith the effective and efficient implementationof the MA and Part D program. In contrast,OIG has the sole authority to imposeCMPs for any determinations concerningfalse, fraudulent, or abusive activities. Thisincludes the submission of any false data.This distinction is important for plan sponsorsto understand, because the regulatorybody that imposes the CMP will providefurther detail as to the nature of the violationand this may affect the way that the plansponsor may respond.Self-reporting of fraud and misconductThe Final Rule does not specifically impose ahard and fast requirement that plan sponsorsself-report any violations pertaining to possiblefraud and misconduct, but the message thatCMS is sending is loud and clear. According toCMS, “self-reporting is a valuable componentof a plan sponsor’s compliance plan.” The FinalRule further states that “while we (CMS) arenot requiring mandatory self-reporting in thisFinal Rule with comment period, there maybe instances under federal criminal and fraudstatutes where MA and Part D sponsors aresubject to prosecution if certain issues are notproperly addressed.”These statements in the Final Rule should alertplan sponsors to the eventuality that self-reportingwill soon be an integral part of all Medicarecompliance plans. Forethought is warrantedinto how the plan receives and processes informationrelated to its operation of the MA orPart D program and how instances of fraud ormisconduct may need to be disclosed.CMS also reiterates its commitment todeveloping and implementing a mandatoryself-reporting requirement and is looking toplan sponsors for comments related to thefollowing five issues:1. How to define what kinds of offensesconstitute “fraud and misconduct” forpurposes of self-reporting.2. Any alternative terms to “fraud and misconduct”that would better describe thecategories of reportable offenses.3. Which entities would be responsible forreporting (sponsor, first-tier, downstreamentities).4. At what point the reporting would haveto take place (at the time of initial discoveryor after reasonable inquiry).5. How the information should be reportedand to whom.It is incumbent upon plan sponsors to stayabreast of any developments regarding the proposedmandatory self-reporting requirementand be prepared to develop related policies andprocedures. This Final Rule will be viewed asadvance notice of CMS’ intent and any delayin development of self-reporting protocols mayhave a negative impact on the plan sponsor.ConclusionWhat can a plan sponsor do to completelyprepare itself for the current and upcomingchanges reflected in the Final Rule? The keyremains vigilance, regardless of the implementationdate of these requirements. The majorityof compliance-based issues are not formallyrequired until January 1, 2009, but there shouldbe plenty of self evaluation and planning relatedto the plan’s compliance program and delegatedcontracts to ensure adherence to the Final Rule.Therefore, some helpful suggestions includehaving an internal or external comprehensivereview of the plan’s Medicare compliance program.This review must include an evaluation ofwhether or not the compliance plan covers allof the elements of FWA detection, correction,and prevention required by Chapter 9. Anydeficiencies in this or any other elements of thecompliance plan should be rectified and documented,in case a CMS review takes place. Howa plan conducts compliance training shouldalso be reviewed. Becasue CMS has opened thedoor for training and education to be delegated,it may behoove some plans to explore externalresources that can assume this responsibility.Next, a full review of the plan’s delegated entityand PBM contracts should be performed.Do these agreements allow for the requisiteamount of transparency and record access setforth in the Final Rule? If any weaknesses or“wiggle room” is discovered in these agreements,those loopholes should be negotiatedto be unequivocally closed. Especially as itpertains to the plan’s PBM contract, explicitdisclosure of price concessions, discounts,and rebates from drug manufacturers mustbe made available in their entirety withoutexception. This requirement should be prominentin the Plan–PBM agreement.Finally, even though no explicit guidancein the Final Rule required plans to adhereto mandatory self-reporting protocols, plansponsors should be under the assumption thatsuch requirements will be shortly forthcoming.Plans should begin to devise and developa process that will define how the plan willidentify events that would lead to a reportand how that report will be executed. Plansdo not want to be behind the compliancecurve when the CMS guidance is released.As evidence by this Final Rule, plan sponsorsare given one last chance to have theircompliance houses in order before intensescrutiny and expectations on the part of CMSbegin. Get started now. n1 42 CFR Parts 422 and 423, December, 5, 2007Health Care Compliance Association • 888-580-8373 • www.hcca-info.org51April 2008

Every day, clinical and researchprograms face pressure toenhance operations and strengthencontrols and compliance.Intense government focus on fraudand abuse as well as the enhancementof compliance programs are criticalareas for all healthcare organizationsand research sites.Huron can help alleviate these pressures. Withmore than 40 experienced professionals devotedto healthcare compliance and clinical researchsolutions, our team is well prepared to help youbenefi t from our expertise. Our services include:• Investigations• Operations improvement• Responsible conduct of research• Budgeting, contracting, and Medicarecoverage analysis• Accreditation Process• IRB and Human Research ProtectionsCompliance• Medicare Coverage Analysis (MCA)• Documentation, coding, and billing services• Compliance effectivenessHuron Consulting Group helps clients effectively address complex challenges that arise in litigation, disputes, investigations, regulatory compliance, procurement,financial distress, and other sources of significant conflict or change. The Company also helps clients deliver superior customer and capital market performance throughintegrated strategic, operational, and organizational change. Huron provides services to a wide variety of both financially sound and distressed organizations, includingFortune 500 companies, medium-sized businesses, leading academic institutions, healthcare organizations, and the law firms that represent these various organizations.www.huronconsultinggroup.com1-866-229-8700April 200852© 2008 Huron Consulting Group Inc. All Rights ReservedHealth Care Compliance Association • 888-580-8373 • www.hcca-info.org01/08

Meet Cynthia Cooper ...continued from page 17self. There is often a price to pay and sometimes it can be severe.When someone steps over the line and becomes a whistleblower,there are usually negative consequences. I write in ExtraordinaryCircumstances about some of the things that happened, notonly to me, but other members of my audit team. At times, we feltisolated. Some people were angry with me for reporting the fraud.However, most employees, even those who lost their jobs or largeportions of their savings, were supportive.I stayed with WorldCom for over two years after the fraud wasreported and until the company successfully emerged from bankruptcy.Corporate headquarters moved from Clinton to Ashburn,VA., and when I left, I was the last WorldCom vice president inClinton. Except for my small internal audit team and a few remainingemployees, the entire floor where we worked was a sea of emptycubicles. I wanted to start my own company and share this storywith professionals and students. I also wanted to write ExtraordinaryCircumstances, which has taken much of my time over thepast few years. Because this is not the path I ever expected to be on,I’ll have to wait and see what the future holds.RS: How would you advise compliance officers who may facesimilar issues, pressures, and similar roadblocks?CC: Listen to your instinct. If something doesn’t feel or seemquite right, it might not be. If people are acting out of character orappear to be working to head you in another direction, step backand ask yourself why. Investigations and auditing can often be aplodding process of developing facts, checking and re-checking theories,and connecting the dots. Continue to ask for support and diguntil you are satisfied that you’ve gotten it right.I also think it’s important to draw clear ethical boundaries andbe prepared to stand up to pressure fromsuperiors or peers before you come to thecrossroads of a major ethical dilemma.Be willing to lose a job to protect yourintegrity and don’t be pressured into doingsomething that you don’t believe is right.If you are faced with a tough dilemma,don’t keep it to yourself. Find someoneyou trust and respect who can give youan independent viewpoint. Dependingon the situation, there are times whenit is beneficial to consult an outsideattorney for advice. nASKLEADERSHIPJohn asks the leadershipyour questionsEditor’s note: John Falcetano isChief Audit/Compliance Officer forUniversity Health Systems of EasternCarolina and a long-time member ofHCCA. This column has been createdto give members the opportunityto submit their questions by e-mail to jfalcetano@suddenlink.net andhave John contact members of HCCA leadership for their response.John FalcetanoQuestion:Is there any kind of formula to determine what a small practicecan disclose without violating the HIPAA “minimum necessary”rule?The answer is provided by Marti Arvin, JD, CHC, CCEP, CIPP/G, CPC,Privacy Officer, University of Louisville:No, there is no formula. The rule essentially states that you shouldshare only what is needed to accomplish the function you are tryingto accomplish. Your practice will need to determine what theminimum necessary is for a particular use or disclosure. With a “use,”the information remains within the covered entity (eg., patient filerequested by a treating physician within the practice). With a “disclosure,”the information is released to someone outside the facility (eg.,an external payer, researcher, public health official).If you make routine types of uses or disclosures of protected healthinformation (PHI), you can try to define the minimum necessarythrough policies and procedures. It is helpful to rememberthat the minimum necessary rule does not apply to disclosuresfor treatment (Note: It does apply to uses for treatment), usesand disclosures to the individual, disclosures to the Secretary ofHealth and Human Services, uses and disclosures under an authorization,uses and disclosures that are required by law, and usesand disclosures required to comply with the HIPAA regulations. nPublished by John Wiley & Sons Inc., Now available in book stores.Health Care Compliance Association • 888-580-8373 • www.hcca-info.org53April 2008

A Master Class in Hospital Reimbursement ComplianceA Six-Part Audio/Web Conference Series by HCCACMS Data Mining Implications Audio CD AvailableRACs Auditors and Other New Predators Audio CD AvailableCompliance Issues Arising Out of Graduate Medical Education (GME) Audio CD AvailableAuditing Compliance with the Provider-Based Status Rules Audio CD AvailablePresent on Admission and Hospital-Acquired Conditions Audio CD AvailableOrganizational Culture and Compliance April 8Special member rate of only $750 for all six sessions!moderated by: Lawrence W. Vernaglia, Partner, Health Care Industry Team, Foley & Lardner, LLP, Boston, MAQuality of Care Initiatives Gaining Momentum - April 24Speakers:Jacqueline c. Baratian, General Counsel, Alston & Bird LLPKatie A. Arnholt, General Counsel OIG/OCIGWilliam Mathias, Principal, Ober/KalerCompliance Week (FREE) - April 25Tips for innovative and fun ways to Celebrate Compliance Weekthroughout you organization May 26-30, 2008Speakers:Jenny O’Brien, Halleland, Lewis, Nilan & Johnson,Steve Lokensgard, Compliance Officer – Allina Hospitals & ClinicsRecovery Audit Contractors (RACs) - April 30Speakers:William Moran, Senior Vice President, Strategic ManagementKaren Feeley, Director of Network Patient Services at New York Presbyterian HospitalCMS RepresentativesPricing for all Conferences:Members $175 per sessionNon-members $215 per sessionAll CD sessions are 90 minutesJoin HCCA today for only $200 ($295 regularly)and receive the member rate!To purchase visit www.hcca-info.orgAudio/Web Conferences Available on CDMore Audio/Web Conference Titles are Available at www.hcca-info.org/audiocdsAll Sessions begin at 12PMCentral | (90 minutes) 1.2 CEUsApril 200854Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

Outpatient therapyclinics and theirreferring physicians:Fraud and abuse risksEditor’s note: Kathie McDonald-McClure isan attorney with the law firm of Wyatt Tarrant& Combs, LLP in Louisville, KY. She may bereached by telephone at 502/562-7526.In the November 2007 issue ofCompliance Today, in an articletitled, “Therapy provided “incidentto”: Developing a framework for complianceby identifying risk,” Nancy J. Beckley aptlyidentified compliance risks for physicians whooffer physical or occupational therapy in theiroffices, including risks under the Stark Law 1and the Anti-kickback Statute. 2 The risks forthe physician practice under these two lawsare amplified when the physician practice hasa compensation arrangement with a therapyclinic or its owner. 3 To complicate matters,these parties may have more than one compensationarrangement with one another, furtherincreasing the risks. This article exploresthe types of relationships that arise betweenphysician practices and therapy clinics and theStark and Anti-kickback risks implicated.The development of compensation arrangementsbetween the physician and therapist canbe a very natural outgrowth of establishing aprior relationship with one another. The relationshipmay begin when the physician referspatients to the therapy clinic. If patient feedbackto the physician is positive, the physicianlikely will refer more patients to the clinic withconfidence that the therapy clinic will provideprompt, quality care for the patients. Thetherapy clinic, in turn, may further gain thephysician’s trust and confidence by keeping theBy Kathie McDonald-McClure, Esq.physician informed about the patient’s care,or providing information about the clinic’sexpertise with certain therapy techniques.The Medicare coverage rules ensure dependenceof outpatient therapy clinics onphysician involvement for their continuedexistence and profitability. Medicare and mostthird-party payers will not cover physicaltherapy unless a physician orders the therapyand certifies continued therapy every 30 days.Because of this dependent relationship, itbehooves the clinic to ensure that it maintainsa good relationship with referring physicians.Good relationships can lead to compensationarrangements. Types of compensationarrangements that may arise after establishingan initial physician referral relationship mightinclude a consulting or medical directoragreement, a lease agreement, or even a managementagreement for a therapy programin the physician’s office. Each one of theserelationships must comply with the Stark Lawand the Anti-kickback Statute.Health Care Compliance Association • 888-580-8373 • www.hcca-info.orgStark LawThe Stark Law generally prohibits referrals forcertain designated health services (DHS) by aphysician to an entity with whom the physicianhas a “financial relationship.” Stark specificallyincludes physical therapy (PT) andoccupational therapy (OT) services on the listof DHS. Physician groups and therapy clinicsshould not bill for any services provided to apatient referred by either party to the other,where the parties have a compensation arrangementin addition to a referral relationship,unless the compensation arrangementcomplies with the Stark Law.Stark carves out some compensation arrangementsthat do not pose a substantial risk offraud and abuse. These carve-outs are called“exceptions.” The exceptions protect certaincompensation arrangements from violatingthe law, but only if the arrangement meetsevery requirement of an exception. To violateStark does not require any “intent”– rather,Stark is a strict liability law.Anti-kickback StatuteThe Anti-kickback Statute makes it a criminaloffense to intentionally offer, pay, solicit, orreceive any remuneration, with a purpose ofinducing or rewarding referrals of items orservices reimbursable by a federal health careprogram. The Act is violated when an entitypays remuneration to a referring physician,knowingly and willfully, to induce orreward referrals of items or services payableby Medicare or Medicaid. For purposes ofthe Anti-kickback Statute, “remuneration”includes the transfer of anything of value, directlyor indirectly, overtly or covertly, in cashor in kind. By its terms, the statute attributescriminal liability to parties on both sides of animpermissible “kickback” transaction.Similar to Stark, the Anti-kickback Statutesets forth “safe harbors” for relationships thatare deemed not to pose a substantial riskof fraud and abuse. Failure to meet everyelement of a safe harbor alone will not meanthe relationship violates the statute, but therelationship remains “suspect.” Unlike Stark,the Anti-kickback Statute is not one of strictliability because it requires intent.Stark vs. Anti-kickback. The fact that arelationship meets a Stark exception does notContinued on page 5655April 2008

Outpatient therapy clinics and their referring physicians: ...continued from page 55automatically protect it against a finding that itcomplies with the Anti-kickback Statute, andvice versa. So, it is important to ensure arrangementscomply with both laws. The Stark Lawand the Anti-kickback Statute are different inother ways besides the element of intent. Importantly,the Anti-kickback Statute is a criminalliability law that includes prison sentences andfines. Stark is a civil statute that prescribes civilmonetary penalties and fines for violations.LeasesLease arrangements invoking the Stark Lawand Anti-kickback Statute arise when a referringphysician (or that physician’s practicegroup) leases space to a therapy clinic. Theselaws are also invoked when the therapy clinicleases space to a referring physician or thephysician’s practice group. For purposes ofStark, such arrangements constitute either director indirect compensation, depending onthe facts. For purposes of the Anti-kickbackStatute, such arrangements would involveremuneration “in cash or in kind.”The applicable Stark exception would be the“lease of space and equipment” exception.A space lease will receive protection underStark only if each of the following six criteriais met:1. The lease must be in writing, signed bythe parties, and specify the premisesand any equipment that it covers.Here, parties must ensure that the lease agreementnames, and is signed by, all physicianswho have a financial interest in the propertybeing leased and who are referring patients tothe therapy clinic. In specifying the premises,the agreement should state the address, squarefootage and, preferably, attach a space plan.2. The rented space or equipment must notexceed that which is reasonable and necessaryfor the legitimate purposes of thelease and must be used exclusively by thelessee when being used by the lessee (andin the case of space rental, the lessee maypay for its use of common areas based onits pro rata share of these areas).The requirement that the lease not exceed whatis reasonable and necessary reduces the risksof abuse. For example, if a referring physicianleases space to a therapy clinic in excess ofthe amount needed and collects rental on allof the space, this may be seen as a reward orfurther inducement to the referring physiciansto continue the referrals. The resulting abuseto the government program occurs when, dueto such induced referrals, services that are notmedically necessary result in overutilization ofgovernment funded services.3. The lease must be for a term of at leastone year.A month-to-month lease would not meet thisrequirement. If the lease agreement is terminatedbefore the end of a year, the parties maynot enter into a new agreement before theexpiration of the original lease. A six-monthholdover at the end of a term of at least a yearis permissible if its terms are identical to thoseof the base agreement.4. The rental charges over the term of thelease must be set in advance and must beconsistent with fair market value (FMV).To meet this requirement, it is advisable thatthe parties obtain a FMV assessment of thespace to be leased. Additionally, the lease mustspecify the actual rent or the method by whichthe parties will calculate the rent. Merelystating in the lease that the rent shall be FMV,without specifying the method or amount,places the parties at risk of failing to meet thisrequirement. In addition, this requirement alsomakes it essential to determine the square footagebeing leased, or the equivalent, in orderto demonstrate FMV. If a referring physicianis using space within the therapy clinic to seepatients on certain days of the week, then theagreement should specify precisely what spaceis being used and determine the physician’s prorata share of the total space in the clinic. (SeeSample Sublease in box.)Sample Sublease to PhysicianA written sublease of space in a therapyclinic specifies the following space is beingleased: “The Lessee [the physician] shallhave exclusive use of one private office(100 sq. ft.), two exam rooms (100 sq.ft. each) and a filing and x-ray viewingarea (50 sq. ft.) while he is present at theclinic. In addition, Lessee shall share theLessor’s [therapy clinic’s] foyer (50 sq. ft.),a common reception area (200 sq. ft.),and a common hallway leading to Lessee’soffice and exam rooms (200 sq. ft.). To theextent physician needs staff, the physicianshall provide such staff (Physician Staff)who shall be present only during the hoursset forth in this Agreement. PhysicianStaff shall utilize two work stations in theLessor’s business office area for the purposeof registering and managing the financialmatters of Lessee’s patients. The Physicianshall use the designated space on Tuesdaysand Thursdays from 8:00 a.m. to 2:00p.m.” (An exhibit to the Agreement showstotal clinic space of 5,000 sq. ft.)Note that the sublease specifies whichspace is being used exclusively by thephysician and which space is part of acommon area. It also is advisable to attachan exhibit to the sublease that showshow the parties allocated the squarefootage of the physician’s space comparedwith the total square footage in eacharea and compared with the total squarefootage of the clinic. The exhibit shouldreflect the total square footage calculatedand ultimately allocated to the physician,which should be used to determine theFMV of the rental payments.April 200856Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

5. The rental charges cannot take into accountthe volume or value of referrals or otherbusiness generated between the parties.For example, if the therapy clinic establisheda rental amount by using a formula thatadjusts that amount based on the number ofpatient referrals from the physician, the leaseagreement would not meet this requirement.6. The lease must be commercially reasonable,even if no referrals were madebetween the parties.For example, if a therapy clinic rents spacefrom a physician group for the purposes ofproviding PT and OT services and the onlypatients treated by the therapy clinic areMedicare and Medicaid patients referred bythe physician group, the lease is not likely tobe seen as “commercially reasonable.” Thisis because the therapy clinic would have nobusiness if you take away the referrals.With the exception of Stark’s requirement for“commercial reasonableness,” the elementsof the Anti-kickback Statute’s safe harbor forspace and equipment leases are essentiallythe same as the Stark requirements above.Even though there is not room in this articleto address each of the Anti-kickback’s safeharbor requirements, it is vital to analyze theproposed lease under Anti-kickback rulesbefore it is executed.Medical director agreementsTherapy clinics often retain the services of areferring physician to act as medical directorwho will review the clinic’s services forquality-of-care issues, help develop standardof-carepolicies, and otherwise consult withthe clinic’s therapists regarding applicationof new therapy techniques. A clinic that isenrolled in Medicare as a Part A rehabilitationagency may want to engage a medicaldirector to help ensure that the clinic is meetingMedicare’s conditions of participation. 4Obtaining such direction from a referringphysician usually involves a “compensationarrangement” that triggers Stark Law scrutinyand remuneration “in cash or in kind” andthat triggers Anti-kickback Statute scrutiny.The most applicable Stark exception wouldthe “personal services arrangements” exception,and the most applicable Anti-kickbacksafe harbor would the “personal services andmanagement contracts” safe harbor. Therequirements of the exception and the safeharbor are very similar, except for a nuanceregarding compensation noted below.To comply with Stark, the arrangementmust meet each one of the following sixrequirements:1. Be in writing, be signed by the partiesto the agreement, and specify the servicescovered by the agreement.For medical director agreements with a medicalgroup, the therapy clinic should ensurethat all doctors who have or may refer servicesto the clinic are named as parties to the agreementand sign it.2. Cover all of the services to be furnishedby the physician (or an immediate familymember) to the therapy clinic.This condition requires either a cross-referencein the agreement to other compensation arrangementsor maintenance of a master list bythe parties of such other arrangements. This canbe done by including an exhibit to the agreementthat lists all compensation arrangementsthat the therapy clinic has with the physician (oran immediate family member). One risk is thatthe parties may fail to list another compensationarrangement, because they simply werenot aware of it. For example, the therapy cliniccould have a lease with ABC Realty, LLC for itsclinic space. Because many physicians are ownersor investors in buildings used for medicalservices, the parties should determine whetherone or more owners of ABC Realty, LLC includesa referring physician. (To reduce the riskof the unknown, before entering any space leaseagreement, the parties should fully disclose allowners of the space.)3. The aggregate services must not exceedthose that are reasonable and necessaryfor the legitimate purposes of the arrangement.Types of services that would certainly bereasonable and necessary for a therapy clinicwould include assisting in ensuring the qualityof the therapy services being provided. Themedical director could participate in reviewingpatient charts, plans of care, the progress oftreatment and the patient’s compliance withtreatment. The medical director could reviewpolicies and procedures related to the deliveryof care at the clinic and provide clinicaleducation on topics germane to the practiceat the clinic. Allowing the medical director toadvertise or promote his medical services topatients of the therapy clinic, however, wouldnot be deemed reasonable and necessary to thelegitimate purposes of the arrangement.4. The term must be at least one year.Again, if terminated during the initial year,the parties may not enter into the same orsubstantially the same arrangement before theend of the initial term.5. The compensation must be determinedin advance, not exceed FMV, and not bedetermined by the volume or value ofany referrals or other business generatedbetween the parties.As with rental payments discussed earlier,the compensation should be documentedin a way that can be objectively and readilyascertained from the face of the agreement.The parties should specify the aggregatecompensation, or a time-based or per unit ofservice-based amount, or a specific formulaContinued on page 59Health Care Compliance Association • 888-580-8373 • www.hcca-info.org57April 2008

Compliance Today Editorial BoardThe following individuals make up the Compliance Today Editorial Advisory Board:Christine Bachrach, CHCSenior Vice President –Lisa Silveria, RN BSNHome Care ComplianceF. Lisa Murtha, JD, CHCManaging DirectorCompliance OfficerHealthSouthCatholic Healthcare WestHuron Consulting GroupPhoto NotAvailableBonnie-Lou BennigDirector of Corporate Compliance& Quality ImprovementVanguard Healthcare Services, LLCCheryl Wagonhurst, JD, CCEPPartnerFoley & Lardner LLPDeborah Randall, JDPartnerArent Fox LLPDavid HoffmanPresidentDavid Hoffman & AssociatesCynthia Boyd, MD, MBAAssociate Vice PresidentChief Compliance OfficerRush University Medical CenterJames G. Sheehan, JDNew York StateMedicaid Inspector GeneralEric Klavetter, JD, MS, MAPrivacy and Compliance OfficerMayo ClinicBecky Cornett, PhD, CHCDirector, Fiscal IntegrityFinance AdministrationThe Ohio State UniversityMedical CenterJeffrey SinaikoPresidentSinaiko Healthcare Consulting, Inc.Kirk Ruddell, CHC, MBACompliance OfficerGabriel Imperato, JD, CHCManaging PartnerDebbie Troklus, CHC, CCEPAssistant Vice President forIsland HospitalBroad and CasselHealth Affairs/ComplianceUniversity of LouisvilleSchool of MedicineJosé A. Tabuena,JD, CFE, CHCCenter for Corporate GovernanceDeloitte LLPApril 200858

Outpatient therapy clinics and their referring physicians: ...continued from page 57for calculating the compensation in a waythat can be objectively verified to be in linewith FMV. FMV assessments often requirethe expertise of an appraiser with experiencein valuing physician compensation arrangements,so it is advisable to consult with one. 5If the therapy clinic has subleased space to themedical director, as in the example discussedabove, make certain that the invoiced servicesdo not include dates and times when thephysician was providing services in his ownpractice in the subleased clinic space.The Anti-Kickback safe harbor differs fromthe Stark exception in that the safe harborrequires that the “aggregate” compensationpaid over the term of the agreement be setin advance. The safe harbor further requiresthat the agreement specify an exact schedulefor services that are periodic, sporadic, orpart-time, and that the precise length of timeand exact charge for each interval be stated. Ifthe medical director’s services are to be paidon an hourly basis, as many are, and invoicedmonthly according to the hours worked toperform the services, the parties will not beable to “aggregate” or total these services,because the services have not even been providedyet! However, the inability to meet thissafe harbor requirement does not mean thatthe agreement is illegal; rather, it’s simply not“safe.” Even if the parties decide to establishan annual compensation rate for the medicaldirector’s services, it is advisable to require themedical director to document the services hehas provided each month and to retain thisdocumentation so that his or her services canbe quantified in case of a future audit.6. The services do not counsel or promotea business arrangement or other activitythat violates any state or federal law, suchas the federal Anti-kickback Statute.For example, if the medical director agreementis designed to financially benefit the physician’sexisting practice by inducing and increasingreferrals, there may be problems in paradise.Management agreementsWe have covered personal services from thereferring physician to the therapy clinic.What about services from the therapy clinicto the referring physician? The Stark andAnti-Kickback laws have implications for atherapy company that provides therapy programmanagement services in the office of thephysician. This is an area where the Stark andAnti-kickback laws part ways in terms of theelements that must be present to be protectedor “safe.” The applicable Stark exception isthe “in-office ancillary services” exception.Under Stark, designated health services, suchas PT and OT, must be furnished “personally”by the physician in the physician’s offices ora “centralized building” used by the “grouppractice” for the provision of some or all ofthe practice’s DHS services. The applicableAnti-kickback safe harbor is the “personalservices and management contracts” safeharbor, the same safe harbor (discussed above)applicable to medical director agreements.Several basic terms should be consideredwhen formulating the therapy services managementagreement between the therapyclinic and the physician practice. Getting theterms right could make the road smootherfor both parties and defend the legality of thearrangement. Note: These pointers shouldnot be viewed as a recitation of specific StarkLaw and Anti-kickback Statute requirements,but rather, for the sake of brevity only, areintended to reduce the most salient requirementsof the complex in-office ancillaryservices exception into contract terms. Thesecontract term pointers are as follows:1. Require claims be filed under the Medicareprovider number of the physicianpractice (not the therapy clinic);2. Require the physician practice to retainthe exclusive authority and ultimateresponsibility over the billing and collectionof services provided in the therapyprogram, including repayment of anyoverpayments by Medicare, Medicaid,and other third-party payers; 63. Set the aggregate compensation for thetherapy company’s management servicesin advance;4. Require the physician practice to retainownership and exclusive control over thetherapy program;5. Require that the physician practice ensuretherapy staff are properly licensed andcompliant with HIPAA; 76. Require the physician practice to assumethe duty and responsibility of ensuringcontinuing compliance with Stark, particularlythe “in-office ancillary services”exception, including:a. That the physician practice constitutesa “group practice”;b. That a physician who is a member ofthe physician practice directly supervisesthe individuals who provide servicesas part of the therapy programand otherwise meets all applicableMedicare payment and coverage rules(i.e., “incident to”);c. That the physician practice will ensurethat the therapy services are providedin a building that meets the StarkLaw exception’s “centralized building”requirement.Why place the onus of Stark compliance on thephysician practice? Because if this arrangementis to go forward, the physician must complywith Stark’s “in-office ancillary services” exception;and this is an exception with elementsover which the therapy practice may havelittle or no control. Why not go for another,less onerous exception under Stark? Becausethe Stark Law requires that compensationContinued on page 60Health Care Compliance Association • 888-580-8373 • www.hcca-info.org59April 2008

Outpatient therapy clinics and their referring physicians: ...continued from page 59arrangements comply with the most applicableexception and, in the majority of situations, thisis the most applicable exception. The personalservices exception that applied to medicaldirector services does not apply to the therapymanagement services because, among otherreasons, the remuneration under this arrangementis running from the physician practice tothe therapy clinic rather than vice versa, as wasthe case with the medical director agreementabove. It would be nice if we could apply a lesscomplex exception, if only to make the analysiseasier – but Stark is neither nice nor easy.In structuring the management servicesarrangement, keep in mind that this is asituation where the physician group desires toprovide ancillary services for which it can bereimbursed. As a result, instead of referringpatients to a third-party DHS entity, thephysicians in this arrangement are referringpatients to themselves, (i.e., the true essenceof “self-referrals”). The therapy clinic is beingengaged to manage those services in exchangefor a pre-established fee. Even though thegreatest risk under Stark would appear to bewith the physician practice, because of theprohibition on physician self-referrals billedto Medicare that do not fit within a Starkexception, Stark imposes liability on bothparties to a prohibited self-referral arrangement.Accordingly, the therapy clinic cannotrest easy simply by placing the onus on thephysician practice to ensure Stark compliance.A final cautionOn September 5, 2007, the Centers forMedicare and Medicaid Services (CMS)released the Stark II Phase III regulations, 8effective November 5, 2007. 9 Contracts thatwere in compliance with Stark as of September5, 2007, were grandfathered in, until thedate of their expiration or renewal. Otherwise,financial arrangements with physiciansshould have been in compliance with the newregulations as of November 5, 2007.Of particular relevance to the scope of thisarticle is Stark’s revised “direct compensation”definition that now utilizes a “stand in theshoes” test. In essence, physicians who aremembers, employees, or independent contractorsof a physician organization now standin the shoes of their physician organization.As a result, each individual physician of thatorganization is now deemed to have the samecompensation arrangement with other DHSentities that their physician organization has.Accordingly, existing compensation arrangementsbetween therapy clinics and physicianpractices should be immediately reviewed toensure they comply in light of the new rules.For example, if the therapy clinic had a compensationarrangement with a physician organizationas a whole, that arrangement is nowwith every physician individually. To bringsuch an agreement into compliance, the partiesshould ensure that all individual physicianswho refer (or are likely to refer) patients to thetherapy clinic are named as parties to, and havesigned, the medical director agreement.1 Ethics in Patient Referrals Act, colloquially known as “Stark,” 42 U.S.C.§1395nn.2 Anti-kickback Statute, 42 U.S.C. § 1320a-7b.3 Under Medicare, outpatient therapy can be provided in one of twoforms: Rehabilitation Agency under Part A or Physical or OccupationalTherapy Group (or Individual) in Private Practice under Part B. Forconvenience, I use “Therapy Clinic” to refer to both forms.4 Conditions of Participation for Outpatient Rehabilitation Agencies canbe found at 42 CFR 485.701 et. seq.5 The Stark II Phase III regulations released on September 5, 2007,eliminated the FMV “exception” in the prior Stark II Phase II regulationthat set forth two methodologies for determining the FMV of an hourlypayment. Nevertheless, Phase III noted that it would still recommendusing multiple, objective, independently published salary surveys todetermine FMV of the hourly rate.6 The therapy program manager could, however, agree to act as the billingagent of the physician under the number assigned to the physician orphysician practice.7 Whether the physician practice can actually employ the therapist maybe controlled by state law. In South Carolina, a physical therapist isstatutorily prohibited from working as an employee of a physician whorefers patients to the physical therapist. See Sloan v. S.C. Bd. of PhysicalTherapy Exam’rs, 370 S.C. 452 (S.C. 2006). The Delaware AttorneyGeneral similarly interpreted the Delaware State Physical TherapyPractice Act. See AG 02-IB25 (10/10/02).8 42 CFR Parts 411 and 424, published in the Fed. Reg., Vol. 72 No.171, Wednesday, September 5, 2007.9 Although CMS suspended the effective date of the revised directcompensation definition for certain providers, such suspension does notinclude outpatient therapy clinics.Compliance Today Needs You!The Health Care Compliance Association(HCCA) is seeking authorsfor Compliance Today. Every monthCompliance Today offers health carecompliance professionals information ona wide-variety of enforcement, regulatory,legal, and compliance programdevelopment and management issues. Todo this we need your help!We are particularly interested in articlescovering compliance concerns involvingall segments of the health care industry,including Behavioral Health, Rehabilitation,Physician practices, Long-TermCare, Homecare and hospice, AmbulatorySurgery Centers, etc.For Details: E-mail Margaret Dragonwith your topic ideas, format questions,etc. at margaret.dragon@hcca-info.org orcall her at 781/593-4924.Articles generally run between 1,250and 2,500 words; this is not a limit, justa guide. Compliance Today uses theChicago Manual of Style. We requirefootnotes to be 10 or less. All referencesmust appear at the end of the article.Please do not use the footnote feature inWord. The author’s contact informationmust be included in the article as well asthe article title. Articles should be submittedas a Word document with verylimited formatting. Anyone interestedin submitting an article for publicationin Compliance Today should send anemail to margaret.dragon@hcca-info.org which includes the article topic anddeadline selected from the list below.IMPORTANT: For those who areCertified In Healthcare Compliance(CHC), please note that CCB awards 2CEUs to authors of articles publishedin Compliance Today.Upcoming Compliance Today Deadlines:n April 20n May 1n May 20n Jume 1n June 19n July 3n July 20n August 1April 200860Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

2008 HCCA ConferencesAprilHCCA’s 12th AnnualCompliance InstituteApril 13–16 | New Orleans, LAMayUpper North CentralRegional ConferenceMay 2 | Grand Rapids, MIUpper NortheastRegional ConferenceMay 16 | New York, NYJuneCompliance AcademyJune 2–5 | Scottsdale, AZPacific NorthwestRegional ConferenceJune 6 | Seattle, WAResearch Compliance AcademyJune 9–12 | San Francisco, CAAdvanced AcademyJune 16–19 | San Francisco, CAWest Coast Regional ConferenceJune 27 | Los Angeles, CAJulyAlaska Regional ConferenceJuly 10–11 | Anchorage, AKAugustCompliance AcademyAugust 11–14 | Chicago, ILSeptemberNew EnglandRegional ConferenceSeptember 5 | Boston, MAResearch Compliance AcademySeptember 8-11Orlando, FLUpper MidwestRegional ConferenceSeptember 12 | Minneapolis, MNMidwest Regional ConferenceSeptember 26 | Kansas City, MOQuality of CareCompliance ConferenceSeptember 28–30 | Philadelphia, PAPlan now to attend HCCA’s 2008 conferences!HCCA offers first-class education, resources,and networking opportunities for everyonein the health care compliance field. Whateveryour focus, HCCA has a conference for you.For more information, visit www.hcca–info.orgOctoberPhysician PracticeCompliance ConferenceOctober 1–3 | Philadelphia, PANorth CentralRegional ConferenceOctober 3 | Chicago, ILAHLA/HCCAFraud & Compliance ForumOctober 5–7 | Baltimore, MDEast CentralRegional ConferenceOctober 10 | Pittsburgh, PAHawaii Regional ConferenceOctober 16–17 | Honolulu, HIResearch Compliance ConferenceOctober 20–22 | Chicago, ILAdvanced AcademyOctober 20–23 | Dallas, TXMountain Regional ConferenceOctober 24 | Denver, COAudit & ComplianceCommittee ConferenceOctober 27–29 | Fort Lauderdale, FLNovemberCompliance AcademyNovember 3–6 | Orlando, FLSouth CentralRegional ConferenceNovember 7 | Nashville, TNMid CentralRegional ConferenceNovember 14 | Louisville, KYDecemberCompliance AcademyDecember 1–4 | San Diego, CAMedicare Part DCompliance ConferenceDecember 7–9 | Baltimore, MDHealth Care Compliance Association • 888-580-8373 • www.hcca-info.org61April 2008

The role of teambuilding in complianceEditor’s note: Larry W. Balmer is the ChiefCompliance Officer, HIPAA Privacy andSecurity Officer for Radiology Incorporated inMishawaka, Indiana. He can be reached byphone at 574/258-1100, ext 284 or by e-mailat lbalmer@rad-inc.com.We are all familiar with the seven basicprinciples of a compliance program. We all dorisk assessments and audits, conduct training,and try to stay abreast of the ever-changingenvironment in which we do business. But,in my opinion, if we do just these things,we are overlooking a critical and necessarycomponent in the establishment and conductof a successful compliance program. Havingserved as a hospital compliance officer andnow, as the compliance officer of a large physiciangroup with a billing service attached, Ifind that the landscape is essentially the same.Without a strong and effective company-wideteam, the best compliance program in theworld will be only partially effective at best.The strongest linkIn any given organization, nothing workswithout the efforts of our employees, or staff,or people, whichever term best fits. In mostcompliance efforts, we are looking for thoseindicators that someone is abusing the systemfor gain, that the business faces risks frombeing improperly structured, that referralsare improper, or that a thousand other issuespresent potential risk to our organizations.In doing so, for a variety of reasons, we oftenoverlook our everyday, hardworking medicalprofessionals, coders, billers, and others, andmiss the contributions of these well-intentionedfolks. They make the system work, andwithout them, we fold up and go home. Theyare indeed our strongest link.By Larry W. Balmer, CCPThe weakest linkLet’s face it though, people are also our weakestlink. Through inadequate training, poormotivation, poor supervision, long hours atmundane jobs, or poorly designed systemsthat are hard to work with, our employees canpresent our greatest and hardest-to-find risksfrom a compliance standpoint. It’s my contentionthat we, as compliance professionals,have to become an indispensable part of theteam building efforts in our organizations, or,if there are none, we have to champion one.The reason is simple. To illustrate, if wehave poorly motivated employees who arereluctant to point out systemic weakness thatlead to improper billing, potential false claimsallegations can result. If we have coders whoare not well trained in payer policies andcoding conventions, improper codes may beassigned, again with false claims ramifications.Of course, the examples go on and on.Simply stated, “Poor performance promotes apoor bottom line.” Through effective complianceefforts, we often realize an enhanced,protected revenue stream for the company,because we are able to point out inefficienciesthrough our evaluations. We also operatefrom a position of strength with problempayers when we know that what we are doingis right, as evidenced by an effective complianceprogram.Employee performance and risk assessmentIn my organization, when we do our semiannualtop-to-bottom review of process andlook for various and sundry indicators ofrisk, one of the most critical steps we take isto evaluate individual employees. In essence,I assign department supervisors to conductreviews of departments other than their own.During those reviews, we try to uncoversystemic weakness and illegal manipulation,and we assess our employee performance asit pertains to their documented training andestablished expectations. The idea is thatsomeone who is not properly trained doesnot know what is expected of them, does notlike their job, is unmotivated, or is otherwiseimpaired in their performance. They may beprone to cutting corners, or just not caring,and thereby, cause mistakes that can becomeproblematic from a compliance standpoint.The reward is that we offer employees achance to speak to someone other than theirboss. We listen to their ideas for improvementand find ways to motivate the workforce bydemonstrating that we care. In addition, wethen hold company-wide meetings in whichwe train and motivate our employees byempowering them.Big picture thinkingThe process of cross-departmental reviewsgives each supervisor (acting as an auditorunder compliance department guidance) adeeper sense of the big picture within thecompany. Each can see the impact of a smallomission in one department as it snowballsinto a major problem for another. This alsoopens lines of communication and gets themiddle management team used to correctingissues as they occur. We, of course, documentthese efforts, but this empowerment of ourmiddle managers saves a large amount of timefor the compliance department, allowing usto conduct large scale audits, handle contractissues, and so on. Weekly meetings help usaddress issues in real time, and allow us tostay on track with corrections by constantlymonitoring their status.Motivation and attitudeWith the procedure I’ve outlined, we spendno small amount of time assessing individualmotivation and attitude. Well-trainedApril 200862Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

employees, who are motivated and feel thatthey are truly important to the company,become part of the compliance team. Theyfeel comfortable that they can report issueswithout retribution. A sad fact is that manypeople will still not report issues, even thoughwe tell them during compliance training thatwe have that expectation and that they canbe free from retribution. However, whenempowered and part of the process, theywill bring issues up much more freely, whichmakes our compliance job easier. This individualassessment is not easy in a large organization.We serve several area hospitals, havea number of outpatient centers, and operatea billing office. We get it done though, bybreaking the audit process down into simplesteps and taking them one at a time.Process improvement with compliance asthe goalAs you improve your internal process, findways to streamline it, make it more efficient,and keep staff fully aware of what your goalsare, you’ll find that achieving compliance ismuch easier. Absent those circumstances orwhere someone purposely manipulates therules to achieve an illegal aim, most complianceissues will arise from those inefficiencies,miscommunications, and poor performancethat can go on in any organization. Complianceis, after all, a management responsibility,and when management achieves compliancewhile also improving process, everyone wins.Compliance as an element of the bottomlinePart of our job needs to be as a “force multiplier”for our organization. We have oureyes and ears to the ground, and through ourassessments, audits, and reviews, we should beable to uncover business practices that are inefficient,need to be streamlined, or just plaindon’t work. Unfortunately, we don’t pay muchattention to these things unless they result insome sort of liability that surfaces at the endof the business cycle and either gets reportedto the compliance office over the hotline orwe get notice of a payer audit. Finding problemsearlier and acting upon them quicklycan save a lot of headaches in the long run.Finding issues before they become problems,pointing them out to management, offeringto help overcome them, and leading improvementefforts may result in a variety of rewardsthat include enhanced respect for compliancein the organization and enhanced revenuethat can be attributed to your department.This makes compliance less of a cost centerand lends greater credibility for your efforts.It also makes our jobs a lot easier in that webecome much more in tune with the healthof the company, and are much more availablefor consultation and discovery of problems inthe early stage.Useable indicatorsThe audit process we use is designed to uncoveruseable indicators of systemic weakness,individual manipulation, and other problemsand practices that could lead to allegations ofillegal behavior through either purposeful actionor willful negligence. We try to identifyroot causes while fixing individual issues, andtry to promote practices that will overcomefuture risks. We then supervise to achievecompliance. If I were to boil this down, Iwould say that compliance becomes a key andindispensable part of the organization whenwe lead practices that clearly benefit the dailylife of the organization. Yes, we still need toconstantly look for the big issues and workwith our board on governance, but when themachine is well oiled and running smoothly,we’ve demonstrated our value. nCompliance Pitfalls in Behavioral Health Programs:...continued from page 47Although we will all employ someone, atsome time in our careers, who may be characterizedas “evil” and who will do “bad” thingsthat can get an organization into trouble, theimplementation of a compliance program willlimit the damage. The training provided toemployees is an integral part of the programand must include material about “right andwrong” and reporting. Beyond this, the trainingrequires shaping for the different groupsfound in behavioral health. The specialtytraining required in guidances is necessaryhere because the varying providers do, in fact,speak different languages.Developing and implementing a complianceprogram in behavioral health organizationsis a challenge, but one which, when met, willprovide an umbrella of protection. nContact Us! www.hcca-info.orginfo@hcca-info.orgFax: 952/988-0146HCCA6500 Barrie Road, Suite 250Minneapolis, MN 55435Phone: 888/580-8373To learn how to place an advertismentin Compliance Today, contactMargaret Dragon:e-mail: margaret.dragon@hcca-info.orgphone: 781/593-4924Health Care Compliance Association • 888-580-8373 • www.hcca-info.org63April 2008

Register beforeAugust 13 andSave $50Save the Date!Qu a l i t y o f Ca r eCo m p l i a nc e ConferenceSeptember 28–30, 2008Doubletree Hotel Philadelphia | Philadelphia, PAAbout the Quality of Care Compliance ConferenceThe Quality of Care Compliance Conference focuses on organizational change:improving quality and compliance for your organization without forgoing thebusiness model. This conference is designed for those involved in improvingtheir organization's quality and compliance initiatives, as well as managers andacademics. Topics include defining how the quality of care initiatives intersect withcompliance and regulations, what pay for performance and improved quality willmean for improved business, and more.April 200864Register now at www.hcca-info.org | 888-580-8373Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

Conflicts of interest:Device makerssettlementsEditor’s note: Judith Waltz is a Partner in theSan Francisco offices of Foley and Lardner,LLP. She may be reached by telephone at415/438-6412 or by e-mail atJWaltz@foley.com.Health care providers and suppliershave long been sensitive tothe government’s concerns aboutpotential conflicts of interest with physicianswho are (or could be) referral sources. Forexample, in the government’s view, a financialrelationship with a particular hospital mightinappropriately influence physicians to refertheir patients to that hospital. Improperremuneration to physicians might, arguably,encourage them to order additional serviceswhich were not medically necessary andreasonable, or to favor a particular provider/supplier of items or services. In summary,from the government’s perspective, financialrelationships with, and remuneration to,physicians may improperly interfere withthe physicians’ medical decision makingabout patient care needs, and result (or couldresult) in increased costs to governmenthealth care programs.The government is now turning its attentionto another sector of the health care industry –medical device manufacturers – and potentialconflicts of interest on the part of physicianthought leaders who have relationships (usuallycalled “arrangements” by governmentenforcers) with those manufacturers. Devicemanufacturers, like pharmaceutical companies,have long recognized that their successdepends upon making their products knownBy Judith A. Waltz, JDto physicians who will prescribe or recommendthe use of their particular product,even if the physician may not be the one whoultimately purchases the product. In additionto their ability to influence current productuse, physicians are also in the best positionto conduct or oversee research which mayexpand future market share, including identifyingadditional clinical uses or adaptationsfor a product.Recent enforcement activity by the Departmentof Justice (DOJ) and the Office of InspectorGeneral of the Department of Healthand Human Services (OIG) demonstrates thegovernment’s current focus on device industryarrangements with physicians which, (as inthe contexts noted above) in the government’sview, may skew independent medical decisionmaking, cause a potential conflict of interestfor the physisican, and represent improperremuneration constituting kickbacks. “Kickbacksto physicians are incompatible witha properly functioning health care system,”said Peter Keisler, Assistant Attorney Generalfor the DOJ’s Civil Division in announcinga settlement with Medtronic Inc. last year.“They corrupt physicians’ medical judgmentand they cause overutilization and misallocationof vital health care resources.”In September 2007, five companies that accountfor nearly 95% of the lucrative marketin hip and knee surgical implants enteredinto agreements with the DOJ to resolveallegations that they used sham consultingagreements and other tactics to induce surgeonsto use their products. These agreementswere alleged to have resulted in violations ofthe federal Anti-kickback Statute, a criminalprohibition against improperly offering orproviding remuneration with the intent toinduce referrals or future business. In a newtwist, four of the manufacturers entered intoDeferred Prosecution Agreements (DPAs),which allows them to avoid prosecution ifthey follow new compliance procedures underfederal monitoring for 18 months. (The fifthmanufacturer entered into a Non-ProsecutionAgreement, under which it agreed to implementall the measures required of the otherfour manufacturers, including the 18 monthsof federal monitoring.) These four manufacturersalso paid a total of $311 millionin penalties, which released them from civilliability, but the fifth did not enter into a civilsettlement. As part of the DPAs, the devicemanufacturers are required to prominentlyfeature on their respective Web sites thename, city, and state of residence for each ofthe manufacturer’s consultants (defined toinclude physicians), along with the paymentsmade to each consultant, both in cash andin-kind.Each of the four orthopedic device manufacturersthat entered into a DPA also enteredinto a Corporate Integrity Agreement (CIA)with the OIG to avoid the potential for exclusionfrom the federal health care programs.(Again, the fifth manufacturer did not enterinto a civil settlement, and consequently receivedno releases for civil liability or from theOIG.) CIAs provide the industry with guidanceas to the operational monitoring whichthe OIG would like, or expect, to see fromsimilarly situated entities. For example, theSeptember 2007 CIA with Smith & Nephew,Inc. requires the creation of a database forall its arrangements (including those withphysicians) with eight required categories ofinformation, including the methodology forContinued on page 66Health Care Compliance Association • 888-580-8373 • www.hcca-info.org65April 2008

Conflicts of interest: Device makers settlements ...continued from page 65determining compensation. This CIA alsorequires tracking of all remuneration to andfrom parties to these arrangements.Device manufacturer enforcement actionshave obviously been lucrative for the federalgovernment. In 2006, Medtronic Inc. agreedto pay the United States $40 million to settlecivil allegations that its Medtronic SofamorDanek division (MSD) paid kickbacks todoctors to induce them to use MSD’s spinalproducts, according to a press release issuedby DOJ. DOJ contended thatthese kickbacks violated theAnti-kickback Statute and theFalse Claims Act. Medtronicalso entered into a CIA as partof the resolution. This investigationwas the result of a qui tamfiling. News reports indicatethat several other investigationsof device manufacturer arrangementswith physicians arecurrently in progress.There are other indications that exposing andlimiting physician relationships with deviceand pharmaceutical manufacturers will bea leading goal for the government in thecoming year. In January 2008, a press releaseissued by the U.S. Attorney’s Office for theEastern District of Arkansas announced theguilty plea of Dr. Patrick Chan, of Searcy, Arkansas.Chan, a neurosurgeon, pleaded guiltyto soliciting and receiving kickbacks from asales representative for several medical companiesthat supplied surgical equipment anddevices that Chan utilized. As of this writing,he has not yet been sentenced. Also accordingto the DOJ press release, in a relatedmatter, a settlement agreement was finalizedin a qui tam lawsuit that was filed againstChan which alleged that Chan violated theFalse Claims Act by accepting kickbacks frommedical device manufacturers and by submittingor causing to be submitted related claimsfor payment from the Medicaid and Medicareprograms. Pursuant to the terms of the quitam settlement agreement, Chan agreed topay $1.5 million, of which $350,000 will bepaid to the relator.In September 2007, Senators CharlesGrassley and Charles Schumer introducedlegislation (the “Physician Payments SunshineAct”) which would require manufacturers ofpharmaceuticals and medical devices withThe government’s current focuson device industry arrangementswith physicians, which may skewindependent medical decisionmaking, cause a potential conflictof interest for the physisican, andrepresent improper remunerationconstituting kickbacks.annual revenues of more than $100 millionto disclose the amount of money given tophysicians (including dinners, vacations, andconsulting fees). Several states already havesimilar mandates. Like the DPA requirementsdiscussed above, which require the manufacturersto report physician arrangements ontheir Web sites, these laws promote transparencyand, presumably, will discourage excessiveor inappropriate relationships.As a result of the increasing scrutiny of thesemanufacturer-physician arrangements, itseems clear that providers, suppliers, andespecially physician groups must considerestablishing policies and procedures which setparameters for physician relationships withproduct manufacturers and distributors. Thisconsideration is recommended even in situationswhere the physicians are not employedby, or contracted with, the provider or supplier,although obviously the risks are greaterwhen physicians are employees (when theiracts in the course of performing their jobs canbe ascribed to the employer). If the productsare inappropriately used by the provider orsupplier as a result of the physician’s conflictof interest (e.g., for medically unnecessaryprocedures, or for procedures with unnecessaryassociated costs), there is an attendantrisk that the government will focus on theentity which submits the claim for reimbursementto a federal health careprogram – i.e., the provider orsupplier. With increasing governmentexpectations for providersand suppliers to provideand be measured on qualitypatient care, the margins forerror have become increasinglynarrow with respect to any factorswhich may skew medicaldecision making as a result ofnon-medical reasons, such as aphysician conflict of interest.Best practicesHealth care providers and suppliers mayconsider using best practices to avoid theenforcement trap, including, but are notlimited to:n Identifying potential risk areas to the provideror supplier that result from physicianarrangements with product manufacturers.n Establishing policies and procedures whichwill, at a minimum, require disclosureof a potential conflict of interest and, inappropriate circumstances, may requirethe physician’s recusal from some decisionmaking. Remember that some physicianrelationships with product manufacturersmay be necessary for, or advantageous to,both the physician and the provider orsupplier (e.g., product training).n Reviewing codes of ethics (or conduct)April 200866Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

and similar guidance published by trade associations such asAdvaMed, Pharmaceutical Research and Manufacturers of America(PhRMA), National Emergency Medicine Association (NEMA), theAmerican Medical Association (AMA), and others, which providebasic guidance on industry contacts with physicians. The OIG’sCompliance Program Guidance for Pharmaceutical Manufacturersmay also provide analogous guidance for device manufacturers, andby extension, the providers and suppliers who use their products.These documents are addressed to the product manufacturers (or,in the case of the AMA, the physicians themselves), but should bereviewed for applicability in the provider and supplier environment,because they are likely to be considered “industry standard” forphysician relationships. Many large academic medical centers havealready implemented policies and procedures for industry contactswith their physicians, which may serve as models for those lookingto adopt their own policies and procedures.n As applicable, reviewing existing arrangements between productmanufacturers and physicians, including, but not limited to, thefollowing, for compliance with applicable laws, regulations, andavailable guidance:n Vendor-sponsored product training and educationn Support for third-party educational conferencesn Sales and promotional meetings with physician participationn Consulting arrangementsn Gifts, paid entertainment, recreation, and mealsn Charitable donationsn Research grantsProviders and suppliers should also examine their own relationshipswith product manufacturers and their representatives, which representthe potential for more direct conflicts of interest.ConclusionDevice manufacturers, following pharmaceutical manufacturers who inturn followed direct health care providers (such as hospitals and nursingfacilities), are now the subject of increased government enforcementactivity. An initial enforcement focus is the manufacturers’ relationshipswith physician thought leaders. Due care must be taken to assure compliancewith all laws and regulations regarding all such arrangements. nThe new edition of this essential guide tohealth care compliance is now availableAuthor Debbie Troklushas revised and updatedCompliance 101 to reflectrecent developments incompliance.The secondedition includes:• Up-to-datecompliance information• A brand-new chapter dedicated toHIPAA regulations• An expanded glossary with additional newterms and definitions• Expanded appendixes, includinga selection of additional new anduser-friendly sample documentsIf you’re planning to become Certified inHealthcare Compliance, Compliance 101 is aninvaluable study aid for the CHC examination.Debbie TroklusGreg WarnerTo order, visit the HCCA Web siteat www.hcca-info.org.Health Care Compliance Association • 888-580-8373 • www.hcca-info.org67April 2008

Corporate Compliance & Ethics WeekMay 25–31, 2008Order YourSupplies NowEach year, CorporateCompliance & Ethics Week iscelebrated the last full weekin May. Co-sponsored by theHealth Care ComplianceAssociation (HCCA) and theSociety of Corporate Complianceand Ethics (SCCE), thefourth Corporate Compliance& Ethics Week will becelebrated May 25–31, 2008.HCCA has a number of itemsavailable for purchase tohelp spotlight complianceand ethics in your organization.Place your order byFriday, May 9, to ensuredelivery before this event.Four colorful glossy posters, 2 ft x 3 ft, each showcasing a different ethical message and includingthe Corporate Compliance & Ethics Week logo (1 each per 4-pack) $25 per 4-pack (min. order 3 packs)Revisit last year’s posters—now with no logo, so you can use them anytime! Four colorful glossy posters,2 ft x 3 ft, each showcasing a different ethical message (1 each per 4-pack) $25 per 4-pack (min. order 3 packs)3˝ color sticker (25/roll)$24.00 per roll2.5˝ stress reliever ball$1.85 ea. (min. order 25)Extra-large 2˝ x 3˝magnetic clip$2.50 ea. (min. order 25)Mini 3˝ flashlight keychain$2.30 ea. (min. order 25)3˝ block of sticky notes$3.75 ea. (min. order 25)Medium-point ballpoint pen (black ink).Includes six compliance messagesthat change with each click$1.99 ea. (min. order 25)Official poster for CorporateCompliance & Ethics Week2 ft x 3 ft glossy color poster$6.25 ea. (min. order 10)Transparent blue waterbottle; polycarbonate plasticand 18 oz. capacity$5 ea. (min. order 10)Stainless steel mug; insulated withscrew-on, spill-resistant lid and 15oz. capacity$5 ea. (min. order 5)Two neon colors in one uniquedouble-ended highlighter$1.85 ea. (min. order 25)Order at www.hcca-info.org, or fax the order form to the Order Fulfillment Center at +1 763 746 9225.Order before May 9 to ensure delivery by Compliance Week!

Health Care Compliance Association6500 Barrie Road, Suite 250, Minneapolis, MN 55435952-988-0146 or 888-580-8373 | www.hcca-info.org(Please call 877-646-9226 for order fulfillment questions.)SUPPLY ORDER FORM (Please allow 10 business days for delivery. Order by May 9 to ensure delivery before the event.)CUSTOMER INFORMATIONCompany NameContact PersonAddressSHIP TO (if different from customer information)Company NameContact PersonAddressCity, State, ZipPhoneEmail(needed for package tracking notification)City, State, ZipPhoneITEM DESCRIPTION PRICE (min. purchase required) Quantity AmountSTAINLESS STEEL MUG $5.00 each (min. order 5) = $25.00 $FLASHLIGHT KEYCHAIN $2.30 each (min. order 25) = $57.50 $STICKER ROLL $24.00 per roll $HIGHLIGHTER $1.85 each (min. order 25) = $46.25 $MAGNETIC CLIP $2.50 each (min. order 25) = $62.50 $STRESS BALL $1.85 each (min. order 25) = $46.25 $WATER BOTTLE $5.00 each (min. order 10) = $50.00 $BALLPOINT PEN $1.99 each (min. order 25) = $49.75 $STICKY NOTE CUBE $3.75 each (min. order 25) = $93.75 $OFFICIAL POSTER $6.25 each (min. order 10) = $62.50 $POSTER 4-PACK (NEW THIS YEAR WITH 2008 LOGO) $25.00 per 4-pack (min. order 3 packs) = $75.00 $POSTER 4-PACK (LAST YEAR’S POSTERS WITHOUT LOGO) $25.00 per 4-pack (min. order 3 packs) = $75.00 $SUBTOTAL $SHIPPINGUPS Ground shipping included in price within My organization is tax exempt SALEs Tax (MN 6.5% & PA 6.0%) $continental U.S. Shipping charges apply outsidecontinental U.S.TOTAL $PAYMENTFAX your credit card or invoice/PO orders to the Compliance Week Order Fulfillment Center at +1 763 746 9225.MAIL your orders paid by check to HCCA, 6500 Barrie Road, Suite 250, Minneapolis, MN 55435.Questions? Call the fulfillment center at 877 646 9226 (US & Canada). (International calls only: +1 952 933 4977.)Bill my credit card: VISA MasterCard AMEX Check enclosed (payable to HCCA) Invoice me Purchase Order NumberCredit Card NumberExp. DateName of Card HolderSignature of Card HolderTax ID: 23-2882664. Your credit card will be charged the correct amount if the total listed is incorrect. We are required to charge sales taxin the states of Minnesota (6.5%) and Pennsylvania (6.0%). Please calculate sales tax for the cost of your products if applicable.

April 200870New HCCA MembersThe Health Care Compliance Associationwelcomes the following new members andorganizations. Please update any contactinformation using the Member Center on theWeb site, or e-mail Karrie Hakenson(karrie.hakenson@hcca-info.org) withchanges or corrections.Alabaman Joan M. Ballard, Norwood Clinic, Inc.n Deborah F. Grimes, JD, UAB UniversityHospitaln Ria Story, East Alabama Medical CenterAlaskan Jeffrey Murchison, Yukon-KuskokwimHealth Corporationn Peachy Williams, KIC Tribal Health ClinicArizonan Steven Calabrese, Sierra Vista RegionalHealth Centern Jaclyn M. Mendez, CPC, Univ PhysiciansHealthcaren Lisa J. Paige, Chandler Regional MedCentern David P. Thomson, PHI Air MedicalArkansasn Dave Ferguson, Wal-MartCalifornian Michele Akbari, CHC, Kaiser Permanenten David C. Alexander, MHA,CHC, KaiserPermanenten Megan A. Bailey, Children’s Hosp ofOrange Ctyn Susie Bernal, AltaMed Health Servicesn Joya M. Bond, Easy Choice Health Plan,Inc.n Lee Dawson, Hospital Compliance, WesternMedical Center Santa Anan Shirell Edmonds, CPC MBA/HCM,Altamed Health Servicesn Annemarie Engelhardt, Kaiser Permanenten Mrs. Sue Flood, Palo Alto Medical Foundationn Elissa Giaimo, CHC, Kaiser Permanenten Alicia M. Gonzales, Kaiser FoundationHlth Plann Donna P. Harper, CHC, Kaiser Foundationn Anna Hayhurst, Kaiser FoundationHospitaln Millicent B. Hunter, CHC, KaiserPermenente-Oakland Med Ctrn Yaman Kahf, Western Medical CenterBusiness Officen Irma Medel, AltaMed Health Servicesn Lee Ann Moore, Talbert Medical Groupn Kathleen E. Murphy, San FranciscoGeneral Hospitaln Ralph Oyaga, Attorney, Pacific Clinicsn PE Quattron Danielle D. Reno, MHA CCS CCS-P,Sutter Healthn Patrice R. Saenz, SyMed Corporationn Julie Salinas, Pueblo Radiologyn Larry Sharfstein, Kaiser Permanenten Gretchen Shenfield, CHC, KaiserPermanenten Colleen Stahl, Gardner Family HlthNetworkn Connie Tharin, Saint Francis MemorialHospn Wendy Tsuei, United Healthcare, Inc.n Nancy J. Wybel-Davis, Western MedicalCenter-AnaheimColoradon Katherine Allen, Centura Health - StAnthony Hospitalsn Barbara Giddings, Biogenidecn Rebecca Hellman, Sorin Group USA, Inc.Conneticutn Zelma Berube, Hartford Hospitaln Michael Kogut, J.D., Murth Cullina, LLPn Janice M. Martin, Norwalk HospitalFloridan James Mark Abernathy, CPA, DeloitteFinancial Advisory Srvsn Amanda Bhikhari, Associate, Huron ConsultingGroupn Elena Crosby, Connextions, Inc.n Stephen J. Dallolio, Jr.n Michelle Fountain, Huron ConsultingGroupn Becky Gant, Salus Rehabilitation, LLCn Ileana Herrera-Pontillo,n Kelly Insignares, PHD, MBA CHA CIPCHC, Univ. of Miamin Juliana Laranjeira Barbosa, DoctorDiabetic Supplyn Diane M. Lerch, Sun Coast Hospitaln James Litridesn Jeffrey L. Myers, Esq, ABEL BANDCharteredn Robert Nicholson, Broad & Casseln Gary W. Portman, Brooks Rehabilitationn Hendrina J. Sleyo, LLB MBA PhD,Hendry Regional Medical Centern Alexis Smith, Baptist Healthn Joni P. Smith, Baptist Healthn David Steckler, Garfunkel Wild & Travis,PCn Carol Taylorn Tom Taylorn Rick Tower, Salus Rehabilitation LLCn Michael Tracyn Maureen A. Wallace, Department ofVeterans Affairsn Darrell White, LifePath Hospice andPalliative Care, Inc.n Laisha Williams, CIA, ProtivitiGeorgian Lynne Anderson, Compliance, DeKalbMedicaln Laurie E. English, McKessonn Robin C. Ginn, MBA, Emory UniversitySchool of Medicinen Thimmiyyia Gosa, Mrs, Consecrated Care,Inc.Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

n Kim King, Kaiser Permenten John D. Lawley, JD, Emory Universityn Vivian F. Lee, Columbus Specialty Hospn Dana G. Mack, Gwinnett Medical Centern Andrew Oreffice, NCDR LLCn Louise Smith, McKesson ProviderTechnologiesn Nakia Smith, Kaiser Permanente, Georgian William F. Springer, Athens Regional MedCtrn Karli Wright, Grande Ronde HospitalHawaiin Dianne Brookins, Alston Hunt Floyd &Ingn Malia L. Lyons, CHC, HI Medical SvcAssociationn Stephany K. Vaioleti, LSW, JD, KahukuHospitalIdahon Lisa Jolliff, CMPE, CHCO, CPC, IdahoEmergency PhysiciansIllinoisn Jenifer L. Bass, Memorial Health Systemn Misti H. Floyd, JD, Swanson, Martin &Bell LLPn Maureen A. Maple, Memorial HealthSystemn Laura K. Merten, Walgreen Con Tammy Pals, FHNn Anna Polyak, Care Centers, Inc.n Christina Roach, RN BSN, SouthernIllinois Healthcaren Mitchell Tannenbaum, AcceleratedRehabilitation Centersn Dianne Willard, MBA,RHIA,CCS-P,Northwestern Memorial Hosp.Indianan Kent Adams, Tri-State OrthopaedicSurgeonsn Maureen Ann Bartolo, MD Wise Incn Jamie Bruce, MDwisen Karin L. Campbell, Midwest ProtonRadiotherapy Instituten Mike P. Fouty, Assoc Physicians &Surgeons Clinic, LLCn John W. Hill, Kelley School of Business-IN Univn Gwendolyn M. Johnson, St VincentHealthn James F. Waddick, MBA, Wishard HealthServicesn Alan Weldy, Goshen Health Systemn Jack H. Wilhelm, King’s Daughters Hosp& Hlth SvcsIowan Debra E. Goss, RN, Life Care RetirementCommunitiesn Susan McGough, FACHE, ShenandoahMemorial Hospitaln Shayan Sheybani, Palmer College ofChiropracticn Sarah E. Valiga, Dallas County HospitalKansasn Serena G. Helvey, RN, Salina SurgicalHospitalKentuckyn Donna M. Elmer, Twin Lakes RegionalMed Ctrn Mary J. Lopez, Anesthesia ComplianceConsultantsn Nancy Mitchell, RN, MHA, ARM, ClarkRegional Med Ctrn Michelle Scottn Rebecca M. Scott, Univ of KY Healthcaren Bridget Shelley, RHIT CPC, ClarkRegional Med Ctrn Jami K. Suver, King’s Daughters Med CtrLouisanan Georgia C. De La Barre, MS CPC-HRMC, Ochsner Health Systemn Paula Early, RN, Medical Center of LAUniv Hospitaln Beverly D. Giammalva, RN BSN,Ochsner Health Systemn Angelle B. Granier, Ochsner HealthSystemn Le Jeanne Harris, LPN CPC, LakePhysicians Networkn Gary L. Kreigh, CIA CFE, OchsnerHealth Systemn Sandra McMillan, Union GeneralHospitaln Faye T. Rogan, FMOL Health Systemn Robert Wicker, BLW Associates LLCMarylandn Susan M. Amrose, MA CPHQ, SheppardPratt Health Systemn Maria E. Brisueno-Burnett, MedStarHealth Systemn Gayle J. Holland, RN BSN, KPMGn Anjali Mulchandani-West, MAXIMUSn Scott A. Nelson, Centers for Medicare &Medicaidn Lyneth Nyabiosi, RHIA Ms, ShepphardPrattn Jennifer R. Shapiro, Ctrs for Medicare &Medicaid Svcsn Sarah Torre, KPMGn Susan Whitecotton, MedStar Health Inc.Manien Darcie E. Ciarcia, Franklin MemorialHospitalMassachusettsn Nicholas A. Accomando, JD, FreseniusMedical Care NAn Carole Bradford, PCHIn Kathy A. Flaherty, Univ of MA MedicalSchooln Lyn A. Henderson, CPC, CCS_P, CHCC,Physician Chart Auditors, LLCn Susan Kee, Tufts Health PlanHealth Care Compliance Association • 888-580-8373 • www.hcca-info.org71April 2008

Your HCCA Staff888-580-8373 | 952-988-0141 | fax 952-988-0146Sarah AnondsonGraphic Artistsarah.anondson@hcca-info.orgAmy AwkerMember Servicesamy.awker@hcca-info.orgGary DeVaanIT Manager/Graphic Artistgary.devaan@hcca-info.orgMargaret DragonDirector of Communicationsmargaret.dragon@hcca-info.orgDarin DvorakDirector of Conferencesand Exhibitsdarin.dvorak@hcca-info.orgWilma EisenmanHR Director/Office Manager/Compliance Officerwilma.eisenman@hcca-info.orgNancy G. GordonManaging Editornancy.gordon@hcca-info.orgMelanie GrossAudio/Web Conference Plannermelanie.gross@hcca-info.orgKarrie HakensonData Entry/Member Relationskarrie.hakenson@hcca-info.orgElizabeth HergertCertification Coordinatorelizabeth.hergert@hcca-info.orgPatti HoskinDatabase Associate/Member Relationspatti.hoskin@hcca-info.orgJennifer JansenConference Plannerjennifer.jansen@hcca-info.orgMeghan KosowskiReceptionistmeghan.kosowski@hcca-info.orgJennifer PowerConference Plannerjennifer.power@hcca-info.orgApril KielDatabase Administrator/Member Relations/Marketingapril.kiel@hcca-info.orgCaroline Lee BivonaProject Specialistcaroline.leebivona@hcca-info.orgPatricia MeesCommunications Editorpatricia.mees@hcca-info.orgMarlene RobinsonAudio Conference Plannermarlene.robinson@hcca-info.orgBeckie SmithConference Plannerbeckie.smith@hcca-info.orgRoy SnellChief Executive Officerroy.snell@hcca-info.orgApril 200872Charlie ThiemChief Financial Officercharlie.thiem@hcca-info.orgNancy VangAdministrative Assistantnancy.vang@hcca-info.orgAllison WillfordAccountantallison.willford@hcca-info.orgJulie WolbersAccountantjulie.wolbers@hcca-info.orgHealth Care Compliance Association • 888-580-8373 • www.hcca-info.org

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s a v e t h e d a t e !Research Compliance AcademyHCCA’s new Research Compliance Academies focus oncompliance issues related solely to research. With a widerange of research-related issues becoming hot topics withenforcement agencies, this academy provides attendees withthe opportunity to get information on many areas that affectresearch compliance officers and their staff on a day-to-daybasis. A small audience encourages hands-on educationaltechniques, small group interaction, and networking.June 9–12, 2008San Francisco, CASeptember 8–11, 2008Lake Buena Vista, FLVisit www.hcca-info.org for registration information and updateswww.hcca-info.org | 888-580-8373