Corporate Compliance Update – 2012

Compliance remains a major focus of the Department of Health and Human Services. Through CMS, the OIG and others, oversight of Medicare and Medicaid reimbursement continues unabated and, in fact, expands. This article summarizes and provides guidance on some of the recent efforts of these departments.

A review of the 2012 Office of Inspector General work plan

Its October again and, as we all expected, the 2012 OIG audit list relative to possible healthcare fraud and abuse has been published. The document is filled with a plethora of new topics and proposed audit activities as well as continuation of audit activities on subjects from years past. The continuation of reviews indicates that the OIG has not satisfied their objectives for the review and should not be construed as losing interest or winding down activities.

This fiscal year’s list holds a few surprise categories with the OIG not providing much clarification or specifics related to the subject to be reviewed. Additionally, the Medicaid program was not spared and many new review activities are planned relating to fraud and abuse activities.

So that healthcare providers may be better prepared in scheduling their own internal monitoring and reviews, we have prepared an overview of some of the more significant 2012 OIG audit topics highlighting the issue and providing insight into the subject matter.

Hospital concerns and guidance


Present on Admission (POA)

The OIG plans to review the accuracy of hospital POA reporting submitted on the acute inpatient hospital claims.

POA indicators are required to be reported for each diagnosis (ICD-9) code. Medicare reimbursement is reduced when certain hospital acquired conditions are identified.

Hospitals should assure current DRG Validation processes, which are traditionally part of Hospital Compliance internal reviews, include validating the present on admission indicator reported on the claim based on documentation in the medical record.

Reliability of hospital reported quality measures

The Plan calls for a review of Hospital internal controls that ensure quality reporting accuracy of data being reported to CMS for Medicare incentive payments. The number of quality reporting indicators has gradually increased from 10 issues in 2003 to a current level of 76. Hospitals not reporting receive a payment reduction for non-reporting.

Hospitals should review current internal procedures used in the validation of quality reporting. Written policy with associated procedures should be adopted. Internal monitoring and quality reviews should include the data collection and reporting process.

Inpatient outlier payments

Hospitals receiving inpatient outliers will be examined nationally, identifying the characteristics of hospitals with high or increasing percentages of cost outlier. Whistleblower lawsuits have increased over the last few years and have resulted in large monetary settlements. Some of the hospitals involved in these lawsuits have been found to have inflated claim charges to qualify for outlier consideration.

Hospitals should adopt policy relating to price setting within the hospital chargemaster. Price setting should be reasonable and have some basis in cost of service.

Review of inpatient and outpatient payments (PPS)

The OIG proposes to use their sophisticated data mining tools as well as computer system matching programs to select claims failing to conform to specific CMS billing requirements. They will focus on those failures to comply with billing instructions that result in hospital overpayments.

This type of review is broad and, without more specific criteria, hospitals will be open to an aggregate of potential review issues. Hospitals are advised to monitor and review billing requirements as published in the Internet Only Manuals.

Acute hospital / hospice transfers

The government will review Hospice relationships (ownership) with acute hospitals as it relates to under arranged general inpatient care. Reviews will center on claims for patients who during the course of inpatient hospital care or in a post hospital discharge status are admitted to Hospice for general inpatient care.

Hospitals with Hospice ownership or contractual arrangements for Inpatient Care should review current Hospice admission criteria as well as hospital discharge planning processes through case management. It appears that the OIG plans to review claims history for patterns showing patient election to the Hospice benefit that are routinely transferred from acute hospital settings for Hospice General Inpatient care. General inpatient care is a level of care paid to Hospices on a per day basis and is similar to acute inpatient care benefits paid under PPS.

Outpatient hospital dental claims

Medicare considers dental services to be excluded from Medicare coverage. The OIG plans to investigate hospital outpatient claims adjudicated to payment for dental related services and possible provider overpayments.

Hospitals should assure procedures are in place in the billing office to prevent claim submissions to Medicare for non-covered statutory excluded services. This process should include screening for non-covered services but also related and incidental services associated with these non-covered services.

Medicare payment for Herceptin and other drugs

The OIG plans to review claims with pharmacy charges for drugs supplied in multi-vial uses but billed with units possibly reflecting single dose vials indicating possible drug waste and Medicare overpayment.

Additional reviews are planned for basic pharmacy billing concentrating on units as they relate to Medicare pass thru payments.

Hospitals with pharmacy modules using drug unit conversion tables to support billing based on HCPC definitions should plan for internal reviews to assure accuracy in the reporting of units associated with drugs supplies by multi-user vials and single dose vials.

Critical access hospitals

Critical access hospitals (CAHs) are not exempt from OIG scrutiny. A new objective this year will be to review CAHs in order to profile them as to their size, the number of patients, services provided and their distance from other hospitals. The OIG will also be reviewing compliance with the CAH conditions of participation.

From what little guidance has been provided, it appears the OIG is not only ensuring that CAHs continue to meet the fairly strict eligibility requirements, but is also gathering somewhat general data on the types of services provided (to be used down the road?). CAHs should ensure they meet all distance, bed size and average length of stay requirements as well as other CoP.


The Work Plan adds topics of interest and continues to support the OIG’s concern and continuation of reviews associated with State Medicaid program involvement with drug rebate programs, State coverage under the Home Community and Personal Care services, State provider and supplier reimbursement policies, provider termination and the Medicaid integrity program audits.

Physician concerns and guidance

Place of service errors

The OIG continues to review place of service assignment for services rendered in ambulatory surgical centers and outpatient departments of hospitals. Since physician, including non-physician practitioner (NPP), reimbursement is paid at a higher rate when services are rendered in the non-facility setting such as the office, the OIG is concerned that physician practices are not assigning the correct place of service when patients receive care in outpatient departments of a hospital or other non-office settings.

This can be a major issue if your practice has become a department of a hospital (known in Medicare parlance as a Provider Based Entity (PBE)). As a PBE, the practice becomes integrated into the facility and, as such, holds itself out as a department of the hospital. Medicare patients are considered hospital outpatients when they receive services at a PBE and, as such, their visits must be billed with an outpatient place of service code.

OIG issue: incident-to services

This is a new issue for the OIG but an old concern. They want to find out if services not personally performed by a physician but billed under the physician’s name (incident-to) are being reported appropriately. They state their concern as: there is no way to confirm from claims data which services billed are performed incident-to; a 2009 OIG review found 21 percent of services reviewed were performed by non-qualified personnel.

What is Incident-To?

Medicare defines incident-to as the services or supplies that are furnished as an integral although incidental part of the physician’s professional services.

Incident-to requirements include: the service must be an integral part of the physician’s plan of care (services may not be for a new patient or a new problem); on-going physician involvement; direct personal supervision by the physician. In addition, both the physician and NPP/auxiliary personnel must have a direct employment relationship or is a leased employee or must be employed by the same group AND the physician must be present in the office suite and immediately available if needed. Service must be provided in the office or in the home, other non-hospital or SNF setting. If these requirements are met, the service may be billed under the supervising physician’s name. See the Medicare Benefit Policy Manual (pub 100-2), Chapter 15, Covered Medical and Other Health Services, Subsection 60, Service and Supplies for more information.

Let’s not forget; the person performing the service must be qualified and the services must be medically necessary. That means different things depending upon what services are performed. For example, it is within the scope of a registered nurse’s license to perform the insertion of a non-indwelling bladder catheter but not in a medical assistant’s scope. So, in this example, if the physician ordered the insertion of the catheter for a sterile urine specimen, the service could be considered a billable incident-to procedure if performed by a RN (if all the other incident-to requirements are met) but non billable if performed by a medical assistant.

To support billing services incident-to documentation must include: the name of the physician whose care plan is being followed, the reason for the visit, a description of the services being rendered and the name of the physician/NPP who is supervising at the time the service is being provided. NHIC, our J-14 MAC, also requires that the supervision provider co-sign the note.

What to Do:

Educate your staff on the specific requirements surrounding incident-to services and billing. Make sure documentation supports the incident-to service. You may have to revise your documentation templates and workflows to make sure you are being compliant.

Evaluation and management services (multiple issues)

Trends in coding of claims

The OIG is continues to review E/M services for aberrant billing patterns. The goal is to confirm that the appropriate level and type of E/M service is being billed.

What to do:

We have been living with this type of scrutiny for decades. The key is to provide ongoing education and training to your practitioners and continue your chart review activities to ensure compliance.

Services provided during global surgery periods

This is a continued review of practices related to the number of follow-up E/M services provided by physicians as part of the global surgery period to determine whether the practices have changed since the global surgery fee concept was introduced.

Use of modifiers during the global surgery period (new)

This is a natural addition related to the review of global surgery periods. The only way to pull a service out of the global window for separate payment is to append a modifier (i.e. 24, 57). The OIG wants to determine if services provided during a global surgical period and billed with any of the aforementioned modifiers are being reimbursed appropriately. The concern is that the application of one of these modifiers is correctly identifying the service billed as being outside/unrelated to the global procedure.

Potential inappropriate payments

As electronic health records (EHRs) proliferate, the OIG says it will continue to target over documented/ “cloned” E/M services as an area for review.

Per Medicare IOM Manuals 100-04 Chapter 12 Section 30.6.1.A: “Medical necessity of a service is the overarching criterion for payment in addition to the individual requirements of a CPT® code. It would not be medically necessary or appropriate to bill a higher level of evaluation and management service when a lower level of service is warranted. The volume of documentation should not be the primary influence upon which a specific level of service is billed. Documentation should support the level of service reported.”

The take home on this one is to make sure you review your EHR to identify how/if copying of previous visits are allowed. If information is copied forward, is it identified as historical data or treated as “brand new” for that date of service? Critically look at your templates. Are they overly prefilled? Does the practitioner’s history of present illness contradict the review of systems? Does the history contradict the exam? Most importantly, does the acuity of the medical decision making support the level of service billed? In simple terms, was it medically necessary to document a comprehensive history and exam for a patient with a stubbed toe?

Expect this issue to continue to be an area of review as EHR’s implementation continues. Due diligence is going to be required to assure that acuity supports the code billed.

Other physician issues in brief

Compliance with Assignment Rules: The OIG will continue to review whether providers are complying with assignment rules and determine to what extent beneficiaries are inappropriately billed in excess of amounts allowed by Medicare.

Part B Imaging Services: Part B imaging services will continue to be reviewed to determine whether the services reflect expenses incurred and whether the utilization rates reflect industry practices.

Diagnostic Radiology Services: Medical necessity will continue to be reviewed for high dollar imaging as well as reviews of duplicate services being ordered by different specialists.

Sleep Testing: the OIG is concerned that there has been an expediential increase in the number of sleep studies billed from 2001-2009. They are reviewing to confirm the medical necessity of sleep studies billed.

Summary of the OIG Work Plan

In its spring 2011 report to Congress (covering the 6 month period ended March 31, 2011), the OIG reported expected recoveries of approximately $3.4 billion, $3.2 billion of which related to its investigations and the remainder related to audit receivables. The OIG also, for the first time, instituted a “Most Wanted Fugitives” list on its website with the 10 profiled individuals allegedly perpetrating frauds in excess of $126.6 million. Four of the fugitives have already been captured, which made room for additions to the “10 most wanted” list. While 10 are highlighted on its website, more than 170 are sought by the OIG. It is clear, based on the successes described in its semi-annual report to Congress and on its website, that the OIG will remain extremely active in its audit and review activities of all provider types.

Other compliance considerations, in brief

3 Day Payment Window: CMS has clarified in its final inpatient PPS rule that the 3 day payment window applies to both preadmission diagnostic and nondiagnostic services furnished to patients by physicians that are wholly owned or wholly operated by the admitting hospital. This can have significant implications for those physicians and physician practices that are not provider-based entities but are wholly owned or operated by a hospital.

PEPPER reports: A hospital’s PEPPER report (Program for evaluating payment patterns report) can be a very effective tool for assisting in compliance. If aberrations are identified on this report, hospitals can use this information to help prioritize internal compliance efforts.

Medicaid Recovery Audit Contractors: On September 16, 2011, CMS issued a final rule on the Medicaid recovery audit contractor program, with an effective date of January 1, 2012. This rule provides guidance to states relating to start up and operational costs, payment methodology to the Medicaid RACs and direction on adequate appeal processes, among other operational issues.

And last but not least, Accountable Care Organizations

On October 20, 2011, CMS released its final rule on accountable care organizations. Simultaneously, CMS and the OIG released an interim final rule with comment period. For ACOs, this interim final rule establishes waivers of the application of:

  • The Physician Self-Referral Law
  • The Federal anti-kickback statute, and
  • Certain civil monetary penalties law provisions

These waivers will apply to specified arrangements involving ACOs, including those ACOs participating in the Advance Payment Initiative. These waivers are authorized by Section 1899(f) of the Act, as added by the Affordable Care Act, and authorized the Secretary to waive certain fraud and abuse laws as necessary to carry out the provisions of Section 1899 of the Act. The waivers will be effective on the date of publication in the Federal Register, which, as of the date of this writing, is unknown.

In addition, to coincide with CMS’ release of the final ACO rule, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) issued their final Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program. The final policy is far different from the originally proposed one earlier this year. The entire statement now generally applies to all collaborations among otherwise independent providers and provider groups intending to participate in the shared savings program. The exception would be for those providers who request a voluntary expedited antitrust review. Further, since mandatory antitrust review will no longer be required, the FTC and DOJ removed language relating to that original provision.


The Department of Health and Human Services, through its agencies, is remaining ever vigilant in its oversight of Medicare and Medicaid payments to healthcare providers across the continuum of care. The future appears no different and, in fact, appears to include even more oversight than currently exists. Providers should carefully review and analyze each of the many work plans and rules that have been published in the past few months in order to determine applicability to each individual circumstance. The result should be to proactively assess the impact to the individual organization as proper planning and oversight is instrumental to a successful compliance outcome.

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Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, investment, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.

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