1. INTRODUCTION

The Office of Inspector General ("OIG") of the Department of Health and Human Services ("HHS") recently published its Compliance Program Guidance for Home Health Agencies ("HHA Compliance Program Guidance"). 63 Fed. Reg. 42,410 (August 7, 1998). This is the third formal OIG effort to promote the voluntary development and implementation of compliance programs for the health care industry. The first, a Model Compliance Plan for Clinical Laboratories, was published in the Federal Register on March 3, 1997, and the second, Compliance Program Guidance for Hospitals, was published in the Federal Register on February 23, 1998.

The HHA Compliance Program Guidance is intended to provide guidance to home health agencies ("HHAs") in developing effective voluntary compliance programs to promote adherence to the requirements of applicable federal and state law as well as to the requirements of private payor programs. It is not a model compliance program, since compliance programs are to be individualized to fit the needs of the specific HHA.

The HHA Compliance Program Guidance is similar in many respects to the Compliance Program Guidance for Hospitals in outlining a basic framework for a compliance program and various regulatory areas to be addressed. The HHA Compliance Program Guidance is quite detailed like the previous Compliance Program Guidance for Hospitals but, in addition, the HHA Compliance Program Guidance very specifically addresses numerous other issues which affect HHAs.

The HHA Compliance Program Guidance contains the same seven basic elements as the hospital compliance guidance. These elements are based on the Federal Sentencing Guidelines. Thirty-one "risk" areas are described in considerable detail (almost double the number of risk areas identified in the hospital guidance), including: billing accuracy; complete, timely and accurate documentation; quality of care issues including underutilization and billing for substandard care; compensation programs with incentives for number of visits performed/revenue generated; and knowing failure to return overpayments. Notably absent is any reference to HHA surety bonds, reflecting the uncertain nature of that proposed HCFA initiative. Many of the risk factors include a specific reference to "billing" or are otherwise related to accounting or reimbursement functions. The HHA Compliance Program Guidance also focuses on HHA responsibility for the actions of its medical staff, subcontractors, and other agents. In addition, HHAs are advised to carefully research the background of employees, staff, and independent contractors to determine whether there have been any adverse actions including criminal sanctions, exclusion, debarment, or adverse licensing actions.

In view of the length and complexity of the HHA Compliance Program Guidance, this memorandum will focus only on selected features of the document that we believe will be of greatest interest to our clients. Please feel free to contact us, however, if you would like additional information about any aspect of the HHA Compliance Program Guidance.

A. Seven Mandatory Elements

The HHA Compliance Program Guidance requires that an HHA compliance program include all of the following seven elements:

• Developing written standards of conduct, policies, and procedures;

• Designating a Chief Compliance Officer and a Compliance Committee;

• Conducting effective training and education for all employees;

• Developing a reporting system to receive complaints;

• Responding to allegations of offenses and enforcing disciplinary guidelines;

• Auditing and monitoring compliance; and

• Investigating and remediating systemic problems and preventing the employment of sanctioned individuals.

While the HHA Compliance Program Guidance makes all seven elements mandatory, it notes that full implementation may not be immediately feasible for all HHAs. The OIG further acknowledges that HHAs will need time to react to the changes specified in the HHA Compliance Program Guidance.

B. High Risk Areas

The HHA Compliance Program Guidance identifies 31 risk areas of special concern to the OIG, for which the OIG recommends that HHAs develop individual policies and procedures, along with appropriate training and educational programs. These risk areas include:

• Billing for items or services not actually rendered;

• Billing for medically unnecessary services;

• Duplicate billing;

• False cost reports;

• Failure to refund credit balances;

• Incentives to referral sources that violate anti-kickback statutes;

• Discriminatory admission and discharge;

• The "Stark" physician self-referral law;

• Billing for patients who are not homebound;

• Overutilization and underutilization;

• Knowing billing for inadequate or substandard care;

• Insufficient documentation;

• Services provided by unqualified or unlicensed clinical personnel;

• Falsified plans of care;

• Inadequate supervision of subcontractors;

• Improper influence by hospitals that own HHAs;

• Disregard of willing and able caregivers; and
• Knowing failure to return overpayments.

Other risk areas identified by the OIG include: joint ventures, billing for coordination costs, false dating of nursing notes and physician certifications, forged signatures, improper marketing activities, patient abandonment, misuse of provider numbers, duplication of services, and failure to comply with licensing requirements and Medicare conditions of participation. Each of these areas is discussed in considerable detail, with the expectation that HHAs’ compliance programs will include specific written policies and procedures governing each.

1. Claims Development And Submission

With respect to the reimbursement process, an HHA’s written policies and procedures should reflect and reinforce current federal health care requirements regarding the submission of claims and cost reports. The policies must create a mechanism for the billing staff to communicate effectively and accurately with the clinical staff. Policies and procedures should:

• Provide for sufficient and timely documentation of all services prior to billing;

• Emphasize that a claim should be submitted only when appropriate, and should include legible documentation supports the claim in adequate detail;

• Indicate that codes for home health services should be based on the patient’s medical record and comply with coding rules and guidelines;

• Provide that the compensation for billing personnel should not offer any financial incentive to submit claims; and

• Establish a process for both pre- and post-submission review to ensure that claims are accurate and documented.

The OIG recommends that, at a minimum, a statistically valid sample of claims should be reviewed both before and after billing is submitted. Particular attention should be paid to issues associated with medical necessity, homebound status, physician certification, and qualifying services to establish coverage eligibility.

2. Cost Reports

The HHA Compliance Program Guidance includes an extensive discussion of various cost reporting issues. Some of the cost report issues highlighted by the OIG include ensuring that:

• Costs are based on appropriate and accurate documentation;

• Unallowable costs are not claimed for reimbursement;

• Allowable and unallowable costs in a single account are properly allocated;

• Allocations of costs to central office cost centers are proper;

• Costs are properly classified;

• Fiscal intermediary prior year audit adjustments are implemented and either not claimed for reimbursement or are clearly identified as protested amounts;

• All related parties are identified and related party charges are reduced to cost;

• Management fees are reasonable and necessary;

• Overpayments are reflected in the appropriate cost report; and

• Procedures are implemented for communicating with intermediaries when errors are discovered.

3. Retention Of Records

The OIG recommends that HHA compliance programs implement a record system which establishes policies and procedures regarding the creation, distribution, retention, storage, retrieval, and destruction of documents. Three types of records should be covered under the compliance plan: first, those records and documentation required under federal or state law for participation in federal health care programs; second, all records and documentation that support the HHA’s cost report and home office cost statement; and third, those records required to protect the integrity of the HHA’s compliance process and confirm its effectiveness.

4. Compliance As An Element Of A Performance Plan

HHA compliance plans are to require that employee evaluations assess an employee’s adherence to the compliance program. In addition, managers and supervisors are to be sanctioned for failing to adequately instruct their subordinates or for failing to detect noncompliance. The HHA Compliance Program Guidance also suggests that employees have a duty to investigate the accuracy and completeness of claims before they are submitted, and the HHA cannot avoid liability simply because a physician ordered the services.

5. Responding To Detected Offenses

a. Timing

The OIG states that whenever there are "reasonable indications of suspected noncompliance," the Chief Compliance Officer or other management officials must "immediately" initiate steps to investigate. If a material violation of law or the requirements of the compliance program has occurred, the Chief Compliance Officer must take "decisive" steps to correct the problem, which may include:

• An immediate referral to criminal and/or civil authorities;

• A corrective action plan (developed with advice from counsel);

• A report to the government; and

• The submission of any overpayment, if applicable.

According to the OIG, if credible evidence of misconduct is discovered and if, after a reasonable inquiry, there is reason to believe that the misconduct "may" violate criminal, civil, or administrative law, the HHA is to report promptly to the appropriate governmental authority, no more than 60 days after determining there is credible evidence of a violation. It is also important to note that the 60 day period does not begin running immediately but may start after some period of investigation (enabling the HHA to determine whether or not there is credible evidence). Advice from the HHA’s in-house counsel or an outside law firm may be sought to determine the extent of liability and to plan the appropriate course of action.

The OIG goes on, however, to add certain restrictions by providing that some violations may be so serious that they warrant immediate notification, prior to or simultaneous with the commencement of an internal investigation. Such immediate notification might be necessary, according to the OIG, if the conduct (1) is a clear violation of criminal law; (2) has a significant adverse effect on the quality of care provided to beneficiaries; or (3) indicates evidence of a systemic failure to comply with applicable laws or other standards of conduct. In addition, the OIG warns against limiting the scope of an internal audit to current billing because it may fail to uncover major deficiencies and lead to liability. This approach may be problematic for those HHAs that wish to implement a compliance plan without undertaking a comprehensive review of past practices.

b. Records Of Investigation

During the course of an HHA’s investigation, the OIG directs that the records of the investigation should contain not only documentation of the violation and a description of the investigative process, but also copies of interview notes and key documents, a log of the witnesses interviewed and the documents reviewed, and the results of the investigation. The procedures to be followed and documents to be maintained are described in considerable detail, raising some question as to whether it will be more difficult to withhold these documents on grounds of attorney-client and/or work product privilege once the government is contacted in connection with an alleged violation.

c. Overpayments

There is a significant discussion of the need for the HHA to promptly return overpayments (and the knowing failure to return overpayments is identified as a high risk issue). Where potential fraud or False Claims Act liability is not involved, the HHA is directed to use normal repayment channels as the appropriate vehicle for repaying identified overpayments. We note, however, that the HHA Compliance Program Guidance provides that overpayments are to be returned in addition to appropriate reporting to the government. According to the OIG, an HHA cannot necessarily return the overpayments and avoid notifying the government authorities.

5. Employee Education And Discipline Policy

The OIG states that the compliance program should include a written policy statement setting forth the degrees of disciplinary actions that may be imposed upon corporate officers, managers, employees, and other health care professionals for a wide range of compliance violations including failure to comply with the HHA’s standards and policies and applicable statutes and regulations. Intentional or reckless noncompliance should subject transgressors to significant sanctions. Such sanctions could range from oral warnings to suspension, termination, or financial penalties. Each situation must be considered on a case-by-case basis to determine the appropriate sanction. The written standards of conduct should elaborate on the procedures for handling disciplinary problems and those who will be responsible for taking appropriate action. Managers and supervisors should be made aware that they have a responsibility to discipline employees in an appropriate and consistent manner.

6. Auditing And Monitoring

The OIG notes that audits should focus on the HHA’s programs or divisions, as well as external relationships with third party contractors. The extent and frequency of such audits may vary depending upon available resources, prior compliance history, and individual risk factors. The OIG even goes so far as to suggest that HHAs interview referring physicians. At a minimum, these audits should be designed to address the HHA’s compliance with laws governing:

• Kickback arrangements;

• The physician self-referral prohibition;

• Claims development and submission;

• Reimbursement;

• Cost reporting; and

• Marketing.

In particular, the OIG suggests that audits should inquire into the HHA’s compliance with Medicare conditions of participation and those rules and policies that have been the focus of particular attention on the part of fiscal intermediaries and law enforcement authorities generally, as well as those areas that have been of specific concern with reference to that individual HHA. The OIG recommends that when a compliance program is established, a baseline assessment or "snapshot" should be undertaken from which the Chief Compliance Officer and others can judge the HHA’s progress.

Overpayments discovered as a result of the audit process should be returned promptly to the affected payor with appropriate documentation and a thorough explanation of the reason for the refund. The audit process also should include a review of any reserves established for payment that may be owed to any federal program. Any reserves that should have been paid to such program should be paid promptly, regardless of whether demand has been made for such payment.

7. The Chief Compliance Officer And Compliance Committee

The OIG believes that it is not advisable for the compliance function to be subordinate to the in-house counsel or chief financial officer. Specifically, the OIG states that free-standing compliance functions help to ensure independent and objective legal reviews and financial analyses of the institution’s compliance efforts and activities. Although the OIG recognizes that an HHA’s size and structure will not always permit such separation, it recommends differentiating the compliance function from these key management positions in order to promote a system of checks and balances. The OIG recommends that a Compliance Committee be established to advise the Compliance Officer and assist in the implementation of the compliance program.

III. Conclusion

The comprehensive scope of the HHA Compliance Program Guidance would appear to make the cost of compliance quite substantial. Numerous risk areas are identified and HHA obligations are described in great detail, thereby eliminating some of the flexibility needed to customize a compliance plan to fit an individual agency’s needs. Moreover, the OIG seems to be suggesting that HHAs face increasing responsibility for the actions of their subcontractors and other agents.

HHAs also should remember the OIG’s specific warning that the HHA Compliance Program Guidance may be modified and expanded as the OIG obtains more information, and to reflect changes in the laws, rules, policies, and procedures of federal, state, and private health plans. In the interim, the OIG is working on guidance for other industries including third-party billing companies, health maintenance organizations, and durable medical equipment suppliers.

Please do not hesitate to contact Elizabeth Carder, Linda Baumann, Stephen Cohen, or any other member of the Reed Smith health care group with whom you work if you would like additional information, or if you need assistance in addressing corporate compliance issues for your organization.