59434 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices

technology to minimize the information

collection burden.

(1) Type of Information Collection

Request: New Collection;

Title of Information Collection:

Employee Building Pass Application

and File;

Form No.: HCFA–730 & 182 (OMB#

0938–NEW);

Use: The purpose of this system and

the forms are to control United States

Government Building Passes issued to

all HCFA employees and non-HCFA

employees who require continuous

access to HCFA buildings in Baltimore

and other HCFA and HHS buildings.;

Frequency: Other; as needed;

Affected Public: Federal Government,

and business or other for-profit;

Number of Respondents: 150;

Total Annual Responses: 150;

Total Annual Hours: 37.50.

(2) Type of Information Collection

Request: Extension of a currently

approved collection;

Title of Information Collection:

Limitation on Liability and Information

Collection Requirements Referenced in

42 CFR 411.404, 411.406, and 411.408;

Form No.: HCFA–R–77 (OMB# 0938–

0465);

Use: The Medicare program requires

to provide written notification of

noncovered services to beneficiaries by

the providers, practitioners, and

suppliers. The notification gives the

beneficiary, provider, practitioner, or

supplier knowledge that Medicare will

not pay for items or services mentioned

in the notification. After this

notification, any future claim for the

same or similar services will not be paid

by the program and the affected parties

will be liable for the noncovered

services.;

Frequency: Other; as needed;

Affected Public: Individuals or

households;

Number of Respondents: 890,826;

Total Annual Responses: 3,563,304;

Total Annual Hours: 296,942.

To obtain copies of the supporting

statement for the proposed paperwork

collections referenced above, access

HCFA’s Web Site Address at http://

www.hcfa.gov/regs/prdact95.htm, or Email your request, including your

address and phone number, to

Paperwork@hcfa.gov, or call the Reports

Clearance Office on (410) 786–1326.

Written comments and

recommendations for the proposed

information collections must be mailed

within 30 days of this notice directly to

the OMB Desk Officer designated at the

following address: OMB Human

Resources and Housing Branch,

Attention: Allison Eydt, New Executive

Office Building, Room 10235,

Washington, D.C. 20503.

Dated: September 11, 2000.

John P. Burke III,

HCFA Reports Clearance Officer, HCFA,

Office of Information Services, Security and

Standards Group, Division of HCFA

Enterprise Standards.

[FR Doc. 00–25581 Filed 10–4–00; 8:45 am]

BILLING CODE 4120–03–P

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Office of Inspector General

OIG Compliance Program for

Individual and Small Group Physician

Practices

AGENCY: Office of Inspector General

(OIG), HHS.

ACTION: Notice.

SUMMARY: This Federal Register notice

sets forth the recently issued

Compliance Program Guidance for

Individual and Small Group Physician

Practices developed by the Office of

Inspector General (OIG). The OIG has

previously developed and published

voluntary compliance program guidance

focused on several other areas and

aspects of the health care industry. We

believe that the development and

issuance of this voluntary compliance

program guidance for individual and

small group physician practices will

serve as a positive step towards assisting

providers in preventing the submission

of erroneous claims or engaging in

unlawful conduct involving the Federal

health care programs.

FOR FURTHER INFORMATION CONTACT:

Kimberly Brandt, Office of Counsel to

the Inspector General, (202) 619–2078.

SUPPLEMENTARY INFORMATION:

Background

The creation of compliance program

guidances is a major initiative of the

OIG in its effort to engage the private

health care community in preventing

the submission of erroneous claims and

in combating fraudulent conduct. In the

past several years, the OIG has

developed and issued compliance

program guidances directed at a variety

of segments in the health care industry.

The development of these types of

compliance program guidances is based

on our belief that a health care provider

can use internal controls to more

efficiently monitor adherence to

applicable statutes, regulations and

program requirements.

Copies of these compliance program

guidances can be found on the OIG web

site at http://www.hhs.gov/oig.

Developing the Compliance Program

Guidance for Individual and Small

Group Physician Practices

On September 8, 1999, the OIG

published a solicitation notice seeking

information and recommendations for

developing formal guidance for

individual and small group physician

practices (64 FR 48846). In response to

that solicitation notice, the OIG received

83 comments from various outside

sources. We carefully considered those

comments, as well as previous OIG

publications, such as other compliance

program guidance and Special Fraud

Alerts, in developing a guidance for

individual and small group physician

practices. In addition, we have

consulted with the Health Care

Financing Administration and the

Department of Justice. In an effort to

ensure that all parties had a reasonable

opportunity to provide input into a final

product, draft guidance for individual

and small group physician practices was

published in the Federal Register on

June 12, 2000 (65 FR 36818) for further

comments and recommendations.

Components of an Effective Compliance

Program

This compliance program guidance

for individual and small group

physician practices contains seven

components that provide a solid basis

upon which a physician practice can

create a voluntary compliance program:

• Conducting internal monitoring and

auditing;

• Implementing compliance and

practice standards;

• Designating a compliance officer or

contact;

• Conducting appropriate training

and education;

• Responding appropriately to

detected offenses and developing

corrective action;

• Developing open lines of

communication; and

• Enforcing disciplinary standards

through well-publicized guidelines.

Similar components have been

contained in previous guidances issued

by the OIG. However, unlike other

guidances issued by OIG, this guidance

for physicians does not suggest that

physician practices implement all seven

components of a full scale compliance

program. Instead, the guidance

emphasizes a step by step approach to

follow in developing and implementing

a voluntary compliance program. This

change is in recognition of the financial

and staffing resource constraints faced

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices 59435

1For the purpose of this guidance, the term

‘‘physician’’ is defined as: (1) a doctor of medicine

or osteopathy; (2) a doctor of dental surgery or of

dental medicine; (3) a podiatrist; (4) an optometrist;

or (5) a chiropractor, all of whom must be

appropriately licensed by the State. 42 U.S.C.

1395x(r).

2Much of this guidance can also apply to other

independent practitioners, such as psychologists,

physical therapists, speech language pathologists,

and occupational therapists.

3Currently, the OIG has issued compliance

program guidance for the following eight industry

sectors: hospitals, clinical laboratories, home health

agencies, durable medical equipment suppliers,

third-party medical billing companies, hospices,

Medicare+Choice organizations offering

coordinated care plans, and nursing facilities. The

guidance listed here and referenced in this

document is available on the OIG web site at http:/

/www.hhs.gov/oig in the Electronic Reading Room

or by calling the OIG Public Affairs office at (202)

619–1343.

4The OIG has issued Advisory Opinions

responding to specific inquiries concerning the

application of the OIG’s authorities, in particular,

the anti-kickback statute, and Special Fraud Alerts

setting forth activities that raise legal and

enforcement issues. These documents, as well as

reports from the OIG’s Office of Audit Services and

Office of Evaluation and Inspections can be

obtained via the Internet address or phone number

provided in Footnote 3. Physician practices can also

review the Health Care Financing Administration

(HCFA) web site on the Internet at http://

www.hcfa.gov, for up-to-date regulations, manuals,

and program memoranda related to the Medicare

and Medicaid programs.

by physician practices. The guidance

should not be viewed as mandatory or

as an all-inclusive discussion of the

advisable components of a compliance

program. Rather, the document is

intended to present guidance to assist

physician practices that voluntarily

choose to develop a compliance

program.

Office of Inspector General’s

Compliance Program Guidance for

Individual and Small Group Physician

Practices

I. Introduction

This compliance program guidance is

intended to assist individual and small

group physician practices (‘‘physician

practices’’) 1 in developing a voluntary

compliance program that promotes

adherence to statutes and regulations

applicable to the Federal health care

programs (‘‘Federal health care program

requirements’’). The goal of voluntary

compliance programs is to provide a

tool to strengthen the efforts of health

care providers to prevent and reduce

improper conduct. These programs can

also benefit physician practices2 by

helping to streamline business

operations.

Many physicians have expressed an

interest in better protecting their

practices from the potential for

erroneous or fraudulent conduct

through the implementation of

voluntary compliance programs. The

Office of Inspector General (OIG)

believes that the great majority of

physicians are honest and share our goal

of protecting the integrity of Medicare

and other Federal health care programs.

To that end, all health care providers

have a duty to ensure that the claims

submitted to Federal health care

programs are true and accurate. The

development of voluntary compliance

programs and the active application of

compliance principles in physician

practices will go a long way toward

achieving this goal.

Through this document, the OIG

provides its views on the fundamental

components of physician practice

compliance programs, as well as the

principles that a physician practice

might consider when developing and

implementing a voluntary compliance

program. While this document presents

basic procedural and structural

guidance for designing a voluntary

compliance program, it is not in and of

itself a compliance program. Indeed, as

recognized by the OIG and the health

care industry, there is no ‘‘one size fits

all’’ compliance program, especially for

physician practices. Rather, it is a set of

guidelines that physician practices can

consider if they choose to develop and

implement a compliance program.

As with the OIG’s previous

guidance, 3 these guidelines are not

mandatory. Nor do they represent an allinclusive document containing all

components of a compliance program.

Other OIG outreach efforts, as well as

other Federal agency efforts to promote

compliance,4 can also be used in

developing a compliance program.

However, as explained later, if a

physician practice adopts a voluntary

and active compliance program, it may

well lead to benefits for the physician

practice.

A. Scope of the Voluntary Compliance

Program Guidance

This guidance focuses on voluntary

compliance measures related to claims

submitted to the Federal health care

programs. Issues related to private payor

claims may also be covered by a

compliance plan if the physician

practice so desires.

The guidance is also limited in scope

by focusing on the development of

voluntary compliance programs for

individual and small group physician

practices. The difference between a

small practice and a large practice

cannot be determined by stating a

particular number of physicians.

Instead, our intent in narrowing the

guidance to the small practices subset

was to provide guidance to those

physician practices whose financial or

staffing resources would not allow them

to implement a full scale, institutionally

structured compliance program as set

forth in the Third Party Medical Billing

Guidance or other previously released

OIG guidance. A compliance program

can be an important tool for physician

practices of all sizes and does not have

to be costly, resource-intensive or timeintensive.

B. Benefits of a Voluntary Compliance

Program

The OIG acknowledges that patient

care is, and should be, the first priority

of a physician practice. However, a

practice’s focus on patient care can be

enhanced by the adoption of a voluntary

compliance program. For example, the

increased accuracy of documentation

that may result from a compliance

program will actually assist in

enhancing patient care. The OIG

believes that physician practices can

realize numerous other benefits by

implementing a compliance program. A

well-designed compliance program can:

• Speed and optimize proper

payment of claims;

• Minimize billing mistakes;

• Reduce the chances that an audit

will be conducted by HCFA or the OIG;

and

• Avoid conflicts with the selfreferral and anti-kickback statutes.

The incorporation of compliance

measures into a physician practice

should not be at the expense of patient

care, but instead should augment the

ability of the physician practice to

provide quality patient care.

Voluntary compliance programs also

provide benefits by not only helping to

prevent erroneous or fraudulent claims,

but also by showing that the physician

practice is making additional good faith

efforts to submit claims appropriately.

Physicians should view compliance

programs as analogous to practicing

preventive medicine for their practice.

Practices that embrace the active

application of compliance principles in

their practice culture and put efforts

towards compliance on a continued

basis can help to prevent problems from

occurring in the future.

A compliance program also sends an

important message to a physician

practice’s employees that while the

practice recognizes that mistakes will

occur, employees have an affirmative,

ethical duty to come forward and report

erroneous or fraudulent conduct, so that

it may be corrected.

59436 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices

5 31 U.S.C. 3729.

6 42 U.S.C. 1320a–7a.

C. Application of Voluntary Compliance

Program Guidance

The applicability of these

recommendations will depend on the

circumstances and resources of the

particular physician practice.

Each physician practice can

undertake reasonable steps to

implement compliance measures,

depending on the size and resources of

that practice. Physician practices can

rely, at least in part, upon standard

protocols and current practice

procedures to develop an appropriate

compliance program for that practice. In

fact, many physician practices already

have established the framework of a

compliance program without referring

to it as such.

D. The Difference Between ‘‘Erroneous’’

and ‘‘Fraudulent’’ Claims To Federal

Health Programs

There appear to be significant

misunderstandings within the physician

community regarding the critical

differences between what the

Government views as innocent

‘‘erroneous’’ claims on the one hand and

‘‘fraudulent’’ (intentionally or recklessly

false) health care claims on the other.

Some physicians feel that Federal law

enforcement agencies have maligned

medical professionals, in part, by a

perceived focus on innocent billing

errors. These physicians are under the

impression that innocent billing errors

can subject them to civil penalties, or

even jail. These impressions are

mistaken.

To address these concerns, the OIG

would like to emphasize the following

points. First, the OIG does not disparage

physicians, other medical professionals

or medical enterprises. In our view, the

great majority of physicians are working

ethically to render high quality medical

care and to submit proper claims.

Second, under the law, physicians are

not subject to criminal, civil or

administrative penalties for innocent

errors, or even negligence. The

Government’s primary enforcement tool,

the civil False Claims Act, covers only

offenses that are committed with actual

knowledge of the falsity of the claim,

reckless disregard, or deliberate

ignorance of the falsity of the claim.5

The False Claims Act does not

encompass mistakes, errors, or

negligence. The Civil Monetary

Penalties Law, an administrative

remedy, similar in scope and effect to

the False Claims Act, has exactly the

same standard of proof.6 The OIG is

very mindful of the difference between

innocent errors (‘‘erroneous claims’’) on

one hand, and reckless or intentional

conduct (‘‘fraudulent claims’’) on the

other. For criminal penalties, the

standard is even higher—criminal intent

to defraud must be proved beyond a

reasonable doubt.

Third, even ethical physicians (and

their staffs) make billing mistakes and

errors through inadvertence or

negligence. When physicians discover

that their billing errors, honest mistakes,

or negligence result in erroneous claims,

the physician practice should return the

funds erroneously claimed, but without

penalties. In other words, absent a

violation of a civil, criminal or

administrative law, erroneous claims

result only in the return of funds

claimed in error.

Fourth, innocent billing errors are a

significant drain on the Federal health

care programs. All parties (physicians,

providers, carriers, fiscal intermediaries,

Government agencies, and beneficiaries)

need to work cooperatively to reduce

the overall error rate.

Finally, it is reasonable for physicians

(and other providers) to ask: what duty

do they owe the Federal health care

programs? The answer is that all health

care providers have a duty to reasonably

ensure that the claims submitted to

Medicare and other Federal health care

programs are true and accurate. The OIG

continues to engage the provider

community in an extensive, good faith

effort to work cooperatively on

voluntary compliance to minimize

errors and to prevent potential penalties

for improper billings before they occur.

We encourage all physicians and other

providers to join in this effort.

II. Developing a Voluntary Compliance

Program

A. The Seven Basic Components of a

Voluntary Compliance Program

The OIG believes that a basic

framework for any voluntary

compliance program begins with a

review of the seven basic components of

an effective compliance program. A

review of these components provides

physician practices with an overview of

the scope of a fully developed and

implemented compliance program. The

following list of components, as set

forth in previous OIG compliance

program guidances, can form the basis

of a voluntary compliance program for

a physician practice:

• Conducting internal monitoring and

auditing through the performance of

periodic audits;

• Implementing compliance and

practice standards through the

development of written standards and

procedures;

• Designating a compliance officer or

contact(s) to monitor compliance efforts

and enforce practice standards;

• Conducting appropriate training

and education on practice standards and

procedures;

• Responding appropriately to

detected violations through the

investigation of allegations and the

disclosure of incidents to appropriate

Government entities;

• Developing open lines of

communication, such as (1) discussions

at staff meetings regarding how to avoid

erroneous or fraudulent conduct and (2)

community bulletin boards, to keep

practice employees updated regarding

compliance activities; and

• Enforcing disciplinary standards

through well-publicized guidelines.

These seven components provide a

solid basis upon which a physician

practice can create a compliance

program. The OIG acknowledges that

full implementation of all components

may not be feasible for all physician

practices. Some physician practices may

never fully implement all of the

components. However, as a first step,

physician practices can begin by

adopting only those components which,

based on a practice’s specific history

with billing problems and other

compliance issues, are most likely to

provide an identifiable benefit.

The extent of implementation will

depend on the size and resources of the

practice. Smaller physician practices

may incorporate each of the components

in a manner that best suits the practice.

By contrast, larger physician practices

often have the means to incorporate the

components in a more systematic

manner. For example, larger physician

practices can use both this guidance and

the Third-Party Medical Billing

Compliance Program Guidance, which

provides a more detailed compliance

program structure, to create a

compliance program unique to the

practice.

The OIG recognizes that physician

practices need to find the best way to

achieve compliance for their given

circumstances. Specifically, the OIG

encourages physician practices to

participate in other provider’s

compliance programs, such as the

compliance programs of the hospitals or

other settings in which the physicians

practice. Physician Practice

Management companies also may serve

as a source of compliance program

guidance. A physician practice’s

participation in such compliance

programs could be a way, at least partly,

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices 59437

7See Appendix D.II. referencing the Provider

Self-Disclosure Protocol for information on how to

conduct a baseline audit.

to augment the practice’s own

compliance efforts.

The opportunities for collaborative

compliance efforts could include

participating in training and education

programs or using another entity’s

policies and procedures as a template

from which the physician practice

creates its own version. The OIG

encourages this type of collaborative

effort, where the content is appropriate

to the setting involved (i.e., the training

is relevant to physician practices as well

as the sponsoring provider), because it

provides a means to promote the desired

objective without imposing excessive

burdens on the practice or requiring

physicians to undertake duplicative

action. However, to prevent possible

anti-kickback or self-referral issues, the

OIG recommends that physicians

consider limiting their participation in a

sponsoring provider’s compliance

program to the areas of training and

education or policies and procedures.

The key to avoiding possible conflicts

is to ensure that the entity providing

compliance services to a physician

practice (its referral source) is not

perceived as nor is it operating the

practice compliance program at no

charge. For example, if the sponsoring

entity conducted claims review for the

physician practice as part of a

compliance program or provided

compliance oversight without charging

the practice fair market value for those

services, the anti-kickback and Stark

self-referral laws would be implicated.

The payment of fair market value by

referral sources for compliance services

will generally address these concerns.

B. Steps for Implementing a Voluntary

Compliance Program

As previously discussed,

implementing a voluntary compliance

program can be a multi-tiered process.

Initial development of the compliance

program can be focused on practice risk

areas that have been problematic for the

practice such as coding and billing.

Within this area, the practice should

examine its claims denial history or

claims that have resulted in repeated

overpayments, and identify and correct

the most frequent sources of those

denials or overpayments. A review of

claim denials will help the practice

scrutinize a significant risk area and

improve its cash flow by submitting

correct claims that will be paid the first

time they are submitted. As this

example illustrates, a compliance

program for a physician practice often

makes sound business sense.

The following is a suggested order of

the steps a practice could take to begin

the development of a compliance

program. The steps outlined below

articulate all seven components of a

compliance program and there are

numerous suggestions for

implementation within each

component. Physician practices should

keep in mind, as stated earlier, that it is

up to the practice to determine the

manner in which and the extent to

which the practice chooses to

implement these voluntary measures.

Step One: Auditing and Monitoring

An ongoing evaluation process is

important to a successful compliance

program. This ongoing evaluation

includes not only whether the physician

practice’s standards and procedures are

in fact current and accurate, but also

whether the compliance program is

working, i.e., whether individuals are

properly carrying out their

responsibilities and claims are

submitted appropriately. Therefore, an

audit is an excellent way for a physician

practice to ascertain what, if any,

problem areas exist and focus on the

risk areas that are associated with those

problems. There are two types of

reviews that can be performed as part of

this evaluation: (1) A standards and

procedures review; and (2) a claims

submission audit.

1. Standards and Procedures

It is recommended that an

individual(s) in the physician practice

be charged with the responsibility of

periodically reviewing the practice’s

standards and procedures to determine

if they are current and complete. If the

standards and procedures are found to

be ineffective or outdated, they should

be updated to reflect changes in

Government regulations or

compendiums generally relied upon by

physicians and insurers (i.e., changes in

Current Procedural Terminology (CPT)

and ICD–9–CM codes).

2. Claims Submission Audit

In addition to the standards and

procedures themselves, it is advisable

that bills and medical records be

reviewed for compliance with

applicable coding, billing and

documentation requirements. The

individuals from the physician practice

involved in these self-audits would

ideally include the person in charge of

billing (if the practice has such a

person) and a medically trained person

(e.g., registered nurse or preferably a

physician (physicians can rotate in this

position)). Each physician practice

needs to decide for itself whether to

review claims retrospectively or

concurrently with the claims

submission. In the Third-Party Medical

Billing Compliance Program Guidance,

the OIG recommended that a baseline,

or ‘‘snapshot,’’ be used to enable a

practice to judge over time its progress

in reducing or eliminating potential

areas of vulnerability. This practice,

known as ‘‘benchmarking,’’ allows a

practice to chart its compliance efforts

by showing a reduction or increase in

the number of claims paid and denied.

The practice’s self-audits can be used

to determine whether:

• Bills are accurately coded and

accurately reflect the services provided

(as documented in the medical records);

• Documentation is being completed

correctly;

• Services or items provided are

reasonable and necessary; and

• Any incentives for unnecessary

services exist.

A baseline audit examines the claim

development and submission process,

from patient intake through claim

submission and payment, and identifies

elements within this process that may

contribute to non-compliance or that

may need to be the focus for improving

execution.7 This audit will establish a

consistent methodology for selecting

and examining records, and this

methodology will then serve as a basis

for future audits.

There are many ways to conduct a

baseline audit. The OIG recommends

that claims/services that were submitted

and paid during the initial three months

after implementation of the education

and training program be examined, so as

to give the physician practice a

benchmark against which to measure

future compliance effectiveness.

Following the baseline audit, a

general recommendation is that periodic

audits be conducted at least once each

year to ensure that the compliance

program is being followed. Optimally, a

randomly selected number of medical

records could be reviewed to ensure that

the coding was performed accurately.

Although there is no set formula to how

many medical records should be

reviewed, a basic guide is five or more

medical records per Federal payor (i.e.,

Medicare, Medicaid), or five to ten

medical records per physician. The OIG

realizes that physician practices receive

reimbursement from a number of

different payors, and we would

encourage a physician practice’s

auditing/monitoring process to consist

of a review of claims from all Federal

payors from which the practice receives

reimbursement. Of course, the larger the

sample size, the larger the comfort level

59438 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices

8Physician practices with laboratories or

arrangements with third-party billing companies

can also check the risk areas included in the OIG

compliance program guidance for those industries.

9The OIG and HCFA are working to compile a list

of basic documents issued by both entities that

could be included in such a binder. We expect to

complete this list later this fall, and will post it on

the OIG and HCFA web sites, as well as publicize

this list to physician organizations and

representatives (information on how to contact the

OIG is contained in Footnote 3; HCFA information

can be obtained at www.hcfa.gov/medlearn or by

calling 1–800–MEDICARE).

the physician practice will have about

the results. However, the OIG is aware

that this may be burdensome for some

physician practices, so, at a minimum,

we would encourage the physician

practice to conduct a review of claims

that have been reimbursed by Federal

health care programs.

If problems are identified, the

physician practice will need to

determine whether a focused review

should be conducted on a more frequent

basis. When audit results reveal areas

needing additional information or

education of employees and physicians,

the physician practice will need to

analyze whether these areas should be

incorporated into the training and

educational system.

There are many ways to identify the

claims/services from which to draw the

random sample of claims to be audited.

One methodology is to choose a random

sample of claims/services from either all

of the claims/services a physician has

received reimbursement for or all

claims/services from a particular payor.

Another method is to identify risk areas

or potential billing vulnerabilities. The

codes associated with these risk areas

may become the universe of claims/

services from which to select the

sample. The OIG recommends that the

physician practice evaluate claims/

services selected to determine if the

codes billed and reimbursed were

accurately ordered, performed, and

reasonable and necessary for the

treatment of the patient.

One of the most important

components of a successful compliance

audit protocol is an appropriate

response when the physician practice

identifies a problem. This action should

be taken as soon as possible after the

date the problem is identified. The

specific action a physician practice

takes should depend on the

circumstances of the situation. In some

cases, the response can be as straight

forward as generating a repayment with

appropriate explanation to Medicare or

the appropriate payor from which the

overpayment was received. In others,

the physician practice may want to

consult with a coding/billing expert to

determine the next best course of action.

There is no boilerplate solution to how

to handle problems that are identified.

It is a good business practice to create

a system to address how physician

practices will respond to and report

potential problems. In addition,

preserving information relating to

identification of the problem is as

important as preserving information that

tracks the physician practice’s reaction

to, and solution for, the issue.

Step 2: Establish Practice Standards and

Procedures

After the internal audit identifies the

practice’s risk areas, the next step is to

develop a method for dealing with those

risk areas through the practice’s

standards and procedures. Written

standards and procedures are a central

component of any compliance program.

Those standards and procedures help to

reduce the prospect of erroneous claims

and fraudulent activity by identifying

risk areas for the practice and

establishing tighter internal controls to

counter those risks, while also helping

to identify any aberrant billing

practices. Many physician practices

already have something similar to this

called ‘‘practice standards’’ that include

practice policy statements regarding

patient care, personnel matters and

practice standards and procedures on

complying with Federal and State law.

The OIG believes that written

standards and procedures can be helpful

to all physician practices, regardless of

size and capability. If a lack of resources

to develop such standards and

procedures is genuinely an issue, the

OIG recommends that a physician

practice focus first on those risk areas

most likely to arise in its particular

practice.8 Additionally, if the physician

practice works with a physician practice

management company (PPMC),

independent practice association (IPA),

physician-hospital organization,

management services organization

(MSO) or third-party billing company,

the practice can incorporate the

compliance standards and procedures of

those entities, if appropriate, into its

own standards and procedures. Many

physician practices have found that the

adoption of a third party’s compliance

standards and procedures, as

appropriate, has many benefits and the

result is a consistent set of standards

and procedures for a community of

physicians as well as having just one

entity that can then monitor and refine

the process as needed. This sharing of

compliance responsibilities assists

physician practices in rural areas that

do not have the staff to perform these

functions, but do belong to a group that

does have the resources. Physician

practices using another entity’s

compliance materials will need to tailor

those materials to the physician practice

where they will be applied.

Physician practices that do not have

standards or procedures in place can

develop them by: (1) Developing a

written standards and procedures

manual; and (2) updating clinical forms

periodically to make sure they facilitate

and encourage clear and complete

documentation of patient care. A

practice’s standards could also identify

the clinical protocol(s), pathway(s), and

other treatment guidelines followed by

the practice.

Creating a resource manual from

publicly available information may be a

cost-effective approach for developing

additional standards and procedures.

For example, the practice can develop a

‘‘binder’’ that contains the practice’s

written standards and procedures,

relevant HCFA directives and carrier

bulletins, and summaries of informative

OIG documents (e.g., Special Fraud

Alerts, Advisory Opinions, inspection

and audit reports).9 If the practice

chooses to adopt this idea, the binder

should be updated as appropriate and

located in a readily accessible location.

If updates to the standards and

procedures are necessary, those updates

should be communicated to employees

to keep them informed regarding the

practice’s operations. New employees

can be made aware of the standards and

procedures when hired and can be

trained on their contents as part of their

orientation to the practice. The OIG

recommends that the communication of

updates and training of new employees

occur as soon as possible after either the

issuance of a new update or the hiring

of a new employee.

1. Specific Risk Areas

The OIG recognizes that many

physician practices may not have in

place standards and procedures to

prevent erroneous or fraudulent conduct

in their practices. In order to develop

standards and procedures, the physician

practice may consider what types of

fraud and abuse related topics need to

be addressed based on its specific

needs. One of the most important things

in making that determination is a listing

of risk areas where the practice may be

vulnerable.

To assist physician practices in

performing this initial assessment, the

OIG has developed a list of four

potential risk areas affecting physician

practices. These risk areas include: (a)

Coding and billing; (b) reasonable and

necessary services; (c) documentation;

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices 59439

10Physician practices seeking additional

guidance on potential risk areas can review the

OIG’s Work Plan to identify vulnerabilities and risk

areas on which the OIG will focus in the future. In

addition, physician practices can also review the

OIG’s semiannual reports, which identify program

vulnerabilities and risk areas that the OIG has

targeted during the preceding six months. All of

these documents are available on the OIG’s

webpage at http://www.hhs.gov/oig.

11Appendix A of this document lists additional

risk areas that a physician practice may want to

review and incorporate into their practice standards

and procedures.

12For example, Dr. X, an ophthalmologist, billed

for laser surgery he did not perform. As one element

of proof, he did not even have laser equipment or

access to such equipment at the place of service

designated on the claim form where he performed

the surgery.

13Billing for services, supplies and equipment

that are not reasonable and necessary involves

seeking reimbursement for a service that is not

warranted by a patient’s documented medical

condition. See 42 U.S.C. 1395i(a)(1)(A) (‘‘no

payment may be made under part A or part B [of

Medicare] for any expenses incurred for items or

services which * * * are not reasonable and

necessary for the diagnosis or treatment of illness

or injury or to improve the functioning of the

malformed body member’’). See also Appendix A

for further discussion on this topic.

14 Double billing occurs when a physician bills

for the same item or service more than once or

another party billed the Federal health care program

for an item or service also billed by the physician.

Although duplicate billing can occur due to simple

error, the knowing submission of duplicate

claims—which is sometimes evidenced by

systematic or repeated double billing—can create

liability under criminal, civil, and/or administrative

law.

15For example, Dr. Y bills Medicare using a

covered office visit code when the actual service

was a non-covered annual physical. Physician

practices should remember that ‘‘necessary’’ does

not always constitute ‘‘covered’’ and that this

example is a misrepresentation of services to the

Federal health care programs.

16An example of this is when the practice bills

for a service performed by Dr. B, who has not yet

been issued a Medicare provider number, using Dr.

A’s Medicare provider number. Physician practices

need to bill using the correct Medicare provider

number, even if that means delaying billing until

the physician receives his/her provider number.

17Unbundling is the practice of a physician

billing for multiple components of a service that

must be included in a single fee. For example, if

dressings and instruments are included in a fee for

a minor procedure, the provider may not also bill

separately for the dressings and instruments.

18A modifier, as defined by the CPT–4 manual,

provides the means by which a physician practice

can indicate a service or procedure that has been

performed has been altered by some specific

circumstance, but not changed in its definition or

code. Assuming the modifier is used correctly and

appropriately, this specificity provides the

justification for payment for those services. For

correct use of modifiers, the physician practice

should reference the appropriate sections of the

Medicare Provider Manual. See Medicare Carrier

Manual Section 4630. For general information on

the correct use of modifiers, a physician practice

can consult the National Correct Coding Initiative

(NCCI). See Appendix F for information on how to

download the NCCI edits. The NCCI coding edits

are updated on a quarterly basis and are used to

process claims and determine payments to

physicians.

19This is the practice of coding/charging one or

two middle levels of service codes exclusively,

under the philosophy that some will be higher,

some lower, and the charges will average out over

an extended period (in reality, this overcharges

some patients while undercharging others).

20Upcoding is billing for a more expensive

service than the one actually performed. For

example, Dr. X intentionally bills at a higher

evaluation and management (E&M) code than what

he actually renders to the patient.

21The official coding guidelines are promulgated

by HCFA, the National Center for Health Statistics,

the American Hospital Association, the American

Medical Association and the American Health

Information Management Association. See

International Classification of Diseases, 9th

Revision, Clinical Modification (ICD–9 CM)(and its

successors); 1998 Health Care Financing

Administration Common Procedure Coding System

(HCPCS) (and its successors); and Physicians’ CPT.

In addition, there are specialized coding systems for

specific segments of the health care industry.

Among these are ADA (for dental procedures), DSM

IV (psychiatric health benefits) and DMERCs (for

durable medical equipment, prosthetics, orthotics

and supplies).

22The failure of a physician practice to: (i)

document items and services rendered; and (ii)

properly submit the corresponding claims for

reimbursement is a major area of potential

erroneous or fraudulent conduct involving Federal

health care programs. The OIG has undertaken

numerous audits, investigations, inspections and

national enforcement initiatives in these areas.

23 ‘‘* * * for the diagnosis or treatment of illness

or injury or to improve the functioning of a

malformed body member.’’ 42 U.S.C.

1395y(a)(1)(A).

and (d) improper inducements,

kickbacks and self-referrals. This list of

risk areas is not exhaustive, or allencompassing. Rather, it should be

viewed as a starting point for an internal

review of potential vulnerabilities

within the physician practice.10 The

objective of such an assessment is to

ensure that key personnel in the

physician practice are aware of these

major risk areas and that steps are taken

to minimize, to the extent possible, the

types of problems identified. While

there are many ways to accomplish this

objective, clear written standards and

procedures that are communicated to all

employees are important to ensure the

effectiveness of a compliance program.

Specifically, the following are

discussions of risk areas for physician

practices: 11

a. Coding and Billing. A major part of

any physician practice’s compliance

program is the identification of risk

areas associated with coding and billing.

The following risk areas associated with

billing have been among the most

frequent subjects of investigations and

audits by the OIG:

• Billing for items or services not

rendered or not provided as claimed; 12

• Submitting claims for equipment,

medical supplies and services that are

not reasonable and necessary; 13

• Double billing resulting in

duplicate payment; 14

• Billing for non-covered services as

if covered; 15

• Knowing misuse of provider

identification numbers, which results in

improper billing; 16

• Unbundling (billing for each

component of the service instead of

billing or using an all-inclusive code); 17

• Failure to properly use coding

modifiers; 18

• Clustering; 19 and

• Upcoding the level of service

provided.20

The physician practice written

standards and procedures concerning

proper coding reflect the current

reimbursement principles set forth in

applicable statutes, regulations 21 and

Federal, State or private payor health

care program requirements and should

be developed in tandem with coding

and billing standards used in the

physician practice. Furthermore, written

standards and procedures should ensure

that coding and billing are based on

medical record documentation.

Particular attention should be paid to

issues of appropriate diagnosis codes

and individual Medicare Part B claims

(including documentation guidelines for

evaluation and management services).22

A physician practice can also institute

a policy that the coder and/or physician

review all rejected claims pertaining to

diagnosis and procedure codes. This

step can facilitate a reduction in similar

errors.

b. Reasonable and Necessary Services.

A practice’s compliance program may

provide guidance that claims are to be

submitted only for services that the

physician practice finds to be

reasonable and necessary in the

particular case. The OIG recognizes that

physicians should be able to order any

tests, including screening tests, they

believe are appropriate for the treatment

of their patients. However, a physician

practice should be aware that Medicare

will only pay for services that meet the

Medicare definition of reasonable and

necessary.23

Medicare (and many insurance plans)

may deny payment for a service that is

not reasonable and necessary according

to the Medicare reimbursement rules.

Thus, when a physician provides

services to a Medicare beneficiary, he or

she should only bill those services that

meet the Medicare standard of being

reasonable and necessary for the

diagnosis and treatment of a patient. A

physician practice can bill in order to

receive a denial for services, but only if

the denial is needed for reimbursement

from the secondary payor. Upon

request, the physician practice should

be able to provide documentation, such

as a patient’s medical records and

59440 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices

24For additional information on proper

documentation, physician practices should also

reference the Documentation Guidelines for

Evaluation and Management Services, published by

HCFA. Currently, physicians may document based

on the 1995 or 1997 E&M Guidelines, whichever is

most advantageous to the physician. A new set of

draft guidelines were announced in June 2000, and

are undergoing pilot testing and revision, but are

not in current use.

25The anti-kickback statute provides criminal

penalties for individuals and entities that

knowingly offer, pay, solicit, or receive bribes or

kickbacks or other remuneration in order to induce

business reimbursable by Federal health care

programs. See 42 U.S.C. 1320a–7b(b). Civil

penalties, exclusion from participation in the

Federal health care programs, and civil False

Claims Act liability may also result from a violation

of the prohibition. See 42 U.S.C. 1320a–7a(a)(5), 42

U.S.C. 1320a–7(b)(7), and 31 U.S.C. 3729–3733.

26The physician self-referral law, 42 U.S.C.

1395nn (also known as the ‘‘Stark law’’), prohibits

a physician from making a referral to an entity with

which the physician or any member of the

physician’s immediate family has a financial

relationship if the referral is for the furnishing of

designated health services, unless the financial

relationship fits into an exception set forth in the

statute or implementing regulations.

27See Appendix B for additional information on

the anti-kickback statute.

28The OIG’s definition of ‘‘fair market value’’

excludes any value attributable to referrals of

Federal program business or the ability to influence

the flow of such business. See 42 U.S.C.

1395nn(h)(3). Adhering to the rule of keeping

business arrangements at fair market value is not a

guarantee of legality, but is a highly useful general

rule.

29See 42 U.S.C. 1320a–7a(a)(5).

30 In the OIG Special Fraud Alert ‘‘Routine

Waiver of Part B Co-payments/Deductibles’’ (May

1991), the OIG describes several reasons why

routine waivers of these cost-sharing amounts pose

concerns. The Alert sets forth the circumstances

under which it may be appropriate to waive these

amounts. See also 42 U.S.C. 1320a–7a(a)(5).

physician’s orders, to support the

appropriateness of a service that the

physician has provided.

c. Documentation. Timely, accurate

and complete documentation is

important to clinical patient care. This

same documentation serves as a second

function when a bill is submitted for

payment, namely, as verification that

the bill is accurate as submitted.

Therefore, one of the most important

physician practice compliance issues is

the appropriate documentation of

diagnosis and treatment. Physician

documentation is necessary to

determine the appropriate medical

treatment for the patient and is the basis

for coding and billing determinations.

Thorough and accurate documentation

also helps to ensure accurate recording

and timely transmission of information.

i. Medical Record Documentation. In

addition to facilitating high quality

patient care, a properly documented

medical record verifies and documents

precisely what services were actually

provided. The medical record may be

used to validate: (a) The site of the

service; (b) the appropriateness of the

services provided; (c) the accuracy of

the billing; and (d) the identity of the

care giver (service provider). Examples

of internal documentation guidelines a

practice might use to ensure accurate

medical record documentation include

the following: 24

• The medical record is complete and

legible;

• The documentation of each patient

encounter includes the reason for the

encounter; any relevant history;

physical examination findings; prior

diagnostic test results; assessment,

clinical impression, or diagnosis; plan

of care; and date and legible identity of

the observer;

• If not documented, the rationale for

ordering diagnostic and other ancillary

services can be easily inferred by an

independent reviewer or third party

who has appropriate medical training;

• CPT and ICD–9–CM codes used for

claims submission are supported by

documentation and the medical record;

and

• Appropriate health risk factors are

identified. The patient’s progress, his or

her response to, and any changes in,

treatment, and any revision in diagnosis

is documented.

The CPT and ICD–9–CM codes

reported on the health insurance claims

form should be supported by

documentation in the medical record

and the medical chart should contain all

necessary information. Additionally,

HCFA and the local carriers should be

able to determine the person who

provided the services. These issues can

be the root of investigations of

inappropriate or erroneous conduct, and

have been identified by HCFA and the

OIG as a leading cause of improper

payments.

One method for improving quality in

documentation is for a physician

practice to compare the practice’s claim

denial rate to the rates of other practices

in the same specialty to the extent that

the practice can obtain that information

from the carrier. Physician coding and

diagnosis distribution can be compared

for each physician within the same

specialty to identify variances.

ii. HCFA 1500 Form. Another

documentation area for physician

practices to monitor closely is the

proper completion of the HCFA 1500

form. The following practices will help

ensure that the form has been properly

completed:

• Link the diagnosis code with the

reason for the visit or service;

• Use modifiers appropriately;

• Provide Medicare with all

information about a beneficiary’s other

insurance coverage under the Medicare

Secondary Payor (MSP) policy, if the

practice is aware of a beneficiary’s

additional coverage.

d. Improper Inducements, Kickbacks

and Self-Referrals. A physician practice

would be well advised to have

standards and procedures that

encourage compliance with the antikickback statute 25 and the physician

self-referral law.26 Remuneration for

referrals is illegal because it can distort

medical decision-making, cause

overutilization of services or supplies,

increase costs to Federal health care

programs, and result in unfair

competition by shutting out competitors

who are unwilling to pay for referrals.

Remuneration for referrals can also

affect the quality of patient care by

encouraging physicians to order services

or supplies based on profit rather than

the patients’ best medical interests.27

In particular, arrangements with

hospitals, hospices, nursing facilities,

home health agencies, durable medical

equipment suppliers, pharmaceutical

manufacturers and vendors are areas of

potential concern. In general the antikickback statute prohibits knowingly

and willfully giving or receiving

anything of value to induce referrals of

Federal health care program business. It

is generally recommended that all

business arrangements wherein

physician practices refer business to, or

order services or items from, an outside

entity should be on a fair market value

basis.28 Whenever a physician practice

intends to enter into a business

arrangement that involves making

referrals, the arrangement should be

reviewed by legal counsel familiar with

the anti-kickback statute and physician

self-referral statute.

In addition to developing standards

and procedures to address arrangements

with other health care providers and

suppliers, physician practices should

also consider implementing measures to

avoid offering inappropriate

inducements to patients.29 Examples of

such inducements include routinely

waiving coinsurance or deductible

amounts without a good faith

determination that the patient is in

financial need or failing to make

reasonable efforts to collect the costsharing amount.30

Possible risk factors relating to this

risk area that could be addressed in the

practice’s standards and procedures

include:

• Financial arrangements with

outside entities to whom the practice

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices 59441

31All physician contracts and agreements with

parties in a position to influence Federal health care

program business or to whom the doctor is in such

a position to influence should be reviewed to avoid

violation of the anti-kickback, self-referral, and

other relevant Federal and State laws. The OIG has

published safe harbors that define practices not

subject to the anti-kickback statute, because such

arrangements would be unlikely to result in fraud

or abuse. Failure to comply with a safe harbor

provision does not make an arrangement per se

illegal. Rather, the safe harbors set forth specific

conditions that, if fully met, would assure the

entities involved of not being prosecuted or

sanctioned for the arrangement qualifying for the

safe harbor. One such safe harbor applies to

personal services contracts. See 42 CFR

1001.952(d).

32See OIG Special Fraud Alert ‘‘Joint Venture

Arrangements’’ (August 1989) available on the OIG

web site at http://www.hhs.gov/oig. See also OIG

Advisory Opinion 97–5.

33Physician practices should establish clear

standards and procedures governing gift-giving

because such exchanges may be viewed as

inducements to influence business decisions.

34There are various Federal regulations governing

the privacy of patient records and the retention of

certain types of patient records. Many states also

have record retention statutes. Practices should

check with their state medical society and/or

affiliated professional association for assistance in

ascertaining these requirements for their particular

specialty and location.

may refer Federal health care program

business;31

• Joint ventures with entities

supplying goods or services to the

physician practice or its patients;32

• Consulting contracts or medical

directorships;

• Office and equipment leases with

entities to which the physician refers;

and

• Soliciting, accepting or offering any

gift or gratuity of more than nominal

value to or from those who may benefit

from a physician practice’s referral of

Federal health care program business.33

In order to keep current with this area

of the law, a physician practice may

obtain copies, available on the OIG web

site or in hard copy from the OIG, of all

relevant OIG Special Fraud Alerts and

Advisory Opinions that address the

application of the anti-kickback and

physician self-referral laws to ensure

that the standards and procedures

reflect current positions and opinions.

2. Retention of Records

In light of the documentation

requirements faced by physician

practices, it would be to the practice’s

benefit if its standards and procedures

contained a section on the retention of

compliance, business and medical

records. These records primarily

include documents relating to patient

care and the practice’s business

activities. A physician practice’s

designated compliance contact could

keep an updated binder or record of

these documents, including information

relating to compliance activities. The

primary compliance documents that a

practice would want to retain are those

that relate to educational activities,

internal investigations and internal

audit results. We suggest that particular

attention should be paid to

documenting investigations of potential

violations uncovered by the compliance

program and the resulting remedial

action. Although there is no

requirement that the practice retain its

compliance records, having all the

relevant documentation relating to the

practice’s compliance efforts or

handling of a particular problem can

benefit the practice should it ever be

questioned regarding those activities.

Physician practices that implement a

compliance program might also want to

provide for the development and

implementation of a records retention

system. This system would establish

standards and procedures regarding the

creation, distribution, retention, and

destruction of documents. If the practice

decides to design a record system,

privacy concerns and Federal or State

regulatory requirements should be taken

into consideration.34

While conducting its compliance

activities, as well as its daily operations,

a physician practice would be well

advised, to the extent it is possible, to

document its efforts to comply with

applicable Federal health care program

requirements. For example, if a

physician practice requests advice from

a Government agency (including a

Medicare carrier) charged with

administering a Federal health care

program, it is to the benefit of the

practice to document and retain a record

of the request and any written or oral

response (or nonresponse). This step is

extremely important if the practice

intends to rely on that response to guide

it in future decisions, actions, or claim

reimbursement requests or appeals.

In short, it is in the best interest of all

physician practices, regardless of size,

to have procedures to create and retain

appropriate documentation. The

following record retention guidelines

are suggested:

• The length of time that a practice’s

records are to be retained can be

specified in the physician practice’s

standards and procedures (Federal and

State statutes should be consulted for

specific time frames, if applicable);

• Medical records (if in the

possession of the physician practice)

need to be secured against loss,

destruction, unauthorized access,

unauthorized reproduction, corruption,

or damage; and

• Standards and procedures can

stipulate the disposition of medical

records in the event the practice is sold

or closed.

Step Three: Designation of a

Compliance Officer/Contact(s)

After the audits have been completed

and the risk areas identified, ideally one

member of the physician practice staff

needs to accept the responsibility of

developing a corrective action plan, if

necessary, and oversee the practice’s

adherence to that plan. This person can

either be in charge of all compliance

activities for the practice or play a

limited role merely to resolve the

current issue. In a formalized

institutional compliance program there

is a compliance officer who is

responsible for overseeing the

implementation and day-to-day

operations of the compliance program.

However, the resource constraints of

physician practices make it so that it is

often impossible to designate one

person to be in charge of compliance

functions.

It is acceptable for a physician

practice to designate more than one

employee with compliance monitoring

responsibility. In lieu of having a

designated compliance officer, the

physician practice could instead

describe in its standards and procedures

the compliance functions for which

designated employees, known as

‘‘compliance contacts,’’ would be

responsible. For example, one employee

could be responsible for preparing

written standards and procedures, while

another could be responsible for

conducting or arranging for periodic

audits and ensuring that billing

questions are answered. Therefore, the

compliance-related responsibilities of

the designated person or persons may be

only a portion of his or her duties.

Another possibility is that one

individual could serve as compliance

officer for more than one entity. In

situations where staffing limitations

mandate that the practice cannot afford

to designate a person(s) to oversee

compliance activities, the practice could

outsource all or part of the functions of

a compliance officer to a third party,

such as a consultant, PPMC, MSO, IPA

or third-party billing company.

However, if this role is outsourced, it is

beneficial for the compliance officer to

have sufficient interaction with the

physician practice to be able to

effectively understand the inner

workings of the practice. For example,

consultants that are not in close

geographic proximity to a practice may

not be effective compliance officers for

the practice.

59442 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices

35The HHS–OIG ‘‘List of Excluded Individuals/

Entities’’ provides information to health care

providers, patients, and others regarding

individuals and entities that are excluded from

participation in Federal health care programs. This

report, in both an on-line searchable and

downloadable database, can be located on the

Internet at http://www.hhs.gov/oig. The OIG

sanction information is readily available to users in

two formats on over 15,000 individuals and entities

currently excluded from program participation

through action taken by the OIG. The on-line

searchable database allows users to obtain

information regarding excluded individuals and

entities sorted by: (1) The legal bases for exclusions;

(2) the types of individuals and entities excluded

by the OIG; and (3) the States where excluded

individuals reside or entities do business. In

addition, the General Services Administration

maintains a monthly listing of debarred contractors,

‘‘List of Parties Debarred from Federal Programs,’’

at http://www.arnet.gov/epls.

36HCFA also offers free online training for

general fraud and abuse issues at http://

www.hcfa.gov/medlearn. See Appendix F for

additional information.

37As noted earlier in this guidance, another way

for physician practices to receive training is for the

physicians and/or the employees of the practice to

attend training programs offered by outside entities,

such as a hospital, a local medical society or a

One suggestion for how to maintain

continual interaction is for the practice

to designate someone to serve as a

liaison with the outsourced compliance

officer. This would help ensure a strong

tie between the compliance officer and

the practice’s daily operations.

Outsourced compliance officers, who

spend most of their time offsite, have

certain limitations that a physician

practice should consider before making

such a critical decision. These

limitations can include lack of

understanding as to the inner workings

of the practice, accessibility and

possible conflicts of interest when one

compliance officer is serving several

practices.

If the physician practice decides to

designate a particular person(s) to

oversee all compliance activities, not

just those in conjunction with the auditrelated issue, the following is a list of

suggested duties that the practice may

want to assign to that person(s):

• Overseeing and monitoring the

implementation of the compliance

program;

• Establishing methods, such as

periodic audits, to improve the

practice’s efficiency and quality of

services, and to reduce the practice’s

vulnerability to fraud and abuse;

• Periodically revising the

compliance program in light of changes

in the needs of the practice or changes

in the law and in the standards and

procedures of Government and private

payor health plans;

• Developing, coordinating and

participating in a training program that

focuses on the components of the

compliance program, and seeks to

ensure that training materials are

appropriate;

• Ensuring that the HHS–OIG’s List of

Excluded Individuals and Entities, and

the General Services Administration’s

(GSA’s) List of Parties Debarred from

Federal Programs have been checked

with respect to all employees, medical

staff and independent contractors; 35

and

• Investigating any report or

allegation concerning possible unethical

or improper business practices, and

monitoring subsequent corrective action

and/or compliance.

Each physician practice needs to

assess its own practice situation and

determine what best suits that practice

in terms of compliance oversight.

Step Four: Conducting Appropriate

Training and Education

Education is an important part of any

compliance program and is the logical

next step after problems have been

identified and the practice has

designated a person to oversee

educational training. Ideally, education

programs will be tailored to the

physician practice’s needs, specialty

and size and will include both

compliance and specific training.

There are three basic steps for setting

up educational objectives:

• Determining who needs training

(both in coding and billing and in

compliance);

• Determining the type of training

that best suits the practice’s needs (e.g.,

seminars, in-service training, self-study

or other programs); and

• Determining when and how often

education is needed and how much

each person should receive.

Training may be accomplished

through a variety of means, including

in-person training sessions (i.e., either

on site or at outside seminars),

distribution of newsletters,36 or even a

readily accessible office bulletin board.

Regardless of the training modality

used, a physician practice should

ensure that the necessary education is

communicated effectively and that the

practice’s employees come away from

the training with a better understanding

of the issues covered.

1. Compliance Training

Under the direction of the designated

compliance officer/contact, both initial

and recurrent training in compliance is

advisable, both with respect to the

compliance program itself and

applicable statutes and regulations.

Suggestions for items to include in

compliance training are: The operation

and importance of the compliance

program; the consequences of violating

the standards and procedures set forth

in the program; and the role of each

employee in the operation of the

compliance program.

There are two goals a practice should

strive for when conducting compliance

training: (1) All employees will receive

training on how to perform their jobs in

compliance with the standards of the

practice and any applicable regulations;

and (2) each employee will understand

that compliance is a condition of

continued employment. Compliance

training focuses on explaining why the

practice is developing and establishing

a compliance program. The training

should emphasize that following the

standards and procedures will not get a

practice employee in trouble, but

violating the standards and procedures

may subject the employee to

disciplinary measures. It is advisable

that new employees be trained on the

compliance program as soon as possible

after their start date and employees

should receive refresher training on an

annual basis or as appropriate.

2. Coding and Billing Training

Coding and billing training on the

Federal health care program

requirements may be necessary for

certain members of the physician

practice staff depending on their

respective responsibilities. The OIG

understands that most physician

practices do not employ a professional

coder and that the physician is often

primarily responsible for all coding and

billing. However, it is in the practice’s

best interest to ensure that individuals

who are directly involved with billing,

coding or other aspects of the Federal

health care programs receive extensive

education specific to that individual’s

responsibilities. Some examples of

items that could be covered in coding

and billing training include:

• Coding requirements;

• Claim development and submission

processes;

• Signing a form for a physician

without the physician’s authorization;

• Proper documentation of services

rendered;

• Proper billing standards and

procedures and submission of accurate

bills for services or items rendered to

Federal health care program

beneficiaries; and

• The legal sanctions for submitting

deliberately false or reckless billings.

3. Format of the Training Program

Training may be conducted either inhouse or by an outside source.37

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices 59443

carrier. This sort of collaborative effort is an

excellent way for the practice to meet the desired

training objective without having to expend the

resources to develop and implement in-house

training.

38Some publications, such as OIG’s Special Fraud

Alerts, audit and inspection reports, and Advisory

Opinions are readily available from the OIG and can

provide a basis for educational courses and

programs for physician practice employees. See

Appendix F for a partial listing of these documents.

See Footnote 3 for information on how to obtain

copies of these documents.

39Currently, the OIG is monitoring a significant

number of corporate integrity agreements that

require many of these training elements. The OIG

usually requires a minimum of one hour annually

for basic training in compliance areas. Additional

training may be necessary for specialty fields such

as claims development and billing.

40 Instances of noncompliance must be

determined on a case-by-case basis. The existence

or amount of a monetary loss to a health care

program is not solely determinative of whether the

conduct should be investigated and reported to

governmental authorities. In fact, there may be

instances where there is no readily identifiable

monetary loss to a health care provider, but

corrective actions are still necessary to protect the

integrity of the applicable program and its

beneficiaries, e.g., where services required by a plan

of care are not provided.

41The physician practice may seek advice from

its legal counsel to determine the extent of the

practice’s liability and to plan the appropriate

course of action.

42The OIG has established a Provider SelfDisclosure Protocol that encourages providers to

voluntarily report suspected fraud. The concept of

voluntary self-disclosure is premised on a

recognition that the Government alone cannot

protect the integrity of the Medicare and other

Federal health care programs. Health care providers

must be willing to police themselves, correct

underlying problems, and work with the

Government to resolve these matters. The Provider

Self-Disclosure Protocol can be located on the OIG’s

web site at: www.hhs.gov/oig. See Appendix D for

further information on the Provider Self-Disclosure

Protocol.

Training at outside seminars, instead of

internal programs and in-service

sessions, may be an effective way to

achieve the practice’s training goals. In

fact, many community colleges offer

certificate or associate degree programs

in billing and coding, and professional

associations provide various kinds of

continuing education and certification

programs. Many carriers also offer

billing training.

The physician practice may work

with its third-party billing company, if

one is used, to ensure that

documentation is of a level that is

adequate for the billing company to

submit accurate claims on behalf of the

physician practice. If it is not, these

problem areas should also be covered in

the training. In addition to the billing

training, it is advisable for physician

practices to maintain updated ICD–9,

HCPCS and CPT manuals (in addition to

the carrier bulletins construing those

sources) and make them available to all

employees involved in the billing

process. Physician practices can also

provide a source of continuous updates

on current billing standards and

procedures by making publications or

Government documents that describe

current billing policies available to its

employees.38

Physician practices do not have to

provide separate education and training

programs for the compliance and coding

and billing training. All in-service

training and continuing education can

integrate compliance issues, as well as

other core values adopted by the

practice, such as quality improvement

and improved patient service, into their

curriculum.

4. Continuing Education on Compliance

Issues

There is no set formula for

determining how often training sessions

should occur. The OIG recommends that

there be at least an annual training

program for all individuals involved in

the coding and billing aspects of the

practice.39 Ideally, new billing and

coding employees will be trained as

soon as possible after assuming their

duties and will work under an

experienced employee until their

training has been completed.

Step Five: Responding To Detected

Offenses and Developing Corrective

Action Initiatives

When a practice determines it has

detected a possible violation, the next

step is to develop a corrective action

plan and determine how to respond to

the problem. Violations of a physician

practice’s compliance program,

significant failures to comply with

applicable Federal or State law, and

other types of misconduct threaten a

practice’s status as a reliable, honest,

and trustworthy provider of health care.

Consequently, upon receipt of reports or

reasonable indications of suspected

noncompliance, it is important that the

compliance contact or other practice

employee look into the allegations to

determine whether a significant

violation of applicable law or the

requirements of the compliance program

has indeed occurred, and, if so, take

decisive steps to correct the problem.40

As appropriate, such steps may involve

a corrective action plan,41 the return of

any overpayments, a report to the

Government,42 and/or a referral to law

enforcement authorities.

One suggestion is that the practice, in

developing its compliance program,

develop its own set of monitors and

warning indicators. These might

include: Significant changes in the

number and/or types of claim rejections

and/or reductions; correspondence from

the carriers and insurers challenging the

medical necessity or validity of claims;

illogical patterns or unusual changes in

the pattern of CPT–4, HCPCS or ICD–9

code utilization; and high volumes of

unusual charge or payment adjustment

transactions. If any of these warning

indicators become apparent, then it is

recommended that the practice follow

up on the issues. Subsequently, as

appropriate, the compliance procedures

of the practice may need to be changed

to prevent the problem from recurring.

For potential criminal violations, a

physician practice would be well

advised in its compliance program

procedures to include steps for prompt

referral or disclosure to an appropriate

Government authority or law

enforcement agency. In regard to

overpayment issues, it is advised that

the physician practice take appropriate

corrective action, including prompt

identification and repayment of any

overpayment to the affected payor.

It is also recommended that the

compliance program provide for a full

internal assessment of all reports of

detected violations. If the physician

practice ignores reports of possible

fraudulent activity, it is undermining

the very purpose it hoped to achieve by

implementing a compliance program.

It is advised that the compliance

program standards and procedures

include provisions to ensure that a

violation is not compounded once

discovered. In instances involving

individual misconduct, the standards

and procedures might also advise as to

whether the individuals involved in the

violation either be retrained,

disciplined, or, if appropriate,

terminated. The physician practice may

also prevent the compounding of the

violation by conducting a review of all

confirmed violations, and, if

appropriate, self-reporting the violations

to the applicable authority.

The physician practice may consider

the fact that if a violation occurred and

was not detected, its compliance

program may require modification.

Physician practices that detect

violations could analyze the situation to

determine whether a flaw in their

compliance program failed to anticipate

the detected problem, or whether the

compliance program’s procedures failed

to prevent the violation. In any event, it

is prudent, even absent the detection of

any violations, for physician practices to

periodically review and modify their

compliance programs.

Step Six: Developing Open Lines of

Communication

In order to prevent problems from

occurring and to have a frank discussion

59444 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices

43 In addition to whatever other method of

communication is being utilized, the OIG

recommends that physician practices post the

HHS–OIG Hotline telephone number (1–800–HHS–

TIPS) in a prominent area.

44See Footnote 35 for information on how to

access these lists.

of why the problem happened in the

first place, physician practices need to

have open lines of communication.

Especially in a smaller practice, an open

line of communication is an integral

part of implementing a compliance

program. Guidance previously issued by

the OIG has encouraged the use of

several forms of communication

between the compliance officer/

committee and provider personnel,

many of which focus on formal

processes and are more costly to

implement (e.g., hotlines and e-mail).

However, the OIG recognizes that the

nature of some physician practices is

not as conducive to implementing these

types of measures. The nature of a small

physician practice dictates that such

communication and information

exchanges need to be conducted

through a less formalized process than

that which has been envisioned by prior

OIG guidance.

In the small physician practice

setting, the communication element

may be met by implementing a clear

‘‘open door’’ policy between the

physicians and compliance personnel

and practice employees. This policy can

be implemented in conjunction with

less formal communication techniques,

such as conspicuous notices posted in

common areas and/or the development

and placement of a compliance bulletin

board where everyone in the practice

can receive up-to-date compliance

information.43

A compliance program’s system for

meaningful and open communication

can include the following:

• The requirement that employees

report conduct that a reasonable person

would, in good faith, believe to be

erroneous or fraudulent;

• The creation of a user-friendly

process (such as an anonymous drop

box for larger practices) for effectively

reporting erroneous or fraudulent

conduct;

• Provisions in the standards and

procedures that state that a failure to

report erroneous or fraudulent conduct

is a violation of the compliance

program;

• The development of a simple and

readily accessible procedure to process

reports of erroneous or fraudulent

conduct;

• If a billing company is used,

communication to and from the billing

company’s compliance officer/contact

and other responsible staff to coordinate

billing and compliance activities of the

practice and the billing company,

respectively. Communication can

include, as appropriate, lists of reported

or identified concerns, initiation and the

results of internal assessments, training

needs, regulatory changes, and other

operational and compliance matters;

• The utilization of a process that

maintains the anonymity of the persons

involved in the reported possible

erroneous or fraudulent conduct and the

person reporting the concern; and

• Provisions in the standards and

procedures that there will be no

retribution for reporting conduct that a

reasonable person acting in good faith

would have believed to be erroneous or

fraudulent.

The OIG recognizes that protecting

anonymity may not be feasible for small

physician practices. However, the OIG

believes all practice employees, when

seeking answers to questions or

reporting potential instances of

erroneous or fraudulent conduct, should

know to whom to turn for assistance in

these matters and should be able to do

so without fear of retribution. While the

physician practice may strive to

maintain the anonymity of an

employee’s identity, it also needs to

make clear that there may be a point at

which the individual’s identity may

become known or may have to be

revealed in certain instances.

Step Seven: Enforcing Disciplinary

Standards Through Well-Publicized

Guidelines

Finally, the last step that a physician

practice may wish to take is to

incorporate measures into its practice to

ensure that practice employees

understand the consequences if they

behave in a non-compliant manner. An

effective physician practice compliance

program includes procedures for

enforcing and disciplining individuals

who violate the practice’s compliance or

other practice standards. Enforcement

and disciplinary provisions are

necessary to add credibility and

integrity to a compliance program.

The OIG recommends that a physician

practice’s enforcement and disciplinary

mechanisms ensure that violations of

the practice’s compliance policies will

result in consistent and appropriate

sanctions, including the possibility of

termination, against the offending

individual. At the same time, it is

advisable that the practice’s

enforcement and disciplinary

procedures be flexible enough to

account for mitigating or aggravating

circumstances. The procedures might

also stipulate that individuals who fail

to detect or report violations of the

compliance program may also be subject

to discipline. Disciplinary actions could

include: Warnings (oral); reprimands

(written); probation; demotion;

temporary suspension; termination;

restitution of damages; and referral for

criminal prosecution. Inclusion of

disciplinary guidelines in in-house

training and procedure manuals is

sufficient to meet the ‘‘well publicized’’

standard of this element.

It is suggested that any

communication resulting in the finding

of non-compliant conduct be

documented in the compliance files by

including the date of incident, name of

the reporting party, name of the person

responsible for taking action, and the

follow-up action taken. Another

suggestion is for physician practices to

conduct checks to make sure all current

and potential practice employees are not

listed on the OIG or GSA lists of

individuals excluded from participation

in Federal health care or Government

procurement programs.44

C. Assessing A Voluntary Compliance

Program

A practice’s commitment to

compliance can best be assessed by the

active application of compliance

principles in the day-to-day operations

of the practice. Compliance programs

are not just written standards and

procedures that sit on a shelf in the

main office of a practice, but are an

everyday part of the practice operations.

It is by integrating the compliance

program into the practice culture that

the practice can best achieve maximum

benefit from its compliance program.

III. Conclusion

Just as immunizations are given to

patients to prevent them from becoming

ill, physician practices may view the

implementation of a voluntary

compliance program as comparable to a

form of preventive medicine for the

practice. This voluntary compliance

program guidance is intended to assist

physician practices in developing and

implementing internal controls and

procedures that promote adherence to

Federal health care program

requirements.

As stated earlier, physician

compliance programs do not need to be

time or resource intensive and can be

developed in a manner that best reflects

the nature of each individual practice.

Many of the recommendations set forth

in this document are ones that many

physician practices already have in

place and are simply good business

practices that can be adhered to with a

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices 59445

1HCFA has recently developed a web site which,

when completed by the end of the year 2000, will

contain the LMRPs for each of the contractors

across the country. The web site can be accessed at

http://www.lmrp.net.

2The relevant manual provisions are located at

MCM, Part III, §§ 7300 and 7320. This section of the

manual also includes the carrier’s recommended

form of an ABN.

reasonable amount of effort. By

implementing an effective compliance

program, appropriate for its size and

resources, and making compliance

principles an active part of the practice

culture, a physician practice can help

prevent and reduce erroneous or

fraudulent conduct in its practice. These

efforts can also streamline and improve

the business operations within the

practice and therefore innoculate itself

against future problems.

Dated: September 27, 2000.

June Gibbs Brown,

Inspector General.

Appendix A: Additional Risk Areas

Appendix A describes additional risk areas

that a physician practice may wish to address

during the development of its compliance

program. If any of the following risk areas are

applicable to the practice, the practice may

want to consider addressing the risk areas by

incorporating them into the practice’s written

standards and procedures manual and

addressing them in its training program.

I. Reasonable and Necessary Services

A. Local Medical Review Policy

An area of concern for physicians relating

to determinations of reasonable and

necessary services is the variation in local

medical review policies (LMRPs) among

carriers. Physicians are supposed to bill the

Federal health care programs only for items

and services that are reasonable and

necessary. However, in order to determine

whether an item or service is reasonable and

necessary under Medicare guidelines, the

physician must apply the appropriate

LMRP.1

With the exception of claims that are

properly coded and submitted to Medicare

solely for the purpose of obtaining a written

denial, physician practices are to bill the

Federal health programs only for items and

services that are covered. In order to

determine if an item or service is covered for

Medicare, a physician practice must be

knowledgeable of the LMRPs applicable to its

practice’s jurisdiction. The practice may

contact its carrier to request a copy of the

pertinent LMRPs, and once the practice

receives the copies, they can be incorporated

into the practice’s written standards and

procedures manual. When the LMRP

indicates that an item or service may not be

covered by Medicare, the physician practice

is responsible to convey this information to

the patient so that the patient can make an

informed decision concerning the health care

services he/she may want to receive.

Physician practices convey this information

through Advance Beneficiary Notices

(ABNs).

B. Advance Beneficiary Notices

Physicians are required to provide ABNs

before they provide services that they know

or believe Medicare does not consider

reasonable and necessary. (The one exception

to this requirement is for services that are

performed pursuant to EMTALA

requirements as described in section II.A). A

properly executed ABN acknowledges that

coverage is uncertain or yet to be determined,

and stipulates that the patient promises to

pay the bill if Medicare does not. Patients

who are not notified before they receive such

services are not responsible for payment. The

ABN must be sufficient to put the patient on

notice of the reasons why the physician

believes that the payment may be denied.

The objective is to give the patient sufficient

information to allow an informed choice as

to whether to pay for the service.

Accordingly, each ABN should:

I. Be in writing;

II. Identify the specific service that may be

denied (procedure name and CPT/HCPC

code is recommended);

III. State the specific reason why the

physician believes that service may be

denied; and

IV. Be signed by the patient acknowledging

that the required information was provided

and that the patient assumes responsibility

to pay for the service.

The Medicare Carrier’s Manual 2 provides

that an ABN will not be acceptable if: (1) The

patient is asked to sign a blank ABN form;

or (2) the ABN is used routinely without

regard to a particularized need. The routine

use of ABNs is generally prohibited because

the ABN must state the specific reason the

physician anticipates that the specific service

will not be covered.

A common risk area associated with ABNs

is in regard to diagnostic tests or services.

There are three steps that a physician

practice can take to help ensure it is in

compliance with the regulations concerning

ABNs for diagnostic tests or services:

1. Determine which tests are not covered

under national coverage rules;

2. Determine which tests are not covered

under local coverage rules such as LMRPs

(contact the practice’s carrier to see if a

listing has been assembled); and

3. Determine which tests are only covered for

certain diagnoses.

The OIG is aware that the use of ABNs is

an area where physician practices experience

numerous difficulties. Practices can help to

reduce problems in this area by educating

their physicians and office staff on the

correct use of ABNs, obtaining guidance from

the carrier regarding their interpretation of

whether an ABN is necessary where the

service is not covered, developing a standard

form for all diagnostic tests (most carriers

have a developed model), and developing a

process for handling patients who refuse to

sign ABNs.

C. Physician Liability for Certifications in the

Provision of Medical Equipment and

Supplies and Home Health Services

In January 1999, the OIG issued a Special

Fraud Alert on this topic, which is available

on the OIG web site at www.hhs.gov/oig/

frdalrt/index.htm. The following is a

summary of the Special Fraud Alert.

The OIG issued the Special Fraud Alert to

reiterate to physicians the legal and

programmatic significance of physician

certifications made in connection with the

ordering of certain items and services for

Medicare patients. In light of information

obtained through OIG provider audits, the

OIG deemed it necessary to remind

physicians that they may be subject to

criminal, civil and administrative penalties

for signing a certification when they know

that the information is false or for signing a

certification with reckless disregard as to the

truth of the information. (See Appendix B

and Appendix C for more detailed

information on the applicable statutes).

Medicare has conditioned payment for

many items and services on a certification

signed by a physician attesting that the

physician has reviewed the patient’s

condition and has determined that an item or

service is reasonable and necessary. Because

Medicare primarily relies on the professional

judgment of the treating physician to

determine the reasonable and necessary

nature of a given service or supply, it is

important that physicians provide complete

and accurate information on any

certifications they sign. Physician

certification is obtained through a variety of

forms, including prescriptions, orders, and

Certificates of Medical Necessity (CMNs).

Two areas where physician certification as to

whether an item or service is reasonable and

necessary is essential and which are

vulnerable to abuse are: (1) Home health

services; and (2) durable medical equipment.

By signing a CMN, the physician

represents that:

1. He or she is the patient’s treating physician

and that the information regarding the

physician’s address and unique physician

identification number (UPIN) is correct;

2. the entire CMN, including the sections

filled out by the supplier, was completed

prior to the physician’s signature; and

3. the information in section B relating to

whether the item or service is reasonable

and necessary is true, accurate, and

complete to the best of the physician’s

knowledge.

Activities such as signing blank CMNs,

signing a CMN without seeing the patient to

verify the item or service is reasonable and

necessary, and signing a CMN for a service

that the physician knows is not reasonable

and necessary are activities that can lead to

criminal, civil and administrative penalties.

Ultimately, it is advised that physicians

carefully review any form of certification

(order, prescription or CMN) before signing it

to verify that the information contained in

the certification is both complete and

accurate.

59446 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices

3See 42 U.S.C. 1395dd(a).

4See 42 U.S.C. 1395dd(b)(1).

5See 42 U.S.C. 1395dd(b)(2) and (3).

6See 42 U.S.C. 1395dd(c)(1)(A).

7Hospitals and physicians, including on-call

physicians, who violate the statute may face

penalties that include civil fines of up to $50,000

(or not more than $25,000 in the case of a hospital

with less than 100 beds) per violation, and

physicians may be excluded from participation in

the Federal health care programs.

8 42 CFR 415.150 through 415.190.

9 42 CFR 415.174.

10 Id.

11This section is not intended to be and is not

a complete reference for teaching physicians. It is

strongly recommended that those physicians who

practice in a teaching setting consult their

respective hospitals for more guidance.

D. Billing for Non-covered Services as if

Covered

In some instances, we are aware that

physician practices submit claims for

services in order to receive a denial from the

carrier, thereby enabling the patient to

submit the denied claim for payment to a

secondary payer.

A common question relating to this risk

area is: If the medical services provided are

not covered under Medicare, but the

secondary or supplemental insurer requires a

Medicare rejection in order to cover the

services, then would the original submission

of the claim to Medicare be considered

fraudulent? Under the applicable regulations,

the OIG would not consider such

submissions to be fraudulent. For example,

the denial may be necessary to establish

patient liability protections as stated in

section 1879 of the Social Security Act (the

Act) (codified at 42 U.S.C. 1395pp). As

stated, Medicare denials may also be required

so that the patient can seek payment from a

secondary insurer. In instances where a claim

is being submitted to Medicare for this

purpose, the physician should indicate on

the claim submission that the claim is being

submitted for the purpose of receiving a

denial, in order to bill a secondary insurance

carrier. This step should assist carriers and

prevent inadvertent payments to which the

physician is not entitled.

In some instances, however, the carrier

pays the claim even though the service is

non-covered, and even though the physician

did not intend for payment to be made. When

this occurs, the physician has a responsibility

to refund the amount paid and indicate that

the service is not covered.

II. Physician Relationships with Hospitals

A. The Physician Role in EMTALA

The Emergency Medical Treatment and

Active Labor Act (EMTALA), 42 U.S.C.

1395dd, is an area that has been receiving

increasing scrutiny. The statute is intended

to ensure that all patients who come to the

emergency department of a hospital receive

care, regardless of their insurance or ability

to pay. Both hospitals and physicians need

to work together to ensure compliance with

the provisions of this law.

The statute imposes three fundamental

requirements upon hospitals that participate

in the Medicare program with regard to

patients requesting emergency care. First, the

hospital must conduct an appropriate

medical screening examination to determine

if an emergency medical condition exists.3

Second, if the hospital determines that an

emergency medical condition exists, it must

either provide the treatment necessary to

stabilize the emergency medical condition or

comply with the statute’s requirements to

effect a proper transfer of a patient whose

condition has not been stabilized.4 A hospital

is considered to have met this second

requirement if an individual refuses the

hospital’s offer of additional examination or

treatment, or refuses to consent to a transfer,

after having been informed of the risks and

benefits.5

If an individual’s emergency medical

condition has not been stabilized, the

statute’s third requirement is activated. A

hospital may not transfer an individual with

an unstable emergency medical condition

unless: (1) The individual or his or her

representative makes a written request for

transfer to another medical facility after being

informed of the risk of transfer and the

transferring hospital’s obligation under the

statute to provide additional examination or

treatment; (2) a physician has signed a

certification summarizing the medical risks

and benefits of a transfer and certifying that,

based upon the information available at the

time of transfer, the medical benefits

reasonably expected from the transfer

outweigh the increased risks; or (3) if a

physician is not physically present when the

transfer decision is made, a qualified medical

person signs the certification after the

physician, in consultation with the qualified

medical person, has made the determination

that the benefits of transfer outweigh the

increased risks. The physician must later

countersign the certification.6

Physician and/or hospital misconduct may

result in violations of the statute.7 One area

of particular concern is physician on-call

responsibilities. Physician practices whose

members serve as on-call emergency room

physicians with hospitals are advised to

familiarize themselves with the hospital’s

policies regarding on-call physicians. This

can be done by reviewing the medical staff

bylaws or policies and procedures of the

hospital that must define the responsibility of

on-call physicians to respond to, examine,

and treat patients with emergency medical

conditions. Physicians should also be aware

of the requirement that, when medically

indicated, on-call physicians must generally

come to the hospital to examine the patient.

The exception to this requirement is that a

patient may be sent to see the on-call

physician at a hospital-owned contiguous or

on-campus facility to conduct or complete

the medical screening examination as long

as:

1. All persons with the same medical

condition are moved to this location;

2. there is a bona fide medical reason to move

the patient; and

3. qualified medical personnel accompany

the patient.

B. Teaching Physicians

Special regulations apply to teaching

physicians’ billings. Regulations provide that

services provided by teaching physicians in

teaching settings are generally payable under

the physician fee schedule only if the

services are personally furnished by a

physician who is not a resident or the

services are furnished by a resident in the

presence of a teaching physician.8

Unless a service falls under a specified

exception, such as the Primary Care

Exception,9 the teaching physician must be

present during the key portion of any service

or procedure for which payment is sought.10

Physicians should ensure the following with

respect to services provided in the teaching

physician setting 11

• Only services actually provided are

billed;

• Every physician who provides or

supervises the provision of services to a

patient is responsible for the correct

documentation of the services that were

rendered;

• Every physician is responsible for

assuring that in cases where the physician

provides evaluation and management (E&M)

services, a patient’s medical record includes

appropriate documentation of the applicable

key components of the E&M services

provided or supervised by the physician (e.g.,

patient history, physician examination, and

medical decision making), as well as

documentation to adequately reflect the

procedure or portion of the services provided

by the physician; and

• Unless specifically excepted by

regulation, every physician must document

his or her presence during the key portion of

any service or procedure for which payment

is sought.

C. Gainsharing Arrangements and Civil

Monetary Penalties for Hospital Payments to

Physicians to Reduce or Limit Services to

Beneficiaries

In July 1999, the OIG issued a Special

Fraud Alert on this topic, which is available

on the OIG web site at www.hhs.gov/oig/

frdalrt/index.htm. The following is a

summary of the Special Fraud Alert.

The term ‘‘gainsharing’’ typically refers to

an arrangement in which a hospital gives a

physician a percentage share of any

reduction in the hospital’s costs for patient

care attributable in part to the physician’s

efforts. The civil monetary penalty (CMP)

that applies to gainsharing arrangements is

set forth in 42 U.S.C. 1320a–7a(b)(1). This

section prohibits any hospital or critical

access hospital from knowingly making a

payment directly or indirectly to a physician

as an inducement to reduce or limit services

to Medicare or Medicaid beneficiaries under

a physician’s care.

It is the OIG’s position that the Civil

Monetary Penalties Law clearly prohibits any

gainsharing arrangements that involve

payments by, or on behalf of, a hospital to

physicians with clinical care responsibilities

to induce a reduction or limitation of services

to Medicare or Medicaid beneficiaries.

However, hospitals and physicians are not

prohibited from working together to reduce

unnecessary hospital costs through other

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices 59447

12This concern is noted in Advisory Opinion No.

98–4 and also the Office of Inspector General

Compliance Program Guidance for Third-Party

Medical Billing Companies. Both are available on

the OIG web site at http://www.hhs.gov/oig.

arrangements. For example, hospitals and

physicians may enter into personal services

contracts where hospitals pay physicians

based on a fixed fee at fair market value for

services rendered to reduce costs rather than

a fee based on a share of cost savings.

D. Physician Incentive Arrangements

The OIG has identified potentially illegal

practices involving the offering of incentives

by entities in an effort to recruit and retain

physicians. The OIG is concerned that the

intent behind offering incentives to

physicians may not be to recruit physicians,

but instead the offer is intended as a kickback

to obtain and increase patient referrals from

physicians. These recruitment incentive

arrangements are implicated by the AntiKickback Statute because they can constitute

remuneration offered to induce, or in return

for, the referral of business paid for by

Medicare or Medicaid.

Some examples of questionable incentive

arrangements are:

• Provision of free or significantly

discounted billing, nursing, or other staff

services.

• Payment of the cost of a physician’s

travel and expenses for conferences.

• Payment for a physician’s services that

require few, if any, substantive duties by the

physician.

• Guarantees that if the physician’s income

fails to reach a predetermined level, the

entity will supplement the remainder up to

a certain amount.

III. Physician Billing Practices

A. Third-Party Billing Services

Physicians should remember that they

remain responsible to the Medicare program

for bills sent in the physician’s name or

containing the physician’s signature, even if

the physician had no actual knowledge of a

billing impropriety. The attestation on the

HCFA 1500 form, i.e., the physician’s

signature line, states that the physician’s

services were billed properly. In other words,

it is no defense for the physician if the

physician’s billing service improperly bills

Medicare.

One of the most common risk areas

involving billing services deals with

physician practices contracting with billing

services on a percentage basis. Although

percentage based billing arrangements are not

illegal per se, the Office of Inspector General

has a longstanding concern that such

arrangements may increase the risk of

intentional upcoding and similar abusive

billing practices.12

A physician may contract with a billing

service on a percentage basis. However, the

billing service cannot directly receive the

payment of Medicare funds into a bank

account that it solely controls. Under 42

U.S.C. 1395u(b)(6), Medicare payments can

only be made to either the beneficiary or a

party (such as a physician) that furnished the

services and accepted assignment of the

beneficiary’s claim. A billing service that

contracts on a percentage basis does not

qualify as a party that furnished services to

a beneficiary, thus a billing service cannot

directly receive payment of Medicare funds.

According to the Medicare Carriers Manual

Section 3060(A), a payment is considered to

be made directly to the billing service if the

service can convert the payment to its own

use and control without the payment first

passing through the control of the physician.

For example, the billing service should not

bill the claims under its own name or tax

identification number. The billing service

should bill claims under the physician’s

name and tax identification number. Nor

should a billing service receive the payment

of Medicare funds directly into a bank

account over which the billing service

maintains sole control. The Medicare

payments should instead be deposited into a

bank account over which the provider has

signature control.

Physician practices should review the

third-party medical billing guidance for

additional information on third-party billing

companies and the compliance risk areas

associated with billing companies.

B. Billing Practices by Non-Participating

Physicians

Even though nonparticipating physicians

do not accept payment directly from the

Medicare program, there are a number of

laws that apply to the billing of Medicare

beneficiaries by non-participating physicians.

Limiting Charges

42 U.S.C. 1395w–4(g) prohibits a

nonparticipating physician from knowingly

and willfully billing or collecting on a

repeated basis an actual charge for a service

that is in excess of the Medicare limiting

charge. For example, a nonparticipating

physician may not bill a Medicare

beneficiary $50 for an office visit when the

Medicare limiting charge for the visit is $25.

Additionally, there are numerous provisions

that prohibit nonparticipating physicians

from knowingly and willfully charging

patients in excess of the statutory charge

limitations for certain specified procedures,

such as cataract surgery, mammography

screening and coronary artery bypass surgery.

Failure to comply with these sections can

result in a fine of up to $10,000 per violation

or exclusion from participation in Federal

health care programs for up to 5 years.

Refund of Excess Charges

42 U.S.C. 1395w–4(g) mandates that if a

nonparticipating physician collects an actual

charge for a service that is in excess of the

limiting charge, the physician must refund

the amount collected above the limiting

charge to the individual within 30 days

notice of the violation. For example, if a

physician collected $50 from a Medicare

beneficiary for an office visit, but the limiting

charge for the visit was $25, the physician

must refund $25 to the beneficiary, which is

the difference between the amount collected

($50) and the limiting charge ($25). Failure

to comply with this requirement may result

in a fine of up to $10,000 per violation or

exclusion from participation in Federal

health care programs for up to 5 years.

Specifically, 42 U.S.C. 1395u(l)(A)(iii)

mandates that a nonparticipating physician

must refund payments received from a

Medicare beneficiary if it is later determined

by a Peer Review Organization or a Medicare

carrier that the services were not reasonable

and necessary. Failure to comply with this

requirement may result in a fine of up to

$10,000 per violation or exclusion from

participation in Federal health care programs

for up to 5 years.

C. Professional Courtesy

The term ‘‘professional courtesy’’ is used to

describe a number of analytically different

practices. The traditional definition is the

practice by a physician of waiving all or a

part of the fee for services provided to the

physician’s office staff, other physicians,

and/or their families. In recent times,

‘‘professional courtesy’’ has also come to

mean the waiver of coinsurance obligations

or other out-of-pocket expenses for

physicians or their families (i.e., ‘‘insurance

only’’ billing), and similar payment

arrangements by hospitals or other

institutions for services provided to their

medical staffs or employees. While only the

first of these practices is truly ‘‘professional

courtesy,’’ in the interests of clarity and

completeness, we will address all three.

In general, whether a professional courtesy

arrangement runs afoul of the fraud and

abuse laws is determined by two factors: (i)

How the recipients of the professional

courtesy are selected; and (ii) how the

professional courtesy is extended. If

recipients are selected in a manner that

directly or indirectly takes into account their

ability to affect past or future referrals, the

anti-kickback statute—which prohibits giving

anything of value to generate Federal health

care program business—may be implicated. If

the professional courtesy is extended through

a waiver of copayment obligations (i.e.,

‘‘insurance only’’ billing), other statutes may

be implicated, including the prohibition of

inducements to beneficiaries, section

1128A(a)(5) of the Act (codified at 42 U.S.C.

1320a–7a(a)(5)). Claims submitted as a result

of either practice may also implicate the civil

False Claims Act.

The following are general observations

about professional courtesy arrangements for

physician practices to consider:

• A physician’s regular and consistent

practice of extending professional courtesy

by waiving the entire fee for services

rendered to a group of persons (including

employees, physicians, and/or their family

members) may not implicate any of the OIG’s

fraud and abuse authorities so long as

membership in the group receiving the

courtesy is determined in a manner that does

not take into account directly or indirectly

any group member’s ability to refer to, or

otherwise generate Federal health care

program business for, the physician.

• A physician’s regular and consistent

practice of extending professional courtesy

by waiving otherwise applicable copayments

for services rendered to a group of persons

(including employees, physicians, and/or

their family members), would not implicate

the anti-kickback statute so long as

membership in the group is determined in a

59448 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices

manner that does not take into account

directly or indirectly any group member’s

ability to refer to, or otherwise generate

Federal health care program business for, the

physician.

• Any waiver of copayment practice,

including that described in the preceding

bullet, does implicate section 1128A(a)(5) of

the Act if the patient for whom the

copayment is waived is a Federal health care

program beneficiary who is not financially

needy.

The legality of particular professional

courtesy arrangements will turn on the

specific facts presented, and, with respect to

the anti-kickback statute, on the specific

intent of the parties. A physician practice

may wish to consult with an attorney if it is

uncertain about its professional courtesy

arrangements.

IV. Other Risk Areas

A. Rental of Space in Physician Offices by

Persons or Entities to Which Physicians Refer

In February 2000, the OIG issued a Special

Fraud Alert on this topic, which is available

on the OIG web site at www.hhs.gov/oig/

frdalrt/index.htm. The following is a

summary of the Special Fraud Alert.

Among various relationships between

physicians and labs, hospitals, home health

agencies, etc., the OIG has identified

potentially illegal practices involving the

rental of space in a physician’s office by

suppliers that provide items or services to

patients who are referred or sent to the

supplier by the physician-landlord. An

example of a suspect arrangement is the

rental of physician office space by a durable

medical equipment (DME) supplier in a

position to benefit from referrals of the

physician’s patients. The OIG is concerned

that in such arrangements the rental

payments may be disguised kickbacks to the

physician-landlord to induce referrals.

Space Rental Safe Harbor to the AntiKickback Statute

To avoid potentially violating the antikickback statute, the OIG recommends that

rental agreements comply with all of the

following criteria for the space rental safe

harbor:

• The agreement is set out in writing and

signed by the parties.

• The agreement covers all of the space

rented by the parties for the term of the

agreement and specifies the space covered by

the agreement.

• If the agreement is intended to provide

the lessee with access to the space for

periodic intervals of time rather than on a

full-time basis for the term of the rental

agreement, the rental agreement specifies

exactly the schedule of such intervals, the

precise length of each interval, and the exact

rent for each interval.

• The term of the rental agreement is for

not less than one year.

• The aggregate rental charge is set in

advance, is consistent with fair market value,

and is not determined in a manner that takes

into account the volume or value of any

referrals or business otherwise generated

between the parties for which payment may

be made in whole or in part under Medicare

or a State health care program.

• The aggregate space rented does not

exceed that which is reasonably necessary to

accomplish the commercially reasonable

business purpose of the rental.

B. Unlawful Advertising

42 U.S.C. 1320b–10 makes it unlawful for

any person to advertise using the names,

abbreviations, symbols, or emblems of the

Social Security Administration, Health Care

Financing Administration, Department of

Health and Human Services, Medicare,

Medicaid or any combination or variation of

such words, abbreviations, symbols or

emblems in a manner that such person

knows or should know would convey the

false impression that the advertised item is

endorsed by the named entities. For instance,

a physician may not place an ad in the

newspaper that reads ‘‘Dr. X is a cardiologist

approved by both the Medicare and Medicaid

programs.’’ A violation of this section may

result in a penalty of up to $5,000 ($25,000

in the case of a broadcast or telecast) for each

violation.

Appendix B: Criminal Statutes

This Appendix contains a description of

criminal statutes related to fraud and abuse

in the context of health care. The Appendix

is not intended to be a compilation of all

Federal statutes related to health care fraud

and abuse. It is merely a summary of some

of the more frequently cited Federal statutes.

I. Health Care Fraud (18 U.S.C. 1347)

Description of Unlawful Conduct

It is a crime to knowingly and willfully

execute (or attempt to execute) a scheme to

defraud any health care benefit program, or

to obtain money or property from a health

care benefit program through false

representations. Note that this law applies

not only to Federal health care programs, but

to most other types of health care benefit

programs as well.

Penalty for Unlawful Conduct

The penalty may include the imposition of

fines, imprisonment of up to 10 years, or

both. If the violation results in serious bodily

injury, the prison term may be increased to

a maximum of 20 years. If the violation

results in death, the prison term may be

expanded to include any number of years, or

life imprisonment.

Examples

1. Dr. X, a chiropractor, intentionally billed

Medicare for physical therapy and

chiropractic treatments that he never actually

rendered for the purpose of fraudulently

obtaining Medicare payments.

2. Dr. X, a psychiatrist, billed Medicare,

Medicaid, TRICARE, and private insurers for

psychiatric services that were provided by

his nurses rather than himself.

II. Theft or Embezzlement in Connection

with Health Care (18 U.S.C. 669)

Description of Unlawful Conduct

It is a crime to knowingly and willfully

embezzle, steal or intentionally misapply any

of the assets of a health care benefit program.

Note that this law applies not only to Federal

health care programs, but to most other types

of health care benefit programs as well.

Penalty for Unlawful Conduct

The penalty may include the imposition of

a fine, imprisonment of up to 10 years, or

both. If the value of the asset is $100 or less,

the penalty is a fine, imprisonment of up to

a year, or both.

Example

An office manager for Dr. X knowingly

embezzles money from the bank account for

Dr. X’s practice. The bank account includes

reimbursement received from the Medicare

program; thus, intentional embezzlement of

funds from this account is a violation of the

law.

III. False Statements Relating to Health Care

Matters (18 U.S.C. 1035)

Description of Unlawful Conduct

It is a crime to knowingly and willfully

falsify or conceal a material fact, or make any

materially false statement or use any

materially false writing or document in

connection with the delivery of or payment

for health care benefits, items or services.

Note that this law applies not only to Federal

health care programs, but to most other types

of health care benefit programs as well.

Penalty for Unlawful Conduct

The penalty may include the imposition of

a fine, imprisonment of up to 5 years, or

both.

Example

Dr. X certified on a claim form that he

performed laser surgery on a Medicare

beneficiary when he knew that the surgery

was not actually performed on the patient.

IV. Obstruction of Criminal Investigations of

Health Care Offenses (18 U.S.C. 1518)

Description of Unlawful Conduct

It is a crime to willfully prevent, obstruct,

mislead, delay or attempt to prevent,

obstruct, mislead, or delay the

communication of records relating to a

Federal health care offense to a criminal

investigator. Note that this law applies not

only to Federal health care programs, but to

most other types of health care benefit

programs as well.

Penalty for Unlawful Conduct

The penalty may include the imposition of

a fine, imprisonment of up to 5 years, or

both.

Examples

1. Dr. X instructs his employees to tell OIG

investigators that Dr. X personally performs

all treatments when, in fact, medical

technicians do the majority of the treatment

and Dr. X is rarely present in the office.

2. Dr. X was under investigation by the FBI

for reported fraudulent billings. Dr. X altered

patient records in an attempt to cover up the

improprieties.

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices 59449

V. Mail and Wire Fraud (18 U.S.C. 1341 and

1343)

Description of Unlawful Conduct

It is a crime to use the mail, private

courier, or wire service to conduct a scheme

to defraud another of money or property. The

term ‘‘wire services’’ includes the use of a

telephone, fax machine or computer. Each

use of a mail or wire service to further

fraudulent activities is considered a separate

crime. For instance, each fraudulent claim

that is submitted electronically to a carrier

would be considered a separate violation of

the law.

Penalty for Unlawful Conduct

The penalty may include the imposition of

a fine, imprisonment of up to 5 years, or

both.

Examples

1. Dr. X knowingly and repeatedly submits

electronic claims to the Medicare carrier for

office visits that he did not actually provide

to Medicare beneficiaries with the intent to

obtain payments from Medicare for services

he never performed.

2. Dr. X, a neurologist, knowingly

submitted claims for tests that were not

reasonable and necessary and intentionally

upcoded office visits and electromyograms to

Medicare.

VI. Criminal Penalties for Acts Involving

Federal Health Care Programs (42 U.S.C.

1320a–7b)

Description of Unlawful Conduct

False Statement and Representations

It is a crime to knowingly and willfully:

(1) make, or cause to be made, false

statements or representations in applying for

benefits or payments under all Federal health

care programs;

(2) make, or cause to be made, any false

statement or representation for use in

determining rights to such benefit or

payment;

(3) conceal any event affecting an

individual’s initial or continued right to

receive a benefit or payment with the intent

to fraudulently receive the benefit or

payment either in an amount or quantity

greater than that which is due or authorized;

(4) convert a benefit or payment to a use

other than for the use and benefit of the

person for whom it was intended;

(5) present, or cause to be presented, a

claim for a physician’s service when the

service was not furnished by a licensed

physician;

(6) for a fee, counsel an individual to

dispose of assets in order to become eligible

for medical assistance under a State health

program, if disposing of the assets results in

the imposition of an ineligibility period for

the individual.

Anti-Kickback Statute

It is a crime to knowingly and willfully

solicit, receive, offer, or pay remuneration of

any kind (e.g., money, goods, services):

• for the referral of an individual to

another for the purpose of supplying items or

services that are covered by a Federal health

care program; or

• for purchasing, leasing, ordering, or

arranging for any good, facility, service, or

item that is covered by a Federal health care

program.

There are a number of limited exceptions

to the law, also known as ‘‘safe harbors,’’

which provide immunity from criminal

prosecution and which are described in

greater detail in the statute and related

regulations (found at 42 CFR 1001.952 and

www.hhs.gov/oig/ak). Current safe harbors

include:

• investment interests;

• space rental;

• equipment rental;

• personal services and management

contracts;

• sale of practice;

• referral services;

• warranties;

• discounts;

• employment relationships;

• waiver of Part A co-insurance and

deductible amounts;

• group purchasing organizations;

• increased coverage or reduced cost

sharing under a risk-basis or prepaid plan;

and

• charge reduction agreements with health

plans.

Penalty for Unlawful Conduct

The penalty may include the imposition of

a fine of up to $25,000, imprisonment of up

to 5 years, or both. In addition, the provider

can be excluded from participation in

Federal health care programs. The

regulations defining the aggravating and

mitigating circumstances that must be

reviewed by the OIG in making an exclusion

determination are set forth in 42 CFR part

1001.

Examples

1. Dr. X accepted payments to sign

Certificates of Medical Necessity for durable

medical equipment for patients she never

examined.

2. Home Health Agency disguises referral

fees as salaries by paying referring physician

Dr. X for services Dr. X never rendered to the

Medicare beneficiaries or by paying Dr. X a

sum in excess of fair market value for the

services he rendered to the Medicare

beneficiaries.

Appendix C: Civil and Administrative

Statutes

This Appendix contains a description of

civil and administrative statutes related to

fraud and abuse in the context of health care.

The Appendix is not intended to be a

compilation of all federal statutes related to

health care fraud and abuse. It is merely a

summary of some of the more frequently

cited Federal statutes.

I. The False Claims Act (31 U.S.C. 3729–

3733)

Description of Unlawful Conduct

This is the law most often used to bring a

case against a health care provider for the

submission of false claims to a Federal health

care program. The False Claims Act prohibits

knowingly presenting (or causing to be

presented) to the Federal Government a false

or fraudulent claim for payment or approval.

Additionally, it prohibits knowingly making

or using (or causing to be made or used) a

false record or statement to get a false or

fraudulent claim paid or approved by the

Federal Government or its agents, like a

carrier, other claims processor, or State

Medicaid program.

Definitions

False Claim—A ‘‘false claim’’ is a claim for

payment for services or supplies that were

not provided specifically as presented or for

which the provider is otherwise not entitled

to payment. Examples of false claims for

services or supplies that were not provided

specifically as presented include, but are not

limited to:

• a claim for a service or supply that was

never provided.

• a claim indicating the service was

provided for some diagnosis code other than

the true diagnosis code in order to obtain

reimbursement for the service (which would

not be covered if the true diagnosis code

were submitted).

• a claim indicating a higher level of

service than was actually provided.

• a claim for a service that the provider

knows is not reasonable and necessary.

• a claim for services provided by an

unlicensed individual.

Knowingly—To ‘‘knowingly’’ present a

false or fraudulent claim means that the

provider: (1) Has actual knowledge that the

information on the claim is false; (2) acts in

deliberate ignorance of the truth or falsity of

the information on the claim; or (3) acts in

reckless disregard of the truth or falsity of the

information on the claim. It is important to

note the provider does not have to

deliberately intend to defraud the Federal

Government in order to be found liable under

this Act. The provider need only

‘‘knowingly’’ present a false or fraudulent

claim in the manner described above.

Deliberate Ignorance—To act in ‘‘deliberate

ignorance’’ means that the provider has

deliberately chosen to ignore the truth or

falsity of the information on a claim

submitted for payment, even though the

provider knows, or has notice, that

information may be false. An example of a

provider who submits a false claim with

deliberate ignorance would be a physician

who ignores provider update bulletins and

thus does not inform his/her staff of changes

in the Medicare billing guidelines or update

his/her billing system in accordance with

changes to the Medicare billing practices.

When claims for non-reimbursable services

are submitted as a result, the False Claims

Act has been violated.

Reckless Disregard—To act in ‘‘reckless

disregard’’ means that the provider pays no

regard to whether the information on a claim

submitted for payment is true or false. An

example of a provider who submits a false

claim with reckless disregard would be a

physician who assigns the billing function to

an untrained office person without inquiring

whether the employee has the requisite

knowledge and training to accurately file

such claims.

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Penalty for Unlawful Conduct

The penalty for violating the False Claims

Act is a minimum of $5,500 up to a

maximum of $11,000 for each false claim

submitted. In addition to the penalty, a

provider could be found liable for damages

of up to three times the amount unlawfully

claimed.

Examples

• A physician submitted claims to

Medicare and Medicaid representing that he

had personally performed certain services

when, in reality, the services were performed

by a nonphysician and they were not

reimbursable under the Federal health care

programs.

• Dr. X intentionally upcoded office visits

and angioplasty consultations that were

submitted for payment to Medicare.

• Dr. X, a podiatrist, knowingly submitted

claims to the Medicare and Medicaid

programs for non-routine surgical procedures

when he actually performed routine, noncovered services such as the cutting and

trimming of toenails and the removal of corns

and calluses.

II. Civil Monetary Penalties Law (42 U.S.C.

1320a–7a)

Description of Unlawful Conduct

The Civil Monetary Penalties Law (CMPL)

is a comprehensive statute that covers an

array of fraudulent and abusive activities and

is very similar to the False Claims Act. For

instance, the CMPL prohibits a health care

provider from presenting, or causing to be

presented, claims for services that the

provider ‘‘knows or should know’’ were:

• not provided as indicated by the coding

on the claim;

• not medically necessary;

• furnished by a person who is not

licensed as a physician (or who was not

properly supervised by a licensed physician);

• furnished by a licensed physician who

obtained his or her license through

misrepresentation of a material fact (such as

cheating on a licensing exam);

• furnished by a physician who was not

certified in the medical specialty that he or

she claimed to be certified in; or

• furnished by a physician who was

excluded from participation in the Federal

health care program to which the claim was

submitted.

Additionally, the CMPL contains various

other prohibitions, including:

• offering remuneration to a Medicare or

Medicaid beneficiary that the person knows

or should know is likely to influence the

beneficiary to obtain items or services billed

to Medicare or Medicaid from a particular

provider;

• employing or contracting with an

individual or entity that the person knows or

should know is excluded from participation

in a Federal health care program.

The term ‘‘should know’’ means that a

provider: (1) Acted in deliberate ignorance of

the truth or falsity of the information; or (2)

acted in reckless disregard of the truth or

falsity of the information. The Federal

Government does not have to show that a

provider specifically intended to defraud a

Federal health care program in order to prove

a provider violated the statute.

Penalty for Unlawful Conduct

Violation of the CMPL may result in a

penalty of up to $10,000 per item or service

and up to three times the amount unlawfully

claimed. In addition, the provider may be

excluded from participation in Federal health

care programs. The regulations defining the

aggravating and mitigating circumstances

that must be reviewed by the OIG in making

an exclusion determination are set forth in 42

CFR part 1001.

Examples

1. Dr. X paid Medicare and Medicaid

beneficiaries $20 each time they visited him

to receive services and have tests performed

that were not preventive care services and

tests.

2. Dr. X hired Physician Assistant P to

provide services to Medicare and Medicaid

beneficiaries without conducting a

background check on P. Had Dr. X performed

a background check by reviewing the HHS–

OIG List of Excluded Individuals/Entities, Dr.

X would have discovered that he should not

hire P because P is excluded from

participation in Federal health care programs

for a period of 5 years.

3. Dr. X and his oximetry company billed

Medicare for pulse oximetry that they knew

they did not perform and services that had

been intentionally upcoded.

III. Limitations on Certain Physician

Referrals (‘‘Stark Laws’’) (42 U.S.C. 1395nn)

Description of Unlawful Conduct

Physicians (and immediate family

members) who have an ownership,

investment or compensation relationship

with an entity providing ‘‘designated health

services’’ are prohibited from referring

patients for these services where payment

may be made by a Federal health care

program unless a statutory or regulatory

exception applies. An entity providing a

designated health service is prohibited from

billing for the provision of a service that was

provided based on a prohibited referral.

Designated health services include: clinical

laboratory services; physical therapy

services; occupational therapy services;

radiology services, including magnetic

resonance imaging, axial tomography scans,

and ultrasound services; radiation therapy

services and supplies; durable medical

equipment and supplies; parenteral and

enteral nutrients, equipment and supplies;

prosthetics, orthotics, prosthetic devices and

supplies; home health services; outpatient

prescription drugs; and inpatient and

outpatient hospital services.

New regulations clarifying the exceptions

to the Stark Laws are expected to be issued

by HCFA shortly. Current exceptions

articulated within the Stark Laws include the

following, provided all conditions of each

exception as set forth in the statute and

regulations are satisfied.

Exceptions for Ownership or Compensation

Arrangements

• physician’s services;

• in-office ancillary services; and

• prepaid plans.

Exceptions for Ownership or Investment in

Publicly Traded Securities and Mutual Funds

• ownership of investment securities

which may be purchased on terms generally

available to the public;

• ownership of shares in a regulated

investment company as defined by Federal

law, if such company had, at the end of the

company’s most recent fiscal year, or on

average, during the previous 3 fiscal years,

total assets exceeding $75,000,000;

• hospital in Puerto Rico;

• rural provider; and

• hospital ownership (whole hospital

exception).

Exceptions Relating to Other Compensation

Arrangements

• rental of office space and rental of

equipment;

• bona fide employment relationship;

• personal service arrangement;

• remuneration unrelated to the provision

of designated health services;

• physician recruitment;

• isolated transactions;

• certain group practice arrangements with

a hospital (pre-1989); and

• payments by a physician for items and

services.

Penalty for Unlawful Conduct

Violations of the statute subject the billing

entity to denial of payment for the designated

health services, refund of amounts collected

from improperly submitted claims, and a

civil monetary penalty of up to $15,000 for

each improper claim submitted. Physicians

who violate the statute may also be subject

to additional fines per prohibited referral. In

addition, providers that enter into an

arrangement that they know or should know

circumvents the referral restriction law may

be subject to a civil monetary penalty of up

to $100,000 per arrangement.

Examples

1. Dr. A worked in a medical clinic located

in a major city. She also owned a free

standing laboratory located in a major city.

Dr. A referred all orders for laboratory tests

on her patients to the laboratory she owned.

2. Dr. X agreed to serve as the Medical

Director of Home Health Agency, HHA, for

which he was paid a sum substantially above

the fair market value for his services. In

return, Dr. X routinely referred his Medicare

and Medicaid patients to HHA for home

health services.

3. Dr. Y received a monthly stipend of $500

from a local hospital to assist him in meeting

practice expenses. Dr. Y performed no

specific service for the stipend and had no

obligation to repay the hospital. Dr. Y

referred patients to the hospital for in-patient

surgery.

IV. Exclusion of Certain Individuals and

Entities From Participation in Medicare and

other Federal Health Care Programs (42

U.S.C. 1320a–7)

Mandatory Exclusion

Individuals or entities convicted of the

following conduct must be excluded from

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices 59451

participation in Medicare and Medicaid for a

minimum of 5 years:

(1) a criminal offense related to the

delivery of an item or service under Medicare

or Medicaid;

(2) a conviction under Federal or State law

of a criminal offense relating to the neglect

or abuse of a patient;

(3) a conviction under Federal or State law

of a felony relating to fraud, theft,

embezzlement, breach of fiduciary

responsibility or other financial misconduct

against a health care program financed by

any Federal, State, or local government

agency;

(4) a conviction under Federal or State law

of a felony relating to the unlawful

manufacture, distribution, prescription, or

dispensing of a controlled substance.

If there is one prior conviction, the

exclusion will be for 10 years. If there are two

prior convictions, the exclusion will be

permanent.

Permissive Exclusion

Individuals or entities convicted of the

following offenses, may be excluded from

participation in Federal health care programs

for a minimum of 3 years:

(1) a criminal offense related to the

delivery of an item or service under Medicare

or Medicaid;

(2) a misdemeanor related to fraud, theft,

embezzlement, breach of fiduciary

responsibility or other financial misconduct

against a health care program financed by

any Federal, State, or local government

agency;

(3) interference with, or obstruction of, any

investigation into certain criminal offenses;

(4) a misdemeanor related to the unlawful

manufacture, distribution, prescription or

dispensing of a controlled substance;

(5) exclusion or suspension under a

Federal or State health care program;

(6) submission of claims for excessive

charges, unnecessary services or services that

were of a quality that fails to meet

professionally recognized standards of health

care;

(7) violating the Civil Monetary Penalties

Law or the statute entitled ‘‘Criminal

Penalties for Acts Involving Federal Health

Care Programs;’’

(8) ownership or control of an entity by a

sanctioned individual or immediate family

member (spouse, natural or adoptive parent,

child, sibling, stepparent, stepchild,

stepbrother or stepsister, in-laws,

grandparent and grandchild);

(9) failure to disclose information required

by law;

(10) failure to supply claims payment

information; and

(11) defaulting on health education loan or

scholarship obligations.

The above list of offenses is not all

inclusive. Additional grounds for permissive

exclusion are detailed in the statute.

Examples

1. Nurse R was excluded based on a

conviction involving obtaining dangerous

drugs by forgery. She also altered

prescriptions that were given for her own

health problems before she presented them to

the pharmacist to be filled.

2. Practice T was excluded due to its

affiliation with its excluded owner. The

practice owner, excluded from participation

in the Federal health care programs for

soliciting and receiving illegal kickbacks, was

still participating in the day-to-day

operations of the practice after his exclusion

was effective.

Appendix D: OIG–HHS Contact Information

I. OIG Hotline Number

One method for providers to report

potential fraud, waste, and abuse problems is

to contact the OIG Hotline number. All HHS

and contractor employees have a

responsibility to assist in combating fraud,

waste and abuse in all departmental

programs. As such, providers are encouraged

to report matters involving fraud, waste and

mismanagement in any departmental

program to the OIG. The OIG maintains a

hotline that offers a confidential means for

reporting these matters.

Contacting the OIG Hotline

By Phone: 1–800–HHS–TIPS (1–800–447–

8477)

By E-Mail: HTips@os.dhhs.gov

By Mail: Office of Inspector General,

Department of Health and Human Services,

Attn: HOTLINE, 330 Independence Ave.,

SW., Washington, DC 20201

When contacting the Hotline, please

provide the following information to the best

of your ability:

• Type of Complaint:

Medicare Part A

Medicare Part B

Indian Health Service

TRICARE

Other (please specify)

• HHS Department or program being

affected by your allegation of fraud, waste,

abuse/mismanagement:

Health Care Financing Administration

(HCFA)

Indian Health Service

Other (please specify)

Please provide the following information.

(However, if you would like your referral to

be submitted anonymously, please indicate

such in your correspondence or phone call.)

Your Name

Your Street Address

Your City/County

Your State

Your Zip Code

Your email Address

• Subject/Person/Business/Department

that allegation is against.

Name of Subject

Title of Subject

Subject’s Street Address

Subject’s City/County

Subject’s State

Subject’s Zip Code

Please provide a brief summary of your

allegation and the relevant facts.

II. Provider Self-Disclosure Protocol

The recommended method for a provider

to contact the OIG regarding potential fraud

or abuse issues that may exist in the

provider’s own organization is through the

use of the Provider Self-Disclosure Protocol.

This program encourages providers to

voluntarily disclose irregularities in their

dealings with Federal health care programs.

While voluntary disclosure under the

protocol does not guarantee a provider

protection from civil, criminal, or

administrative actions, the fact that a

provider voluntarily disclosed possible

wrongdoing is a mitigating factor in OIG’s

recommendations to prosecuting agencies.

Although other agencies may not have formal

policies offering immunity or mitigation for

self-disclosure, they typically view selfdisclosure favorably for the self-disclosing

entity. Self-reporting offers providers the

opportunity to minimize the potential cost

and disruption of a full-scale audit and

investigation, to negotiate a fair monetary

settlement, and to avoid an OIG permissive

exclusion preventing the provider from doing

business with Federal health care programs.

In addition, if the provider is obligated to

enter into an Integrity Agreement (IA) as part

of the resolution of a voluntary disclosure,

there are three benefits the provider might

receive as a result of self-reporting:

• If the provider has an effective

compliance program and agrees to maintain

its compliance program as part of the False

Claims Act settlement, the OIG may not even

require an IA;

• In cases where the provider’s own audits

detected the disclosed problem, the OIG may

consider alternatives to the IA’s auditing

provisions. The provider may be able to

perform some or all of its billing audits

through internal auditing methods rather

than be required to retain an independent

review organization to perform the billing

review; and

• Self-disclosing can help to demonstrate a

provider’s trustworthiness to the OIG and

may result in the OIG determining that it can

sufficiently safeguard the Federal health care

programs through an IA without the

exclusion remedy for a material breach,

which is typically included in an IA.

Specific instructions on how a physician

practice can submit a voluntary disclosure

under the Provider Self-Disclosure Protocol

can be found on the OIG’s internet site at

www.hhs.gov/oig or in the Federal Register

at 63 FR 58399 (1998). A physician practice

may, however, wish to consult with an

attorney prior to submitting a disclosure to

the OIG.

The Provider Self-Disclosure Protocol can

also be a useful tool for baseline audits. The

protocol details the OIG’s views on the

appropriate elements of an effective

investigative and audit plan for providers.

Physician practices can use the selfdisclosure protocol as a model for conducting

audits and self-assessments.

In relying on the protocol for audit design

and sample selection, a physician practice

should pay close attention to the sections on

self-assessment and sample selection. These

two sections provide valuable guidance

regarding how these two functions should be

performed.

The self-assessment section of the protocol

contains information that can be applied to

audit design. Self-assessment is an internal

financial assessment to determine the

59452 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices

1Available through the OIG web site at http://

www.hhs.gov/oas/ratstat.html.

monetary impact of the matter. The approach

of a review can include reviewing either all

claims affected or a statistically valid sample

of the claims.

Sample selection must include several

elements. These elements are drawn from the

Government sampling program known as

RAT–STATS.1 All of these elements are set

forth in more detail in the Provider SelfDisclosure Protocol, but the elements are (1)

Sampling unit, (2) sampling frame, (3) probe,

(4) sample size, (5) random numbers, (6)

sample design and (7) missing sample items.

All of these sampling items should be clearly

documented by the physician practice and

compiled in the format set forth in the

Provider Self-Disclosure Protocol. Use of the

format set forth in the Provider SelfDisclosure Protocol will help physician

practices to ensure that the elements of their

internal audits are in conformance with OIG

standards.

Appendix E: Carrier Contact

Information

Medicare

A complete list of contact information

(address, phone number, email address) for

Medicare Part A Fiscal Intermediaries,

Medicare Part B Carriers, Regional Home

Health Intermediaries, and Durable Medical

Equipment Regional Carriers can be found on

the HCFA web site at www.hcfa.gov/

medicare/incardir.htm.

Medicaid

Contact information (address, phone

number, email address) for each State

Medicaid carrier can be found on the HCFA

web site at www.hcfa.gov/medicaid/

mcontact.htm. In addition to a list of

Medicaid carriers, the web site includes

contact information for each State survey

agency and the HCFA Regional Offices.

Contact information for each State

Medicaid Fraud Control Unit can be found

on the OIG web site at www.hhs.gov/oig/oi/

mfcu/index.htm.

Appendix F: Internet Resources

Office of Inspector General—U.S.

Department of Health and Human Services

www.hhs.gov/oig

This web site includes a variety of

information relating to Federal health care

programs, including the following:

Advisory Opinions

Anti-kickback Information

Compliance Program Guidance

Corporate Integrity Agreements

Fraud Alerts

Links to web pages for the:

Office of Audit Services (OAS)

Office of Evaluation and Inspections (OEI)

Office of Investigations (OI)

OIG List of Excluded Individuals/Entities

OIG News

OIG Regulations

OIG Semi-Annual Report

OIG Workplan

Health Care Financing Administration

www.hcfa.gov

This web site includes information on a

wide array of topics, including the following:

Medicare

National Correct Coding Initiative

Intermediary-Carrier Directory

Payment

Program Manuals

Program Transmittals & Memorandum

Provider Billing/HCFA Forms

Statistics and Data

Medicaid

HCFA Regional Offices

Letters to State Medicaid Directors

Medicaid Hotline Numbers

Policy & Program Information

State Medicaid Contacts

State Medicaid Manual

State Survey Agencies

Statistics and Data

HCFA Medicare Training

www.hcfa.gov/medlearn

This site provides computer-based training

on the following topics:

HCFA 1500 Form

Fraud & Abuse

ICD–9–CM Diagnosis Coding

Adult Immunization

Medicare Secondary Payer (MSP)

Women’s Health

Front Office Management

Introduction to the World of Medicare

Home Health Agency

HCFA 1450 (UB92)

Government Printing Office

www.access.gpo.gov

This site provides access to Federal

statutes and regulations pertaining to Federal

health care programs.

The U.S. House of Representatives Internet

Library

uscode.house.gov/usc.htm

This site provides access to the United

States Code, which contains laws pertaining

to Federal health care programs.

[FR Doc. 00–25500 Filed 10–4–00; 8:45 am]

BILLING CODE 4152–01–P

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

National Institutes of Health

National Cancer Institute; Notice of

Meeting

Pursuant to section 10(a) of the

Federal Advisory Committee Act, as

amended (5 U.S.C. Appendix 2), notice

is hereby given of a meeting of the

President’s Cancer Panel.

The meeting will be open to the

public, with attendance limited to space

available. Individuals who plan to

attend and need special assistance, such

as sign language interpretation or other

reasonable accommodations, should

notify the Contact Person listed below

in advance of the meeting.

Name of Committee: President’s Cancer

Panel.

Date: October 12–13, 2000.

Time: 9:00 AM to 4:00 PM.

Agenda: Town Hall Meeting. Topic will be

Improving Cancer Care for All: Real People—

Real Problems.

Place: Radisson Northern Hotel, 19 North

28th Street, Billings, MT 59101.

Contact Person: Maureen O. Wilson,

Executive Secretary, National Cancer

Institute, National Institutes of Health, 31

Center Drive, Building 31, Room 4A48,

Bethesda, MD 20892, 301/496–1148.

This notice is being published less than 15

days prior to the meeting due to scheduling

conflicts.

(Catalogue of Federal Domestic Assistance

Program Nos. 93.392, Cancer Construction;

93.393, Cancer Cause and Prevention

Research; 93.394, Cancer Detection and

Diagnosis Research; 93.395, Cancer

Treatment Research; 93.396, Cancer Biology

Research; 93.397, Cancer Centers Support;

93.398, Cancer Research Manpower; 93.399,

Cancer Control, National Institutes of Health,

HHS)

Dated: September 26, 2000.

LaVerne Y. Stringfield,

Director, Office of Federal Advisory

Committee Policy.

[FR Doc. 00–25538 Filed 10–4–00; 8:45 am]

BILLING CODE 4140–01–M

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

National Institutes of Health

National Cancer Institute; Notice of

Meeting

Pursuant to section 10(a) of the

Federal Advisory Committee Act, as

amended (5 U.S.C. Appendix 2), notice

is hereby given of a meeting of the

National Cancer Institute Director’s

Consumer Liaison Group.

The meeting will be open to the

public, with attendance limited to space

available. Individuals who plan to

attend and need special assistance, such

as sign language interpretation or other

reasonable accommodations, should

notify the Contact Person listed below

in advance of the meeting.

Name of Committee: National Cancer

Institute Director’s Consumer Liaison Group.

Date: October 17–18, 2000.

Time: 8 AM to 12:30 PM.

Agenda: To discuss NCI’s activities related

to Health Disparities and Quality of Care, and

Update on the Office of Communications

reorganization regarding DCLG activities,

including reports from the working groups.

Place: National Cancer Institute, 6116

Executive Boulevard, Suite 300C, Rockville,

MD 20852.

Contact Person: Elaine Lee, Acting

Executive Secretary, Office of Liaison

Activities, National Institutes of Health,