56832 Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Notices 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Health Resources and Services 

Administration 

Notice of Meeting of the Advisory 

Committee on Organ Transplantation 

AGENCY: Health Resources and Services 

Administration, HHS. 

ACTION: Notice of Meeting of the 

Advisory Committee on Organ 

Transplantation. 

SUMMARY: Pursuant to Public Law 92– 

463, the Federal Advisory Committee 

Act, as amended (5 U.S.C. Appendix 2), 

notice is hereby given of the fourteenth 

meeting of the Advisory Committee on 

Organ Transplantation (ACOT), 

Department of Health and Human 

Services (HHS). The meeting will be 

held from approximately 8:30 a.m. to 5 

p.m. on November 13, 2008, and from 

8:30 a.m. to 3 p.m. on November 14, 

2008, at the Hilton Washington DC/ 

Rockville Executive Meeting Center, 

1750 Rockville Pike, Rockville, MD 

20852. The meeting will be open to the 

public; however, seating is limited and 

pre-registration is encouraged (see 

below). 

SUPPLEMENTARY INFORMATION: Under the 

authority of 42 U.S.C. 217a, Section 222 

of the Public Health Service Act, as 

amended, and 42 CFR 121.12 (2000), 

ACOT was established to assist the 

Secretary in enhancing organ donation, 

ensuring that the system of organ 

transplantation is grounded in the best 

available medical science, and assuring 

the public that the system is as effective 

and equitable as possible, and, thereby, 

increasing public confidence in the 

integrity and effectiveness of the 

transplantation system. ACOT is 

composed of up to 25 members, 

including the Chair. Members are 

serving as Special Government 

Employees and have diverse 

backgrounds in fields such as organ 

donation, health care public policy, 

transplantation medicine and surgery, 

critical care medicine and other medical 

specialties involved in the identification 

and referral of donors, non-physician 

transplant professions, nursing, 

epidemiology, immunology, law and 

bioethics, behavioral sciences, 

economics and statistics, as well as 

representatives of transplant candidates, 

transplant recipients, organ donors, and 

family members. 

ACOT will hear presentations on the 

Report on New York State Transplant 

Council’s Committee on Quality 

Improvement in Living Kidney 

Donation; Organ Procurement 

Organization Quality Assessment/ 

Performance; Status of OPTN Living 

Donor Follow Up; Risks for Disease 

Transmission; Factors Affecting Future 

Donor Potential; Reimbursement and 

the Changing Nature of the Donor Pool; 

Projected Growth in End-Stage Renal 

Disease and Implications for Future 

Demand for Kidney Transplants; 

Economic Impact of Transplantation; 

and Briefing on OPTN White Paper on 

Charges for Pancreata Recovered for 

Islet Transplantation. The three ACOT 

work groups also will update the full 

Committee on their deliberations on 

living donor advocacy and postdonation complications, sources of 

funding for additional data collection, 

and reducing pediatric deaths on the 

waitlist. 

The draft meeting agenda will be 

available on October 31 on the 

Department’s donation Web site at 

http://www.organdonor.gov/acot.html. 

A registration form will be available 

on or about October 15. Registration can 

be completed electronically at http:// 

www.team-psa.com/dot/acot2008/. 

Registration also can be completed 

through the Department’s donation Web 

site at http://www.organdonor.gov/ 

acot.html. The completed registration 

form should be submitted by facsimile 

to Professional and Scientific Associates 

(PSA), the logistical support contractor 

for the meeting, at fax number (703) 

234–1701. Individuals without access to 

the Internet who wish to register may 

call Sowjanya Kotakonda with PSA at 

(703) 234–1737. Individuals who plan to 

attend the meeting and need special 

assistance, such as sign language 

interpretation or other reasonable 

accommodations, should notify the 

ACOT Executive Secretary, Remy 

Aronoff, in advance of the meeting. Mr. 

Aronoff may be reached by telephone at 

301–443–3300, e-mail: 

remy.aronoff@hrsa.hhs.gov or in writing 

at the address provided below. 

Management and support services for 

ACOT functions are provided by the 

Division of Transplantation, Healthcare 

Systems Bureau, Health Resources and 

Services Administration, 5600 Fishers 

Lane, Parklawn Building, Room 12C–06, 

Rockville, Maryland 20857; telephone 

number 301–443–7577. 

After the presentations and ACOT 

discussions, members of the public will 

have an opportunity to provide 

comments. Because of the Committee’s 

full agenda and the timeframe in which 

to cover the agenda topics, public 

comment will be limited. All public 

comments will be included in the 

record of the ACOT meeting. 

Dated: September 23, 2008. 

Elizabeth M. Duke, 

Administrator. 

[FR Doc. E8–22821 Filed 9–29–08; 8:45 am] 

BILLING CODE 4165–15–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Office of Inspector General 

OIG Supplemental Compliance 

Program Guidance for Nursing 

Facilities 

AGENCY: Office of Inspector General 

(OIG), HHS. 

ACTION: Notice. 

SUMMARY: This Federal Register notice 

sets forth the supplemental compliance 

program guidance (CPG) for nursing 

facilities developed by the Office of 

Inspector General (OIG). OIG is 

supplementing its prior CPG for nursing 

facilities issued in 2000. The 

supplemental CPG contains new 

compliance recommendations and an 

expanded discussion of risk areas. The 

supplemental CPG takes into account 

Medicare and Medicaid nursing facility 

payment systems and regulations, 

evolving industry practices, current 

enforcement priorities (including the 

Government’s heightened focus on 

quality of care), and lessons learned in 

the area of nursing facility compliance. 

The supplemental CPG provides 

voluntary guidelines to assist nursing 

facilities in identifying significant risk 

areas and in evaluating and, as 

necessary, refining ongoing compliance 

efforts. 

FOR FURTHER INFORMATION CONTACT: 

Amanda Walker, Associate Counsel, 

Office of Counsel to the Inspector 

General, (202) 619–0335; or Catherine 

Hess, Senior Counsel, Office of Counsel 

to the Inspector General, (202) 619– 

1306. 

Background 

Beginning in 1998, OIG embarked on 

a major initiative to engage the private 

health care community in preventing 

the submission of erroneous claims and 

in combating fraud and abuse in the 

Federal health care programs through 

voluntary compliance efforts. As part of 

that initiative, OIG has developed a 

series of CPGs directed at the following 

segments of the health care industry: 

Hospitals; clinical laboratories; home 

health agencies; third-party billing 

companies; the durable medical 

equipment, prosthetics, orthotics, and 

supply industry; hospices; Medicare 

Advantage (formerly known as 


ebenthall on PROD1PC60 with NOTICES
Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Notices 56833 

1Copies of the CPGs are available on our Web site 

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

complianceguidance.html. 

2See 65 FR 14289 (March 16, 2000), ‘‘Publication 

of the OIG Compliance Program Guidance for 

Nursing Facilities’’ (2000 Nursing Facility CPG), 

available on our Web site at http://oig.hhs.gov/ 

authorities/docs/cpgnf.pdf. 

3See 73 FR 4248 (January 24, 2008), ‘‘Solicitation 

of Information and Recommendations for Revising 

the Compliance Program Guidance for Nursing 

Facilities,’’ available on our Web site at http:// 

oig.hhs.gov/authorities/docs/08/ 

CPG_Nursing_Facility_Solicitation.pdf. 

4See 73 FR 20680 (April 16, 2008), ‘‘Draft OIG 

Supplemental Compliance Program Guidance for 

Nursing Facilities,’’ available on our Web site at 

http://oig.hhs.gov/fraud/docs/complianceguidance/ 

NurseCPGIIFR.pdf. 

5For purposes of convenience in this guidance, 

the term ‘‘nursing facility’’ or ‘‘facility’’ includes a 

skilled nursing facility (SNF) and a nursing facility 

(NF) that meet the requirements of sections 1819 

and 1919 of the Social Security Act (Act) (42 U.S.C. 

1395i–3, 1396r), respectively, as well as entities that 

own or operate such facilities. Where appropriate, 

we distinguish SNFs from NFs. While long-term 

care providers other than SNFs or NFs, such as 

assisted living facilities, should find this CPG 

useful, we recognize that they may be subject to 

different laws, rules, and regulations and, 

accordingly, may have different or additional risk 

areas and may need to adopt different compliance 

strategies. We encourage all long-term care 

providers to establish and maintain effective 

compliance programs. 

6See 2000 Nursing Facility CPG, supra note 2. 

Medicare+Choice) organizations; 

nursing facilities; ambulance suppliers; 

physicians; and pharmaceutical 

manufacturers.1 It is our intent that 

CPGs encourage the development and 

use of internal controls to monitor 

adherence to applicable statutes, 

regulations, and program requirements. 

The suggestions made in the CPGs are 

not mandatory, and nursing facilities 

should not view the CPGs as exhaustive 

discussions of beneficial compliance 

practices or relevant risk areas. 

OIG originally published a CPG for 

the nursing facility industry on March 

16, 2000.2 Since that time, there have 

been significant changes in the way 

nursing facilities deliver, and receive 

reimbursement for, health care services, 

as well as significant changes in the 

Federal enforcement environment and 

increased concerns about quality of care 

in nursing facilities, which continues to 

be a high priority of OIG. In response to 

these developments, and in an effort to 

receive initial input on this guidance 

from interested parties, OIG published a 

notice in the Federal Register on 

January 24, 2008, seeking stakeholder 

comments.3 After consideration of the 

public comments and the issues raised, 

OIG published a draft supplemental 

CPG for Nursing Facilities in the 

Federal Register on April 16, 2008, to 

ensure that that all parties had a 

reasonable and meaningful opportunity 

to provide input into the final product.4

We received seven comments on the 

draft document, all from trade 

associations. We also held stakeholder 

meetings with the commenters who 

chose to meet with us. OIG considered 

the written comments and input from 

the meetings during the development of 

the final supplemental CPG. 

Commenters uniformly supported OIG’s 

efforts to update the 2000 Nursing 

Facility CPG. Some of the commenters 

suggested that OIG clarify the draft 

supplemental CPG to reflect more fully 

the role consultant pharmacists can 

play, in conjunction with other 

members of residents’ care teams, in 

achieving appropriate medication 

management in nursing facilities. Other 

commenters suggested modifications to 

other aspects of the draft supplemental 

CPG, including physician roles and 

contractual issues. The final 

supplemental CPG incorporates 

clarifications responsive to these 

comments. Several commenters 

suggested legislative or policy changes 

outside the scope of the supplemental 

CPG, and those comments are not 

addressed by the final supplemental 

CPG. 

In the draft supplemental CPG, we 

specifically solicited suggestions 

regarding specific measures of 

compliance program effectiveness 

tailored to nursing facilities. We did not 

receive suggestions proposing such 

measures, and therefore did not include 

an effectiveness measures section in the 

final supplemental CPG. 

OIG Supplemental Compliance 

Program Guidance for Nursing 

Facilities 

This document is organized in the 

following manner: 

I. Introduction 

A. Benefits of a Compliance Program 

B. Application of Compliance Program 

Guidance 

II. Reimbursement Overview 

A. Medicare 

B. Medicaid 

III. Fraud and Abuse Risk Areas 

A. Quality of Care 

1. Sufficient Staffing 

2. Comprehensive Resident Care Plans 

3. Medication Management 

4. Appropriate Use of Psychotropic 

Medications 

5. Resident Safety 

(a) Promoting Resident Safety 

(b) Resident Interactions 

(c) Staff Screening 

B. Submission of Accurate Claims 

1. Proper Reporting of Resident Case-Mix 

by SNFs 

2. Therapy Services 

3. Screening for Excluded Individuals and 

Entities 

4. Restorative and Personal Care Services 

C. The Federal Anti-Kickback Statute 

1. Free Goods and Services 

2. Service Contracts 

(a) Non-Physician Services 

(b) Physician Services 

3. Discounts 

(a) Price Reductions 

(b) Swapping 

4. Hospices 

5. Reserved Bed Payments 

D. Other Risk Areas 

1. Physician Self-Referrals 

2. Anti-Supplementation 

3. Medicare Part D 

E. HIPAA Privacy and Security Rules 

IV. Other Compliance Considerations 

A. An Ethical Culture 

B. Regular Review of Compliance Program 

Effectiveness 

V. Self-Reporting 

VI. Conclusion 

I. Introduction 

Continuing its efforts to promote 

voluntary compliance programs for the 

health care industry, the Office of 

Inspector General (OIG) of the 

Department of Health and Human 

Services (Department) publishes this 

Supplemental Compliance Program 

Guidance (CPG) for Nursing Facilities.5

This document supplements, rather 

than replaces, OIG’s 2000 Nursing 

Facility CPG, which addressed the 

fundamentals of establishing an 

effective compliance program for this 

industry.6

Neither this supplemental CPG, nor 

the original 2000 Nursing Facility CPG, 

is a model compliance program. Rather, 

the two documents collectively offer a 

set of guidelines that nursing facilities 

should consider when developing and 

implementing a new compliance 

program or evaluating an existing one. 

We are mindful that many nursing 

facilities have already devoted 

substantial time and resources to 

compliance efforts. For those nursing 

facilities with existing compliance 

programs, this document may serve as a 

roadmap for updating or refining their 

compliance plans. For facilities with 

emerging compliance programs, this 

supplemental CPG, read in conjunction 

with the 2000 Nursing Facility CPG, 

should facilitate discussions among 

facility leadership regarding the 

inclusion of specific compliance 

components and risk areas. 

In drafting this supplemental CPG, we 

considered, among other things, public 

comments; relevant OIG and Centers for 

Medicare & Medicaid Services (CMS) 

statutory and regulatory authorities 

(including CMS’s regulations governing 

long-term care facilities at 42 CFR part 

483; CMS transmittals, program 

memoranda, and other guidance; and 

the Federal fraud and abuse statutes, 

together with the anti-kickback safe 


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56834 Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Notices 

7Section 1888(e) of the Act (42 U.S.C. 1395yy(e)) 

(noting the PPS rate applied to services provided on 

harbor regulations and preambles); other 

OIG guidance (such as OIG advisory 

opinions, special fraud alerts, bulletins, 

and other public documents); 

experience gained from investigations 

conducted by OIG’s Office of 

Investigations, the Department of Justice 

(DOJ), and the State Medicaid Fraud 

Control Units; and relevant reports 

issued by OIG’s Office of Audit Services 

and Office of Evaluation and 

Inspections. We also consulted with 

CMS, DOJ, and nursing facility resident 

advocates. 

This supplemental CPG responds to 

developments in the nursing facility 

industry, including significant changes 

in the way nursing facilities deliver, and 

receive reimbursement for, health care 

services, evolving business practices, 

and changes in the Federal enforcement 

environment. Moreover, this 

supplemental CPG reflects OIG’s 

continued focus on quality of care in 

nursing facilities. Together with our law 

enforcement partners, we have used, 

with increasing frequency, Federal civil 

fraud remedies to address cases 

involving poor quality of care, including 

troubling failure of care on a systemic 

level in some organizations. To promote 

compliance and prevent fraud and 

abuse, OIG is supplementing the 2000 

Nursing Facility CPG with specific risk 

areas related to quality of care, claims 

submissions, the Federal anti-kickback 

statute, and other emerging areas. 

A. Benefits of a Compliance Program 

Nursing facilities are vital to the 

health and welfare of millions of 

Americans. OIG recognizes that most 

facilities and the people who work in 

them strive daily to provide high 

quality, compassionate, cost-effective 

care to residents. A successful 

compliance program addresses the 

public and private sectors’ common 

goals of reducing fraud and abuse, 

enhancing health care providers’ 

operations, improving the quality of 

health care services, and reducing their 

overall cost. Meeting these goals 

benefits the nursing facility industry, 

the Government, and residents alike. 

Compliance programs help nursing 

facilities fulfill their legal duty to 

provide quality care; to refrain from 

submitting false or inaccurate claims or 

cost information to the Federal health 

care programs; and to avoid engaging in 

other illegal practices. 

A nursing facility may gain important 

additional benefits by voluntarily 

implementing a compliance program, 

including: 

• Demonstrating the nursing facility’s 

commitment to honest and responsible 

corporate conduct; 

• Increasing the likelihood of 

preventing unlawful and unethical 

behavior or identifying and correcting 

such behavior at an early stage; 

• Encouraging employees and others 

to report potential problems, which 

permits appropriate internal inquiry and 

corrective action and reduces the risk of 

False Claims Act lawsuits, and 

administrative sanctions (e.g., penalties, 

assessments, and exclusion), as well as 

State actions; 

• Minimizing financial loss to the 

Government and taxpayers, as well as 

corresponding financial loss to the 

nursing facility; 

• Enhancing resident satisfaction and 

safety through the delivery of improved 

quality of care; and 

• Improving the nursing facility’s 

reputation for integrity and quality, 

increasing its market competitiveness 

and reputation in the community. 

OIG recognizes that implementation 

of a compliance program may not 

entirely eliminate improper or unethical 

conduct from nursing facility 

operations. However, an effective 

compliance program demonstrates a 

nursing facility’s good faith effort to 

comply with applicable statutes, 

regulations, and other Federal health 

care program requirements, and may 

significantly reduce the risk of unlawful 

conduct and corresponding sanctions. 

B. Application of Compliance Program 

Guidance 

Given the diversity of the nursing 

facility industry, there is no single 

‘‘best’’ nursing facility compliance 

program. OIG recognizes the 

complexities of the nursing facility 

industry and the differences among 

facilities. Some nursing facilities are 

small and may have limited resources to 

devote to compliance measures; others 

are affiliated with well-established, 

large, multi-facility organizations with a 

widely dispersed work force and 

significant resources to devote to 

compliance. 

Accordingly, OIG does not intend this 

supplemental CPG to be a ‘‘one-size-fitsall’’ guidance. OIG strongly encourages 

nursing facilities to identify and focus 

their compliance efforts on those areas 

of potential concern or risk that are most 

relevant to their organizations. A 

nursing facility should tailor its 

compliance measures to address 

identified risk areas and to fit the 

unique environment of the facility 

(including its structure, operations, 

resources, the needs of its resident 

population, and prior enforcement 

experience). In short, OIG recommends 

that each nursing facility adapt the 

objectives and principles underlying 

this guidance to its own particular 

circumstances. 

In section II below, for contextual 

purposes, we provide a brief overview 

of the reimbursement system. In section 

III, entitled ‘‘Fraud and Abuse Risk 

Areas,’’ we present several fraud and 

abuse risk areas that are particularly 

relevant to the nursing facility industry. 

Each nursing facility should carefully 

examine these risk areas and identify 

those that potentially affect it. Next, in 

section IV, ‘‘Other Compliance 

Considerations,’’ we offer 

recommendations for establishing an 

ethical culture and for assessing and 

improving an existing compliance 

program. Finally, in section V, ‘‘SelfReporting,’’ we set forth the actions 

nursing facilities should take if they 

discover credible evidence of 

misconduct. 

II. Reimbursement Overview 

We begin with a brief overview of 

Medicare and Medicaid reimbursement 

for nursing facilities as context for the 

subsequent risk areas section. This 

overview is intended to be a summary 

only. It does not establish or interpret 

any program rules or regulations. 

Nursing facilities are advised to consult 

the relevant program’s payment, 

coverage, and participation rules, 

regulations, and guidance, which 

change over time. Any questions 

regarding payment, coverage, or 

participation in the Medicare or 

Medicaid programs should be directed 

to the relevant contractor, carrier, CMS 

office, or State Medicaid agency. 

A. Medicare 

Medicare reimbursement to SNFs and 

NFs depends on several factors, 

including the character of the facility, 

the beneficiary’s circumstances, and the 

type of items and services provided. 

Generally speaking, SNFs are Medicarecertified facilities that provide extended 

skilled nursing or rehabilitative care 

under Medicare Part A. They are 

typically reimbursed under Part A for 

the costs of most items and services, 

including room, board, and ancillary 

items and services. In some 

circumstances (discussed further 

below), SNFs may receive payment 

under Medicare Part B. Facilities that 

are not SNFs are not reimbursed under 

Part A. They may be reimbursed for 

some items and services under Part B. 

Medicare pays SNFs under a 

prospective payment system (PPS) for 

beneficiaries covered by the Part A 

extended care benefit.7 Covered 


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Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Notices 56835 

or after July 1, 1998). See also CMS, ‘‘Consolidated 

Billing,’’ available on CMS’s Web site at http:// 

www.cms.hhs.gov/SNFPPS/ 

05_ConsolidatedBilling.asp. 

8Sections 1812(a)(2) and 1861(i) of the Act (42 

U.S.C. 1395d(a)(2), 1395x(i)). 

9Section 1888(e) of the Act (42 U.S.C. 1395yy(e)). 

10Section 1812(a)(2)(A) of the Act (42 U.S.C. 

1395d(a)(2)(A)). 

11Section 1888(e)(4)(G)(i) of the Act (42 U.S.C. 

1395yy(e)(4)(G)(i)). 

12 Id. 

13Sections 1819(b)(3) and 1919(b)(3) of the Act 

(42 U.S.C. 1395i–3(b)(3), 1396r(b)(3)), and their 

implementing regulation, 42 CFR 483.20, require 

nursing facilities participating in the Medicare or 

Medicaid programs to use a standardized RAI to 

assess each nursing facility resident’s strengths and 

needs. 

14See id. 

15Sections 1842(b)(6)(E) and 1862(a)(18) of the 

Act (42 U.S.C. 1395u, 1395aa); Section 1888(e) of 

the Act (42 U.S.C. 1395yy(e)) (noting the PPS rate 

applied to services provided on or after July 1, 

1998). See also Consolidated Billing, supra note 7. 

16See id. 

17Section 1888(e) of the Act (42 U.S.C. 1395yy); 

Consolidated Billing, supra note 7. 

18 Id. 

19 Id. 

20 Id. 

21Section 1888(e)(2)(A) of the Act (42 U.S.C. 

1395yy(e)(2)(A)); CMS, ‘‘Skilled Nursing Facilities 

(SNF) Consolidated Billing (CB) as It Relates to 

Therapy Services,’’ MLN Matters Number: SE0518 

(MLN Matters SE0518), available on CMS’s Web site 

at http://www.cms.hhs.gov/MLNMattersArticles/ 

downloads/SE0518.pdf. 

22 Id. 

23MLN Matters SE0518, supra note 21. 

24 Id. 

25 Id. 

26 Id. 

27 Id. 

28Section 1861(n) of the Act (42 U.S.C. 1395x(n)). 

29Section 1861(h)(5) of the Act (42 U.S.C. 

1395x(h)(5)). 

30Section 1861(n) of the Act (42 U.S.C. 1395x(n)). 

beneficiaries are those who require 

skilled nursing or rehabilitation services 

and receive the services from a 

Medicare-certified SNF after a 

qualifying hospital stay of at least 3 

days.8 The PPS rate is a fixed, per diem 

rate.9 The maximum benefit is 100 days 

per ‘‘spell of illness.’’ 10

CMS adjusts the PPS per diem rate 

per resident to ensure that the level of 

payment made for a particular resident 

reflects the resource intensity that 

would typically be associated with that 

resident’s clinical condition.11 This 

methodology, referred to as the 

Resource Utilization Group (RUG) 

classification system, currently in 

version RUG-III, uses beneficiary 

assessment data extrapolated from the 

Minimum Data Set (MDS) to assign 

beneficiaries to one of the RUG-III 

groups.12 The MDS is composed of data 

variables for each resident, including 

diagnoses, treatments, and an evaluation 

of the resident’s functional status, 

which are collected via a Resident 

Assessment Instrument (RAI).13 Such 

assessments are conducted at 

established intervals throughout a 

resident’s stay. The resident’s RUG 

assignment and payment rate are then 

adjusted accordingly for each interval.14

The PPS payments cover virtually all 

of the SNF’s costs for furnishing 

services to Medicare beneficiaries 

covered under Part A. Under the 

‘‘consolidated billing’’ rules, SNFs bill 

Medicare for most of the services 

provided to Medicare beneficiaries in 

SNF stays covered under Part A, 

including items and services that 

outside practitioners and suppliers 

provide under arrangement with the 

SNF.15 The SNF is responsible for 

paying the outside practitioners and 

suppliers for these services.16 Services 

covered by this consolidated billing 

requirement include, by way of 

example, physical therapy, occupational 

therapy, and speech therapy services; 

certain non-self-administered drugs and 

supplies furnished ‘‘incident to’’ a 

physician’s services (e.g., ointments, 

bandages, and oxygen); braces and 

orthotics; and the technical component 

of most diagnostic tests.17 These items 

and services must be billed to Medicare 

by the SNF.18

The consolidated billing requirement 

does not apply to a small number of 

excluded services, such as physician 

professional fees and certain ambulance 

services.19 These excluded services are 

separately billable to Part B by the 

individual or entity furnishing the 

service. For example, professional 

services furnished personally by a 

physician to a Part A SNF resident are 

excluded from consolidated billing and 

are billed by the physician to the Part 

B carrier.20

Some Medicare beneficiaries reside in 

a Medicare-certified SNF, but are not 

eligible for Part A extended care benefits 

(e.g., a beneficiary who did not have a 

qualifying hospital stay of at least 3 days 

or a beneficiary who has exhausted his 

or her Part A benefit). These 

beneficiaries—sometimes described as 

being in ‘‘non-covered Part A stays’’— 

may still be eligible for Part B coverage 

of certain individual services. 

Consolidated billing would not apply to 

such individual services, with the 

exception of therapy services.21

Physical therapy, occupational therapy, 

and speech language pathology services 

furnished to SNF residents are always 

subject to consolidated billing.22 Claims 

for therapy services furnished during a 

non-covered Part A stay must be 

submitted to Medicare by the SNF 

itself.23 Thus, according to CMS 

guidance, the SNF is reimbursed under 

the Medicare fee schedule for the 

therapy services, and is responsible for 

reimbursing the therapy provider.24

When a beneficiary resides in a 

nursing facility (or part thereof) that is 

not certified as an SNF by Medicare, the 

beneficiary is not considered an SNF 

resident for Medicare billing 

purposes.25 Accordingly, ancillary 

services, including therapy services, are 

not subject to consolidated billing.26

Either the supplier of the ancillary 

service or the facility may bill the 

Medicare carrier for the Part B items and 

services directly.27 In these 

circumstances, it is the joint 

responsibility of the facility and the 

supplier to ensure that only one of them 

bills Medicare. 

Part B coverage for durable medical 

equipment (DME) presents special 

circumstances because the benefit 

extends only to items furnished for use 

in a patient’s home.28 DME furnished 

for use in an SNF or in certain other 

facilities providing skilled care is not 

covered by Part B. Instead, such DME is 

covered by the Part A PPS payment or 

applicable inpatient payment.29 In some 

cases, NFs that are not SNFs can be 

considered a ‘‘home’’ for purposes of 

DME coverage under Part B.30

B. Medicaid 

Medicaid provides another means for 

nursing facility residents to pay for 

skilled nursing care, as well as room 

and board in a nursing facility certified 

by the Government to provide services 

to Medicaid beneficiaries. Medicaid is a 

State and Federal program that covers 

certain groups of low-income and 

medically needy people. Medicaid also 

helps residents dually eligible for 

Medicare and Medicaid pay their 

Medicare premiums and cost-sharing 

amounts. Because Medicaid eligibility 

criteria, coverage limitations, and 

reimbursement rates are established at 

the State level, there is significant 

variation across the nation. Many States, 

however, pay nursing facilities a flat 

daily rate that covers room, board, and 

routine care for Medicaid beneficiaries. 

III. Fraud and Abuse Risk Areas 

This section should assist nursing 

facilities in their efforts to identify 

operational areas that present potential 

liability risks under several key Federal 

fraud and abuse statutes and 

regulations. This section focuses on 

areas that are currently of concern to the 

enforcement community. It is not 

intended to address all potential risk 

areas for nursing facilities. Identifying a 

particular practice or activity in this 

section is not intended to imply that the 

practice or activity is necessarily illegal 


ebenthall on PROD1PC60 with NOTICES
56836 Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Notices 

31Centers for Disease Control and Prevention 

(CDC), ‘‘The State of Aging and Health in America 

2007,’’ available on CDC’s Web site at http:// 

www.cdc.gov/aging/pdf/saha_2007.pdf. 

32 Id. (quoting Julie Louise Gerberding, M.D., 

MPH, Director, CDC, U.S. Department of Health and 

Human Services). 

33 ‘‘Listening Session: Abuse of Our Elders: How 

We Can Stop It: Hearing Before the Senate Special 

Committee on Aging,’’ 110th Congress (2007) 

(testimony of Gregory Demske, Assistant Inspector 

General for Legal Affairs, Office of Inspector 

General, U.S. Department of Health and Human 

Services), available at http://aging.senate.gov/ 

events/hr178gd.pdf; see also 18 U.S.C. 287 

(concerning false, fictitious, or fraudulent claims); 

18 U.S.C. 1001 (concerning statements or entries 

generally); 18 U.S.C. 1035 (concerning false 

statements relating to health care matters); 18 U.S.C. 

1347 (concerning health care fraud); 18 U.S.C. 1516 

(concerning obstruction of a Federal audit); the 

Federal False Claims Act (31 U.S.C. 3729–3733); 

section 1128A of the Act (42 U.S.C. 1320a–7a) 

(concerning civil monetary penalties); section 

1128B(c) of the Act (42 U.S.C. 1320a–7b(c)) 

(concerning false statements or representations with 

respect to condition or operation of institutions). In 

addition to the Federal criminal, civil, and 

administrative liability for false claims and 

kickback violations outlined in this CPG, nursing 

facilities also face exposure under State laws, 

including criminal, civil, and administrative 

sanctions. 

34The requirement to deliver quality health care 

is a continuing obligation for nursing facilities. As 

regulations change, so too should the training. 

Therefore, this recommendation envisions more 

than an initial employee ‘‘orientation’’ training on 

the nursing facility’s obligations to provide quality 

health care. CMS has multiple resources available 

to assist nursing facilities in developing training 

programs. See CMS, ‘‘Sharing Innovations in 

Quality, Resources for Long Term Care,’’ available 

on CMS’s Web site at http://siq.air.org/default.aspx; 

CMS, ‘‘Skilled Nursing Facilities/Long-Term Care 

Open Door Forum,’’ available on CMS’s Web site at 

http://www.cms.hhs.gov/OpenDoorForums/ 

25_ODF_SNFLTC.asp; CMS, ‘‘State Operations 

Manual,’’ Pub. No. 100–07, available on CMS’s Web 

site at http://www.cms.hhs.gov/Manuals/IOM/ 

list.asp; see also Medicare Quality Improvement 

Community, ‘‘MedQIP—Medicare Quality 

Improvement Community,’’ available on CMS’s 

Web site at http://www.medqic.org. Nursing 

facilities may also find it useful to review the CMS 

Quality Improvement Organizations Statement of 

Work, available at http://www.cms.hhs.gov/ 

QualityImprovementOrgs/04_9thsow.asp. In 

addition, facilities may wish to stay abreast of 

emerging best practices, which are often promoted 

by industry associations. 

35Sections 1819(b)(4)(A) and 1919(b)(4)(A) of the 

Act (42 U.S.C. 1395i–3(b)(4)(A), 1396r(b)(4)(A)); 42 

CFR 483.30. 

36For example, State nursing facility staffing 

standards, which exist for the majority of States, 

vary in types of regulated staff, the ratios of staff, 

and the facilities to which the regulations apply. 

See Jane Tilly, et al., ‘‘State Experiences with 

Minimum Nursing Staff Ratios for Nursing 

Facilities: Findings from Case Studies of Eight 

States’’ (November 2003) (joint paper by The Urban 

Institute and the Department), available at http:// 

aspe.hhs.gov/daltcp/reports/8statees.htm. 

37Nursing facilities operate in an environment of 

high staff turnover where it is difficult to attract, 

train, and retain an adequate workforce. Turnover 

among nurse aides, who provide most of the handson care in nursing facilities, means that residents 

are constantly receiving care from new staff who 

often lack experience and knowledge of individual 

residents. Furthermore, research correlates staff 

shortages and insufficient training with substandard 

care. See OIG, OEI Report OEI–01–04–00070, 

‘‘Emerging Practices in Nursing Homes,’’ March 

2005, available on our Web site at http:// 

oig.hhs.gov/oei/reports/oei-01-04-00070.pdf 

(reviewing emerging practices that nursing facility 

administrators believe reduce their staff turnover). 

in all circumstances or that it may not 

have a valid or lawful purpose. This 

section addresses the following areas of 

significant concern for nursing facilities: 

Quality of care, submission of accurate 

claims, Federal anti-kickback statute, 

other risk areas, and Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA) privacy and security 

rules. 

This guidance does not create any 

new law or legal obligations, and the 

discussions in this guidance are not 

intended to present detailed or 

comprehensive summaries of lawful or 

unlawful activity. This guidance is not 

intended as a substitute for consultation 

with CMS, a facility’s fiscal 

intermediary or Program Safeguard 

Contractor, a State Medicaid agency, or 

other relevant State agencies with 

respect to the application and 

interpretation of payment, coverage, 

licensure, or other provisions that are 

subject to change. Rather, this guidance 

should be used as a starting point for a 

nursing facility’s legal review of its 

particular practices and for 

development or refinement of policies 

and procedures to reduce or eliminate 

potential risk. 

A. Quality of Care 

By 2030, the number of older 

Americans is estimated to rise to 71 

million,31 making the aging of the U.S. 

population ‘‘one of the major public 

health challenges we face in the 21st 

century.’’ 32 In addressing this 

challenge, a national focus on the 

quality of health care is emerging. 

In cases that involve failure of care on 

a systemic and widespread basis, the 

nursing facility may be liable for 

submitting false claims for 

reimbursement to the Government 

under the Federal False Claims Act, the 

Civil Monetary Penalties Law (CMPL), 

or other authorities that address false 

and fraudulent claims or statements 

made to the Government.33 Thus, 

compliance with applicable quality of 

care standards and regulations is 

essential for the lawful behavior and 

success of nursing facilities. 

Nursing facilities that fail to make 

quality a priority, and consequently fail 

to deliver quality health care, risk 

becoming the target of governmental 

investigations. Highlighted below are 

common risk areas associated with the 

delivery of quality health care to 

nursing facility residents that frequently 

arise in enforcement cases. These 

include sufficient staffing, 

comprehensive care plans, medication 

management, appropriate use of 

psychotropic medications, and resident 

safety. This list is not exhaustive. 

Moreover, nursing facilities should 

recognize that these issues are often 

inter-related. Nursing facilities that 

attempt to address one issue will often 

find that they must address other areas 

as well. The risk areas identified in 

sections III.B. (Submission of Accurate 

Claims), III.C. (Anti-Kickback), and III.D. 

(Other Risk Areas) below are also 

intertwined with quality of care risk 

areas and should be considered as well. 

As a starting point, nursing facilities 

should familiarize themselves with 42 

CFR part 483 (part 483), which sets forth 

the principal requirements for nursing 

facility participation in the Medicare 

and Medicaid programs. It is essential 

that key members of the organization 

understand these requirements and 

support their facility’s commitment to 

compliance with these regulations. 

Targeted training for care providers, 

managers, administrative staff, officers, 

and directors on the requirements of 

part 483 will help nursing facilities 

ensure that they are fulfilling their 

obligation to provide quality health 

care.34

1. Sufficient Staffing 

OIG is aware of facilities that have 

systematically failed to provide staff in 

sufficient numbers and with appropriate 

clinical expertise to serve their 

residents. Although most facilities strive 

to provide sufficient staff, nursing 

facilities must be mindful that Federal 

law requires sufficient staffing necessary 

to attain or maintain the highest 

practicable physical, mental, and 

psychosocial well-being of residents.35

Thus, staffing numbers and staff 

competency are critical. 

The relationship between staff ratios, 

staff competency, and quality of care is 

complex.36 No single staffing model will 

suit every facility. A staffing model that 

works in a nursing facility today may 

not meet the facility’s needs in the 

future. Nursing facilities, therefore, are 

strongly encouraged to assess their 

staffing patterns regularly to evaluate 

whether they have sufficient staff 

members who are competent to care for 

the unique acuity levels of their 

residents. 

Important considerations for assessing 

staffing models include, among others, 

resident case-mix, staff skill levels, staffto-resident ratios, staff turnover,37

staffing schedules, disciplinary records, 

payroll records, timesheets, and adverse 


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38See, e.g., OIG, OEI Report OEI–02–99–00040, 

‘‘Nursing Home Resident Assessment Quality of 

Care,’’ January 2001, available on our Web site at 

http://oig.hhs.gov/oei/reports/oei-02–99–00040.pdf. 

39 42 CFR 483.20(k). An effective compliance 

program would also monitor discharge and transfer 

of residents for compliance with Federal and State 

regulations. See, e.g., 42 CFR 483.12 (detailing 

transfer and discharge obligations). Because many 

of the legitimate reasons for transfer or discharge 

relate to the medical or psychosocial needs of the 

resident, the care plan team may be in a position 

to provide recommendations on discharge or 

transfer of a resident. 

40 42 CFR 483.20(k)(2)(ii) (requiring an 

interdisciplinary team, including the physician, a 

registered nurse with responsibility for the resident, 

and other disciplines involved in the resident’s 

care). 

41Nursing facilities with residents with mental 

illness or mental retardation should ensure that 

they have the Preadmission Screening and Resident 

Review (PASRR) screens for their residents. See 42 

CFR 483.20(m). In addition, for residents who do 

not require specialized services, facilities should 

ensure that they are providing the ‘‘services of 

lesser intensity’’ as set forth in CMS regulations. 

See 42 CFR 483.120(c). Care plan meetings can 

provide nursing facilities with an ideal opportunity 

to ensure that these obligations are met. 

42Where possible, residents and their family 

members or legal guardians should be included in 

the development of care and treatment plans. 

Unless the resident has been declared incompetent 

or otherwise found to be incapacitated under State 

law, the resident has a right to participate in his or 

her care planning and treatment. 42 CFR 

483.10(d)(3). 

43See, e.g., 42 CFR 483.40(b), (c), (e). 

44 42 CFR 483.40(a). 

45 42 CFR 483.20(k)(2)(ii). 

46See 42 CFR 483.40(a) (obligating a facility to 

ensure a physician supervises resident care); 42 

CFR 483.40(b) (requiring physicians to review the 

resident’s ‘‘total program of care’’). 

47Sections 1819(b)(4)(A)(iii) and 

1919(b)(4)(A)(iii) of the Act (42 U.S.C. 1395i– 

3(b)(4)(A)(iii) and 1396r(b)(4)(A)(iii)). In addition, 

under 42 CFR 483.60, SNFs and NFs must ‘‘provide 

routine and emergency drugs and biologicals to 

[their] residents, or obtain them under an agreement 

described in [section] 483.75(h) * * *’’ Nursing 

facilities must meet this obligation even if a 

pharmacy charges a Medicare Part D copayment to 

a dual eligible beneficiary who cannot afford to pay 

the copayment. See CMS, ‘‘Part D Questions re: Copays for Institutionalized Individuals April 19, 

2006,’’ Question 2. and Response, in ‘‘Medicare Part 

D Claims Filing Window Extended to 180 Days,’’ 

Medicare Rx Update: May 9, 2006, available on 

CMS’s Web site at http://www.cms.hhs.gov/ 

Pharmacy/downloads/update050906.pdf. 

48CMS, ‘‘State Operations Manual,’’ Pub. No. 

100–07, Appendix PP, section 483.60, available on 

CMS’s Web site at http://cms.hhs.gov/manuals/ 

Downloads/som107ap_pp_guidelines_ltcf.pdf. 

49 42 CFR 483.60(b)(1). 

event reports (e.g., falls or adverse drug 

events), as well as interviews with staff, 

residents, and residents’ family or legal 

guardians. Facilities should ensure that 

the methods used to assess staffing 

accurately measure actual ‘‘on-thefloor’’ staff rather than theoretical ‘‘onpaper’’ staff. For example, payroll 

records that reflect actual hours and 

days worked may be more useful than 

prospectively generated staff schedules. 

2. Comprehensive Resident Care Plans 

Development of comprehensive 

resident care plans is essential to 

reducing risk. Prior OIG reports revealed 

that a significant percentage of resident 

care plans did not reflect residents’ 

actual care needs.38 Through its 

enforcement and compliance 

monitoring activities, OIG continues to 

see insufficient care plans and their 

impact on residents as a risk area for 

nursing facilities. 

Medicare and Medicaid regulations 

require nursing facilities to develop a 

comprehensive care plan for each 

resident that addresses the medical, 

nursing, and mental and psychosocial 

needs for each resident and includes 

reasonable objectives and timetables.39

Nursing facilities should ensure that 

care planning includes all disciplines 

involved in the resident’s care.40

Perfunctory meetings or plans 

developed without the full clinical team 

may create less than comprehensive 

resident-centered care plans. 

Inadequately prepared plans make it 

less likely that residents will receive 

coordinated, multidisciplinary care. 

Insufficient plans jeopardize residents’ 

well-being and risk the provision of 

inadequate care, medically unnecessary 

care services, or medically 

inappropriate services. 

To reduce these risks, nursing 

facilities should design measures to 

ensure an interdisciplinary and 

comprehensive approach to developing 

care plans. Basic steps, such as 

appropriately scheduling meetings to 

accommodate the full interdisciplinary 

team, completing all clinical 

assessments before the meeting is 

convened,41 opening lines of 

communication between direct care 

providers and interdisciplinary team 

members, involving the resident and the 

residents’ family members or legal 

guardian,42 and documenting the length 

and content of each meeting, may assist 

facilities with meeting this requirement. 

Another risk area related to care plans 

includes the involvement of attending 

physicians in resident care. Although 

specific regulations govern the role and 

responsibilities of attending 

physicians,43 the nursing facility also 

has a critical role—ensuring that a 

physician supervises each resident’s 

care.44 Facilities must also include the 

attending physician in the development 

of the resident’s care plan.45 Thus, an 

effective compliance program would 

ensure physician involvement in these 

processes.46 For example, many 

facilities schedule meetings to discuss a 

particular resident’s care plan. Facilities 

may wish to develop policies and 

procedures to facilitate participation by 

attending physicians, who often are not 

physically present at the nursing facility 

on a daily basis. Facilities may improve 

communication with physicians by 

providing advance notice of care 

planning meetings. Nursing facilities 

should evaluate, in conjunction with the 

attending physician, how best to ensure 

physician participation—whether via 

consultation and post-meeting 

debriefing, or telephone or personal 

attendance at meetings—with a focus on 

serving the best interests of the resident 

and complying with applicable 

regulations. 

3. Medication Management 

The Act requires nursing facilities to 

provide ‘‘pharmaceutical services 

(including procedures that assure 

accurate acquiring, receiving, 

dispensing, and administering of all 

drugs and biologicals) to meet the needs 

of each resident.’’ 47 Nursing facilities 

should be mindful of potential quality 

of care problems when adopting and 

implementing policies and procedures 

to provide these services. A failure to 

manage pharmaceutical services 

properly can seriously jeopardize 

resident safety and even result in 

resident deaths. 

Nursing facilities can promote 

compliance by having in place proper 

medication management processes that 

advance patient safety, minimize 

adverse drug interactions, and ensure 

that irregularities in a resident’s drug 

regimen are promptly discovered and 

addressed. Nursing facilities should 

implement policies and procedures for 

maintaining accurate drug records and 

tracking medications. Nursing facilities 

should provide appropriate training on 

a regular basis to familiarize all staff 

involved in the pharmaceutical care of 

residents with proper medication 

management. To this end, the facility’s 

consultant pharmacist is an important 

resource. Consultant pharmacists, who 

specialize in the medication needs 

specific to older adults or 

institutionalized individuals, can help 

facilities ‘‘identify, evaluate, and 

address medication issues that may 

affect resident care, medical care, and 

quality of life.’’ 48

CMS regulations require that nursing 

facilities employ or obtain the services 

of a licensed pharmacist to ‘‘provide[] 

consultation on all aspects of the 

provision of pharmacy services in the 

facility * * *.’’ 49 The pharmacist must 

review the drug regimen of each 

resident at least once a month and 


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50 42 CFR 483.60(c). 

51 42 CFR 483.60(b)(2), (3). 

52CMS, ‘‘State Operations Manual,’’ Pub. No. 

100–07, Appendix PP, section 483.60, available on 

CMS’s Web site at http://cms.hhs.gov/manuals/ 

Downloads/som107ap_pp_guidelines_ltcf.pdf. In 

cases where the nursing facilities employ or 

contract directly with pharmacists to provide 

consultant pharmacist services, the nursing facility 

should ensure that the pharmacist’s compensation 

is not structured in any manner that reflects the 

volume or value of drugs prescribed for, or 

administered to, patients. 

53Nursing facilities that receive consultant 

pharmacist services under contract with a long-term 

care pharmacy should be mindful that the provision 

or receipt of free services or services at non-fairmarket value rates between actual or potential 

referral sources present a heightened risk of fraud 

and abuse. For further discussion of the antikickback statute and service arrangements, see 

sections III.C.1. and III.C.2. 

54See, e.g., 42 CFR 483.20(k)(3) (requiring 

services that are ‘‘provided or arranged by the 

facility’’ to comport with professional standards of 

quality); 42 CFR 483.25 (requiring facilities to 

provide necessary care and services, including the 

resident’s right to be free of unnecessary drugs); 42 

CFR 483.75(b) (requiring facilities to provide 

services in compliance ‘‘with all applicable Federal, 

State, and local laws, regulations, and codes, and 

with accepted professional standards and principles 

* * *’’). 

55 42 CFR 483.13(a). 

56 42 CFR 483.25(l)(1). An unnecessary drug 

includes any medication, including psychotropic 

medications, that is excessive in dose, used 

excessively in duration, used without adequate 

monitoring, used without adequate indications for 

its use, used in the presence of adverse 

consequences, or any combination thereof. Id. 

57 42 CFR 483.25(l)(2). 

58 42 CFR 483.60(c). 

59 42 CFR 483.20(k). 

60 42 CFR 483.25(l)(2). 

61Sections 1819 and 1919 of the Act (42 U.S.C. 

1351i–3 and 1396r); 42 CFR 483.10; see also 42 CFR 

483.15 and 483.25. 

62See id. 

63For an overview of research relating to resident 

abuse and neglect, see Catherine Hawes, Ph.D., 

‘‘Elder Abuse in Residential Long-Term Care 

Settings: What is Known and What Information is 

Needed?,’’ in Elder Mistreatment: Abuse, Neglect, 

and Exploitation in an Aging America (National 

Research Council, 2003); U.S. Government 

Accountability Office (GAO), GAO Report GAO– 

02–312, ‘‘Nursing Homes: More Can Be Done to 

Protect Residents from Abuse,’’ March 2002, 

available on GAO’s Web site at http://www.gao.gov/ 

new.items/d02312.pdf; Administration on Aging, 

Elder Abuse Web site, available at http:// 

www.aoa.gov/eldfam/elder_rights/elder_abuse/ 

elder_abuse.aspx. 

64 42 CFR 483.13(c); see also 42 CFR 483.13(a). 

65 Id. 

66Under State mandatory reporting statutes, 

persons such as health care professionals, human 

service professionals, clergy, law enforcement, and 

financial professionals may have a legal obligation 

to make a formal report to law enforcement officials 

or a central reporting agency if they suspect that a 

nursing facility resident is being abused or 

neglected. To ensure compliance with these 

statutes, nursing facilities should consider training 

relating to compliance with their relevant States’ 

laws. Nursing facilities can also assist by providing 

ready access to law enforcement contact 

information. 

report any irregularities discovered in a 

resident’s drug regimen to the attending 

physician and the director of nursing.50

These pharmacists are also required to: 

(1) ‘‘[e]stablish[] a system of records of 

receipt and disposition of all controlled 

drugs * * * ;’’ and (2) ‘‘[d]etermine[] 

that drug records are in order and that 

an account of all controlled drugs is 

maintained and periodically 

reconciled.’’ 51 As indicated in CMS 

guidance, ‘‘[t]he facility may provide for 

this service through any of several 

methods (in accordance with [S]tate 

requirements) such as direct 

employment or contractual agreement 

with a pharmacist.’’ 52 Some of the 

consultant pharmacists obtained by 

nursing facilities are employed by longterm care pharmacies that furnish drugs 

and supplies to nursing facilities.53

Whatever the arrangement or method 

used, the nursing facility and consultant 

pharmacist should work together to 

achieve proper medication management 

in the facility. 

4. Appropriate Use of Psychotropic 

Medications 

Based on our enforcement and 

compliance monitoring activities, OIG 

has identified inappropriate use of 

psychotropic medications for residents 

as a risk area in at least two ways—the 

prohibition against inappropriate use of 

chemical restraints and the requirement 

to avoid unnecessary drug usage. 

Facilities have affirmative obligations 

to ensure appropriate use of 

psychotropic medications. Specifically, 

nursing facilities must ensure that 

psychopharmacological practices 

comport with Federal regulations and 

generally accepted professional 

standards.54 The facility is responsible 

for the quality of drug therapy provided 

in the facility. Federal law prohibits 

facilities from using any medication as 

a means of chemical restraint for 

‘‘purposes of discipline or convenience, 

and not required to treat the resident’s 

medical symptoms.’’ 55 In addition, 

resident drug regimens must be free 

from unnecessary drugs.56 For residents 

who specifically require antipsychotic 

medications, CMS regulations also 

require, unless contraindicated, that 

residents receive gradual dose 

reductions and behavioral interventions 

aimed at reducing medication use.57

In light of these requirements, nursing 

facilities should ensure that there is an 

adequate indication for the use of the 

medication and should carefully 

monitor, document, and review the use 

of each resident’s psychotropic drugs. 

Working together, the attending 

physicians, medical director, consultant 

pharmacist, and other resident care 

providers play a critical role in 

achieving these objectives. Compliance 

measures could include educating care 

providers regarding appropriate 

monitoring and documentation 

practices and auditing drug regimen 

reviews 58 and resident care plans to 

determine if they incorporate an 

assessment of the resident’s ‘‘medical, 

nursing, and mental and psychosocial 

needs,’’ 59 including the need for 

psychotropic medications for a specific 

medical condition.60 The attending 

physicians, the medical director, the 

consultant pharmacist, and other care 

providers should collaborate to analyze 

the outcomes of care using the results of 

the drug regimen reviews, progress 

notes, and monitoring of the resident’s 

behaviors. 

5. Resident Safety 

Nursing facility residents have a legal 

right to be free from abuse and neglect.61

Facilities should take steps to ensure 

that they are protecting their residents 

from these risks.62 Of particular concern 

is harm caused by staff and fellow 

residents.63

(a) Promoting Resident Safety 

Federal regulations mandate that 

nursing facilities develop and 

implement policies and procedures to 

prohibit mistreatment, neglect, and 

abuse of residents.64 Facilities must also 

thoroughly investigate and report 

incidents to law enforcement, as 

required by State laws.65 Although 

experts continue to debate the most 

effective systems for enhancing the 

reporting, investigation, and 

prosecution of nursing facility resident 

abuse, an effective compliance program 

recognizes the value of a demonstrated 

internal commitment to eliminating 

resident abuse.66 An effective 

compliance program will include 

policies, procedures, and practices to 

prevent, investigate, and respond to 

instances of potential resident abuse, 

neglect, or mistreatment, including 

injuries resulting from staff-on-resident 

abuse and neglect, resident-on-resident 

abuse, and abuse from unknown causes. 

Confidential reporting is a key 

component of an effective resident 

safety program. Such a mechanism 

enables staff, contractors, residents, 

family members, visitors, and others to 

report threats, abuse, mistreatment, and 

other safety concerns confidentially to 

senior staff empowered to take 

immediate action. Posters, brochures, 

and online resources that encourage 

readers to report suspected safety 

problems to senior facility staff are 

commonly used. Another commonly 


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67Facilities could explore partnering with the 

ombudsmen and other consumer advocates in 

sponsoring or participating in special training 

programs designed to prevent abuse. See ‘‘Elder 

Justice: Protecting Seniors from Abuse and Neglect: 

Hearing Before the Senate Committee on Finance,’’ 

107th Congress (2002) (testimony of Catherine 

Hawes, Ph.D., titled ‘‘Elder Abuse in Residential 

Long-Term Care Facilities: What is Known About 

the Prevalence, Causes, and Prevention’’), available 

at http://finance.senate.gov/hearings/testimony/ 

061802chtest.pdf. 

68 42 CFR 483.13(c)(1)(ii). 

69OIG, Audit Report A–12–12–97–0003, 

‘‘Safeguarding Long-Term Care Residents,’’ 

September 1998, available on our Web site at 

http://oig.hhs.gov/oas/reports/aoa/d9700003.pdf. 

70Because there is no one central repository for 

criminal records, there is a significant limitation to 

searching the criminal record databases only for the 

State in which the facility is located. A better 

practice may be to search databases for all States in 

which the applicant resided or was employed. 

71 42 CFR 483.75(e)(5). 

72 42 CFR 483.75(e)(6). 

73A 2006 OIG report found that 22 percent of 

claims were upcoded, representing $542 million in 

potential overpayments for FY 2002. OIG, OEI 

Report OEI–02–02–00830, ‘‘A Review of Nursing 

Facility Resource Utilization Groups,’’ February 

2006, available on our Web site at http:// 

oig.hhs.gov/oei/reports/oei-02–02–00830.pdf. 

used compliance component for 

reporting violations is a dedicated 

hotline that allows staff, contractors, 

residents, family members, visitors, and 

others with concerns to report 

suspicions. Regardless of the reporting 

vehicle, ideally coverage for reporting 

and addressing resident safety issues 

would be on a constant basis (i.e., 24 

hours per day/7 days per week). 

Moreover, nursing facilities should 

make clear to caregivers, facility staff, 

and residents that the facility is 

committed to protecting those who 

make reports from retaliation. 

Facilities may also want to consider a 

program to engage everyone who comes 

in contact with nursing facility 

residents—whether health care 

professionals, administrative and 

custodial staff, family and friends, 

visiting therapists, or community 

members—in the mission of protecting 

residents. Such a program could include 

specialized training for everyone who 

interacts on a regular basis with 

residents on recognizing warning signs 

of neglect or abuse and on effective 

methods to communicate with 

potentially fearful residents in a way 

likely to induce candid self-reporting of 

neglect or abuse.67

(b) Resident Interactions 

The nursing facility industry, resident 

advocacy groups, and law enforcement 

are becoming increasingly concerned 

about resident abuse committed by 

fellow residents. Abuse can occur as a 

result of the failure to properly screen 

and assess, or the failure of staff to 

monitor, residents at risk for aggressive 

behavior. Such failures can jeopardize 

both the resident with aggressive 

behaviors and the victimized resident. 

Heightened awareness and monitoring 

for abuse are crucial to eradicating 

resident-on-resident abuse. Nursing 

facilities can advance their mission to 

provide a safe environment for residents 

through targeted education relating to 

resident-on-resident abuse (particularly 

for staff with responsibilities for 

admission evaluations). Thorough 

resident assessments, comprehensive 

care plans, periodic resident 

assessments, and proper staffing 

assignments would also assist nursing 

facilities in their mission to provide a 

safe environment for residents. 

(c) Staff Screening 

Nursing facilities cannot employ 

individuals ‘‘[f]ound guilty of abusing, 

neglecting, or mistreating residents,’’ or 

individuals with ‘‘a finding entered into 

[a] State nurse aide registry concerning 

abuse, neglect, mistreatment of residents 

or misappropriation of their 

property.’’ 68 Effective recruitment, 

screening, and training of care providers 

are essential to ensure a viable 

workforce. Although no preemployment background screening can 

provide nursing facilities with absolute 

assurance that a job applicant will not 

commit a crime in the future, nursing 

facilities must make reasonable efforts 

to ensure that they have a workforce 

that will maintain the safety of their 

residents. 

Commonly, nursing facilities screen 

potential employees against criminal 

record databases. OIG is aware that 

there is a ‘‘great diversity in the way 

States systematically identify, report, 

and investigate suspected abuse.’’ 69

Nonetheless, a comprehensive 

examination of a prospective 

employee’s criminal record in all States 

in which the person has worked or 

resided may provide a greater degree of 

protection for residents.70

Verification of education, licensing, 

certifications, and training for care 

providers can also assist nursing 

facilities in their efforts to ensure they 

provide patients with qualified and 

skilled caregivers. Many States have 

requirements that nursing facilities 

conduct these checks for all professional 

care providers, such as therapists, 

medical directors, and nurses. Federal 

regulations require a nursing facility to 

check its State nurse aide registry to 

ensure that potential hires for nurse aide 

positions have met competency 

evaluation requirements or are 

otherwise exempted from registration 

requirements.71 In addition, the facility 

must also check every State nurse aide 

registry it ‘‘believes will include 

information’’ on the individual.72 To 

ensure compliance with this 

requirement, facilities should have 

mechanisms in place to identify which 

State registries they must examine. 

B. Submission of Accurate Claims 

Nursing facilities must submit 

accurate claims to Federal health care 

programs. Examples of false or 

fraudulent claims include claims for 

items not provided or not provided as 

claimed, claims for services that are not 

medically necessary, and claims when 

there has been a failure of care. 

Submitting a false claim, or causing a 

false claim to be submitted, to a Federal 

health care program may subject the 

individual, the entity, or both to 

criminal prosecution, civil liability 

(including treble damages and penalties) 

under the False Claims Act, and 

exclusion from participation in Federal 

health care programs. 

Common and longstanding risks 

associated with claim preparation and 

submission include duplicate billing, 

insufficient documentation, and false or 

fraudulent cost reports. While nursing 

facilities should continue to be vigilant 

with respect to these important risk 

areas, we believe these risk areas are 

relatively well understood in the 

industry, and therefore they are not 

specifically addressed in this section. 

As reimbursement systems have 

evolved, OIG has uncovered other types 

of fraudulent transactions related to the 

provision of health care services to 

residents of nursing facilities 

reimbursed by Medicare and Medicaid. 

In this section, we will discuss some of 

these risk areas. This list is not 

exhaustive. It is intended to assist 

facilities in evaluating their own risk 

areas. In addition, section III.A. above 

outlines other regulatory requirements 

that, if not met, may subject nursing 

facilities to potential liability for 

submission of false or fraudulent claims. 

1. Proper Reporting of Resident CaseMix by SNFs 

We are aware of instances in which 

SNFs have improperly upcoded resident 

RUG assignments.73 Classifying a 

resident into the correct RUG, through 

resident assessments, requires accurate 

and comprehensive reporting about the 

resident’s conditions and needs. 

Inaccurate reporting of data could result 

in the misrepresentation of the 

resident’s status, the submission of false 

claims, and potential enforcement 

actions. Therefore, we have identified 


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74To the extent a State Medicaid program relies 

upon RUG classification, or a variation of this 

system, to calculate its reimbursement rate, nursing 

facilities, as defined in section 1919 of the Act (42 

U.S.C. 1396r), should be aware of this risk area as 

well. 

75See, e.g., CMS, ‘‘2007 Action Plan for (Further 

Improvement of) Nursing Home Quality,’’ 

September 2006, available on CMS’s Web site at 

http://www.cms.hhs.gov/SurveyCertificationGen

Info/downloads/2007ActionPlan.pdf. 

76 In addition to assisting facilities with ensuring 

that claims data are accurate, monitoring MDS data 

may assist facilities in recognizing common 

warning signs of a systemic care problem (e.g., 

increase in or excessive pressure ulcers or falls). 

77There may be additional risk areas for outside 

therapy suppliers. 

78Additional risks related to the anti-kickback 

statute are discussed below in section III.C. 

79See 42 CFR 483.20(b) and (k). 

80See OIG, OEI Report OEI–09–99–00563, 

‘‘Physical, Occupational, and Speech Therapy for 

Medicare Nursing Home Patients: Medical 

Necessity and Quality of Care Based on Treatment 

Diagnosis,’’ August 2001, available on our Web site 

at http://oig.hhs.gov/oei/reports/oei-09–99– 

00563.pdf. 

81 42 CFR 1001.1901. Exclusions imposed prior to 

August 5, 1997, cover Medicare and all State health 

care programs (including Medicaid), but not other 

Federal health care programs. See The Balanced 

Budget Act of 1997 (Pub. L. 105–33) (amending 

section 1128 of the Act (42 U.S.C. 1320a–7) to 

expand the scope of exclusions imposed by OIG). 

82Such items or services could include 

administrative, clerical, and other activities that do 

not directly involve patient care. See section 

1128A(a)(6) of the Act (42 U.S.C. 1320a–7a(a)(6)). 

83 Id. 

84A nursing facility that relies upon third-party 

agencies to provide temporary or contract staffing 

should consider including provisions in its 

contracts that require the vendors to screen staff 

against OIG’s List of Excluded Individuals/Entities 

before determining that they are eligible to work at 

the nursing facility. Although a nursing facility 

would not avoid liability for violating Medicare’s 

prohibition on payment for services rendered by the 

excluded staff person merely by including such a 

provision, requiring the vendors to screen staff may 

help a nursing facility avoid engaging the services 

of excluded persons, and could be taken into 

account in the event of a Government enforcement 

action. 

85Available on our Web site at http://oig.hhs.gov/ 

fraud/exclusions/listofexcluded.html. 

86Available at http://www.epls.gov/. 

87Reinstatement of excluded entities and 

individuals is not automatic. Those wishing to 

again participate in the Medicare, Medicaid, and all 

Federal health care programs must apply for 

reinstatement and receive authorized notice from 

OIG that reinstatement has been granted. Obtaining 

a provider number from a Medicare contractor, a 

State agency, or a Federal health care program does 

not reinstate eligibility to participate in those 

programs. There are no provisions for retroactive 

reinstatement. See 42 CFR 1001.1901. 

88OIG, ‘‘The Effect of Exclusion From 

Participation in Federal Health Care Programs,’’ 

September 1999, available on our Web site at 

http://oig.hhs.gov/fraud/docs/alertsandbulletins/ 

effected.htm. 

the assessment, reporting, and 

evaluation of resident case-mix data as 

a significant risk area for SNFs.74

Because of the critical role resident 

case-mix data play in resident care 

planning and reimbursement, training 

on the collection and use of case-mix 

data is important. An effective 

compliance program will include 

training of responsible staff to ensure 

that persons collecting the data and 

those charged with analyzing and 

responding to the data are 

knowledgeable about the purpose and 

utility of the data. Facilities must also 

ensure that data reported to the Federal 

Government are accurate. Both internal 

and external periodic validation of data 

may prove useful. Moreover, as 

authorities continue to scrutinize 

quality-reporting data,75 nursing 

facilities are well-advised to review 

such data regularly to ensure their 

accuracy and to identify and address 

potential quality of care issues.76

2. Therapy Services 

The provision of physical, 

occupational, and speech therapy 

services continues to be a risk area for 

nursing facilities. Potential problems 

include: (i) Improper utilization of 

therapy services to inflate the severity of 

RUG classifications and obtain 

additional reimbursement; (ii) 

overutilization of therapy services billed 

on a fee-for-service basis to Part B under 

consolidated billing; and (iii) stinting on 

therapy services provided to patients 

covered by the Part A PPS payment.77

These practices may result in the 

submission of false claims.78

In addition, unnecessary therapy 

services may place frail but otherwise 

functioning residents at risk for physical 

injury, such as muscle fatigue and 

broken bones, and may obscure a 

resident’s true condition, leading to 

inadequate care plans and inaccurate 

RUG classifications.79 Too few therapy 

services may expose residents to risk of 

physical injury or decline in condition, 

resulting in potential failure of care 

problems. 

OIG strongly advises nursing facilities 

to develop policies, procedures, and 

measures to ensure that residents are 

receiving medically appropriate therapy 

services.80 Some practices that may be 

beneficial include: Requirements that 

therapy contractors provide complete 

and contemporaneous documentation of 

each resident’s services; regular and 

periodic reconciliation of the 

physician’s orders and the services 

actually provided; interviews with the 

residents and family members to be sure 

services are delivered; and assessments 

of the continued medical necessity for 

services during resident care planning 

meetings at which the attending 

physician attends. 

3. Screening for Excluded Individuals 

and Entities 

No Federal health care program 

payment may be made for items or 

services furnished by an excluded 

individual or entity.81 This payment 

ban applies to all methods of Federal 

health care program reimbursement. 

Civil monetary penalties (CMP) may be 

imposed against any person who 

arranges or contracts (by employment or 

otherwise) with an individual or entity 

for the provision of items or services for 

which payment may be made under a 

Federal health care program,82 if the 

person knows or should know that the 

employee or contractor is excluded from 

participation in a Federal health care 

program.83

To prevent hiring or contracting with 

an excluded person, OIG strongly 

advises nursing facilities to screen all 

prospective owners, officers, directors, 

employees, contractors,84 and agents 

prior to engaging their services against 

OIG’s List of Excluded Individuals/ 

Entities (LEIE) on OIG’s Web site,85 as 

well as the U.S. General Services 

Administration’s Excluded Parties List 

System.86 In addition, facilities should 

consider implementing a process that 

requires job applicants to disclose, 

during the pre-employment process (or, 

for vendors, during the request for 

proposal process), whether they are 

excluded. Facilities should strongly 

consider periodically screening their 

current owners, officers, directors, 

employees, contractors, and agents to 

ensure that they have not been excluded 

since the initial screening. 

Facilities should also take steps to 

ensure that they have policies and 

procedures that require removal of any 

owner, officer, director, employee, 

contractor, or agent from responsibility 

for, or involvement with, a facility’s 

business operations related to the 

Federal health care programs if the 

facility has actual notice that such a 

person is excluded. Facilities may also 

wish to consider appropriate training for 

human resources personnel on the 

effects of exclusion. Exclusion 

continues to apply to an individual even 

if he or she changes from one health 

care profession to another while 

excluded. That exclusion remains in 

effect until OIG has reinstated the 

individual, which is not automatic.87 A 

useful tool for the training is OIG’s 

Special Advisory Bulletin, titled ‘‘The 

Effect of Exclusion From Participation 

in Federal Health Care Programs.’’ 88

4. Restorative and Personal Care 

Services 

Facilities must ensure that residents 

receive appropriate restorative and 


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89 42 CFR 483.25 (requiring facilities to provide 

care and services necessary to ensure a resident’s 

ability to participate in activities of daily living do 

not diminish unless a clinical condition makes the 

decline unavoidable). 

90 Id. 

91 Indicators to watch for include, but are not 

limited to, bedsores, falls, unexplained weight loss, 

and dehydration. 

92 42 U.S.C. 1320a–7b(b). 

93See, e.g., CMS, Form 855A, ‘‘Medicare Federal 

Health Care Provider/Supplier Application,’’ 

Certification Statement at section 15, paragraph 

A.3., available on CMS’s Web site at http:// 

www.cms.hhs.gov/CMSForms/downloads/ 

CMS855a.pdf. 

personal care services to allow residents 

to attain and maintain their highest 

practicable level of functioning.89 These 

services include, among others, care to 

avoid pressure ulcers, active and 

passive range of motion, ambulation, 

fall prevention, incontinence 

management, bathing, dressing, and 

grooming activities.90

OIG is aware of facilities that have 

billed Federal health care programs for 

restorative and personal care services 

despite the fact that the services were 

not provided or were so wholly 

deficient that they amounted to no care 

at all. Federal health care programs do 

not reimburse for restorative and 

personal care services under these 

circumstances. Nursing facilities that 

fail to provide necessary restorative and 

personal care services risk billing for 

services not rendered as claimed, and 

therefore may be subject to liability 

under fraud and abuse statutes and 

regulations. 

To avoid this risk, nursing facilities 

are strongly encouraged to have 

comprehensive procedures in place to 

ensure that services are of an 

appropriate quality and level and that 

services are in fact delivered to nursing 

facility residents. To accomplish this, 

facilities may wish to engage in resident 

and staff interviews; medical record 

reviews; 91 consultations with attending 

physicians, the medical director, and 

consultant pharmacists; and personal 

observations of care delivery. Moreover, 

complete and contemporaneous 

documentation of services is critical to 

ensuring that services are rendered. 

C. The Federal Anti-Kickback Statute 

The Federal anti-kickback statute, 

section 1128B(b) of the Act,92 places 

constraints on business arrangements 

related directly or indirectly to items or 

services reimbursable by Federal health 

care programs, including, but not 

limited to, Medicare and Medicaid. The 

anti-kickback statute prohibits the 

health care industry from engaging in 

some practices that are common in other 

business sectors, such as offering or 

receiving gifts to reward past or 

potential new referrals. 

The anti-kickback statute is a criminal 

prohibition against remuneration (in 

any form, whether direct or indirect) 

made purposefully to induce or reward 

the referral or generation of Federal 

health care program business. The antikickback statute prohibits offering or 

paying anything of value for patient 

referrals. It also prohibits offering or 

paying of anything of value in return for 

purchasing, leasing, ordering, or 

arranging for or recommending the 

purchase, lease, or order of any item or 

service reimbursable in whole or in part 

by a Federal health care program. The 

statute also covers the solicitation or 

acceptance of remuneration for referrals 

for, or the generation of, business 

payable by a Federal health care 

program. Liability under the antikickback statute is determined 

separately for each party involved. In 

addition to criminal penalties, violators 

may be subject to CMPs and exclusion 

from the Federal health care programs. 

Nursing facilities should also be aware 

that compliance with the anti-kickback 

statute is a condition of payment under 

Medicare and other Federal health care 

programs.93 As such, liability may arise 

under the False Claims Act if the antikickback statute violation results in the 

submission of a claim for payment 

under a Federal health care program. 

Nursing facilities make and receive 

referrals of Federal health care program 

business. Nursing facilities need to 

ensure that these referrals comply with 

the anti-kickback statute. Nursing 

facilities may obtain referrals of Federal 

health care program beneficiaries from a 

variety of health care sources, including, 

for example, physicians and other 

health care professionals, hospitals and 

hospital discharge planners, hospices, 

home health agencies, and other nursing 

facilities. Physicians, pharmacists, and 

other health care professionals may 

generate referrals for items and services 

reimbursed to the nursing facilities by 

Federal health care programs. In 

addition, when furnishing services to 

residents, nursing facilities often direct 

or influence referrals to others for items 

and services reimbursable by Federal 

health care programs. For example, 

nursing facilities may refer patients to, 

or order items or services from, 

hospices; DME companies; laboratories; 

diagnostic testing facilities; long-term 

care pharmacies; hospitals; physicians; 

other nursing facilities; and physical, 

occupational, and speech therapists. All 

of these circumstances call for vigilance 

under the anti-kickback statute. 

Although liability under the antikickback statute ultimately turns on a 

party’s intent, it is possible to identify 

arrangements or practices that may 

present a significant potential for abuse. 

For purposes of identifying potential 

kickback risks under the anti-kickback 

statute, the following inquiries are 

useful: 

• Does the nursing facility (or its 

affiliates or representatives) provide 

anything of value to persons or entities 

in a position to influence or generate 

Federal health care program business for 

the nursing facility (or its affiliates) 

directly or indirectly? 

• Does the nursing facility (or its 

affiliates or representatives) receive 

anything of value from persons or 

entities for which the nursing facility 

generates Federal health care program 

business, directly or indirectly? 

• Could one purpose of an 

arrangement be to induce or reward the 

generation of business payable in whole 

or in part by a Federal health care 

program? Importantly, under the antikickback statute, neither a legitimate 

business purpose for an arrangement 

nor a fair-market value payment will 

legitimize a payment if there is also an 

illegal purpose (i.e., inducing Federal 

health care program business). 

Any arrangement for which the answer 

to any of these inquiries is affirmative 

implicates the anti-kickback statute and 

requires careful scrutiny. 

Several potentially aggravating 

considerations are useful in identifying 

arrangements at greatest risk of 

prosecution. In particular, in assessing 

risk, nursing facilities should ask the 

following questions, among others, 

about any potentially problematic 

arrangements or practices they identify: 

• Does the arrangement or practice 

have a potential to interfere with, or 

skew, clinical decision-making? 

• Does the arrangement or practice 

have a potential to increase costs to 

Federal health care programs or 

beneficiaries? 

• Does the arrangement or practice 

have a potential to increase the risk of 

overutilization or inappropriate 

utilization? 

• Does the arrangement or practice 

raise patient safety or quality of care 

concerns? 

Nursing facilities should be mindful of 

these concerns when structuring and 

reviewing arrangements. An affirmative 

answer to one or more of these 

questions is a red flag signaling an 

arrangement or practice that may be 

particularly susceptible to fraud and 

abuse. 

Nursing facilities that have identified 

potentially problematic arrangements or 


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94Parties to an arrangement cannot obtain safe 

harbor protection by entering into a sham contract 

that complies with the written agreement 

requirement of a safe harbor and appears, on paper, 

to meet all of the other safe harbor requirements, 

but does not reflect the actual arrangement between 

the parties. In other words, in assessing compliance 

with a safe harbor, the question is not whether the 

terms in a written contract satisfy all of the safe 

harbor requirements, but whether the actual 

arrangement satisfies the requirements. 

95While informative for guidance purposes, an 

OIG advisory opinion is binding only with respect 

to the particular party or parties that requested the 

opinion. The analyses and conclusions set forth in 

OIG advisory opinions are fact-specific. 

Accordingly, different facts may lead to different 

results. 

practices can take a number of steps to 

reduce or eliminate the risk of an antikickback violation. Most importantly, 

the anti-kickback statute and the 

corresponding regulations establish a 

number of ‘‘safe harbors’’ for common 

business arrangements. The safe harbors 

protect arrangements from liability 

under the statute. The following safe 

harbors are of most relevance to nursing 

facilities: 

• Investment interests safe harbor (42 

CFR 1001.952(a)), 

• Space rental safe harbor (42 CFR 

1001.952(b)), 

• Equipment rental safe harbor (42 

CFR 1001.952(c)), 

• Personal services and management 

contracts safe harbor (42 CFR 

1001.952(d)), 

• Discount safe harbor (42 CFR 

1001.952(h)), 

• Employee safe harbor (42 CFR 

1001.952(i)), 

• Electronic health records items and 

services safe harbors (42 CFR 

1001.952(y)), and 

• Managed care and risk sharing 

arrangements safe harbors (42 CFR 

1001.952(m), (t), and (u)). 

To receive protection, an arrangement 

must fit squarely in a safe harbor. Safe 

harbor protection requires strict 

compliance with all applicable 

conditions set out in the relevant 

regulation.94 Compliance with a safe 

harbor is voluntary. Failure to comply 

with a safe harbor does not mean an 

arrangement is illegal per se. 

Nevertheless, we recommend that 

nursing facilities structure arrangements 

to fit in a safe harbor whenever possible. 

Nursing facilities should evaluate 

potentially problematic arrangements 

with referral sources and referral 

recipients that do not fit into a safe 

harbor by reviewing the totality of the 

facts and circumstances, including the 

intent of the parties. Depending on the 

circumstances, some relevant factors 

include: 

• Nature of the relationship between 

the parties. What degree of influence do 

the parties have, directly or indirectly, 

on the generation of business for each 

other? 

• Manner in which participants were 

selected. Were parties selected to 

participate in an arrangement in whole 

or in part because of their past or 

anticipated referrals? 

• Manner in which the remuneration 

is determined. Does the remuneration 

take into account, directly or indirectly, 

the volume or value of business 

generated? Is the remuneration 

conditioned in whole or in part on 

referrals or other business generated 

between the parties? Is the arrangement 

itself conditioned, directly or indirectly, 

on the volume or value of Federal health 

care program business? Is there any 

service provided other than referrals? 

• Value of the remuneration. Is the 

remuneration fair-market value in an 

arm’s-length transaction for legitimate, 

reasonable, and necessary services that 

are actually rendered? Is the nursing 

facility paying an inflated rate to a 

potential referral source? Is the nursing 

facility receiving free or below-marketrate items or services from a provider or 

supplier? Is compensation tied, directly 

or indirectly, to Federal health care 

program reimbursement? Is the 

determination of fair-market value based 

upon a reasonable methodology that is 

uniformly applied and properly 

documented? 

• Nature of items or services 

provided. Are items and services 

actually needed and rendered, 

commercially reasonable, and necessary 

to achieve a legitimate business 

purpose? 

• Potential Federal program impact. 

Does the remuneration have the 

potential to affect costs to any of the 

Federal health care programs or their 

beneficiaries? Could the remuneration 

lead to overutilization or inappropriate 

utilization? 

• Potential conflicts of interest. 

Would acceptance of the remuneration 

diminish, or appear to diminish, the 

objectivity of professional judgment? 

Are there patient safety or quality-ofcare concerns? If the remuneration 

relates to the dissemination of 

information, is the information 

complete, accurate, and not misleading? 

• Manner in which the arrangement 

is documented. Is the arrangement 

properly and fully documented in 

writing? Are the nursing facilities and 

outside providers and suppliers 

documenting the items and services 

they provide? Is the nursing facility 

monitoring items and services provided 

by outside providers and suppliers? Are 

arrangements actually conducted 

according to the terms of the written 

agreements? It is the substance, not the 

written form, of an arrangement that is 

determinative. 

These inquiries—and appropriate 

follow-up inquiries—can help nursing 

facilities identify, address, and avoid 

problematic arrangements. 

Available OIG guidance on the antikickback statute includes OIG Special 

Fraud Alerts and advisory bulletins. 

OIG also issues advisory opinions to 

specific parties about their particular 

business arrangements.95 A nursing 

facility concerned about an existing or 

proposed arrangement may request a 

binding OIG advisory opinion regarding 

whether the arrangement violates the 

Federal anti-kickback statute or other 

OIG fraud and abuse authorities. 

Procedures for requesting an advisory 

opinion are set out at 42 CFR part 1008. 

The safe harbor regulations (and 

accompanying Federal Register 

preambles), fraud alerts and bulletins, 

advisory opinions (and instructions for 

obtaining them, including a list of 

frequently asked questions), and other 

guidance are available on our Web site 

at http://oig.hhs.gov. 

The following discussion highlights 

several known areas of potential risk 

under the anti-kickback statute. The 

propriety of any particular arrangement 

can only be determined after a detailed 

examination of the attendant facts and 

circumstances. The identification of a 

given practice or activity as ‘‘suspect’’ or 

as an area of risk does not mean it is 

necessarily illegal or unlawful, or that it 

cannot be properly structured to fit in a 

safe harbor. It also does not mean that 

the practice or activity is not beneficial 

from a clinical, cost, or other 

perspective. Instead, the areas identified 

below are practices that have a potential 

for abuse and that should receive close 

scrutiny from nursing facilities. 

1. Free Goods and Services 

OIG has a longstanding concern about 

the provision of free goods or services 

to an existing or potential referral 

source. There is a substantial risk that 

free goods or services may be used as a 

vehicle to disguise or confer an 

unlawful payment for referrals of 

Federal health care program business. 

For example, OIG gave the following 

warning about free computers in the 

preamble to the 1991 safe harbor 

regulations: 

A related issue is the practice of giving 

away free computers. In some cases the 

computer can only be used as part of a 

particular service that is being provided, for 

example, printing out the results of 

laboratory tests. In this situation, it appears 


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96 56 FR 35952, 35978 (July 29, 1991), ‘‘Medicare 

and State Health Care Programs: Fraud and Abuse; 

OIG Anti-Kickback Provisions,’’ available on our 

Web site at http://oig.hhs.gov/fraud/docs/ 

safeharborregulations/072991.htm. 

97 59 FR 65372, 65377 (December 19, 1994), 

‘‘Publication of OIG Special Fraud Alerts,’’ 

available on our Web site at http://oig.hhs.gov/ 

fraud/docs/alertsandbulletins/121994.html. 

98There is a safe harbor for electronic health 

records software arrangements at 42 CFR 

1001.952(y), which can be used by nursing 

facilities. The safe harbor is available if all of its 

conditions are satisfied. The safe harbor does not 

protect free hardware or equipment. 

99 42 CFR 1001.952(d). 

100Long-term care pharmacies, many of which 

employ consultant pharmacists, have purchasing 

agreements with pharmaceutical manufacturers and 

contracts with health plans. In addition, long-term 

care pharmacies typically employ their own 

formularies for some residents. As a result of these 

arrangements and contracts, long-term care 

pharmacies may prefer that nursing facility 

customers and residents use some drugs over 

others. 

101 In all cases, prescribing decisions should be 

based upon the unique needs of the patients being 

served in that facility, established clinical 

guidelines, and evidence of cost effectiveness. The 

determination of clinical efficacy and 

appropriateness of the particular drugs should 

precede, and be paramount to, the consideration of 

costs. 

that the computer has no independent value 

apart from the service being provided and 

that the purpose of the free computer is not 

to induce an act that is prohibited by the 

statute * * *. In contrast, sometimes the 

computer that is given away is a regular 

personal computer, which the physician is 

free to use for a variety of purposes in 

addition to receiving test results. In that 

situation the computer has a definite value to 

the physician, and, depending on the 

circumstances, may well constitute an illegal 

inducement.96

Similarly, with respect to free services, 

OIG observed in a Special Fraud Alert 

that: 

While the mere placement of a laboratory 

employee in the physician’s office would not 

necessarily serve as an inducement 

prohibited by the anti-kickback statute, the 

statute is implicated when the phlebotomist 

performs additional tasks that are normally 

the responsibility of the physician’s office 

staff. These tasks can include taking vital 

signs or other nursing functions, testing for 

the physician’s office laboratory, or 

performing clerical services. Where the 

phlebotomist performs clerical or medical 

functions not directly related to the 

collection or processing of laboratory 

specimens, a strong inference arises that he 

or she is providing a benefit in return for the 

physician’s referrals to the laboratory. In 

such a case, the physician, the phlebotomist, 

and the laboratory may have exposure under 

the anti-kickback statute. This analysis 

applies equally to the placement of 

phlebotomists in other health care settings, 

including nursing homes, clinics and 

hospitals.97

The principles illustrated by each of 

the above examples also apply in the 

nursing facility context. The provision 

of goods or services that have 

independent value to the recipient or 

that the recipient would otherwise have 

to provide at its own expense confers a 

benefit on the recipient. This benefit 

may constitute prohibited remuneration 

under the anti-kickback statute, if one 

purpose of the remuneration is to 

generate referrals of Federal health care 

program business. 

Examples of suspect free goods and 

services arrangements that warrant 

careful scrutiny include: 

• Pharmaceutical consultant services, 

medication management, or supplies 

offered by a pharmacy; 

• Infection control, chart review, or 

other services offered by laboratories or 

other suppliers; 

• Equipment, computers, or software 

applications 98 that have independent 

value to the nursing facility; 

• DME or supplies offered by DME 

suppliers for patients covered by the 

SNF Part A benefit; 

• A laboratory phlebotomist 

providing administrative services; 

• A hospice nurse providing nursing 

services for non-hospice patients; and 

• A registered nurse provided by a 

hospital. 

Nursing facilities should be mindful 

that, depending on the circumstances, 

these and similar arrangements may 

subject the parties to liability under the 

anti-kickback statute, if the requisite 

intent is present. 

2. Services Contracts 

(a) Non-Physician Services 

Often kickbacks are disguised as 

otherwise legitimate payments or are 

hidden in business arrangements that 

appear, on their face, to be appropriate. 

In addition to the provision of free 

goods and services, the provision or 

receipt of goods or services at non-fairmarket value rates presents a heightened 

risk of fraud and abuse. Nursing 

facilities often arrange for certain 

services and supplies to be provided to 

residents by outside suppliers and 

providers, such as pharmacies; clinical 

laboratories; DME suppliers; ambulance 

providers; parenteral and enteral 

nutrition (PEN) suppliers; diagnostic 

testing facilities; rehabilitation 

companies; and physical, occupational, 

and speech therapists. These 

relationships need to be scrutinized 

closely under the anti-kickback statute 

to ensure that they are not vehicles to 

disguise kickbacks from the suppliers 

and providers to the nursing facility to 

influence the nursing facility to refer 

Federal health care program business to 

the suppliers and providers. 

To minimize their risk, nursing 

facilities should periodically review 

contractor and staff arrangements to 

ensure that: (i) There is a legitimate 

need for the services or supplies; (ii) the 

services or supplies are actually 

provided and adequately documented; 

(iii) the compensation is at fair-market 

value in an arm’s-length transaction; 

and (iv) the arrangement is not related 

in any manner to the volume or value 

of Federal health care program business. 

Nursing facilities are well-advised to 

have all of the preceding facts 

documented contemporaneously and 

prior to payment to the provider of the 

supplies or services. To eliminate their 

risk, nursing facilities should structure 

services arrangements to comply with 

the personal services and management 

contracts safe harbor 99 whenever 

possible. 

Nursing facilities should also adopt 

and implement policies and procedures 

to minimize the risk of improper 

pharmaceutical decisions tainted by 

kickbacks. For example, depending on 

the circumstances, a consultant 

pharmacist employed by a long-term 

care pharmacy may face a potential 

conflict of interest when making 

recommendations about a resident’s 

drug regimen if a drug that is not on the 

pharmacy’s formulary is prescribed.100

Nursing facilities should establish 

policies that make clear that all 

prescribing decisions must be based on 

the best interests of the individual 

patient.101 Drug switches may only be 

made upon authorization of the 

attending physician, medical director, 

or other licensed prescriber (except in 

certain limited circumstances where 

permitted by State law, e.g., permissible 

generic substitutions or changes allowed 

under a collaborative practice agreement 

between a physician and a pharmacist). 

Nursing facilities should consider 

implementing policies and procedures 

to monitor drug records for patterns that 

may indicate inappropriate drug 

switching or steering. All staff and 

practitioners involved in prescribing, 

administering, and managing 

pharmaceuticals should be educated on 

the legal prohibition against accepting 

anything of value from a pharmacy or 

pharmaceutical manufacturer to 

influence the choice of drug or to switch 

a resident from one drug to another. 

(b) Physician Services 

Nursing facilities also arrange for 

physicians to provide medical director, 

quality assurance, and other services. 

Such physician oversight and 


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102 42 CFR 1001.952(d). 

103 42 CFR 1001.952(j). 

104See, e.g., OIG’s September 22, 1999, letter 

regarding ‘‘Discount Arrangements Between 

Clinical Laboratories and SNFs’’ (referencing OIG 

Advisory Opinion No. 99–2 issued February 26, 

1999), available on our Web site at http:// 

oig.hhs.gov/fraud/docs/safeharborregulations/ 

rs.htm; 56 FR 35952 at the preamble (July 29, 1991), 

‘‘Medicare and State Health Care Programs: Fraud 

and Abuse; OIG Anti-Kickback Provisions,’’ 

available on our Web site at http://oig.hhs.gov/ 

fraud/docs/safeharborregulations/072991.htm. 

105The Medicare reimbursement rate for routine 

hospice services provided in a nursing facility does 

not include room and board expenses, so payment 

for room and board may be the responsibility of the 

patient. CMS, ‘‘Medicare Benefit Policy Manual,’’ 

Pub. No. 100–02, chapter 9, section 20.3, available 

on CMS’s Web site at http://www.cms.hhs.gov/ 

Manuals/IOM/list.asp. For Medicaid patients, the 

State will pay the hospice at least 95 percent of the 

State’s Medicaid daily nursing facility rate, and the 

hospice is then responsible for paying the nursing 

facility for the beneficiary’s room and board. 

Section 1902(a)(13)(B) of the Act (42 U.S.C. 

1396a(a)(13)(B)). 

involvement at the nursing facility 

contributes to the quality of care 

furnished to the residents. These 

physicians, however, may also be in a 

position to generate Federal health care 

program business for the nursing 

facility. For instance, these physicians 

may refer patients for admission. They 

may order items and services that result 

in an increased RUG or that are billable 

separately by the nursing facility. 

Physician arrangements need to be 

closely monitored to ensure that they 

are not vehicles to pay physicians for 

referrals. As with other services 

contracts, nursing facilities should 

periodically review these arrangements 

to ensure that: (i) There is a legitimate 

need for the services; (ii) the services are 

provided; (iii) the compensation is at 

fair-market value in an arm’s-length 

transaction; and (iv) the arrangement is 

not related in any manner to the volume 

or value of Federal health care program 

business. In addition, prudent nursing 

facilities will maintain 

contemporaneous documentation of the 

arrangement, including, for example, 

the compensation terms, time logs or 

other accounts of services rendered, and 

the basis for determining compensation. 

Prudent facilities will also take steps to 

ensure that they have not engaged more 

medical directors or other physicians 

than necessary for legitimate business 

purposes. They will also ensure that 

compensation is commensurate with the 

skill level and experience reasonably 

necessary to perform the contracted 

services. To eliminate their risk, nursing 

facilities should structure services 

arrangements to comply with the 

personal services and management 

contracts safe harbor 102 whenever 

possible. 

3. Discounts 

(a) Price Reductions 

Public policy favors open and 

legitimate price competition in health 

care. Thus, the anti-kickback statute 

contains an exception for discounts 

offered to customers that submit claims 

to the Federal health care programs, if 

the discounts are properly disclosed and 

accurately reported. However, to qualify 

for the exception, the discount must be 

in the form of a reduction in the price 

of the good or service based on an arm’slength transaction. In other words, the 

exception covers only reductions in the 

product’s or service’s price. 

In conducting business, nursing 

facilities routinely purchase items and 

services reimbursable by Federal health 

care programs. Therefore, they should 

familiarize themselves with the 

discount safe harbor at 42 CFR 

1001.952(h). In particular, nursing 

facilities should ensure that all 

discounts—including any rebates—are 

properly disclosed and accurately 

reflected on their cost reports (and in 

any claims as appropriate) filed with a 

Federal program. In addition, some 

nursing facilities purchase products 

through group purchasing organizations 

(GPO) to which they belong. Any 

discounts received from vendors who 

sell their products under a GPO contract 

should be properly disclosed and 

accurately reported on the nursing 

facility’s cost reports. Although there is 

a safe harbor for administrative fees 

paid by a vendor to a GPO,103 that safe 

harbor does not protect discounts 

provided by a vendor to purchasers of 

products. 

(b) Swapping 

Nursing facilities often obtain 

discounts from suppliers and providers 

on items and services that the nursing 

facilities purchase for their own 

account. In negotiating arrangements 

with suppliers and providers, a nursing 

facility should be careful that there is no 

link or connection, explicit or implicit, 

between discounts offered or solicited 

for business that the nursing facility 

pays for and the nursing facility’s 

referral of business billable by the 

supplier or provider directly to 

Medicare or another Federal health care 

program. For example, nursing facilities 

should not engage in ‘‘swapping’’ 

arrangements by accepting a low price 

from a supplier or provider on an item 

or service covered by the nursing 

facility’s Part A per diem payment in 

exchange for the nursing facility 

referring to the supplier or provider 

other Federal health care program 

business, such as Part B business 

excluded from consolidated billing, that 

the supplier or provider can bill directly 

to a Federal health care program. Such 

‘‘swapping’’ arrangements implicate the 

anti-kickback statute and are not 

protected by the discount safe harbor. 

Nursing facility arrangements with 

clinical laboratories, DME suppliers, 

and ambulance providers are some 

examples of arrangements that may be 

prone to ‘‘swapping’’ problems. 

As we have previously explained in 

other guidance,104 the size of a discount 

is not determinative of an anti-kickback 

statute violation. Rather, the appropriate 

question to ask is whether the discount 

is tied or linked, directly or indirectly, 

to referrals of other Federal health care 

program business. When evaluating 

whether an improper connection exists 

between a discount offered to a nursing 

facility and referrals of Federal health 

care program business billed by a 

supplier or provider, suspect 

arrangements include below-cost 

arrangements or arrangements at prices 

lower than the prices offered by the 

supplier or provider to other customers 

with similar volumes of business, but 

without Federal health care program 

referrals. Other suspect practices 

include, but are not limited to, 

discounts that are coupled with 

exclusive provider agreements and 

discounts or other pricing schemes 

made in conjunction with explicit or 

implicit agreements to refer other 

facility business. In sum, if any direct or 

indirect link exists between a price 

offered by a supplier or provider to a 

nursing facility for items or services that 

the nursing facility pays for out-ofpocket and referrals of Federal business 

for which the supplier or provider can 

bill a Federal health care program, the 

anti-kickback statute is implicated. 

4. Hospices 

Hospice services for terminally ill 

patients are typically provided in the 

patients’ homes. In some cases, 

however, a nursing facility is the 

patient’s home. In such cases, nursing 

facilities often arrange for the provision 

of hospice services in the nursing 

facility if the resident meets the hospice 

eligibility criteria and elects the hospice 

benefit. These arrangements pose 

several fraud and abuse risks. For 

example, to induce referrals, a hospice 

may offer a nursing facility 

remuneration in the form of free nursing 

services for non-hospice patients; 

additional room and board 

payments; 105 or inflated payments for 

providing hospice services to the 


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106Under the regulations at 42 CFR 418.80, 

hospices must generally furnish substantially all of 

the core hospice service themselves. Hospices are 

permitted to furnish non-core services under 

arrangements with other providers or suppliers, 

including nursing facilities. 42 CFR 418.56; CMS, 

‘‘State Operations Manual,’’ Pub. No. 100–07, 

chapter 2, section 2082C, available on CMS’s Web 

site at http://www.cms.hhs.gov/Manuals/IOM/ 

list.asp. 

107Under certain circumstances, a nursing facility 

that knowingly refers to hospice patients who do 

not qualify for the hospice benefit may be liable for 

the submission of false claims. The Medicare 

hospice eligibility criteria are found at 42 CFR 

418.20. 

108OIG Special Fraud Alert on Fraud and Abuse 

in Nursing Home Arrangements With Hospices, 

March 1998, available on our Web site at http:// 

oig.hhs.gov/fraud/docs/alertsandbulletins/ 

hospice.pdf. 109 42 CFR 1001.952(d). 110The Provider Reimbursement Manual provides 

as follows: 

Providers are permitted to enter into reserved bed 

agreements, as long as the terms of that agreement 

do not violate the provisions of the statute and 

regulations which govern provider agreements, 

which (1) prohibit a provider from charging the 

beneficiary or other party for covered services; (2) 

prohibit a provider from discriminating against 

Medicare beneficiaries, as a class, in admission 

policies; or (3) prohibit certain types of payments 

in connection with referring patients for covered 

services. A provider may jeopardize its provider 

agreement or incur other penalties if it enters into 

a reserved bed agreement that violates these 

requirements. 

CMS, ‘‘Provider Reimbursement Manual,’’ Pub. 

No. 15–1, pt. 1, ch. 21, section 2105.3(D), available 

on CMS’s Web site at http://www.cms.hhs.gov/ 

Manuals/PBM. 

111Nursing facilities should be mindful that 

conditioning the offer of reserved beds specifically 

on referrals of Federal health care program 

beneficiaries by the hospital to the nursing facility 

would raise concerns under the anti-kickback 

statute, even if no payments were made. 

112 42 U.S.C. 1395nn. 

113The complete list of DHS is found at section 

1877(h)(6) of the Act (42 U.S.C. 1395nn(h)(6)) and 

42 CFR 411.351. 

114See 66 FR 856, 923 (January 4, 2001), 

‘‘Medicare and Medicaid Programs; Physicians’ 

Referrals to Health Care Entities With Which They 

Have Financial Relationships; Final Rule,’’ 

available on CMS’s Web site at http:// 

www.cms.hhs.gov/PhysicianSelfReferral/ 

Downloads/66FR856.pdf. 

hospice’s patients.106 Nursing facilities 

should be mindful that requesting or 

accepting remuneration from a hospice 

may subject the nursing facility and the 

hospice to liability under the antikickback statute if the remuneration 

might influence the nursing facility’s 

decision to do business with the 

hospice.107

Some of the practices that are suspect 

under the anti-kickback statute include: 

• A hospice offering free goods or 

goods at below-fair-market value to 

induce a nursing facility to refer 

patients to the hospice; 

• A hospice paying room and board 

payments to the nursing facility in 

excess of what the nursing facility 

would have received directly from 

Medicaid had the patient not been 

enrolled in hospice. Any additional 

payment must represent the fair-market 

value of additional services actually 

provided to that patient that are not 

included in the Medicaid daily rate; 

• A hospice paying amounts to the 

nursing facility for additional services 

that Medicaid considers to be included 

in its room and board payment to the 

hospice; 

• A hospice paying above fair-market 

value for additional services that 

Medicaid does not consider to be 

included in its room and board payment 

to the nursing facility; 

• A hospice referring its patients to a 

nursing facility to induce the nursing 

facility to refer its patients to the 

hospice; 

• A hospice providing free (or belowfair-market value) care to nursing 

facility patients, for whom the nursing 

facility is receiving Medicare payment 

under the SNF benefit, with the 

expectation that after the patient 

exhausts the SNF benefit, the patient 

will receive hospice services from that 

hospice; and 

• A hospice providing staff at its 

expense to the nursing facility. 

For additional guidance on 

arrangements with hospices, nursing 

facilities should review OIG’s Special 

Fraud Alert on Nursing Home 

Arrangements with Hospices.108

Whenever possible, nursing facilities 

should structure their relationships with 

hospices to fit in a safe harbor, such as 

the personal services and management 

contracts safe harbor.109

5. Reserved Bed Payments 

Sometimes hospitals enter into 

reserved bed arrangements with nursing 

facilities to receive guaranteed or 

priority placement for their discharged 

patients.110 Under some reserved bed 

arrangements, hospitals provide 

remuneration to nursing facilities to 

keep certain beds available and open. 

These arrangements could be 

problematic under the anti-kickback 

statute if one purpose of the 

remuneration is to induce referrals of 

Federal health care program business 

from the nursing facility to the 

hospital.111 Payments should not be 

determined in any manner that reflects 

the volume or value of existing or 

potential referrals of Federal health care 

program business from the nursing 

facility to the hospital. Examples of 

some reserved bed payments that may 

give rise to an inference that the 

arrangement is connected to referrals 

include: (1) Payments that result in 

double-dipping by the nursing facility 

(e.g., sham payments for beds that are 

actually occupied or for which the 

facility is otherwise receiving 

reimbursement); (2) payments for more 

beds than the hospital legitimately 

needs; and (3) excessive payments (e.g., 

payments that exceed the nursing 

facility’s actual costs of holding a bed or 

the actual revenues a facility reasonably 

stands to forfeit by holding a bed given 

the facility’s occupancy rate and patient 

acuity mix). Reserved bed arrangements 

should be entered into only when there 

is a bona fide need to have the 

arrangement in place. Reserved bed 

arrangements should serve the limited 

purpose of securing needed beds, not 

future referrals. 

D. Other Risk Areas 

1. Physician Self-Referrals 

Nursing facilities should familiarize 

themselves with the physician selfreferral law (section 1877 of the Act),112

commonly known as the ‘‘Stark’’ law. 

The physician self-referral law prohibits 

entities that furnish ‘‘designated health 

services’’ (DHS) from submitting—and 

Medicare from paying—claims for DHS 

if the referral for the DHS comes from 

a physician with whom the entity has a 

prohibited financial relationship. This is 

true even if the prohibited financial 

relationship is the result of inadvertence 

or error. Violations can result in 

refunding of the prohibited payment 

and, in cases of knowing violations, 

CMPs, and exclusion from the Federal 

health care programs. Knowing 

violations of the physician self-referral 

law can also form the basis for liability 

under the False Claims Act. 

Nursing facility services, including 

SNF services covered by the Part A PPS 

payment, are not DHS for purposes of 

the physician self-referral law. However, 

laboratory services, physical therapy 

services, and occupational therapy 

services are among the DHS covered by 

the statute.113 Nursing facilities that bill 

Part B for laboratory services, physical 

therapy services, occupational therapy 

services, or other DHS pursuant to the 

consolidated billing rules are 

considered entities that furnish DHS.114

Accordingly, nursing facilities should 

review all financial relationships with 

physicians who refer or order such 

services to ensure compliance with the 

physician self-referral law. 

When analyzing potential physician 

self-referral situations, the following 

three-part inquiry is useful: 

• Is there a referral (including, but not 

limited to, ordering a service for a 

resident) from a physician for a 

designated health service? If not, there 


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115Available on CMS’s Web site at http:// 

www.cms.hhs.gov/PhysicianSelfReferral/. 

116Section 1877(b)–(e) of the Act (42 U.S.C. 

1395nn(b)–(e)). See also 42 CFR 411.351–.357. 

117Section 1866(a) of the Act (42 U.S.C. 

1395cc(a)); 42 CFR 489.20; section 1128B(d) of the 

Act (42 U.S.C. 1320a–7b(d)); 42 CFR 447.15; 42 CFR 

483.12(d)(3). 

118See id.; see also CMS, ‘‘Skilled Nursing 

Facility Manual,’’ Pub. No. 12, chapter 3, sections 

317 and 318, available on CMS’s Web site at 

http://www.cms.hhs.gov/Manuals/PBM/list.asp. 

119Section 1860D–1 of the Act (42 U.S.C. 1395w– 

101). 

120 Id. 

121See CMS Survey and Certification Group’s 

May 11, 2006, letter to State Survey Agency 

Directors, available on CMS’s Web site at http:// 

www.cms.hhs.gov/SurveyCertificationGenInfo/

downloads/SCLetter06–16.pdf. This letter 

communicates CMS’s current guidance on these 

Part D issues. As the Part D program evolves, 

nursing facilities should keep current with any 

guidance issued by CMS and conform their policies 

and procedures accordingly. 

122 Id. 

123 Id. 

is no physician self-referral issue. If yes, 

then the next inquiry is: 

• Does the physician (or an 

immediate family member) have a direct 

or indirect financial relationship with 

the nursing facility? A financial 

relationship can be created by 

ownership, investment, or 

compensation; it need not relate to the 

furnishing of DHS. If there is no 

financial relationship, there is no 

physician self-referral issue. If there is a 

financial relationship, the next inquiry 

is: 

• Does the financial relationship fit in 

an exception? If not, the statute is 

violated. 

Detailed regulations regarding the 

italicized terms are set forth at 42 CFR 

411.351 through 411.361 (substantial 

additional explanatory material appears 

in preambles to the final regulations: 66 

FR 856 (January 4, 2001), 69 FR 16054 

(March 26, 2004), 72 FR 51012 

(September 5, 2007), and 73 FR 48434 

(August 19, 2008)).115

Nursing facilities should pay 

particular attention to their 

relationships with attending physicians 

who treat residents and with physicians 

who are nursing facility owners, 

investors, medical directors, or 

consultants. The statutory and 

regulatory exceptions are key to 

compliance with the physician selfreferral law. Exceptions exist for many 

common types of arrangements.116 To fit 

in an exception, an arrangement must 

squarely meet all of the conditions set 

forth in the exception. Importantly, it is 

the actual relationship between the 

parties, and not merely the paperwork, 

that must fit in an exception. Unlike the 

anti-kickback safe harbors, which are 

voluntary, fitting in an exception is 

mandatory under the physician selfreferral law. Compliance with a 

physician self-referral law exception 

does not immunize an arrangement 

under the anti-kickback statute. 

Therefore, arrangements that implicate 

the physician self-referral law should 

also be analyzed under the antikickback statute. 

In addition to reviewing particular 

arrangements, nursing facilities can 

implement several systemic measures to 

guard against violations. First, many of 

the potentially applicable exceptions 

require written, signed agreements 

between the parties. Nursing facilities 

should enter into appropriate written 

agreements with physicians. In 

addition, nursing facilities should 

review their contracting processes to 

ensure that they obtain and maintain 

signed agreements covering all time 

periods for which an arrangement is in 

place. Second, many exceptions require 

fair-market value compensation for 

items and services actually needed and 

rendered. Thus, nursing facilities 

should have appropriate processes for 

making and documenting reasonable, 

consistent, and objective determinations 

of fair-market value and for ensuring 

that needed items and services are 

furnished or rendered. Nursing facilities 

should also implement systems to track 

non-monetary compensation provided 

annually to referring physicians (such as 

free parking or gifts) and ensure that 

such compensation does not exceed 

limits set forth in the physician selfreferral regulations. 

Further information about the 

physician self-referral law and 

applicable regulations can be found on 

CMS’s Web site at http:// 

www.cms.hhs.gov/ 

PhysicianSelfReferral/. Information 

regarding CMS’s physician self-referral 

advisory opinion process can be found 

at http://www.cms.hhs.gov/Physician

SelfReferral/07_advisory_opinions.asp#

TopOfPage. 

2. Anti-Supplementation 

As a condition of its Medicare 

provider agreement and under 

applicable Medicaid regulations and a 

criminal provision precluding 

supplementation of Medicaid payment 

rates, a nursing facility must accept the 

applicable Medicare or Medicaid 

payment (including any beneficiary 

coinsurance or copayments authorized 

under those programs), respectively, for 

covered items and services as the 

complete payment.117 For covered items 

and services, a nursing facility may not 

charge a Medicare or Medicaid 

beneficiary, or another person in lieu of 

the beneficiary, any amount in addition 

to what is otherwise required to be paid 

under Medicare or Medicaid (i.e., a costsharing amount). For example, an SNF 

may not condition acceptance of a 

beneficiary from a hospital upon 

receiving payment from the hospital or 

the beneficiary’s family in an amount 

greater than the SNF would receive 

under the PPS. For Medicare and 

Medicaid beneficiaries, a nursing 

facility may not accept supplemental 

payments, including, but not limited to, 

cash and free or discounted items and 

services, from a hospital or other source 

merely because the nursing facility 

considers the Medicare or Medicaid 

payment to be inadequate (although a 

nursing facility may accept donations 

unrelated to the care of specific 

patients). The supplemental payment 

would be a prohibited charge imposed 

by the nursing facility on another party 

for services that are already covered by 

Medicare or Medicaid.118

3. Medicare Part D 

Medicare Part D extends voluntary 

prescription drug coverage to all 

Medicare beneficiaries,119 including 

individuals who reside in nursing 

facilities. Like all Medicare 

beneficiaries, nursing facility residents 

who decide to enroll in Part D have the 

right to choose their Part D plans.120

Part D plans offer a variety of drug 

formularies and have arrangements with 

a variety of pharmacies to dispense 

drugs to the plan’s enrollees. Nursing 

facilities also enter into arrangements 

with pharmacies to dispense drugs. 

Typically, these are exclusive or semiexclusive arrangements designed to ease 

administrative burdens and coordinate 

accurate administration of drugs to 

residents. When a resident is selecting 

a particular Part D plan, it may be that 

the Part D plan that best satisfies a 

beneficiary’s needs does not have an 

arrangement with the nursing facility’s 

pharmacy. CMS has stated that it 

expects nursing facilities ‘‘to work with 

their current pharmacies to assure that 

they recognize the Part D plans chosen 

by that facility’s Medicare beneficiaries, 

or, in the alternative, to add additional 

pharmacies to achieve that 

objective.’’ 121 CMS also suggests that a 

nursing facility ‘‘could contract 

exclusively with another pharmacy that 

contracts more broadly with Part D 

plans.’’ 122

CMS has explained that ‘‘[n]ursing 

homes may, and are encouraged to, 

provide information and education to 

residents on all available Part D 

plans.’’ 123 When educating residents, 


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124 Id. 

125 42 U.S.C. 1395w–101. 

126 45 CFR parts 160 and 164, subparts A and E; 

available at http://www.hhs.gov/ocr/hipaa/ 

finalreg.html. In addition to the HIPAA Privacy and 

Security Rules, facilities should also take steps to 

adhere to the privacy and confidentiality 

requirements for residents’ personal and clinical 

records, 42 CFR 483.10(e), and any applicable State 

privacy laws. 

127OCR, ‘‘HHS—Office of Civil Rights—HIPAA,’’ 

available at http://www.hhs.gov/ocr/hipaa/. 

128Nursing facilities can contact OCR by 

following the instructions on its Web site, available 

at http://www.hhs.gov/ocr/contact.html, or by 

calling the HIPAA toll-free number, (866) 627–7748. 

129 45 CFR parts 160 and 164, subparts A and C, 

available on CMS’s Web site at http://www.cms.gov/ 

SecurityStandard/02_Regulations.asp. 

130Nursing facilities can contact CMS by 

following the instructions on its Web site, http:// 

www.cms.hhs.gov/HIPAAGenInfo/. 

131Much like the dashboard of a car, a 

‘‘dashboard’’ is an instrument that provides the 

recipient with a user-friendly (i.e., presented in an 

appropriate context) snapshot of the key pieces of 

information needed by the recipient to oversee and 

manage effectively the operation of an organization 

and forestall potential problems, while avoiding 

information overload. 

132See, e.g., OIG, ‘‘Driving for Quality in LongTerm Care: A Board of Director’s Dashboard— 

Government-Industry Roundtable,’’ available on our 

Web site at http://oig.hhs.gov/fraud/docs/ 

complianceguidance/Roundtable013007.pdf. 

nursing facilities should ensure that the 

information provided is complete and 

objective. It may be helpful for nursing 

facilities to walk residents through the 

important details of the plans available 

to the residents, including items such as 

premium and cost-sharing structures, 

and to discuss the extent to which each 

plan does, or does not, provide coverage 

of the resident’s medications. Nursing 

facilities must be particularly careful, 

however, not to act in ways that would 

frustrate a beneficiary’s freedom of 

choice in choosing a Part D plan. As 

stated by CMS, ‘‘[u]nder no 

circumstances should a nursing home 

require, request, coach or steer any 

resident to select or change a plan for 

any reason,’’ nor should it ‘‘knowingly 

and/or willingly allow the pharmacy 

servicing the nursing home’’ to do the 

same.124 Providing residents with 

complete and objective information 

about all of the plans available to the 

residents helps reduce the risk that 

efforts to educate residents will lead to 

steering. 

Nursing facilities and their employees 

and contractors should not accept any 

payments from any plan or pharmacy to 

influence a beneficiary to select a 

particular plan. Beneficiary freedom of 

choice in choosing a Part D Plan is 

ensured by section 1860D–1 of the 

Act.125 Nursing facilities may not limit 

this choice in the Part D program. 

E. HIPAA Privacy and Security Rules 

As of April 14, 2003, all nursing 

facilities that conduct electronic 

transactions governed by HIPAA are 

required to comply with the Privacy 

Rule adopted under HIPAA.126

Generally, the HIPAA Privacy Rule 

addresses the use and disclosure of 

individuals’ personally identifiable 

health information (called ‘‘protected 

health information’’ or ‘‘PHI’’) by 

covered nursing facilities and other 

covered entities. The Privacy Rule also 

covers individuals’ rights to understand 

and control how their health 

information is used. The Privacy Rule 

also requires nursing facilities to 

disclose PHI to the individual who is 

the subject of the PHI or to the Secretary 

of the Department of Health and Human 

Services under certain circumstances. 

The Privacy Rule and helpful 

information about how it applies can be 

found on the Web site of the 

Department’s Office for Civil Rights 

(OCR).127 Questions about the Privacy 

Rule should be submitted to OCR.128

The Privacy Rule gives covered 

nursing facilities and other covered 

entities some flexibility to create their 

own privacy procedures. Each nursing 

facility should make sure that it is 

compliant with all applicable provisions 

of the Privacy Rule, including standards 

for the use and disclosure of PHI with 

and without patient authorization and 

the provisions pertaining to permitted 

and required disclosures. 

The HIPAA Security Rule specifies a 

series of administrative, technical, and 

physical security safeguards for covered 

entities to ensure the confidentiality of 

electronic PHI.129 Nursing facilities that 

are covered entities were required to be 

compliant with the Security Rule by 

April 20, 2005. The Security Rule 

requirements are flexible and scalable, 

which allows each covered entity to 

tailor its approach to compliance based 

on its own unique circumstances. 

Covered entities may consider their 

organization and capabilities, as well as 

costs, in designing their security plans 

and procedures. Questions about the 

HIPAA Security Rule should be 

submitted to CMS.130

IV. Other Compliance Considerations 

A. An Ethical Culture 

As laid out in the 2000 Nursing 

Facility CPG, it is important for a 

nursing facility to have an 

organizational culture that promotes 

compliance. OIG commends nursing 

facilities that have adopted a code of 

conduct that details the fundamental 

principles, values, and framework for 

action within the organization, and that 

articulates the organization’s 

commitment to compliance. OIG 

encourages those facilities that have not 

yet adopted codes of conduct to do so. 

In addition to codes of conduct, an 

organization can adopt other measures 

to express its commitment to 

compliance. First, and foremost, a 

nursing facility’s leadership should 

foster an organizational culture that 

values, and even rewards, the 

prevention, detection, and resolution of 

quality of care and compliance 

problems. Good compliance practices 

may include the development of a 

mechanism, such as a ‘‘dashboard,’’ 131

designed to communicate effectively 

appropriate compliance and 

performance-related information to a 

nursing facility’s board of directors and 

senior officers. The dashboard or other 

communication tool should include 

quality of care information. Further 

information and resources about quality 

of care dashboards are available on our 

Web site.132

When communication tools such as 

dashboards are properly implemented 

and include quality of care information, 

the directors and senior officers can, 

among other things: (1) Demonstrate a 

commitment to quality of care and foster 

an organization-wide culture that values 

quality of care; (2) improve the facility’s 

quality of care through increased 

awareness of and involvement in the 

oversight of quality of care issues; and 

(3) track and trend quality of care data 

(e.g., State agency survey results, 

outcome care and delivery data, and 

staff retention and turnover data) to 

identify potential quality of care 

problems, identify areas in which the 

organization is providing high quality of 

care, and measure progress on quality of 

care initiatives. Each dashboard should 

be tailored to meet the specific needs 

and sophistication of the implementing 

nursing facility, its board members, and 

senior officers. OIG views the use of 

dashboards, and similar tools, as a 

helpful compliance practice that can 

lead to improved quality of care and 

assist the board members and senior 

officers in fulfilling, respectively, their 

oversight and management 

responsibilities. 

In summary, the nursing facility 

should endeavor to develop a culture 

that values compliance from the top 

down and fosters compliance from the 

bottom up. Such an organizational 

culture is the foundation of an effective 

compliance program. 


ebenthall on PROD1PC60 with NOTICES
56848 Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Notices 

133 2000 Nursing Facility CPG, supra note 2, at 

14289. 

134OIG, ‘‘HHS—OIG—Fraud Prevention & 

Detection—Corporate Integrity Agreements,’’ 

available on our Web site at http://oig.hhs.gov/ 

fraud/cias.html. 

135Appropriate Federal and State authorities 

include OIG, CMS, the Criminal and Civil Divisions 

of the Department of Justice, the U.S. Attorney in 

relevant districts, the Food and Drug 

Administration, the Department’s Office for Civil 

Rights, the Federal Trade Commission, the Drug 

Enforcement Administration, the Federal Bureau of 

Investigation, and the other investigative arms for 

the agencies administering the affected Federal or 

State health care programs, such as the State 

Medicaid Fraud Control Unit, the Defense Criminal 

Investigative Service, the Department of Veterans 

Affairs, the Health Resources and Services 

Administration, and the Office of Personnel 

Management (which administers the Federal 

Employee Health Benefits Program). 

136To qualify for the ‘‘not less than double 

damages’’ provision of the False Claims Act, the 

provider must provide the report to the Government 

within 30 days after the date when the provider first 

obtained the information. 31 U.S.C. 3729(a). 

137Some violations may be so serious that they 

warrant immediate notification to governmental 

authorities prior to, or simultaneous with, 

commencing an internal investigation. By way of 

example, OIG believes a provider should 

immediately report misconduct that: (i) Is a clear 

violation of administrative, civil, or criminal laws; 

(ii) poses an imminent danger to a patient’s safety; 

(iii) has a significant adverse effect on the quality 

of care provided to Federal health care program 

beneficiaries; or (iv) indicates evidence of a 

systemic failure to comply with applicable laws or 

an existing corporate integrity agreement, regardless 

of the financial impact on Federal health care 

programs. 

138OIG has published criteria setting forth those 

factors that OIG takes into consideration in 

determining whether it is appropriate to exclude an 

individual or entity from program participation 

pursuant to section 1128(b)(7) of the Act (42 U.S.C. 

1320a–7(b)(7)) for violations of various fraud and 

abuse laws. See 62 FR 67392 (December 24, 1997), 

‘‘Criteria for Implementing Permissive Exclusion 

Authority Under Section 1128(b)(7) of the Social 

Security Act.’’ 

139For details regarding the Provider SelfDisclosure Protocol, including timeframes and 

required information, see 63 FR 58399 (October 30, 

1998), ‘‘Publication of the OIG’s Provider SelfDisclosure Protocol,’’ available on our Web site at 

http://oig.hhs.gov/authorities/docs/ 

selfdisclosure.pdf. See also OIG’s April 15, 2008, 

Open Letter to Health Care Providers, available on 

our Web site at http://oig.hhs.gov/fraud/docs/ 

openletters/OpenLetter4–15–08.pdf; OIG’s April 24, 

2006, Open Letter to Health Care Providers, 

available on our Web site at http://oig.hhs.gov/ 

fraud/docs/openletters/ 

Open%20Letter%20to%20Providers%202006.pdf. 

B. Regular Review of Compliance 

Program Effectiveness 

Nursing facilities should regularly 

review the implementation and 

execution of their compliance program 

systems and structures. This review 

should be conducted periodically, 

typically on annual basis. The 

assessment should include an 

evaluation of the overall success of the 

program, as well as each of the basic 

elements of a compliance program 

individually, which include: 

• Designation of a compliance officer 

and compliance committee; 

• Development of compliance 

policies and procedures, including 

standards of conduct; 

• Developing open lines of 

communication; 

• Appropriate training and teaching; 

• Internal monitoring and auditing; 

• Response to detected deficiencies; 

and 

• Enforcement of disciplinary 

standards. 

Nursing facilities seeking guidance for 

establishing and evaluating their 

compliance operations should review 

OIG’s 2000 Nursing Facility CPG, which 

explains in detail the fundamental 

elements of a compliance program.133

Nursing facilities may also wish to 

consult quality of care corporate 

integrity agreements (CIA) entered into 

between OIG and parties settling 

specific matters.134 Other issues a 

nursing facility may want to evaluate 

are whether there has been an allocation 

of adequate resources to compliance 

initiatives; whether there is a reasonable 

timetable for implementation of the 

compliance measures; whether the 

compliance officer and compliance 

committee have been vested with 

sufficient autonomy, authority, and 

accountability to implement and enforce 

appropriate compliance measures; and 

whether compensation structures create 

undue pressure to pursue profit over 

compliance. 

V. Self-Reporting 

If the compliance officer, compliance 

committee, or a member of senior 

management discovers credible 

evidence of misconduct from any source 

and, after a reasonable inquiry, believes 

that the misconduct may violate 

criminal, civil, or administrative law, 

the nursing facility should promptly 

report the existence of the misconduct 

to the appropriate Federal and State 

authorities.135 The reporting should 

occur within a reasonable period, but 

not longer than 60 days,136 after 

determining that there is credible 

evidence of a violation.137 Prompt 

voluntary reporting will demonstrate 

the nursing facility’s good faith and 

willingness to work with governmental 

authorities to correct and remedy the 

problem. In addition, prompt reporting 

of misconduct will be considered a 

mitigating factor by OIG in determining 

administrative sanctions (e.g., penalties, 

assessments, and exclusion) if the 

reporting nursing facility becomes the 

subject of an OIG investigation.138

To encourage providers to make 

voluntary disclosures to OIG, OIG 

published the Provider Self-Disclosure 

Protocol.139 When reporting to the 

Government, a nursing facility should 

provide all relevant information 

regarding the alleged violation of 

applicable Federal or State law(s) and 

the potential financial or other impact of 

the alleged violation. The compliance 

officer, under advice of counsel and 

with guidance from governmental 

authorities, may be requested to 

continue to investigate the reported 

violation. Once the investigation is 

completed, and especially if the 

investigation ultimately reveals that 

criminal, civil, or administrative 

violations have occurred, the 

compliance officer should notify the 

appropriate governmental authority of 

the outcome of the investigation. This 

notification should include a 

description of the impact of the alleged 

violation on the applicable Federal 

health care programs or their 

beneficiaries. 

VI. Conclusion 

In today’s environment of increased 

scrutiny of corporate conduct and 

increasingly large expenditures for 

health care, it is imperative for nursing 

facilities to establish and maintain 

effective compliance programs. These 

programs should foster a culture of 

compliance and a commitment to 

delivery of quality health care that 

begins at the highest levels and extends 

throughout the organization. This 

supplemental CPG is intended as a 

resource for nursing facilities to help 

them operate effective compliance 

programs that decrease errors, fraud, 

and abuse and increase quality of care 

and compliance with Federal health 

care program requirements for the 

benefit of the nursing facilities and their 

residents. 

Dated: September 24, 2008. 

Daniel R. Levinson, 

Inspector General. 

[FR Doc. E8–22796 Filed 9–29–08; 8:45 am] 

BILLING CODE 4152–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

National Institutes of Health 

Government-Owned Inventions; 

Availability for Licensing 

AGENCY: National Institutes of Health, 

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ACTION: Notice. 

SUMMARY: The inventions listed below 

are owned by an agency of the U.S. 


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