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Newsletters: Health Care Corporate Compliance
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Health Care Corporate Compliance

Steve Swensen, President, The Oley Foundation, Parent of HomePEN Consumer

Most of us probably think of health care fraud and abuse in relatively simple, clear terms: A patient is overcharged for services or products, or is charged for services not rendered or not medically necessary - these are the kinds of things that come to mind as abusive or fraudulent practices. We learned however, at the 14th Annual Oley Conference, that this is, indeed, a simple view of the matter, and one far more narrow than that taken by the federal government. Consider these scenarios: Your medical coverage is partly or wholly endowed by federal dollars (e.g., Medicare, Railroad Retirement Fund) and your physician routinely provides you with free samples of an enteral solution; or, your hospital waives your coinsurance payment without demostrating financial need; or, your home health care company underwrites your travel to the Oley conference, or agrees to provide at no charge nutrient supplements, such as carnitine, because your insurance payer deems them medically unnecessary. To you, with all the financial and other burdens homePEN places on you, it may seem that the health care system is on your side, it’s helping, it has a human heart. But to the government, these transactions might appear to be kickbacks or inducements intended to reward you for your business. There is, after all, no free lunch, and the cost of these gratuities may well be embedded in charges elsewhere in the system that could be reduced if they weren’t indirectly defraying free services to you. Consequently, in each of these instances, your physician, hospital or home care company, by choosing to help you, runs the very real risk of investigation, prosecution and/or severe monetary or other penalties for health care fraud and abuse.

In these and similar ways, the regulatory environment which health care providers operate within limits the kinds of support and assistance they can offer consumers. The impact of these limitations has been increasingly felt throughout the homePEN community, and many consumers and providers have encouraged Oley to raise awareness of these issues. We were fortunate to have at our annual meeting a speaker well qualified to address consumers and providers on this subject. Julian De La Rosa has long experience both in government and as a consultant to the health care industry. Mr. De La Rosa retired from the FBI in 1989 after thirty years of service. He subsequently received a presidential appointment to serve as the inspector general at the Department of Labor during the final years of the Reagan administration. He is currently a Vice President at Strategic Management Systems, Inc., Alexandria, VA, advising health care companies on federal health care regulations. The main points of Mr. De La Rosa’s presentation are summarized below.

In 1995, the Clinton administration prioritized an investigative initiative against health care fraud, abuse and waste. This policy shift reflected national concern that improper payments, estimated at some 12.6 billion dollars in 1998 ($20.3 billion in 1997 and $23.2 billion in 1996) were contributing factors in the projected bankruptcy of the Medicare trust fund. It was further intended to establish guidelines to regulate the delivery of increasingly complex and costly medical therapies in a highly competitive and rapidly changing marketplace. This initiative falls under the jurisdiction of many federal agencies, including the Department of Justice, the Inspector General of Health and Human Services, the Internal Revenue Service and the Social Security Administration. For the first time in its history, the Federal Bureau of Investigation has also become actively and extensively engaged in the investigation of health care fraud. In addition, the government has encouraged senior citizens and other Medicare/Medicaid beneficiaries to participate in their investigative efforts, and Congress recently allocated $5,000,000 to train 15,000 retirees in the detection and prevention of health care fraud and abuse.


The Regulations

A number of laws have been enacted to back up federal investigators. For example, the anti-kickback statute prohibits, among other things, “the knowing and willful solicitation and receipt of remuneration in return for referring an individual for which payment may be made under Medicare.” This covers criminal violations, but civil penalties may also be assessed under the Expanded Civil Monetary Penalties Law (CMPL). CMPL stipulates that penalties may be imposed upon any person who “offers to or transfers remuneration to any individual eligible for benefits...that such person knows or should know is likely to influence such individual to order or receive from a particular provider...any item or service for which payment may be made.” In other words, the government doesn’t have to prove that providers have knowingly used remuneration to influence patient choice, but only that they should have known the likely effect of remuneration. In this context, “remuneration” includes “the waiver of coinsurance and deductible amounts and transfers of items or services for free or for less than fair market value.” Exceptions include items or services of “nominal value,” such as “refreshments, medical literature, local transportation or participation in free health fairs.” The waiver of coinsurance payments is also allowed for individuals with demonstrated financial need.

Working under these laws, government agencies have aggressively pursued violators. Health care providers have been assessed many millions of dollars in penalties for violations ranging from obvious fraud to failure to detect recurring billing errors. In addition, more than 8,000 providers have been banned in the last three years from participation in all government programs, including Medicare and Medicaid. During its two-year demonstration phase, Operation Restore Trust returned $23 million in savings and penalties to the government for every $1 million spent to investigate and prosecute fraud, abuse and waste. Eighty five percent of these monies are restored to the Medicare trust fund while the balance underwrites further investigations. Partly as a result of the savings, fines and the recovery of improper payments generated by federal investigations, the projected bankruptcy of the Medicare trust fund has been pushed back from 2001 to 2015.


Atmosphere of Concern, Uncertainty

The government’s objective is, of course, to stop fraud, abuse and waste, and health care providers can generally protect themselves by documenting the medical necessity of their services and by monitoring their compliance with federal regulations governing billing procedures, patient referrals and other business practices. However, the final determination as to what constitutes fraud and abuse lies with government agencies. In many cases, health care providers cannot be certain that their practices meet the federal standard. For example, St. Judes hospital in Memphis has traditionally waived the co-pay requirement for every pediatric oncology patient admitted to their facility. Hospital counsel felt this practice might be in violation of anti-kickback statutes and sought an advisory ruling from the Office of the Inspector General of Health and Human Services (OIG). St. Judes was advised that this practice “...could potentially generate prohibited remuneration under the anti-kickback statutes.” However, because specific safeguards to protect against fraud and abuse are in place at St. Judes, the OIG will not take enforcement action against St. Judes for this practise. Health care providers cannot take for granted that traditional business conduct is legal under current fraud and abuse statutes. Their activities are under intense scrutiny and they must work closely with federal agencies to ensure that they are in full compliance with the law.

These, in short, were the key points of Mr. De La Rosa’s presentation, and they struck home to many of us in the Oley audience. Given all of the special needs that accompany infusion therapy, homePEN consumers have in the past been especially likely to benefit from such services as may now violate federal regulations. Home infusion companies in particular have often been able to meet consumer needs with supplies or services that may not meet a strict definition of medical necessity or which may be prohibitively expensive at fair market value. Consumers who have depended upon nutritional supplements supplied at no charge, or travel stipends to attend educational conferences, or other such assistance may well be adversely affected by the new climate of government regulation and investigation. Whether or not there will be any long-term negative impact on the practice of home infusion therapy remains to be seen. For the present, consumers, providers and regulators might best ensure high quality of care by openly and frankly discussing these issues among themselves. Communication is not always easy, but it is, at least, still free.

This website is an educational resource. It is not intended to provide medical advice or recommend a course of treatment. You should discuss all issues, ideas, suggestions, etc. with your clinician prior to use. Clinicians in a relevant field have reviewed the medical information; however, the Oley Foundation does not guarantee the accuracy of the information presented, and is not liable if information is incorrect or incomplete. If you have questions please contact Oley staff.


Updated in 2015 with a generous grant from Shire, Inc. 


This website was updated in 2015 with a generous grant from Shire, Inc. This website is an educational resource. It is not intended to provide medical advice or recommend a course of treatment. You should discuss all issues, ideas, suggestions, etc. with your clinician prior to use. Clinicians in a relevant field have reviewed the medical information; however, the Oley Foundation does not guarantee the accuracy of the information presented, and is not liable if information is incorrect or incomplete. If you have questions please contact Oley staff.
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