OIG Issues Final Compliance Rules

November 15, 2000
Practice Management
John W. McDaniel

The federal Department of Health and Human Services Office of Inspector General (OIG) has issued final instructions to help physicians in individual and small group practices design voluntary compliance programs. The guidance from the OIG is designed to help physicians in solo and small group practices develop effective, voluntary compliance measures to prevent fraud and abuse in government health programs, such as Medicare and Medicaid.

A voluntary compliance program can help physicians identify erroneous and fraudulent claims and ensure that submitted claims are accurate, the OIG said when issuing the guidance in September. A program also can help a practice by improving claims payment, minimizing billing mistakes, and avoiding conflicts with the self-referral and anti-kickback statutes, the OIG said.

Known as the Compliance Program Guidance for Individual and Small Group Physician Practices, the guidance is voluntary, but it would be safe to assume that the OIG strongly encourages implementing a medical practice compliance program for any physician serving Medicare and Medicaid beneficiaries.

Since the guidance takes away any excuse physicians may have for not implementing a compliance program, the guidance may mark the beginning of the establishment of a standard of care for physician practices. In other words, the government may view the failure to have a compliance program in place to be below the acceptable standard of care.

The OIG has identified fraud and abuse as an important area of public policy. The federal Health Care Financing Administration (HCFA) has determined that fraud and abuse costs the federal government more than $20 billion per year. What’s more, “insufficient documentation” and “no documentation” account for more than half of questionable claims.

Therefore, it is clear that at a minimum every physician practice should implement a coding compliance program that analyzes the levels of service utilization by physicians to ensure compliance with HCFA standards and to determine areas of potential undercoding and overcoding. The program also should require periodic reporting on evaluation and management coding by each physician and periodic documentation of chart audits for each physician to ensure appropriate documentation of procedural codes and medical necessity. The practice also should conduct individual educational sessions with physicians and office staff members to review the results expected of the coding compliance program and to establish a framework within which each physician may accomplish these tasks in order to satisfy compliance requirements.

Physicians should keep in mind that they tend to overbill for what they document and they tend to underbill for what they provide.

First Steps

Unlike other instructions from the OIG, the final physician guidance does not suggest that practices implement all seven of what it calls the standard components of a full-scale compliance program, the OIG said. While the seven components provide a solid basis for creating a compliance program, full implementation of all components may not be feasible for smaller practices, the OIG said. Instead, the guidance emphasizes a step-by-step approach for practices implementing a voluntary compliance program. Practices can begin by identifying risk areas based on a practice’s specific history with billing problems and other compliance issues that might benefit from closer scrutiny and corrective measures.

The step-by-step approach is as follows:

1. Conduct internal monitoring by doing performance audits periodically

2. Write and implement compliance standards and procedures

3. Designate a compliance officer or person to monitor compliance efforts and enforce practice standards

4. Train and educate staff members on practice standards and procedures

5. Respond appropriately to detected violations by investigating allegations and disclosing incidents to appropriate authorities

6. Develop lines of communication by discussing the issues of erroneous or fraudulent conduct at staff meetings and by keeping employees up to date on compliance activities

7. Enforce disciplinary standards by publicizing the practice’s guidelines on these issues.

The final guidance identifies four specific compliance risk areas in which the OIG has focused its investigations and audits of physician practices. The four areas are proper coding and billing, ensuring that services are reasonable and necessary, proper documentation, and avoiding improper inducements, kickbacks and self-referrals.

1. Coding and billing. The following risk areas associated with billing have been among the most frequent subjects of OIG investigations and audits:

• Billing for items or services not rendered or not provided as claimed

• Submitting claims for equipment, medical supplies, and services that are not reasonable or necessary

• Double billing

• Billing for noncovered services as if covered

• Knowing misuse of provider identification numbers that results in improper billing

• Billing for unbundled services

• Failure to use coding modifiers properly

• Upcoding the level of service provided.

Written policies and procedures concerning coding should reflect the current reimbursement principles set forth in applicable statutes and regulations. Also, written policies and procedures should ensure that coding and billing are based on medical record documentation and medical necessity.

Physicians should pay particular attention to issues involving diagnosis codes and individual Medicare Part B claims, including documentation guidelines for evaluation and management services. In addition, practices should institute a policy that all rejected claims pertaining to diagnosis and procedural codes should be reviewed each month. The practice should develop a monthly claim denial follow-up log to ensure that all claim denials are followed to conclusion.

2. Reasonable and necessary services. Practices should provide guidance to staff members that Medicare will pay only for services that meet the Medicare definition of reasonable and necessary. Therefore, Medicare (and all insurance plans) should be billed only for services believed to be reasonable and necessary for the diagnosis and treatment of each patient.

3. Documentation. Timely, accurate, and complete documentation is one of the most important physician practice compliance issues. The rules on documentation relate to medical records, CPT-4 and ICD-9CM codes, and the HCFA 1500 Form from the federal Health Care Financing Administration.

The medical record may be used to validate the site of service, the appropriateness of the services provided, and the accuracy of the billing. At a minimum, accurate medical record documentation should be complete and legible, of course. But documentation of each patient encounter also should include the reason for the encounter; any relevant history; results of a physical examination; the findings; any prior diagnostic test results; an assessment, clinical impression, or diagnosis; a plan of care; and date and legible identity of the observer.

If not documented, the rationale for ordering diagnostic or other ancillary services should be easily inferred by an independent reviewer or third party.
The medical record also should include support for the CPT-4 and ICD-9CM Codes. HCFA and private insurers should be able to determine who provided the services. These issues can be the root of investigations of inappropriate or erroneous conduct and have been identified by HCFA and OIG as a leading cause of inappropriate payments.

The guidance specifies that the HCFA 1500 Form is deemed to be properly completed when it links the diagnosis codes with the steps taken to perform an examination and record a personal history. It also must link a single most appropriate diagnosis with a corresponding procedural code, use modifiers appropriately, and provide HCFA with all information about any other insurance coverage a patient may have.

4. Kickbacks, inducements, and self-referrals. The guidance states that physician practices should have policies and procedures to ensure compliance with anti-kickback rules and with the physician self-referral laws and regulations. Whenever a practice intends to enter into a business arrangement that involves making referrals, counsel familiar with these laws and regulations should review the arrangement.

It is generally recommended that all business arrangements in which a physician practice refers business to an outside entity should be on a fair market value basis. What’s more, physician practices should implement measures to avoid offering inappropriate inducements to patients, such as the routine waiver of coinsurance or deductible payments.

To help ensure that the practice remains in compliance, it should obtain copies of all relevant OIG Special Fraud Alerts and Advisory Opinions from the OIG’s site on the Internet (see below).

Flexibility Stressed

Recognizing the financial and staffing limits in most physician practices, the final guidance stresses flexibility in how practices implement the voluntary compliance measures. Physicians can participate in the compliance programs of other providers, such as hospitals or other settings in which they practice, the OIG said. Such participation could augment the practice’s own compliance efforts, the OIG explained.

The final guidance also provides direction for larger practices developing compliance programs. The OIG recommends that larger practices use the physician guidance and previously issued instructions, such as the Third-Party Medical Billing Company Compliance Program Guidance or the Clinical Laboratory Compliance Program Guidance, to develop an appropriate compliance program.

The final guidance includes several appendices on additional risk areas and information about criminal, civil, and administrative laws related to the federal health care programs. Physicians also will find information about the OIG’s self-disclosure protocol and other useful resources, the OIG said.

For more information on the guidance, physicians can download the guidance from the OIG’s site on the Internet at www.hhs.gov/oig/new.html.