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Regulatory Compliance Has No Speed Traps

“A truth that’s told with bad intent
Beats all the lies you can invent.”
- William Blake

Formed through legislation signed by President Gerald Ford in 1976, the Office of the Inspector General (OIG) is one federal agency that should never be underestimated by those in the health care industry. In its pursuit to protect the integrity of health care programs and the welfare of their beneficiaries, the OIG boasts the power to determine the fate of most health care providers through standards both objective (42 U.S.C. § 1320a-7(a) – Mandatory Exclusions) and subjective (42 U.S.C. § 1320a-7(b) – Permissive Exclusions). While those unfortunate enough to find themselves on the List of Excluded Individuals and Entities (LEIE) may at times disagree, the pellucidity with which the OIG enforces its statutory directive is in perfect alignment with the transparency through which the agency insists providers conduct their business.

However, providers should take some comfort in knowing that the OIG does not safeguard health care in the manner of state patrolmen utilizing a surreptitious web of “speed traps,” which some states limit in part to prevent “clandestine methods of traffic enforcement designed to augment local revenues through exorbitant fines” (Dyer v. Department of Motor Vehicles, 163 Cal. App. 4th 161, 169 (2008)).  While the OIG consistently produces record-breaking recoveries of funds, it continues to issue an annual warning to providers about the areas in health care on which it plans to focus over the coming 12 months.  Health care providers would be wise to read each and every word on the 101-page update for 2014, entitled the “Work Plan.”  For those still unconvinced, unwilling or unable to pore through this winter classic, the following summary offers highlights from the OIG’s most recent annual opus.

Hospitals and Other Providers

Though it has traditionally been considered an extension of the False Claims Act, OIG oversight is no longer limited to billing and collection, but now extends to cover the entire revenue cycle process.  As a means to identify improper conduct by hospitals, the OIG intends to review inpatient admission criteria and standards.  This particular focus is inextricably connected with the “two midnight benchmark” (recently delayed by the Centers for Medicare & Medicaid Services (CMS) until September, 2014) which  addresses salient guidance in identifying appropriate inpatient care for those beneficiaries expected to need at least two nights of hospital care, lest the admission be deemed an outpatient stay.

In recent years the regulatory spotlight has expanded to include hospital management, and in 2014 the OIG will review salary figures to determine their impact, if any, on the Medicare trust fund.  At issue is whether or not employee compensation is commensurate with the managerial services provided as it relates to a hospital, and patient care in particular.  Although no such limits presently exist under the Medicare regulations, the scrutiny under which hospital executives have come in recent years may prove to be just as informative as its inclusion in the OIG’s 2014 Work Plan.

If Medicare’s first 50 years could be summarized by its efforts to contain costs, the new era of reform focuses instead on quality and performance.  The OIG will review quality improvement projects in hospitals, as well as the effectiveness of these programs in terms of clinical care.  Similarly, while the paradigm between a hospital and its medical staff differs throughout the nearly 6,000 hospitals across the United States, starting in 2014 the OIG will try to create order from this chaos.  As part of its annual plan, the OIG will review the standard hospital process for assessing medical staff applicants in an attempt to ensure that this leadership group remains accountable for the quality of patient care, especially since the federal agency believes that “robust hospital privileging programs” are integral to patient safety.

The Vigilant Fight Against Fraud and Abuse

In the health care industry, the notion “innocent until proven guilty” does not always apply. The OIG’s oversight with respect to payments for the benefit of providers subject to credible allegations of fraud by state regulatory agencies remains undisputed. That said, the OIG also reviews the processes employed by each state when suspending payments to providers to ensure that these programs satisfy the substantive thresholds for participation in the Medicaid program. Any state failing to meet these standards, as well as any state unwilling or unable to comply, may risk the loss of Medicaid funding separately and apart from the tenets of Medicaid expansion.

The passage of the Affordable Care Act brought changes to health care whistleblower laws, and in particular provided an increased pool from which a whistleblower may be compensated.  The OIG will continue to investigate improper expenditures of funds from the American Recovery and Reinvestment Act of 2009 (ARRA) through the agency’s multi-phase program designed to protect some $830 billion in monies earmarked to stimulate the national economy.  While transparency is an integral part of ARRA funds spending, the OIG must be careful to shield employees from retaliatory actions by non-governmental employers in the event reports of ARRA fund misuses are made.

Protecting Those Who Protect the Insurers

Deep within the Affordable Care Act’s 906 pages exist fiscal incentives in the form of premium tax credits, cost-sharing reduction payments and premium stabilization monies. As the debate surrounding the propriety of these safeguards begins to take shape, the OIG’s focus remains on protecting the integrity of such funding.  No one is exempt from OIG scrutiny, including CMS as it administers payments for risk adjustment and reinsurance programs. The OIG further gauges how effectively CMS monitors state and federal subsidy payments within a highly fluid and constantly changing consumer population that is forced to move between Medicaid and a health insurance exchange in record time.

Risk corridor or bailout terminology notwithstanding, the OIG must not waiver as it evaluates the effectiveness of internal controls over advanced premium tax credits and cost-sharing reductions that started this year and can differ widely, depending on such variables as levels of income, marital status, household composition and whether or not an individual qualifies for government- or employer-sponsored health care insurance.  As it dodges partisan shots across the risk corridor bow, the OIG must also examine the target amounts established by qualified health plans (QHPs) attempting to seek shelter thereunder.  With billions of dollars exchanging hands between those QHPs with lower-than-expected allowable costs and QHPs with higher-than-predicted expenses, the OIG must keep a watchful eye on CMS and other non-governmental programs while defending against problems reminiscent of Medicare Part D payments in its early days.

As the popularity of the National Security Agency plummets faster than a speeding unmanned aircraft system (commonly known as a “drone”) and the Affordable Care Act struggles to regain its composure after stumbling through the winter holidays, in many ways the future of health care funding rests with the OIG. Though saddled with a set of responsibilities to rival those of any secret agent, the OIG remains committed to its above-board approach, and as a result the health care industry can take comfort in the fact that it knows in advance what the agency intends to do this year. For companies across the nation that share the road with the OIG from time to time, such a map of its itinerary should prove to be an invaluable resource.

About the Author

Craig Garner

About the Author
Craig B. Garner is an attorney and health care consultant, specializing in issues surrounding modern American health care and the ways in which it should be managed in its current climate of reform. Craig is also an adjunct professor of law at Pepperdine University School of Law, where he teaches courses on Hospital Law and the Affordable Care Act. Between 2002 and 2011, Craig was the Chief Executive Officer at Coast Plaza Hospital. Craig is also a Fellow Designate with the American College of Healthcare Executives, a Member of the State Bar of California, Business Law Section, Health Law Committee and a Vice Chair of the Healthcare Reform Educational Task Force of the American Health Lawyers Association.