OIG Nursing Facility Compliance Program Guidance: Renewed Focus on Fraud and Abuse

Medicare and Medicaid Billing Requirements

The Nursing Facility ICPG recommends that nursing facilities take proactive measures to ensure compliance with federal healthcare program (FHCP) billing rules and verify the accuracy of claims.

OIG reports common claims preparation and submission risks under the SNF prospective payment system (PPS), including:

• Duplicate billing;
• Insufficient documentation;
• False or fraudulent cost reports; and
• Noncompliance with the SNF three-day rule, which requires a covered enrollee under a PPS to receive skilled nursing or rehabilitation services from a Medicare-certified SNF after a qualifying hospital stay of at least three days
• Noncompliance with consolidated billing rules, which requires SNFs to bill Medicare Part A for most of the services and SNF covered stays provided to Medicare enrollees, including items and services that outside practitioners and suppliers provide “under arrangement” with the SNF.

OIG recommends:

• Developing and maintaining policies that incorporate resident assessments, care planning, tracking of resident progress and outcomes, documentation of services provided, and appropriate coding.
• Implementing competency-based training to ensure understanding of billing requirements for Medicare under the SNF patient-driven payment model.
• Confirming that coding reflects residents’ characteristics and comorbidities, and that services provided are individualized, skilled, and medically necessary.
• Assessing therapy services to ensure therapy management does not result in underutilization.

Payments that include performance measures may increase the risk that nursing facilities modify data and claims to qualify for such payments. OIG suggests nursing facilities include an emphasis on the importance of data accuracy in auditing, monitoring, and training initiatives. OIG also mentions Medicare Advantage and Medicaid managed care payments, and states that nursing facilities must ensure the accuracy of claims they submit to managed care plans to avoid causing the plans to submit false claims to a FHCP. Facilities must not skimp on care provided to residents enrolled in the plan or discriminate against more costly residents enrolled in the plan. Lastly, because the Part A SNF PPS (or the Medicare Advantage plan that provides the Part A benefits) generally covers prescriptions when an individual is in a covered Part A stay, nursing facilities must not bill for prescriptions to be covered by Part D when an individual is in a covered Part A stay.

Medicare Health Plan Enrollment for Nursing Facility Residents 

OIG states that nursing facilities that educate residents regarding various Medicare health plans or assist residents with plan enrollment decisions should mitigate the risk of inappropriately directing residents to a particular plan or enrollment decision by:

• Remaining neutral and providing objective information;
• Declining remuneration from any individuals or entities tied to enrollment decisions;
• Complying with health plan policies and Medicare regulations related to marketing and enrollment as described in the Nursing Facility ICPG Reimbursement Supplement (link); and
• Acting in the best interests of the resident.

FEDERAL ANTI-KICKBACK STATUTE COMPLIANCE

The Nursing Facility ICPG identifies arrangements that OIG believes warrant scrutiny under the federal Anti-Kickback Statute (AKS). These arrangements, while not exhaustive, add to those that OIG previously noted in its 2008 guidance for nursing facilities:

• Free goods and services;
• Services contracts (including nonphysician and physician services);
• Discounts;
• Hospices; and
• Reserved bed payments.

Long-Term Care Pharmacy and Consultant Pharmacist Arrangements

Nursing facilities should educate all staff and contractors involved in prescribing, administering, and managing pharmaceuticals about the federal AKS prohibition against knowing and willful solicitation or receipt of remuneration to influence the choice of a drug when the drug is payable under an FHCP.

OIG recommends that nursing facilities adopt policies clarifying that all prescribing decisions must be made in the best interests of the patient and that drug switches should only be made upon authorization of the attending physician, medical director, or other licensed prescriber. OIG recommends taking steps to minimize the potential for conflicts of interest that impact pharmaceutical prescribing decisions, particularly when a nursing facility’s consultant pharmacist is affiliated with a long-term care pharmacy, which may in turn mitigate AKS risk. Such steps include:

• Entering into separate contracts for consultant pharmacy services and long-term care pharmacy services;
• Encouraging or requiring consultant pharmacists and long-term care pharmacies to disclose affiliations that may present a conflict of interest;
• Aligning remuneration with fair market value and without regard to volume or value of drugs prescribed for or administered to residents; and
• Monitoring drug records for patterns of inappropriate steering, switching, or overprescribing.

Hospital and Hospice Arrangements

OIG specifically notes concerns about nursing facilities providing charity care to certain patients as a favor to the referring hospital and nursing facilities accepting payments from hospitals to accept a discharged patient. Such arrangements may include supplemental payments that the nursing facility receives from hospitals in exchange for expediting admission of the former hospital patient to free up the hospital bed for a different patient. OIG states that no safe harbor protection is available under the federal AKS and that such arrangements may lead to interference with clinical decision making, steering, and unfair competition. OIG acknowledges that some arrangements related to timely discharge of patients could be structured to meet the criteria of a value-based care safe harbor, however.

Hospitals may enter into reserved bed arrangements with nursing facilities to receive guaranteed or priority placement for their discharged patients in accordance with Centers for Medicare and Medicaid Services (CMS) requirements (see, e.g., Provider Reimbursement Manual, Ch. 21, § 2105.3(D)). However, OIG cautions that these arrangements could violate the AKS if one purpose of the remuneration is to induce referrals of FHCP business from the nursing facility to the hospital. Examples of reserved bed payments that may give rise to an inference that the arrangement is connected to referrals include:

• Payments for beds that are occupied and for which the facility is already receiving reimbursement;
• Payments for more beds than the hospital legitimately needs; and
• Payments that exceed a 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 for the limited purpose of securing needed beds, not future referrals. OIG reminds nursing facilities that conditioning the offer of reserved beds on referrals of FHCP enrollees by the hospital to the nursing facility would raise AKS concerns even if no payment was made.

OIG also provides examples of suspect arrangements between a nursing facility and a hospice whereby the nursing facility solicits or receives from the hospice goods or services for free (or below fair market value) or monetary payments for:

• Room and board for a resident in excess of what the facility would have received directly from Medicaid if the patient had 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);
• Additional services for a resident that are included in the Medicaid room and board payment to the hospice;
• Additional services for a resident that are not included in the Medicaid room and board payment (at a rate that is above fair market value); and
• A nursing facility’s provision of hospice services to a hospice’s patients (at a rate that is above fair market value).

Facilities should carefully monitor their relationships with hospices to protect against the types of suspect arrangements flagged by OIG.

Care Coordination and Value-Based Care Arrangements

The care coordination and value-based care safe harbors were codified as part of the US Department of Health and Human Services Regulatory Sprint to Coordinated Care in 2020 and therefore were not available in 2008, when OIG released its previous nursing facility compliance program guidance. Because these arrangements inherently involve patient referrals between care settings, remuneration exchanged under these arrangements must be reviewed for AKS risk. Under the new safe harbors, nursing facilities that are part of a value-based enterprise or that participate in CMS-sponsored models may be able to protect arrangements that were previously unable to fit into a safe harbor.

Joint Ventures

OIG has long advised that joint ventures (through equity or contract) between nursing facilities and other healthcare entities, particularly ancillary service providers, must be carefully structured to ensure that the joint venture is entered into for a legitimate purpose and does not exhibit attributes of problematic joint ventures (see, e.g., OIG, Special Fraud Alert: Joint Venture Arrangements (1989), reprinted in 59 Fed. Reg. 65,372, 65,373 (Dec. 19, 1994); OIG, Special Advisory Bulletin: Contractual Joint Ventures (2003)). OIG describes a potential problematic joint venture formed by a nursing facility and contracted service provider whereby one purpose of the arrangement may be to permit the service provider to pay the facility a share of the profits from the facility’s referrals to the service provider for services reimbursable under a FHCP. OIG reminds providers of the small entity investments, care coordination arrangements, and value-based arrangements safe harbors that may be available for certain joint ventures.

Recommendations to Mitigate Fraud and Abuse Risks Under the AKS

OIG recommends the following practices to evaluate arrangements under the federal AKS.

• Structuring arrangements to meet all applicable AKS safe harbor criteria whenever possible and reviewing such arrangements periodically to ensure safe harbor criteria continue to be satisfied.
• Ensuring that:
  • There is a legitimate need for the services and supplies covered by the proposed arrangement(s);
  • There are not more providers engaged than necessary for legitimate business purposes;
  • Service and/or supplies are actually provided;
  • Compensation is commensurate with the skill level and experience required and is consistent with fair market value in an arm’s-length transaction; and
  • The arrangement does not take into account the volume or value of FHCP business.
• Particularly when an arrangement does not meet a safe harbor, documenting factors that mitigate fraud and abuse risks prior to payment to the provider under the arrangement, and monitoring for consistency with these factors.
• Maintaining contemporaneous documentation, e.g., time logs.
• Implementing recommendations from the OIG’s General Compliance Program Guidance (GCPG) regarding financial arrangements tracking.

RELATED PARTY TRANSACTIONS

OIG is concerned that nursing facility owners, operators, and private investors taking part in related-party transactions may participate in tunneling (i.e., the practice of misrepresenting or hiding profitability by overstating payments for operational expenses that are funneled to related parties). Tunneling typically manifests as:

• Real estate transactions in which a nursing facility sells its building and land to a commonly owned company or real estate investment trust, then leases the property back at higher than fair market rates; or
• Arrangements for the outsourcing of administrative or management services with commonly owned companies under which the nursing facility pays higher than fair market rates.

To mitigate this risk, nursing facilities should routinely audit financial data and verify that transactions are fair market value, of quality comparable to or greater than competing services provided by entities that are not commonly owned or controlled, and chosen based primarily on the wellbeing of residents.

COMPLIANCE, QUALITY, AND RESIDENT SAFETY CONSIDERATIONS

Expanding on OIG’s GCPG recommendations and 2008 guidance, nursing facilities implementing OIG’s seven elements of a compliance program should consider the following specific recommendations. The Nursing Facility ICPG is not exhaustive, however, so facilities should review it and the GCPG in light of their own organization’s risk profile as they work to implement, evaluate, and update compliance program operations.

Oversight Role of Responsible Individuals

Nursing facilities’ governing bodies, members, owners, investors, operators, and executive leadership (defined as “responsible individuals” in the Nursing Facility ICPG) should communicate their commitment to making compliance, quality, and resident safety a priority over profit margins. The Nursing Facility ICPG stresses the importance of responsible individuals’ participation in compliance initiatives. Responsible individuals should conduct periodic meetings with facility leadership, the compliance officer, and the compliance committee to assess the nursing facility’s:

• Compliance program and system of internal controls;
• Response to state, federal, internal, and external reports of quality of care and resident safety problems; and
• Status of remedial efforts developed in response to identified problems.

OIG highlights that the inclusion of investors in the term “responsible individuals” is crucial, because investors should actively question whether the operating and management companies in their investment portfolios:

• Comply with FHCP requirements and fraud and abuse laws;
• Dedicate the necessary resources to the organization’s compliance and quality programs;
• Provide high-quality care; and
• Create a safe and comfortable living environments for all residents.

Responsible individuals should consider adopting a resolution or charter summarizing their review and oversight of the allocation of all necessary resources to support the nursing facility’s compliance initiatives. This may include increasing support for the nursing facility’s compliance officer and compliance programs to ensure that the nursing facility adheres to regulatory requirements and professionally recognized standards of care.

Role of the Compliance Committee in Supporting Collaboration and Alignment Between Compliance and Quality Functions

OIG advises that a compliance committee should be appointed at the corporate level, and that nursing facilities should consider including regional or facility-level staff to support the committee depending upon the size and structure of the enterprise. Nursing facilities should also consider coordinating the compliance committee’s work with the facility’s quality assurance and performance improvement program. OIG believes collaborative efforts may eliminate any redundancies in responsibilities across compliance and quality initiatives and may yield other efficiencies and cost savings for nursing facilities.

Nursing facility compliance committees, in addition to completing the duties described in the GCPG, should regularly review:

• Resident, family, guardian, and staff complaints;
• Internal surveys;
• Staffing turnover and exit interviews;
• State and federal surveys;
• Resident outcomes and care delivery;
• Events reporting;
• Staffing hours reports;
• Hotline calls and disclosure logs;
• CMS quality indicators measuring nursing facility performance; and
• Financial indicators.

Competency-Based Training

OIG recommends regularly assessing staff training needs and the delivery of such training. Current and exiting staff should be asked to provide feedback, and this information should be used to identify training gaps and make necessary modifications to the training plan. OIG recommends that nursing facilities provide training in response to all risks identified in the Nursing Facility ICPG.

Risk Assessment, Internal Review, and Monitoring Processes

Nursing facilities should have (and should regularly evaluate) an annual risk assessment, internal review, and monitoring process to identify and address risks associated with the nursing facility’s participation in FHCPs, including risk areas discussed in the Nursing Facility ICPG. Site visits should be conducted regularly and should include responsible individuals. Priority should be placed on high-risk areas as determined through facility data collection and the results of previous reviews.

Reporting Requirements

Responsible individuals should consider reporting obligations a priority and should demonstrate a heightened interest in all reporting being complete, accurate, and timely.

OIG recommends that nursing facility compliance and quality programs develop and establish:

• Clear and comprehensible procedures that guide staff involved in all relevant functions through appropriate reporting practices designed to achieve consistency and continuity.
• Direct communication channels for staff to request and obtain clarity from relevant facility leaders.
• Audits and systematic analyses of the root causes of errors in data.

KEY TAKEAWAYS

• Nursing facility billing and coding practices and financial arrangements are under scrutiny by OIG, with joint ventures; “tunneling”; and pharmacy, hospice, and hospital arrangements specifically called into question.
• Nursing facilities should ensure that their corporate compliance efforts are sufficiently robust to support appropriate auditing and monitoring activities and evaluation of arrangements with actual or potential referral sources for compliance with the AKS and similar state fraud and abuse laws.
• Responsible individuals – including investors – should prioritize compliance and quality initiatives and communicate such focus throughout the organization.