Federal government expands compliance initiatives - Cover Story

Healthcare Financial Management, Sept, 1997 by John K. Dugan

In 1995, the Federal government initiated Operation Restore Trust to increase enforcement of fraud and abuse regulations in Medicare and Medicaid programs. With the success of the original initiative, the government is expanding the project to additional states and program areas. The initial scrutiny of home health agencies, nursing homes, hospice care, and durable medical equipment is being expanded to managed care plans and acute care hospitals with an eye toward DRG creep.

To manage this increased enforcement activity, healthcare organizations should institute comprehensive corporate compliance programs. Such programs should provide a framework that delineates responsibilities and provides a systematic means to resolve issues in a timely manner.

In May 1997, HHS Secretary Donna E. Shalala reinforced President Clinton's affirmation that combating fraud and abuse in the Medicare and Medicaid programs is "a top personal priority" by announcing the expansion of Operation Restore Trust (ORT). ORT, a two-year demonstration project launched in May 1995, was designed to test several innovative approaches to combating fraud and abuse in the Medicare and Medicaid programs. The expansion and extension of the project indicates that healthcare fraud and abuse investigations will target additional states beyond the original five in the demonstration project.

Healthcare organizations can improve their compliance practices by understanding government objectives and the nature of Federal investigations and by developing a comprehensive corporate compliance program that includes formal monitoring procedures. Healthcare industry compliance will be enforced on an ongoing basis.

ORT: AN UPDATE

The principal goal of ORT was to increase enforcement in healthcare programs where the government believed that fraud and abuse were prevalent. The critical elements of the initiative included guaranteed funding for antifraud and abuse activities carried out by HHS and its agencies; a coordinated "partnering" effort involving multiple Federal and state agencies; local control over these programs; and a focus on specific high-growth program areas, including home health agencies, nursing homes, hospice care, and durable medical equipment suppliers. The project initially targeted five states - California, Florida, Illinois, New York, and Texas - where, collectively, more than one-third of all Medicare and Medicaid beneficiaries live.

Data released in May by HHS indicate that ORT brought in revenues totaling $187.5 million. This figure includes $67.3 million from criminal restitution and fines; $72.8 million from civil judgments, fines, and settlements; and $47.4 million from services inappropriately billed or medically unnecessary services rendered.

Other results of ORT are as follows:

* Seventy-four criminal convictions, 58 civil actions, 69 current indictments, and 218 providers excluded from participation in the Medicare and Medicaid programs;

* Forty-seven completed audit and inspection reports and 31 audits and evaluations under way.

* Completed reviews of 168 home health agencies and nursing homes; and

* Six new Office of the Inspector General (OIG) field offices, increasing the total number of field offices to 31, with plans to open eight more offices in FY98.

A second, less successful goal of ORT was the Voluntary Disclosure Program. This program sought to provide healthcare providers with a mechanism for voluntarily reporting instances of potential fraud, abuse, or billing errors to the OIG for appropriate consideration and settlement. The program was modeled on a similar, successful program for the defense industry.

Proactive reporting by healthcare providers was to be a major consideration in reducing any penalties imposed by the OIG, but the Department of Justice (DOJ) can still investigate any suspected criminal wrongdoing. In addition, being proactive could cost a provider double damages for billing errors that could have been appropriately settled by the fiscal intermediary or carrier but that were being referred to a regional HCFA office and the OIG. Thus, the program did not catch on.

ORT has effectively curtailed some fraud and abuse and contributed to behavioral changes throughout the healthcare industry. Over the next two years, the project's geographic focus will expand to include 12 additional states: Arizona, Colorado, Georgia, Louisiana, Massachusetts, Missouri, New Jersey, Ohio, Pennsylvania, Tennessee, Virginia, and Washington. In addition, ORT will broaden its focus to include psychiatric-related issues and several new antifraud and abuse targets, including acute care hospitals and managed care plans. Ultimately, HHS will implement the techniques developed during these demonstration phases for all Medicare and Medicaid program areas in all 50 states. Additional efforts and strategies are needed to encourage healthcare providers to voluntarily report billing errors.

CODING INVESTIGATIONS - OPERATION "DRG CREEP"

As part of its ongoing antifraud and abuse investigations, the OIG, working with the DOJ, recently issued subpoenas to several Pennsylvania hospitals for copies of selected Medicare inpatient medical records from 1994 through 1996. This action was taken as part of a 1997 OIG initiative to examine the accuracy of certain ICD-9 diagnosis code selections and resulting DRG assignments.