The Fundamentals of Hospice Compliance: What Is It and What Are the Implications for the Future? An Overview for Hospice Clinicians, Part 1 : Home Healthcare Now

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The Fundamentals of Hospice Compliance

What Is It and What Are the Implications for the Future? An Overview for Hospice Clinicians, Part 1

Balfour, Susan RN

Author Information
Home Healthcare Nurse 30(2):p 114-123, February 2012. | DOI: 10.1097/NHH.0b013e3182429194


The New Reality


What do the following three statements have in common?

  • In February 2011, the Office of the Inspector General (OIG) of the Department of Health and Human Services (DHHS) launched its first-ever “most wanted fugitives” list to focus public attention on individuals who steal from federal healthcare programs.
  • The Centers for Medicare and Medicaid Services (CMS) announced that, as of July 1, 2011, it would use the same type of predictive modeling technology that is used in the private sector to identify credit card fraud to analyze prepaid claims (CMS, 2011). The goal is to aid in the prevention of Medicare fraud by identifying real-time claims data patterns that may signal the need for further scrutiny or action (CMS, 2011).
  • In 2010, the government recovered 4 billion dollars through its healthcare fraud prevention and enforcement efforts, the largest amount ever collected in a single 12-month period (DHHS, 2011).

The similarity? They are all related to the government's newly energized efforts designed to ferret out fraud and abuse by Medicare or Medicaid providers—and there are more to come. Even though they may seem far removed from the everyday challenges of hospices providing patient care, the government's vigorous campaign requires action from all providers—including hospices, because hospices definitely are not immune to fraud.

In 2009, the OIG issued a report with its findings on Medicare hospice care for nursing facility residents. From their investigations, they determined that 82% of the claims for this beneficiary segment did not meet Medicare coverage requirements—a staggering and troubling number (OIG, 2009). In July 2011, the OIG followed up with a report looking at Medicare hospice providers that focus on nursing facility residents and recommended that the CMS monitor these hospices and reduce Medicare payments for all hospice care provided in nursing facilities (OIG, 2011). (See Glossary of Terms.)

How Can Hospices Prepare?

What should a hospice provider do to prepare itself in this environment? There is one clear answer: now is the time for every hospice to focus on building a robust and comprehensive compliance framework or strengthening an existing (and perhaps moribund) one. The project will require resources and will impact everyone in the agency, but there is also good news—the framework that supports compliance is almost the exact framework that can improve the quality and consistency of patient care.

The purpose of this two-part article is to assist hospices in understanding this environment and in learning how to negotiate it as successfully as possible. Part 1 explores the OIG's focus on voluntary compliance programs. Part 2 will address specific hospice risk areas and provide strategies to minimize risk.

The Office of the Inspector General

The current inspector general (IG) of the Health and Human Services (HHS), Daniel Levinson, oversees the largest IG office in the federal government—more than 1,700 employees. Although responsible for overseeing all HHS programs, the primary focus is on Medicare and Medicaid. This is because of the huge volume of services and the total annual expenditures—more than $800 billion in the Medicare, Medicaid, and the Children's Health Insurance Programs (CHIP) alone. This dollar amount represents 19% of the total federal budget (OIG, n.d., slide 50), and its magnitude helps explain the OIG's focus on identifying and ferreting out fraud and abuse.

What Is Fraud and Abuse?

The Medicare Program Integrity Manual System defines fraud as “the intentional deception or misrepresentation that an individual knows to be false or does not believe to be true and makes, knowing that the deception could result in some unauthorized benefit to himself/herself or some other person” (CMS Internet Only Manual, 2011). In the same Manual, abuse is defined simply as “billing services that are not covered or are not correctly coded” (CMS Internet Only Manual, 2011); however, in common practice it is more expansively considered as behaviors or practices of providers, physicians, or suppliers of services and equipment that, although normally not considered fraudulent, are inconsistent with accepted sound medical, business, or fiscal practices and may, directly or indirectly, result in unnecessary costs to the program, improper payment, or payment for services that fail to meet professionally recognized standards of care, or which are medically unnecessary. (For a detailed list of terms used in this article, please refer to the Glossary of Terms.)

For purposes of this article, consider fraud and abuse simply as actions or inactions resulting in improper payouts of Medicare or Medicaid dollars. The action or inaction that lead to the improper payment may range from a simple error to intentional fraud; the further to the right end of the spectrum the provider's actions are determined to be, the more severe the penalties. The continuum used by OIG is shown in Figure 1.

Figure 1:
Office of the Inspector General Improper Payment Continuum.

Compliance Programs

In determining how best to stretch its limited resources to combat fraud and abuse, the OIG recognized that engaging the healthcare community in joining its efforts could be very effective. What if every healthcare provider had an internal program that voluntarily monitored its own adherence to applicable statutes, regulation, and program requirements by instituting its own internal controls?

To promote this vision of voluntary compliance programs, in the 1990s the OIG developed written compliance guidance for over a dozen provider groups and published each in the Federal Register, the official daily publication for rules, proposed rules, and notices of federal agencies and organizations (Federal Register Main Page, n.d.). Each “guidance” included a broad discussion of the benefits of a compliance plan (including possible mitigation of penalties for a provider that ran afoul of the regulations), the seven compliance plan elements, and the identification of risk areas specific to the provider group.

Hospice-Specific Guidance

Hospice-specific guidance was published on October 5, 1999 and listed 28 distinct compliance risk areas with additional emphasis on five of the 28 areas. These are (1) eligibility, (2) the plan of care, (3) utilization of services, (4) levels of care, and (5) services provided to nursing-home residents. (See Box 1.) Although the guidance is now more than a decade old, the identified risk areas are the same ones with which the hospice community continues to struggle today. Annually the OIG publishes its WorkPlan, which includes an updated focus on high compliance risk areas. Hospice typically has three or four areas of note. In fact, the 2012 guidance has been updated and is noted in the accompanying box entitled “The OIG FY 2012 Work Plan: Items Impacting Hospice Providers.”

Box 1:
Hospice Risk Areas

Many hospices took actions in the period immediately following the release of the compliance program guidance. Actions varied greatly: some hospices bought a product or toolkit to help them develop their program and then put it on the shelf; others dug in and truly developed a comprehensive and effective program. Although there is no way to measure how prevalent these programs are today, it has been my experience that it is rare to run into a hospice with a fully functioning and integrated compliance framework. Clearly, there is more work to be done.

The Patient Protection and Affordable Care Act: Compliance Programs Will Be Mandatory

Although voluntary compliance programs were a step forward, IG Levinson has frequently articulated the OIG's position compliance programs should be mandatory. In testimony before the Senate Special Committee on Aging in 2009 he stated that, “although compliance programs do not guarantee reduced fraud and abuse, they are an important component of a comprehensive government-industry partnership to promote program integrity. We recommend that providers and suppliers should be required to adopt compliance programs as a condition of participating in the Medicare and Medicaid programs” (Levinson, 2009).

With the passage of the Patient Protection and Affordable Care Act (ACA) of 2010, that has come to pass. Although the specific requirements (including the effective date) have not been finalized, one of the ACA provisions will require mandatory compliance plans for every provider and supplier who bills government payers for services provided to its beneficiaries.

The Seven Compliance Program Elements

Although the specifics of the mandatory compliance programs are unknown, it is expected that they will be built around the same seven elements that have been used in the previous guidance documents. These elements serve as an effective guide for each hospice provider as it develops the compliance structure that fits its size, complexity, and specific risk areas. In the 1999 hospice guidance the OIG, recognizing the wide variations in hospice size and structure, noted that “the applicability of the recommendations and guidelines provided in this document depends on the circumstances of each particular hospice. However, regardless of a hospice's size or structure, the OIG believes that every hospice can and should strive to accomplish the objectives and principles underlying all of the compliance policies and procedures recommended within this guidance” (OIG, 1999).

The Fundamental Elements

The seven elements, simple and quite straightforward, are:

  1. Implementing written policies, procedures, and standards of conduct;
  2. Designating a compliance officer (CO) and compliance committee;
  3. Conducting effective training and education;
  4. Developing effective lines of communication;
  5. Enforcing standards through well-publicized disciplinary guidelines;
  6. Conducting internal monitoring and auditing; and
  7. Responding promptly to detected offenses and developing corrective action. (Office of the Inspector General, 1999)

Although this list is a good starting point, it may be helpful to visualize the elements as a framework consisting of three separate areas: the formal infrastructure, the reality, and the ongoing tracking. See Figure 2.

Figure 2

The Formal Infrastructure

Five of the seven compliance elements are incorporated in the formal infrastructure in Figure 2.

OIG Element #1 Implement written policies, procedures and standards of conduct.

Action: Think through how people should behave and how care should be provided and write it down.

A hospice's standards of conduct form the foundation of its compliance structure. The OIG expects that the standards should, in addition to articulating the hospice's commitment to operate in an ethical manner, comply with all federal, state, and private insurer standards, promote integrity, support objectivity, and foster trust. This written document should be written in clear, understandable language, and appropriate to the reading level and language of the individuals who will be reading (and using) it. The standards should be read and signed by board members, leadership, employees, and volunteers, at the time of hire (or start of service) and periodically thereafter (OIG, 1999). In addition, it is important to provide copies of the standards of conduct to vendors and independent contractors, if any, and incorporate language in their contracts that require adherence to the standards.

Accompanying these written standards of conduct are the written compliance policies, procedures, and practices that take into account the hospice's specific risks and vulnerabilities. As with the standards of conduct, these materials need to be written in a clear and comprehensible manner and must be accessible to employees and any other impacted parties. One of the most important written policies is the “nonretaliation” policy, which must be evident to all staff and nurtured carefully to maintain and build the trust of employees that compliance is a core element of the business.

OIG Element #2

Designate a compliance officer & compliance committee.

Action: Identify a high level individual who will be responsible, and accountable, for compliance efforts and pull together a group to assist in the implementation of the program.

Each hospice needs a high-level “point person” for its compliance efforts—and that person is the CO. In a large hospice, compliance may be the person's sole responsibility; in a smaller one, it may be one of the person's many areas of responsibility. No matter the hospice's size, without a CO with direct access to the governing body, sufficient authority, training, and resources to carry out the responsibilities of the role, efforts may flounder and not be successful. Efforts may also flounder if the individual in the CO position is missing key traits needed for success to the role—being open and accessible, possessing excellent critical thinking skills, having high ethical and moral standards, and being a relationship builder.

A compliance committee is also important to the success of the program. The role of the compliance committee is to provide advice and assistance to the CO. Larger agencies may have a standing committee with members chosen to reflect a broad cross section of functional areas and skills; very small agencies may opt for “as needed” task forces rather than a standing committee.

OIG Element #3

Conduct effective training and education.

Action: Train people—and make certain that you do it effectively.

Complying with federal, state, and private insurer requirements is not possible unless individuals at all levels of the hospice actually know what these requirements are. Each new board member, employee, and volunteer needs to receive baseline or general training on the elements of the hospice's compliance program, standards of conduct, and how to report a compliance concern, as well as specific training appropriate to his or her responsibilities within the hospice. The training needs to be up to date, and there must be some method of determining its effectiveness and assessing how closely actions reflect compliance or lack thereof. This is an area in which many hospices may fall short.

OIG Element #4

Develop effective lines of communication.

Action: Make sure you have a way for the important information to flow throughout the organization and create a means for employees with compliance questions or concerns to voice them without fear of retaliation.

Providing employees with an open line of communication to the CO is critical. If staff members have questions or confusion about hospice policies, practices, or procedures they need to be assured that they can pose their questions (or concerns) to the CO or a committee member without fear of retaliation and with the expectation that, if requested and to the extent possible, the question be treated with confidentiality. Additionally, the OIG also recommends the use of third-party or other anonymous reporting mechanism such as a telephone hotline. Having an anonymous and confidential hotline or other method of confidential reporting is essential for a structurally sound program; however, timely follow-up to the call or report is paramount to establishing an effective program.

OIG Element #5

Enforce standards through well-publicized disciplinary procedures.

Action: Decide what will happen if someone breaks the rules, tell everyone and follow through.

This last key area of the formal infrastructure bridges in the importance of human resources. Once the work has been done to define standards of behavior, create policies, procedures, and protocols, conduct appropriate and timely education, and establish lines of communication, success is only possible if individuals carry out the responsibilities of their positions in the expected and correct manner. Failure to do so is failing to meet the responsibilities of the position.

Tools to enforce standards include tying or linking regulatory knowledge and compliance into performance reviews and interim monitoring sessions. If a performance issue is identified, it is critical that it be reviewed on a regular basis, that it is addressed immediately and with consistent application of negative consequences appropriate to the severity of the act, and across all job levels. An absence of timely action erodes the integrity of the compliance structure.

The Reality: Compliance Is Leadership Driven

An organization's culture is driven by its leadership. Leadership's words and actions set the expectations for the integrity and ethical behavior of people within the organization and are directly related to the true success (or lack thereof) of the agency's compliance program. It is not difficult to discern the reality by observing how people act, what they say, and what behavior is considered acceptable.

In addition to observations, any anonymous communications that come in through a telephone hotline or other communication method may shed light on the reality. The CO and the compliance committee need to be aware of the information gleaned and investigate and address as necessary.

It is quite possible to create a very sound formal compliance infrastructure on article and then fall tragically short of the mark when it comes to reality. Are policies clear and well written but rarely followed? Or are they followed by most people while others are allowed to use their own procedures? Does the culture allow a lot of “I know that's what they told you in orientation, but this is how we really do it here” behavior? Are shortcuts allowed that do not “quite” meet the regulatory requirements? Any of these problems can seriously undermine the effectiveness of the program.

Ongoing Tracking

All systems, no matter how well designed, can naturally degrade over time. This same process can occur with the systems that comprise a hospice's compliance framework.

OIG Element #6

Conduct internal monitoring and auditing.

Action: Prioritize compliance risk areas, determine how to monitor them, make a schedule and stick to it.

Routine monitoring of key processes produces information that highlights problems early enough to quickly address them. Ideally, monitoring is incorporated into the routine workflow or operations and, as healthcare providers move toward more electronic processes, much can be done automatically. If a problem arises, the cause may be evident and easily addressed or it may require in-depth auditing.

The hospice with a robust and functional compliance structure identifies the most important compliance risk areas, uses them to develop a comprehensive auditing and monitoring plan, and carries it out as scheduled.

The Final Element

OIG Element #7

Respond promptly to detected offenses and develop corrective action.

Action: If a problem is discovered, respond to it immediately and figure out what to do to fix it.

The OIG recognizes that having a compliance program in place does not guarantee that there will never be a problem. What they do expect is that problems are more likely to be identified and that they will be addressed when they arise. It is beyond the scope of this article to discuss what steps should be taken when a compliance issue is uncovered (and the potential penalties for ignoring it or trying to cover it up), but a good rule of thumb is to consult a healthcare attorney to obtain legal guidance.

Tying It All Together: Compliance Is Everyone's Role

Imagine a group of hospice professionals in a workshop on regulatory and compliance topics. The speaker asks for those participants responsible for compliance to identify themselves. Only a few hands go up.

Summary and Implications

Old thinking relegated the responsibility for compliance to the CO. New thinking demands that every healthcare provider, including hospices, shift their approach and their actions to reflect the new reality and the new expectations—everyone at every layer of the organization is responsible for compliance.

Hospices that have made the commitment to developing and maintaining a comprehensive, coordinated compliance structure have learned that there is a silver lining—higher quality and more consistent patient care. This connection will be further developed and explored in Part 2 when we bring the compliance framework alive by examining specific hospice risk areas and, using the “Path of the Prudent Hospice,” explore how to conduct a focused inquiry into any compliance or quality area.

Case Example: Part 1

Noah Carson, a 66-year-old male, was admitted to hospice care on May 2 with a terminal diagnosis of pancreatic CA with metastases to the liver. He elected his Hospice Medicare benefit at the time of admission. On May 12, he was admitted to the hospital under the Medicare hospice general inpatient (GIP) level of care following an onset of severe pain at home. He remained in the hospital for 4 days and was then discharged home on an effective pain regimen.

Case Example: Part 2

Prebilling Review of Claim for GIP for Noah Carson

Before submitting claims for May services to Medicare, the compliance committee decided to review 50% of all claims that included any days of inpatient (both general inpatient and respite) and continuous care to determine if the documentation supported the higher level of care. The review of the documentation of Mr. Carson's GIP found:

  1. No indication of any team involvement in the decision to transfer Mr. Carson to GIP.
  2. The plan of care was not updated, based when the patient was transferred to GIP level of care.
  3. There was documentation of one phone call to the GIP facility to speak with Mr. Carson's primary registered nurse (RN) the day after his GIP admission.
  4. There was no documentation of any contact with the attending physician or any visits or calls to the hospital.
  5. There was no documentation of any contact with the family.
  6. Although the hospice registered nurse had documented the increased pain that led to the transfer to GIP, there was no ongoing documentation to support the patient remaining at GIP level for 4 days.

The review committee determined that the hospice clinical record did not support submission of a claim for 4 days of general inpatient care and changed the level of care on the claim to routine home care.

Under the terms of their contract for GIP, the hospice submitted payment to the hospital for 4 days of general inpatient care.

What steps were taken next?

The case example question will be addressed in Part 2 of this article, which will appear in a subsequent issue of Home Healthcare Nurse.

Glossary of Terms

Abuse: Behaviors or practices of providers that, although normally not considered fraudulent, are inconsistent with accepted sound medical, business, or fiscal practices and may, directly or indirectly, result in unnecessary costs to Medicare and Medicaid, improper payment, or payment for services that fail to meet professionally recognized standards of care, or which are medically unnecessary.

Compliance: Adherence to applicable federal and state law and the program requirements of federal, state, and private health plans.

Compliance Officer: Individual designated to serve as the focal point for compliance activities. Serves as an internal resource for regulatory and compliance issues and reports on a regular basis to the governing body, the chief executive officer, and the compliance committee.

Fraud: The intentional deception or misrepresentation that an individual knows to be false or does not believe to be true and makes, knowing that the deception could result in some unauthorized benefit to himself or herself or some other person.

Office of the Inspector General (OIG): Objective, independent entity that conducts audits, investigations, and inspections of programs of Health and Human Services (HHS). The mission of the OIG includes combating waste, fraud, and abuse in Medicare and Medicaid.

Patient Protection and Affordable Care Act (ACA): Federal statute signed into law March 23, 2010; also knows as healthcare reform law.

The OIG FY 2012 Work Plan: Items Impacting Hospice Providers

Link to Entire Work Plan:

Each annual work plan is divided into provider-specific sections. In the plan for fiscal year (FY) 2012, there are two hospice projects listed in the hospice section and then three others, each in a different provider's section.


Acute-Care Hospital Inpatient Transfers to Inpatient Hospice Care (New)

We will review Medicare claims for inpatient stays for which the beneficiary was transferred to hospice care and examine the relationship, either financial or common ownership, between the acute-care hospital and the hospice provider and how Medicare treats reimbursement for similar transfers from the acute-care setting to other settings. Regulations at 42 CFR § 412.2 state that inpatient prospective payment system (IPPS) payments to hospitals for inpatient stays are payment in full for hospitals' operating costs. Regulations state that hospice payments can be made for a general inpatient care day (42 CFR § 318.301(b)(4)). A general inpatient care day is one on which an individual who has elected hospice care receives general inpatient care in an inpatient facility for pain control or acute or chronic symptom management that cannot be managed in other settings (OAS; W-00-12-35602; various reviews; expected issue date: FY2012; new start).


Hospice Marketing Practices and Financial Relationships with Nursing Facilities (New)

We will review hospices' marketing materials and practices and their financial relationships with nursing facilities. Medicare covers hospice services for eligible beneficiaries under Medicare Part A (Social Security Act, § 1812(a)). In a recent report, OIG found that 82% of hospice claims for beneficiaries in nursing facilities did not meet Medicare coverage requirements. MedPAC, an independent congressional agency that advises Congress on issues affecting Medicare, has noted that hospices and nursing facilities may be involved in inappropriate enrollment and compensation. MedPAC has also highlighted instances in which hospices aggressively marketed their services to nursing facility residents. We will focus our review on hospices that have a high percentage of their beneficiaries in nursing facilities (OEI; 02-10-00071; 02-10-00072; expected issue date: FY 2012; work in progress).

Medicare Hospice General Inpatient Care

We will review the use of hospice general inpatient care from 2005 to 2010. We will assess the appropriateness of hospices' general inpatient care claims and hospice beneficiaries' drug claims billed under Part D. Federal regulations address Medicare CoPs for hospice at 42 CFR Part 418. We will review hospice medical records to address concerns that this level of hospice care is being misused and to determine the extent to which drugs are being inappropriately billed to Part D (OEI; 02-10-00490; expected issue date: FY 2012; work in progress).

Part D Drug Pricing and Payment-Related Reviews

Duplicate Drug Claims for Hospice Beneficiaries

We will review the appropriateness of drug claims for individuals who are receiving hospice benefits under Medicare Part A and drug coverage under Medicare Part D. We will determine whether payments under Part D are correct, supported, and not duplicated in hospice per diem amounts. We will also determine the extent of any duplication found and identify controls to prevent duplicate drug payments. Medicare Part D drug plans should not pay for drugs that are covered under the Part A hospice benefit. CMS publishes hospice payment rates, which include prescription drugs used for pain relief and symptom control related to the beneficiary's terminal illness (Medicare Claims Processing Manual, Pub. No. 100-04, ch. 11, § 30.2). Hospice providers are paid per diem amounts, which include payments for these drugs. A drug prescribed for a Part D beneficiary shall not be considered for payment if the drug was prescribed and dispensed or administered under Part A or Part B (Social Security Act, § 1860D-2(e)(2)(B)) (OAS; W-00-10-35307; W-00-11-35307; various reviews; expected issue date: FY 2012; work in progress).

Medicaid Reviews: Other Medicaid Services and Payments

Hospice Services: Compliance With Reimbursement Requirements

We will determine whether Medicaid payments for hospice services complied with Federal reimbursement requirements. Medicaid may cover hospice services for individuals with terminal illnesses (Social Security Act, § 1905(o)(1)(A)). Hospice care provides relief of pain and other symptoms and supportive services to terminally ill persons and assistance to their families in adjusting to the patients' illness and death. An individual, having been certified as terminally ill, must elect hospice coverage and waive all rights to certain otherwise covered Medicaid services (CMS's State Medicaid Manual, Pub. 45, § 4305). In FY 2010, Medicaid payments for hospice services totaled more than $816 million (OAS; W-00-11-31385; various reviews; expected issue date: FY 2012; new start. OEI; 00-00-00000; expected issue date: FY 2013; new start).


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