A year after issuing its General Compliance Program Guidance, the Department of Health and Human Services Office of Inspector General (“OIG”) has published the first industry-specific compliance guidance with  “Industry Segment-Specific Compliance Guidance for Skilled Nursing Facilities and Nursing Facilities” (the “Nursing Facility ICPG”). 

Notably, it has been more than 16 years since the OIG last offered a comprehensive update in this space as the last major update was in 2008. This new update is intended to address the significant changes in the nursing facility industry since 2008, including changes in business practices and the way that nursing facilities receive reimbursement for services.

Overview of OIG’s Guidance

Unlike the broader General Compliance Program Guidance (“GCPG”), which applies to all individuals and entities in the health care industry, the Nursing Facility ICPG is specifically tailored to nursing facilities. The OIG has emphasized that both the Nursing Facility ICPG and the GCPG are voluntary and nonbinding andare separate from and meant to complement the Centers for Medicare & Medicaid Services (CMS) Compliance Program Requirements of Participation, which are mandatory for any facilities participating in those federal health care programs.

The Nursing Facility ICPG identifies and provides risk mitigation recommendations for four potential compliance risk areas for skilled nursing facilities (“SNFs”) and nursing facilities (“NFs”): (1) quality of care and quality of life; (2) Medicare and Medicaid billing requirements; (3) federal Anti-Kickback Statute (“AKS”) considerations; and (4) other risk areas, such as related-party transactions, the physician self-referral law, and Health Insurance Portability and Accountability Act of 1996 (“HIPAA”).  We discuss each area below.

Compliance Risk Areas for SNFs and NFs

Quality of Care and Quality of Life

Because nursing facilities serve as both the location where residents receive medically necessary care and a home where they reside while receiving care, it is essential for nursing facilities to provide quality of care and quality of life for residents.  To even participate in Medicare and Medicaid, nursing facilities must expressly agree to comply with regulations related to standards of care and must certify that services are provided in compliance with applicable rules. If a facility does not provide care that meets the professional standards of quality or does not render services in an environment that promotes quality of life, then those claims for reimbursement may be considered false. Therefore, failure to provide quality care and promote quality of life poses a risk of submitting a false claim to Medicare or Medicaid, which could result in substantial civil and criminal penalties for the provider.  The OIG and DOJ have increasingly used substandard quality of care as the basis for investigations and enforcement actions, with the OIG imposing Quality of Care Corporate Integrity Agreements (“CIAs”).

OIG’s Material Recommendations:

  • Increase registered nurse and overall nurse staffing.  Consider hiring a qualified director of nursing, regularly recognizing staff members’ outstanding performances, and investing in necessary technologies to improve efficiencies.
  • Develop and implement individualized resident care plans and creating enriching activities. Develop policies that encourage open communication in care planning meetings and provide the activity director with discretion to develop creative activities.
  • Manage changing resident demographics.  Develop a system of clear admissions standards and, before admitting each potential new resident, ensure that the facility has the resources to provide services to the potential resident.
  • Facilitate medication management safety. Offer training to familiarize all staff involved in resident care with proper medication management practices and documentation requirements.
  • Mitigate the risk of inappropriate use of medications and minimizing the potential for conflicts of interest to impact pharmaceutical decisions.  Require consistent documentation of the appropriate use of medication and consider having separate contracts for consultant pharmacist services and for long-term pharmacy services.
  • Mitigate resident safety risks.  Consider adopting a Resident Safety Program consisting of continual monitoring of adverse events and quality of care issues.

Medicare and Medicaid Billing Requirements

Ensuring compliance with Medicare and Medicaid billing requirements allows for continued participation in the programs and safeguards individuals and entities from criminal prosecution under the False Claims Act or civil liability under the Civil Monetary Penalties Law.

Material recommendations from OIG include:

  • Address risks associated with claim preparation and submission under the SNF Prospective Payment System (PPS).  Invest in training to ensure clinical and billing staff fully understand the new requirements for billing Medicare under the SNF PPS. Conduct reviews and audits to confirm that coding accurately reflects residents’ characteristics and comorbidities.
  • Emphasize the importance of data accuracy for value-based payment models and programs (including the SNF Value-Based Purchasing Program).
  • Ensure nursing facilities do not bill Medicare Advantage Prescription Drug plans or Part D Prescription Drug Plans for prescriptions covered by part D when an individual is in a covered Part A stay.
  • Mitigate risks when educating residents regarding health plan enrollment decisions to ensure efforts do not lead to inappropriate steering towards a particular plan.

Federal Anti-Kickback Statute

Because nursing facilities are in a position to obtain and make referrals of federal health care program business from other providers (such as hospices, physicians, laboratories, other health care professionals, and other nursing facilities), nursing facilities must comply with the federal Anti-Kickback Statute (“AKS”).  Therefore, nursing facility arrangements must materially satisfy an AKS safe harbor to be protected.  Examples of applicable safe harbors for nursing facilities may include, but are not limited to, the following:

  • Investment interests (42 C.F.R. § 1001.952(a))
  • Space rental (42 C.F.R. § 1001.952(b))
  • Equipment rental (42 C.F.R. § 1001.952(c))
  • Discounts (42 C.F.R. § 1001.952(h))
  • See pg. 34 of the Nursing Facility ICPG for more examples

Material recommendations from OIG include:

  • Whenever possible, nursing facilities should structure their arrangements to meet all conditions set forth in a safe harbor, which would protect the applicable arrangement from sanctions under the AKS. Consider not only the written arrangement documenting the agreement (if any) but how the arrangement is actually conducted as the AKS is an intent-based statute.
  • Document factors that mitigate the fraud and abuse risk in the arrangement before payment to the provider of supplies or services. For example, maintain documentation regarding formal fair market valuations conducted or other factors used to informally determine compensation is at fair market value (“FMV”) (e.g., compensation for similar arrangements involving nursing facilities of similar size).
  • Monitor arrangements to ensure they continue to be consistent with any features intended to mitigate fraud and abuse.
  • Scrutinize goods and services arrangements provided for free (or FMV) between nursing facilities and referral sources because these arrangements could be interpreted as vehicles to disguise an unlawful payment for referrals of federal health care program business.
  • Structure discount arrangements to meet the discounts safe harbor.  To qualify for the safe harbor, the discount must be a reduction in the amount the nursing facility is charged for an item or service based on an arm’s-length transaction.
  • Do not accept free (or below FMV) goods or services from a long-term care pharmacy.
  • Carefully monitor any remuneration exchanged with hospitals and hospices to ensure the renumeration is not intended to induce or reward referrals. 
  • Exercise caution when considering and entering into joint ventures, and where possible, structure joint ventures to meet an AKS safe harbor (e.g., small entity investments, care coordination arrangements, value-based arrangements with substantial downside financial risk or full financial risk).

Other Risk Areas

OIG briefly touches on other compliance risk areas, which are discussed briefly below.

  • Related-Party Transactions: OIG is particularly concerned about “tunneling” – the practice of misrepresenting or hiding profitability by overstating payments for operational expenses that are funneled to related parties. Tunneling in the nursing facility industry appears in (1) real estate transactions when a nursing facility sells its building and land to a commonly owned company and then leases the property back at higher than FMV; and (2) management or administrative services arrangements with commonly owned companies where the nursing facility pays higher than FMV for those services.
  • Physician Self-Referral Law (the “Stark law”):  SNF services covered by Medicare Part A PPS payment are not considered designated health services (“DHS”) under the Stark law, but nursing facilities may perform and bill services other than SNF services covered by the Medicare Part A PPS payment. These services could include laboratory services, physical therapy, occupational therapy, and outpatient speech-language pathology services, which are DHS and thus making the nursing facility a DHS entity.  OIG recommends that DHS entities should review all financial relationships with physicians who may refer DHS and the immediate family members of such referring physicians and ensure that these relationships satisfy all elements of an applicable Stark law exception in order to be protected.
  • Anti-Supplementation: Nursing facilities must accept the applicable Medicare or Medicaid payment for covered items and services as payment in full and may not charge the enrollee any amount in addition to what is otherwise required.
  • HIPAA Privacy, Security, and Breach Notification Rules: Most nursing facilities are considered “covered entities” under HIPAA because they are health care providers that conduct certain health care transactions electronically.  Therefore, most nursing facilities must comply with HIPAA.
  • Civil rights: Nursing facilities must comply with applicable civil rights laws, which prohibit discrimination.

Main Takeaways from the Nursing Facility ICPG

While Compliance Program ROPs represent a mandatory floor for nursing facility compliance, the Nursing Facility ICPG provides suggestions to reach a voluntary ceiling.  For nursing facilities looking to assess current compliance practices or implement new programs, the Nursing Facility ICPG is a useful starting point that provides a framework upon which facilities may build.

Reed Smith will continue to track developments with the OIG expected release of further Industry-Specific guidance if you have any questions about this topic, please reach out to the Health Care Lawyers at Reed Smith.