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The Office of Inspector General ("OIG") of the Department of Health & Human Services ("HHS") recently issued its Work Plan for Fiscal Year 2004 ("Work Plan"). The Work Plan identifies areas that the OIG will study, audit and/or investigate in fiscal year 2004. The Work Plan provides valuable guidance for identifying high risk compliance areas for special emphasis by the OIG that may apply to your health care organization. The following summarizes the most significant OIG projects in 2004.

General Issues

The OIG plans to examine CMS oversight of the Joint Commission on Accreditation of Healthcare Organizations, issue new "safe harbor" exemptions to anti-kickback laws and revise the guidance for hospital compliance programs, according to the Work Plan. The Work Plan also addresses several HIPAA issues. Specifically, the OIG will:

• Assess the use of "smart card" technology in Medicare - which can foster portable, electronic patient medical records – focusing on information security, data privacy and program integrity concerns
• Determine whether hospital information and security systems meet HIPAA standards, including whether Medicare and Medicaid beneficiary data are appropriately safeguarded
• Evaluate managed care organization controls over electronic transmission of patient data to determine compliance with the HIPAA security rule
• Conduct an early assessment of college and university policies and procedures for protecting the privacy of medical records for people participating in clinical trials and other research funded by the National Institutes of Health

Hospitals

In FY 2004, the OIG will continue reviewing whether hospital outlier claims were submitted according to Medicare rules, and will continue to identify program vulnerabilities with regard to Medicaid and Medicare outlier payments. The OIG plans to look at long-term-care hospitals to determine the extent to which they operate as a hospital within a hospital and the related implications. Other key hospital issues the OIG will review include:

• Inpatient Capital Payments. OIG will conduct a series of reviews of inpatient hospital capital payments, including whether the CMS process for updating capital rates is accurate and appropriate
• Inpatient PPS Update Factors. OIG will examine elements that make up IPPS rates and whether factors included in the market-based updates sufficiently cover PPS elements and represent fair increases in Medicare rates
• Medical Necessity for Inpatient Rehabilitation and Inpatient Psychiatric Stays. OIG will determine the extent to which improper Medicare payments for these stays were caused by medical necessity or coverage issues
• Medical Education Payments for Dental and Podiatry Residents. OIG will study the appropriateness of graduate medical education payments for these residents
• Nursing and Allied Health Education Payments. OIG will look at the appropriateness of payments for provider-run nursing and allied health education programs
• DRG Coding Update. OIG will study DRGs that have a history of aberrant coding to determine whether some acute hospitals have aberrant coding patterns
• Organ Acquisition Costs. OIG will scrutinize whether organ acquisition costs listed on Medicare hospital cost reports were correct and proper and did not include costs that should have been allocated to post-transplant activities or other cost centers
• Home Office Costs at Critical Access Hospitals. OIG will review cost reports to figure out whether home-office costs and related party transactions were properly allocated and treated consistently with Medicare rules

Other OIG projects related to hospitals include DRG payment limits, hospital reporting of restraint-related deaths, charges and payments under new prospective payment systems, coronary artery stents, diagnostic testing in emergency rooms, outpatient prospective payment system, outpatient cardiac rehabilitation services, Medicaid graduate medical education payments, hospital patient transfers, and the Medicaid DRG payment window.

Managed Care Plans

The OIG will review a number of issues related to managed care plans, including marketing and enrollment practices, encounter data reporting, administrative costs, and duplicate Medicare payments to cost-based plans. The Work Plan notes that the OIG will determine whether managed care plans have adhered to Medicare+Choice prompt payment requirements for providers, and assess CMS's oversight of managed care plans compliance with the requirements. Other OIG managed care plan projects include adjusted community rate proposals and follow-up on proposals, managed care "deeming" organizations, enhanced managed care payments, and excessive medical costs.

Physicians

The OIG lists 12 areas of focus pertaining directly to physicians. For the second consecutive year, consultation is at the top of the list, with a study to be issued in 2004 that will determine the appropriateness of billing for physician consultation services and the reasons for inaccurate billings, as well as their financial impact on Medicare. Aberrant physician coding patterns of evaluation and management services also will be examined, with specific attention being paid to disproportionately high volumes of high-level E&M codes that result in greater Medicare reimbursement. Other focus areas include the use of modifier -25 in E&M coding, place of service errors, "long distance" physician claims, care plan oversight, medical necessity of diagnostic tests, services and supplies incident to physician services, and ordering by physicians excluded from Medicare. Other physician projects include:

• Acquisition costs of pharmaceuticals administered in physician offices
• Billing for E&M services and other procedures on a single day
• Use of modifiers with National Correct Coding Initiative edits
• Services provided under end-state renal disease monthly capitation payments
• Radiation therapy services

Compliance Activities Health Care Organizations Should Undertake

Health care organization compliance plans must include comprehensive consideration of the OIG Work Plan in order to be effective. In addition to studying the Work Plan itself, compliance staff should review the results of the OIG's audits and investigations that are posted on the OIG's website. Every OIG audit report includes a section detailing the methodology used to accomplish the objectives of the audit. The methodology section describes the OIG's method for identifying providers for review, details the sampling plan, states the time period from which the claims were selected, and describes the OIG's other procedures for conducting the audit. The audit reports also describe the rules and regulations that the OIG uses to make decisions as to whether the health care organizations' practices comply with applicable law. Compliance officers can use this information to determine whether their interpretation of the applicable criteria is the same as the OIG's interpretation, and to design audit and monitoring tools to address the risk area. It is also recommended that health care organizations take the following actions in light of the 2004 Work Plan:

• Risk Areas. If your compliance program sets forth key risk areas, amend it to add new risk areas reflected in the 2004 Work Plan. Document any determinations to amend the risk areas or other parts of your compliance program as a result of the 2004 Work Plan.
• Monitoring and Audits. Initiate internal and/or external monitoring and audits of the areas of OIG focus to evaluate your organization's compliance in these areas. Document these efforts by preparing a written summary of the methodology and results of any internal and/or external monitoring or audits, as well as any corrective actions that are taken as a result of the monitoring or audits.
• Educate Personnel. Educate management, professionals and staff with respect to new risk areas and the need to develop mechanisms to reduce the risk of noncompliance. Document all efforts in connection with any educational programs or seminars offered regarding compliance issues.

If you require our assistance or have any questions please contact Michael Dowell at mdowell@tocounsel.com or the lawyer in the firm who generally handles your health care legal matters.