Life Science Compliance Update

December 22, 2017

OIG Asks CMS to Track Medicare Costs from Device Failures


A recent Office of Inspector General (OIG) report suggests that the lack of medical device-specific information on Medicare claim forms complicates CMS efforts to identify and track Medicare costs related to the replacement of recalled or prematurely failed medical devices.

The OIG determined that Medicare costs related to the replacement of recalled or prematurely failed medical devices could not be identified and tracked using only claim data. However, using claim and other data in combination with complex and labor-intensive auditing procedures, OIG estimated that services related to the replacement of seven recalled and prematurely failed medical devices cost Medicare $1.5 billion during calendar years 2005 through 2014. It was also estimated that $140 million in beneficiary copayment and deductible liabilities were related to these recalled and prematurely failed medical devices and their related services and procedures.

Medicare claim forms include the medical procedures performed but do not contain a field for reporting medical device-specific information. By including medical device-specific information on the claim forms, CMS could more effectively identify and track Medicare’s aggregate costs related to recalled or prematurely failed devices. This could help reduce Medicare costs by identifying poorly performing devices more quickly, which could also protect beneficiaries from unnecessary costs and improve their chances of receiving appropriate follow-up care more quickly.

To do the review, OIG identified Medicare claims for calendar years 2005 through 2014 for all services provided to Medicare beneficiaries who had replacements of seven selected recalled cardiac medical devices. Then, a random sample of 526 claims and requested medical records for each sample item to determine whether the claim was associated with a replacement of a recalled or prematurely failed medical device were requested.

The OIG recommends: (1) that CMS continue to work with the Accredited Standards Committee and (2) that CMS require hospitals to use condition codes 49 or 50 on claims for reporting a device replacement procedure.

The OIG recommends CMS continue to work with the Accredited Standards Committee to ensure that the Device Identifier (DI) is included on the next version of claim forms. From there, CMS would use this data to identify and track the additional health care costs incurred by Medicare for recalled or prematurely failed medical device. CMS did note that it was considering adding the DI to the claim form, but that it will “carefully evaluate the potential that this policy would impose burden on physicians unnecessarily.”

OIG also recommended that CMS require hospitals to use condition codes 49 or 50 (indicating specific product replacements) on claims for reporting a device replacement procedure for all procedures that resulted from a recall or premature failure, regardless of whether the device was provided at no cost or with a credit. CMS concurs with this recommendation in cases where payment is impacted.

October 25, 2017

OIG Faults CMS for Improper Payment Rates


Under the Improper Payments Information Act of 2002, as amended, the Department of Health and Human Services (HHS) is required to annually report on improper payments and meet certain improvement metrics. In a report released last fall, HHS identified approximately $96.9 billion in gross improper payments in fiscal year (FY) 2016.  $90 billion of this money were found to be overpayments.

On May 16, 2017, the HHS Office of Inspector General (OIG) released a report examining these improper payments to determine HHS’s compliance with the statute.  In violation of the statute, the improper payment rates for both Medicare fee-for-service and Medicaid exceeded 10 percent in FY 2016. The OIG also found that HHS did not meet its improper payment reduction goals for the Medicare Advantage program and the Children’s Health Insurance Program (CHIP).

OIG Report

In the OIG findings, HHS largely agreed with what was reported. Working with Ernst & Young, it was determined HHS met many requirements but did not fully comply with IPIA. Among the items required for compliance with IPIA, EY determined HHS published the AFR for fiscal year (FY) 2016, conducted risk assessments for 22 programs deemed not susceptible to improper payments and determined the programs were not at risk for them, and published corrective action plans for 7 of the 8 programs OMB deemed susceptible to significant improper payments and all 5 programs deemed susceptible to significant improper payment under the Disaster Relief Appropriations Act (DRAA) (P.L. No. 113-2) that had not expended all funds by FY 2016.

EY concluded that HHS did not comply with several IPIA requirements. EY found HHS did not report an improper payment estimate for the Temporary Assistance for Needy Families program. EY also determined HHS did not achieve an improper payment rate of less than 10 percent for the Medicare Fee-for-Service and Medicaid programs; did not meet improper-payment-rate reduction targets for the Medicare Advantage program, the Children's Health Insurance Program, and the Foster Care program; and did not conduct recovery audits for the Medicare Advantage program.

OIG Recommendations

According to the OIG, HHS has not fully addressed recommendations from the prior years’ OIG performance audits related to improper payments, including the need to provide an improper payment estimate and corrective action plan for TANF, meet certain improper payment rate reduction targets, and reduce improper payment rates to below 10%. Addressing these recommendations would improve HHS’s compliance with the IPIA, as amended, including compliance issues identified in the current findings.

Some of the recommendations include:

  • HHS first focus on implementing an approach to reporting on TANF improper payment as this process will aid in identifying root causes of TANF improper payments. However, OIG recommends that HHS develop and publish corrective action plans after implementing an approach.
  • OIG recommend that HHS and ACF continue working with states to (1) provide technical assistance and training related to policy updates and (2) support the Foster Care program in reaching its overall reduction goal target through appropriate implementation of corrective action plans at the state-level.
  • OIG recommend HHS proactively take action throughout the fiscal year to achieve its established improper payment target rates. Medicare Advantage did not achieve the target rate mainly due to insufficient documentation by third parties, and therefore, OIG recommend, for example, that HHS continue to work with the Medicare Advantage plans and providers to communicate the documentation requirements and monitor the adherence to such requirements throughout the year.
  • In addition, CHIP did not achieve its target rate in FY 2016 due to administrative or process errors made by the state or local agencies, and as a result, OIG recommend, for example, that HHS work with the states to bring their respective systems into compliance to implement new requirements.
  • OIG recommend that HHS focus on the root causes for the improper payment rate percentage and evaluate critical and feasible action steps to decrease the improper payment rate percentage below 10%.
  • OIG recommended that HHS focus on the root causes of the improper payment percentage and evaluate critical and feasible action steps to assist states with their compliance efforts for these new requirements.
  • This would include working with the states to bring their respective systems into full compliance with new requirements to decrease the improper payment rate percentage below 10%. In addition, as HHS only reviews 17 states each year for the Medicaid improper payment rate, HHS should continue to follow up with states during the interim period to verify that corrective actions identified after the improper payment error rate measurement review are being implemented.
  • OIG recommend that HHS actively search for RAC contractors for Medicare Advantage (Part C) and finalize the award in a timely manner with the intention to perform RAC audits in FY 2017.

July 19, 2017

Effectiveness, The Holy Grail of Compliance - Both the DOJ & OIG Weigh In


Measuring the effectiveness of compliance programs is no easy task since governing agencies have not published a template that will work in all cases; compliance measurements are unique to each company’s size, operations, resources and risks factors. Although there is no “one size fits all” program, both the DOJ and the OIG (in conjunction with the Health Care Compliance Association (“HCCA”)) recently issued guidelines and recommendations for healthcare organizations to design, implement, evaluate and improve their compliance programs. Unfortunately, this may have been done in a vacuum as neither agency appeared to have consulted with one another. There are similarities, differences, and ambiguities between the two agencies’ point of views. This article serves to compare and contrast the compliance guidelines as set forth by the DOJ and OIG within weeks of each other.

More than 25 years have passed since U.S. Sentencing Commission put forth the now infamous seven elements of an effective compliance program. Since then, Compliance Officers continue to chase the “holy grail” of effectiveness. Unfortunately, determining whether a compliance program is effective and how to measure for effectiveness has proven both elusive and difficult. Compounding the challenge is that in the historical period, compliance program guidance has been limited and infrequent. But in the first quarter of 2017, in an unprecedented move, both the United States Department of Justice (“DOJ”) and Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) issued guidance on compliance programs.

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