For Immediate Release - November 30, 1998

Contact: Judy Holtz (202) 619-0893

Ben St. John (202) 619-1028

OIG Issues Compliance Program Guidance
for Third-Party Medical Billing Companies

Inspector General June Gibbs Brown of the Department of Health and Human Services today released the fourth set of compliance guidelines, the "Compliance Program Guidance for Third-Party Medical Billing Companies." "This guidance, designed to assist companies that process bills for the nation's health care providers in preventing fraud, waste and abuse, affects virtually every segment of the health care industry," said Inspector General Brown.

Developed by the department's Office of Inspector General, the guidance is part of the OIG's ongoing effort to work collaboratively with the public and private sectors to establish a comprehensive and practical set of guidelines aimed at assisting billing companies and the nation's health care professionals in complying with Federal health care program requirements. The OIG developed these guidelines in tandem with the Health Care Financing Administration, the Department of Justice, and representatives of various trade associations and health care practice groups.

"These voluntary guidelines will help ensure that billing companies submit proper claims to Medicare, and that Medicare pays those claims appropriately," Health Care Financing Administrator Nancy-Ann DeParle said. "Such efforts will reduce the waste, fraud and abuse that harms beneficiaries and taxpayers alike."

The foundation of this voluntary guidance mirrors the compliance elements set forth in the Federal Sentencing Guidelines and OIG's previously issued compliance program guidances. The seven elements articulated in these guidelines include: implementation of written policies, procedures and standards of conduct; designation of a high-level compliance officer and other appropriate officials; development of training and education programs; creation of hotlines or other measures for receiving complaints and procedures for protecting callers from retaliation; enforcement of standards through well-publicized disciplinary directives; performance of internal audits; and prompt response to detected offenses through corrective action.

"Increasingly," Brown said, "billing companies are providing crucial services that could greatly impact the solvency and stability of the Medicare Trust Fund. Health care providers rely on billing companies to assist them in processing claims in accordance with applicable statutes and regulations. Additionally, health care professionals are consulting with billing companies to provide timely and accurate advice with regard to reimbursement matters, as well as overall business decision-making. As a result, the OIG considers this compliance program guidance particularly important in the partnership to defeat health care fraud."

The nature of the billing company's third-party relationship provides unique challenges for these organizations in developing a compliance program that will promote adherence to applicable federal, state and private health care program requirements. An individual billing company may support a variety of providers, all with different specialities, and consequently different statutory and regulatory frameworks. It is with this in mind that the OIG strongly recommends that billing companies coordinate with their provider-clients in establishing compliance responsibilities. The key to a successful compliance program in the third-party context is open and frequent communication.

The OIG identified the following specific risk areas for billing companies: billing for services or items that have not been documented; duplicate billing; unbundling; upcoding; inappropriate balance billing; inadequate resolution of overpayments; lack of integrity of computer systems; failure to properly use modifiers; routine waiver of copayments; and improper discounts on professional services. The risk areas should be the focus of the company's initial compliance efforts. In particular, the billing company should focus its training and audit efforts on identified risk areas.

In response to considerable interest in the reporting requirements of the original draft of the guidance, the OIG developed a bifurcated reporting requirement system. If a billing company discovers credible evidence of misconduct in its own activities, the billing company should report such conduct immediately to the appropriate government authorities. If a billing company discovers credible evidence of the provider-clients misconduct, the billing company may either: (1) terminate the contract; or (2) report the misconduct to the appropriate government authorities.

The OIG emphasizes that misconduct does not include inadvertent errors or mistakes. Such errors should be reported through the normal channels, including a notification to the provider of the error and all necessary information for the provider to make a timely repayment to the applicable payor. However, if a pattern of these type of errors occurs on the part of the provider-client, the billing company may wish to take the next step and either: (1) report the misconduct; or (2) terminate the contract. The OIG feels strongly that this bifurcated system strikes an appropriate balance between the billing company's responsibility for integrity and solvency of the Medicare program and its delicate third party relationship with its clients.

"While compliance with the guidelines is strictly voluntary, the existence of an effective compliance program could mitigate any action taken against a billing company caught in subsequent wrongdoing. The OIG has articulated to the health care industry that the existence of an effective compliance program will be considered when determining the nature and level of administrative sanctions, penalties and exclusions to be imposed against a company," said Mrs. Brown.

Earlier guidance was issued for hospitals, clinical laboratories and home health agencies. Drafts of compliance program guidance for the Durable Medical Equipment, Prosthetics, Orthotics and Supplies industry and Medicare+Choice Organizations offering Coordinated Care Plans will be published in the Federal Register early next year.

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