Meet - Health Care Compliance Association

Volume Six 

Number Five 

May 2004 

Published Monthly 

Interview 

with 

Allison 

Maney 

REGISTER TODAY! 

FOR THE AHLA/HCCA FRAUD & COMPLIANCE FORUM, BALTIMORE, 

MD–SEPT 26-28, 2004 - For registration info go to the HCCA 

Website, www.hcca-info.org, or see page 39 of this issue. 

INSIDE 

Leadership letter 

2 

3 

3 

4 

6 

8 

11 

14 

17 

19 

23 

27 

28 

30 

Weblinks 

On the calendar 

Intangible value of 

membership 

Focus on ethics & 

compliance 

OIG spotlight 

Preventing compliance 

litigation 

Health care professionals 

and the 

Pharma Code 

Meet Allison Maney 

The spill-over effect 

MMA Part B presents 

new challenges 

e-learning revolution 

FYI 

CEO’s letter

HCCA 2004 

Compliance 

Institute, 

WOW! 

AL JOSEPHS 

HCCA President 

Wow! The 2004 Compliance Institute is 

just a few weeks away and judging from the 

program and the registrations it will be a 

great success. We expect over 1,300 attendees 

for the second year in a row. This has 

become the compliance educational event 

of the year. Just as the Compliance Institute 

ends we will begin planning for the 2005 Compliance 

Institute. Just as we begin to plan, I encourage you to begin 

planning to join us in New Orleans on April 17-20, 2005. 

This year, as in past years, we will hear directly from national 

regulatory and enforcement leaders. We will hear from Dara 

Corrigan, U.S. Department of Health and Humans Services 

Acting Principal Deputy Inspector General, Lew Morris, 

General Counsel to the Inspector General, and Assistant U.S. 

Attorney Jim Sheehan. In addition, Kim Brandt, Acting 

Director Program Integrity, and Lisa Zone, Director of Benefit 

Integrity and Law Enforcement, Centers for Medicare and 

Medicaid Services will discuss their work at CMS including 

the effectiveness project, and answer questions. 

Staying current with changing rules and regulations is one of 

the most challenging aspects of compliance. As you can see 

from the highlights, HCCA works to build relationships with 

the key leaders of the regulatory and enforcement community 

and other government agencies to ensure accurate and timely 

information is available to our members. 

We have also seen growing 

interest in the Industry 

Immersion Sessions available 

again at this years’ Institute, 

which focus on specific 

industry segments such as 

Physician Groups, Behavioral 

Health, HIPAA/Privacy, 

Payor/Managed Care, Large Health Systems, Pharmaceutical, 

Academic, Home Care/Hospice, Research, Durable Medical 

Equipment, and Long Term Care. These session have been 

designed to offer both industry-specific education and networking 

opportunities. 

The continuing growth of compliance as a profession is evidenced 

by the expected large attendance at this annual event. 

It also identifies the need we all have for continuing education. 

HCCA will continue it’s commitment to national events 

like the Compliance Institute, but also to bringing local inexpensive 

educational and networking opportunities to major 

cities across the country. 

I’d like to acknowledge the excellent work of the 2004 

Compliance Institute Planning Committee. Thank you Steve 

Ortquist, Chair and Dan Roach, Vice Chair for your leadership 

and for making this year’s meeting a great success. 

Working with Steve and Dan were Wilma Acosta and F. Lisa 

Murtha. All their work has resulted in a dynamic program. 

Working along with the committee were everyone on the 

HCCA staff, particularly Roy Snell, HCCA CEO, Tracy 

Hlavacek, Conference Planner, Erin O’Donnell, Director of 

Operations, April Kraft, Database Manager and Member 

Relations, Darin Dvorak, Conference Planner, Gary DeVaan, 

Website Manager and Graphics, and Margaret Dragon, 

Director of Communications and Public Relations. ■ 

May 2004 

2 

HCCA’S 

HCCA exists to champion ethical 

practice and compliance standards 

MISSION in the health care community and 

to provide the necessary resources for compliance professionals and 

others who share these principles. 

HCCA • 5780 LINCOLN DRIVE, SUITE 120 • MINNEAPOLIS, MN 55436 

Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

WEBLINKS 

■ Chief Compliance Officer job among top 10 hot jobs 

http://www.ctnet.com/pr/studies/hotjobs2004/pfversion.html 

CMS Links: 

■ Clinical Laboratory Improvement Amendments(CLIA) policy 

and data reporting guidance for first survey cycle following 

the effective date of CMS-2226-F (S&C 04-16) 

http://www.cms.hhs.gov/medicaid/survey-cert/sc0416.pdf 

■ CMS accepts comment via the Internet 

http://www.cms.hhs.gov/media/press/release.asp?Counter=957 

■ Definitions of terms used in the Life Safety Code of the 

National Fire Protection Association 


■ CLIA policy and data reporting guidance for first cycle following 

effective date of CMS-2226-F 


■ CMS: Elimination of the 90-day grace period for HCPCS 

codes 

http://www.cms.hhs.gov/manuals/pm_trans/r89cp.pdf 

■ CMS upcoming Open Door Forum schedule 

http://www.cms.hhs.gov/opendoor/schedule.asp 

HHS OIG Website links: 

■ OIG addresses patient discounts 

http://oig.hhs.gov/fraud/docs/alertsandbulletins/2004/ 

FA021904hospitaldiscounts.pdf 

■ Hospital settles under OIG Self-Disclosure Protocol 

http://oig.hhs.gov/publications/docs/press/2003/ 

021104Stfrancis—pressrelease.pdf 

■ Medicare reimbursement for Lupron 

http://oig.hhs.gov/oei/reports/oei-03-03-00250.pdf 

■ Update: Excessive Medicare reimbursement for Albuterol 

http://oig.hhs.gov/oei/reports/oei-03-03-00510.pdf 

■ Update: Excessive Medicare reimbursement for Ipratropium 

Bromide http://oig.hhs.gov/oei/reports/oei-03-03-00520.pdf ■ 

Errata: 

In the April issue of Compliance Today, on page 20, the last 

sentence was incomplete due to a printing error. It should 

have read: “We are very fortunate that we have so many effective 

volunteers such as Allison helping us.” ■ 

HCCA • 888-580-8373 • www.hcca-info.org 

HCCA 

ON 

THE 

CALENDAR 

2004 ■ OCT 1, North Central Area 

CONFER- 

ENCES: 

(See page 5 for upcoming 

audioconferences) 

ANCHORAGE, AK 

■ JUL 22-23, Alaska Area 

Meeting 

LOS ANGELES, CA 

■ JUL 16, West Coast Area 


SAN FRANCISCO, CA 

■ OCT 7-8, Physician Practice 

Compliance Conference 

WASHINGTON, DC 

■ MAY 21, Northeast Area 


■ SEPT 26-29, AHLA/HCCA 

Fraud and Compliance Forum 

ORLANDO, FL 

■ OCT 22, Southeast Area 


CHICAGO, IL 

■ APR 25-28, HCCA 

Compliance Institute 

For more information about events 

or resources, check out the HCCA 

Website, http://www.hcca-info.org 

or call 888/580-8373. 

■ Monitoring & Auditing Practices 

for Effective Compliance 

■ HCCA’s Compliance, Conscience, 

and Conduct, a videobased 

compliance training 

program 

■ HCCA’s book, Compliance 101 

■ Individual & Small Group 

Physician Practice Compliance: 


BOSTON, MA 

■ SEPT 10, New England Area 


MINNEAPOLIS, MN 

■ SEPT 13, Upper Midwest 

Area Meeting (new date) 

KANSAS CITY, MO 

■ AUG 6, Midwest Area 


LAS VEGAS, NV 

■ NOV 5, Southwest Area 


NEW YORK, NY 

■ NOV 15, Mid Atlantic Area 


PHILADELPHIA, PA 

■ OCT 15, Northeast Area 


SALT LAKE CITY, UT 

■ SEPT 13, Mountain Area 


SEATTLE, WA 

■ JUN 4, Pacific Area 

Meeting ■ 

RESOURCES 

What every physician should 

know 

■ Privacy Matters–HCCA’s videobased 

HIPAA Training Program 

HCCA’s CD Videos - 

■ Alice Gosfield-Unplugged (with 

2 HCCB CEUs) 

■ HIPAA Forum Digital Reference 

CD (with 20 HCCB CEUs) 

■ Physician Group Practices 

Compliance Conference (with 

3.6 HCCB CEUs) ■ 

3 

May 2004

By Shawn Y. DeGroot, CHC 

May 2004 

4 

Editor’s note: Shawn Y. DeGroot is Vice 

President of Corporate Compliance, 

Rapid City Regional Hospital and serves 

on the HCCA Board of Directors. She 

may be reached at 605/719-5661. 

In the beginning...there were two. 

Conversation ensued, others 

gathered and benefited from the 

discussion and sharing of information. 

Then the two became three. They 

decided to meet again. Momentum 

intensified and interest to unify 

increased. Identification of “what” and 

“who” they were became necessary for 

continued existence. As Paul Harvey 

would say, “and now the rest of the 

story.” 

The evolution of HCCA was initiated 

with a simple conversation and shared 

information that perpetuated into a 

healthy, viable association. While there 

are tangible benefits of belonging to an 

association such as receiving timely 

information via email or a magazine, 

obtaining education at a conference, 

the priceless benefit of membership is 

ultimately networking. Networking is a 

valuable commodity that may yield 

direct or indirect benefits whether you 

have had the opportunity of meeting 

the distinguished CMS and OIG representatives 

or whether you want to 

exchange business cards for communication 

with a compliance officer in a 

comparable area of expertise. It is up to 

you as a professional to fully utilize 

your membership networking opportunities. 

Secondly, a real issue for health care 

entities is the fairly high turnover rate 

in the compliance profession. Isolation 

at the top, lack of budget, excellent 

reporting structure on paper only, and 

“killing the messenger”, are just a few 

professional realities that are elements 

of burn-out in this profession. On the 

other hand, serving as a change agent, 

ensuring that documentation supports 

the care provided, and making certain 

that the financial records appropriately 

reflect the process lead to great satisfaction. 

Maintaining that perspective is 

challenging, but can be accomplished 

through networking. Equally important 

is for employers to remain cognizant of 

the intangible value for retention, professional 

growth, and positive organizational 

recognition. 

Recently a friend I made through networking 

in the government forwarded a 

book to me, I Should Be Burnt Out by 

Now...So How Come I’m Not? The chapter 

on communication and relationships 

addresses the distinct advantage of 

maintaining relationships. 

“Build a large network of informal relationships. 

If each relationship was a line 

on a map, how big is your map? If your 

map is small with only a few lines, 

you’re probably in a clique and you’re 

too isolated. The larger the network, 

the less likely you will burn out.” 

Finally, each year health care budgets 

are scrutinized for travel, FTE’s, software, 

consulting fees, membership 

dues, etc. In the business of health care 

Health Care Compliance Association • 888-580-8373 • www.hcca-info.org 

SHAWN Y. DEGROOT 

we equate many items directly to 

cost/savings or expenses/revenue. 

When that subject arises, I challenge 

you and your employers to consider 

the intangible benefit of networking, 

specifically with membership in 

HCCA. As an individual or corporation, 

personal and corporate positive 

exposure is priceless. At the end of the 

day the network you have created as 

an individual or corporation can be 

your map to the future. ■ 

Reference: Neuhauser, Peg, Ray Bender and Kirk 

Stromberg. I Should Be Burnt Out by Now...So How 

Come I’m Not? Part Three, Connections and 

Relationships, pg. 130. 

Call for authors! 

Please email your article or topic 

ideas to Compliance Today 

editor, Margaret Dragon, at 

Margaret.Dragon@hcca-info.org. 

Be sure to include your telephone 

number. Or call Margaret at 

781/593-4924 to discuss your 

article ideas. Some topic ideas to 

consider: compliance and the 

Board, HIPAA compliance education 

and training, EMTALA 

compliance, conflicts of interest, 

and attorney/client privilege. ■

Join us for the following 

HCCA Audio 

Conferences 

Get the latest “how to” information–tools you can implement–without 

even leaving your office! Register on the 

HCCA Website–www.hcca-info.org. Once payment is 

received you are registered and will receive an email a few 

days before the conference with any conference handouts 

and contact phone number and instructions. 

➤➤ 

➤➤ 

➤➤ 

➤➤ 

➤➤ 

➤➤ 

Stark II, Phase II Regulations 

Speakers: Part I–John Knapp, Rory Jaffe, & F. Lisa 

Murtha. Part II–Gadi Weinreich, Daniel Roach, & 

F. Lisa Murtha 

April 19 and 22 

Clinical Trial Billing Process Improvement 

Speakers: F. Lisa Murtha & John Washlick 

May 4 and 6 

Orthopedic Coding and Documentation 

Speaker: Cara Friedrich 

May 11 and 12 

Quality and Credentialing 

Speakers: Marilyn May, Margaret Hutchinson, & 

Suzie Draper 

June 1 

Top Three Coding Initiatives FY2005 

Speakers: Mary Mulholland & Carol Poholig 

June 23 

Anesthesiology and Critical Care Coding and 

Documenting 

Speakers: Angela Brown & Abby Pendleton 

July 20 and 21 

Be on the lookout for: 

➤➤ 

➤➤ 

Cardiac Rehabilitation Centers 

Data Access and Analysis 

Hospital and Physician Focuses 

HCCA Audio Conferences are a fast 

and easy way to aquire HCCB CEs! 


5 

May 2004

FOCUS 

ON 

ETHICS & 

COMPLIANCE 

May 2004 

The amended by its Board of Governors in 

Code of November 2003. 

Ethics for 

executives and The Code of Conduct discusses the 

the work of the compliance professional 

which fall on executives. Health care 

many complex ethical responsibilities 

by Jeffrey Oak, PhD 

executives have responsibilities to the 

profession of health care management, 

Editor’s note: Jeffrey Oak, PhD, is to patients or others served, to their 

Director of Compliance and Business own organization, to employees, and to 

Integrity, US Department of Veteran their communities and the society at 

Affairs, Veterans Health Administration. large. Compliance officers can support 

He may be reached at 202/501-1831. their executives in fulfilling their 

responsibilities in all of these areas. 

Health care compliance officers who 

successfully link the organization’s compliance 

efforts with the larger profession 

of health care management 

Ethical responsibilities to the professional 

standards governing the work of At the most basic level, executives have 

the chief executive, lend powerful support 

to the central role of compliance regulations. These laws and regulations 

a responsibility to follow all laws and 

within the life of the organization. establish the minimum threshold for an 

What I aim to do in this article is to organization to open its doors: complying 

with them gives an organization a 

discuss the points of overlap between 

the role of the compliance officer and “right to operate.” Here the role of the 

the professional standards outlined in compliance officer in assisting the executive 

to meet ACHE’s Code of Ethics is 

the American College of Health Care 

Executives’ (ACHE) Code of Ethics for clear, obvious, and direct. It is worth 

Health Care Executives. 

noting that there is specific mention of 

undertaking these activities in “good 

ACHE is the premier professional society 

for health care leaders, boasting to meet the letter of the law with 

faith:” it is not enough for an executive 

more than 30,000 members. ACHE is respect to legal requirements, while permitting 

a kind of legal gamesmanship. 

well known for its educational programs, 

and especially for its prestigious The Code suggests that the executive 

credentialing program. In an industry must meet the spirit and intent of the 

which places a premium on board certification 

in clinical specialties, the CHE 

law as well. 

(Diplomate) and FACHE (Fellow) credentials 

signify that an executive is overlap between the standards in 

Another place where there is direct 

“board certified” in health care administration. 

One key element of ACHE’s of the compliance officer is by assisting 

ACHE’s Code of Ethics and the work 

credentialing process is to demonstrate executives to avoid conflicts of interest, 

a comprehensive understanding of its whether financial or otherwise. While 

in this section, complying with the law 

and avoiding conflicts of interest are 

among the most essential responsibilities 

which an executive has toward the 

profession of health care management. 

Responsibilities to patients 

Not surprisingly, all the responsibilities 

which an executive has toward patients 

revolve around quality of care. While 

the delivery of high quality patient care 

falls directly on the shoulders of physicians, 

nurses, therapists and other clinicians, 

the executive plays an important 

role in assuring that adequate resources 

and an organizational infrastructure are 

in place to support these activities. In 

the early days of compliance, quality of 

care was not on the radar screen for the 

vast majority of compliance professionals. 

But the current investigative and 

enforcement focus on delivering quality 

patient care, especially in the long term 

care arena, has transformed the delivery 

of quality care into an issue to which 

many compliance officers have to 

devote themselves. 

Another issue mentioned in the Code is 

the importance of executives helping to 

assure that procedures exist to protect 

the confidentiality and privacy of 

Code of Ethics, which was recently there are several other specific standards patients. Here again, to the extent that 

6 Health Care Compliance Association • 888-580-8373 • www.hcca-info.org 

JEFFREY OAK

compliance officers can assist the organization 

in both mitigating problems in 

the patient care arena and protecting 

patient privacy, these activities also 

assist executives in meeting the standards 

of their own professional code. 

Responsibilities to the organization 

There are a whole host of opportunities 

for compliance professionals to assist 

executives in fulfilling their responsibilities 

to the organization. The ACHE 

Code of Ethics enumerates the importance 

of sound management and business 

practices, truthful communications 

and data integrity, accurate financial 

reporting and disclosure of errors. It is 

also worth noting that there is specific 

mention of the executive’s responsibility 

to prevent “aggressive accounting practices 

that may result in disputable 

financial reports.” No doubt, the trickle 

down effect of Sarbanes-Oxley beginning 

to affect even non-profit health 

care organizations is a significant factor 

which contributed to adding this caution 

about “aggressive accounting.” 

The vast majority of compliance programs 

will not have direct operational 

responsibility for business practices, 

communications, financial reports, or 

disclosure of errors. However, one of 

the central themes of the new guidance 

document produced by HHS and 

American Health Lawyers (“Corporate 

Responsibility and Corporate 

Compliance: A Resource for Health 

Care Boards of Directors”) is that compliance 

is a process to assure that information 

about operational problems 

flows up to a high enough level within 

the organization so that they can be 

addressed, because “directors must be 

aware of what is going on about them 

in the corporate business.” 

Responsibilities to employees 

ACHE’s Code of Ethics states that one 

of the principal responsibilities of executives 

to their employees is to create a 

work environment that promotes ethical 

conduct, by ensuring that employees 

can freely express ethical concerns without 

fear of harassment or reprisal. This 

standard could have come straight out 

of the compliance training program for 

any number of health care organizations 

across our nation. As we all know, 

one of the elements of an effective compliance 

program is the existence of an 

internal process for reporting concerns 

(e.g. a hotline). To the extent that a 

compliance officer effectively imple- 

ments and oversees this reporting 

process, he or she directly supports 

ACHE’s Code of Ethics. 

Responsibilities to society 

The final set of executive responsibilities 

under this Code is toward the community 

and society at large. Woven 

through its discussion of meeting the 

health care needs of the community, 

assuring access, participating in public 

dialogue about health care policy, and 

enabling informed health care choices, 

is the central point that health care is a 

public trust. Trust is something that 

must be gained the old fashioned way, 

in the words of that old E.F. Hutton 

commercial: by earning it. Compliance 

programs are among the most important 

ways for a health care organization 

to earn public trust. 

Compliance programs can lend powerful 

assistance to health care executives in 

meeting many of the responsibilities outlined 

ACHE’s Code of Conduct for 

Health Care Executives. When compliance 

officers are successful in this important 

endeavor, they help executives to 

earn the trust of the public, a noble task 

that must be pursued every day in the 

life of the health care organization. ■ 

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7 

May 2004

By Renee M. Howard 

May 2004 

Editor’s note: Renee Howard is an attorney 

in the Washington, D.C., office of OIG audit findings. 

services and a brief summary of the 

Jones Day. She may be reached at 

202/879-3939. 

Medicare coverage of cardiac rehab 

services 

In its 2003 Work Plan, the There are no laws or regulations that 

Department of Health and specifically address Medicare coverage of 

Human Services Office of cardiac rehabilitation services. Instead, 

Inspector General (OIG) announced its cardiac rehabilitation services provided 

plan to review cardiac rehabilitation in a hospital outpatient department are 

services provided in hospital outpatient covered as services provided “incident 

departments to determine whether those to” a physician’s service. 3 

services met Medicare coverage requirements. 

True to its word, between July A. Direct Supervision – As “incident 

and December 2003, the OIG issued to” services, outpatient cardiac rehabilitation 

services must be provided under a 

twenty-four audit reports as part of a 

nationwide review of outpatient cardiac physician’s “direct supervision.” 4 

rehabilitation programs. According to Medicare regulations define “direct 

the OIG, the audits were conducted to supervision” generally as the physician’s 

determine whether: 

presence “on the premises of the location 

and immediately available to fur- 

■ Hospital policies and procedures 

reflect Medicare cardiac rehabilitation nish assistance and direction throughout 

coverage requirements for direct the performance of the procedure. It 

physician supervision, “incident to” 

does not mean that the physician must 

be present in the room where the procedure 

is performed.” 

services and Medicare covered diagnoses 

Medicare regulations 

do not specifically define “direct 

■ Payments for outpatient cardiac rehabilitation 

services provided to 

supervision” as it relates to cardiac rehabilitation 

services. 

Medicare beneficiaries during 

Calendar Year 2001 were for 

The Medicare Intermediary Manual 

Medicare covered diagnoses, were (MIM) provides that, for outpatient 

supported by adequate documentation, 

and were otherwise allowable supervision requirement is generally 

therapeutic services, “the physician 

for reimbursement 2 

assumed to be met where the services 

are performed on hospital premises.” 6 

For all twenty-four hospitals audited, This guidance is seemingly qualified by 

the OIG found deficiencies in one or a provision in the Medicare Coverage 

more of the areas named above. Below Issues Manual (MCIM), 7 which states 

is an overview of Medicare coverage that a physician supervising cardiac 

“exercise program area” and “immediately 

available” when cardiac rehabilitation 

services are being provided. 8 The 

MCIM further provides that Medicare 

fiscal intermediaries (FIs) may determine 

whether a specific physician location 

is “too remote” to be considered in 

the “exercise area.” As a result, through 

local medical review policies (LMRPs), 

bulletins, and other communications to 

hospitals, FIs have set forth their own 

specific coverage requirements for outpatient 

cardiac rehabilitation services. 9 

OIG Findings. The OIG audit reports 

emphasize the role of FI policies in satisfying 

the direct supervision requirement 

for cardiac rehabilitation services. For 

example, several hospitals audited by the 

OIG relied on nearby physicians and/or 

physicians in the emergency department 

to supervise cardiac rehabilitation services. 

The OIG did not expressly condone 

or disapprove of such policies, but 

instead instructed hospitals to work 

with their FIs “to ensure that the 

reliance placed on nearby physicians and 

emergency department physicians to 

provide this supervision conforms with 

the [Medicare direct supervision] 

requirements.” 10 A larger problem identified 

by the OIG was failure to desig- 

requirements for cardiac rehabilitation rehabilitation services must be in the nate any physician to supervise cardiac 

8 Health Care Compliance Association • 888-580-8373 • www.hcca-info.org 

RENEE M. HOWARD

ehabilitation services. Almost half of 

the hospitals audited had not designated 

a physician to supervise cardiac rehabilitation 

services. Even those hospitals 

that did designate a supervising physician 

often could not demonstrate that 

direct supervision occurred because 

there was no documentation in the cardiac 

rehabilitation program’s medical 

records evidencing physician supervision 

during exercise sessions. 

satisfy the “incident to” requirements 

for cardiac rehabilitation services. For all 

but two hospitals, the OIG “could not 

identify the hospital physician professional 

services to which the cardiac 

rehabilitation services were provided 

‘incident to.’” For example, “there was 

no documentation to support that a 

hospital physician personally saw the 

patient periodically and sufficiently 

often to assess the course of treatment 

and the patient’s progress and, where 

necessary, to change the treatment program.” 

12 

For every hospital, the OIG found that 

at least some claims did not have sufficient 

documentation in the medical 

record to support medical necessity 

(e.g., no documentation to support a 

diagnosis of stable angina pectoris). In 

addition, the OIG found that that many 

of the twenty-four hospitals submitted 

claims reflecting units of time rather 

than one visit per session of cardiac 

rehabilitation services. As a result, these 

hospitals received payments for multiple 

units of service for each cardiac rehabilitation 

session rather than payment for 

one unit of service. 

B. Periodic and sufficient evaluation 

by supervising physician – Because 

cardiac rehabilitation services are covered 

under the “incident to” benefit, 

services must be furnished as an integral, 

although incidental, part of the 

physician’s professional services in the 

course of diagnosis or treatment of an 

illness or injury. According to the MIM: 

C. Medical necessity and units of 

service – The MCIM provides that cardiac 

rehabilitation services are considered 

“reasonable and necessary” (and 

thus are covered by Medicare) only for 

“patients with a clear medical need, who 

Conclusions and recommendations 

Although all twenty-four of the OIG’s 

cardiac rehabilitation audit reports identified 

billing and documentation errors, 

the reports do not state or imply that 

the OIG intends to seek or recommend 

This does not mean that each occasion 

of service by a nonphysician cian, and (1) have a documented diag- 

are referred by their attending physi- 

sanctions against any of the audited hospitals. 

Instead, the OIG requested the 

need also be the occasion of the actual 

rendition of a personal profession- 

within the preceding 12 months; or (2) 

nosis of acute myocardial infarction 

hospitals to (i) refund any overpayments 

identified in the OIG audit to their FIs; 

al service by the physician. However, have had coronary artery bypass graft 

and (ii) conduct an internal review of all 

during any course of treatment rendered 

by auxiliary personnel, the pectoris.” 13 Services provided in connec- 

surgery; and/or (3) have stable angina 

cardiac rehabilitation claims from 

August 1, 2000 (the effective date of the 

physician must personally see the tion with a cardiac rehabilitation program 

are considered reasonable and nec- 

outpatient prospective payment system) 

patient periodically and sufficiently 

to the present and report their findings 

often to assess the course of treatment 

and the patient’s progress and, three sessions per week in a 12-week 

essary for up to 36 sessions, usually 

to their FIs and the OIG. 

where necessary, to change the treatment 

regimen. 11 

one unit of service. 14 Thus, claims for 

period. Each session is considered to be 

Although the OIG handled overpayments 

for cardiac rehabilitation services 

cardiac rehabilitation services may be 

as simple recoupment matters in the 

Thus, in addition to being “in the exercise 

area” and “immediately available” tation to support medical necessity, or if 

denied if there is insufficient documen- 

context of these audits, hospitals should 

not assume that the OIG will always 

for consultation, a physician supervising the claims are billed using an incorrect 

proceed in this fashion. Now that the 

cardiac rehabilitation service must also number of units. 

OIG has addressed cardiac rehabilitation 

see a patient “periodically and sufficiently 

often” to manage the patient’s OIG Findings. For each of the twenty- 

coverage requirements through its published 

audit reports, it may be less forgiving 

in the future of hospitals that bill 

course of treatment. 

four hospitals audited, the OIG 

OIG Findings. Overwhelmingly, the 

hospitals audited by the OIG did not 

reviewed a sample of 30 Medicare 

claims from calendar year 2001 for outpatient 

cardiac rehabilitation services. 

for cardiac rehabilitation services that do 

not meet Medicare coverage require- 

Continued on page 10 


9 

May 2004

OIG spotlight...continued from page 9 

ments. In addition, since the OIG 

announced in its 2004 Work Plan that it 

is continuing to review outpatient cardiac 

rehabilitation services, 15 hospitals 

can expect continued scrutiny and audit 

activity in this area. 

Compliance tips 

Thus, hospitals should ensure that their 

policies and procedures for cardiac rehabilitation 

services comply with the 

OIG’s recent guidance as well as local 

coverage policies. In particular: 

■ Hospital policies and procedures 

should clearly designate one or more 

physicians to provide direct supervision 

of cardiac rehabilitation services. 

The supervising physician(s) must be 

in the exercise program area and 

immediately available whenever an 

exercise session is conducted. Local 

medical review policies should be 

consulted for more specific requirements. 

■ If a hospital relies on other nearby 

physicians or emergency department 

physicians to provide supervision for 

some or all cardiac rehabilitation sessions, 

the hospital should work with 

its FI to ensure that its supervision 

protocol is sufficient. 

■ Medical records for cardiac rehabilitation 

patients should (i) reflect that 

direct supervision was provided during 

all exercise sessions; (ii) demonstrate 

that the supervising physician 

periodically saw the patient and 

managed the course of treatment; 

and (iii) contain sufficient documentation 

of medical necessity. 

■ Hospitals should implement controls 

to ensure that only one unit of service 

is billed for each cardiac rehabilitation 

session. ■ 

1 See HHS/OIG FY2003 Work Plan, at 7, available at 

http://oig.hhs.gov/publications/workplan.html#1. 

2 See, e.g., OIG, Review of Outpatient Cardiac 

Rehabilitation Services at Berkshire Medical Center, 

No. A-01-03-00514, at i (December 8, 2003). 

3 See 42 U.S.C. § 1395x(s)(2)(B). 

4 See 42 C.F.R. § 410.26(f). 

5 Id. 

6 MIM § 3112.4. 

7 The MCIM sets forth whether specific services can 

be paid under Medicare National Coverage Policies. 

National Coverage Policies are “national policies,” 

which “grant[], limit[] or exclude[] Medicare coverage 

for a specific medical service, procedure, or 

device” and are “binding on all Medicare carriers 

[and] fiscal intermediaries.” 64 Fed. Reg. 22,619, 

22,622 (April 27, 1999). 

8 See MCIM § 35-35A (“Services of non-physician 

personnel are furnished under the direct supervision 

of a physician. Direct supervision means that a 

physician must be in the exercise program area and 

immediately available and accessible for an emergency 

at all times the exercise program is conducted. 

It does not require that a physician be physically 

present in the exercise room itself, provided the contractor 

does not determine that the physician is too 

remote from the patients’ exercise area to be considered 

immediately available and accessible.”). 

9 For example, Riverbend GBA, the fiscal intermediary 

for hospitals in New Jersey and Tennessee, in a 

bulletin to all hospitals and outpatient rehabilitation 

facilities, defines “exercise area” as “the entire suite in 

which the exercise actually takes place as well as any 

office or examination area adjacent to or across the 

hall from the suite. The physician must be available 

at all times and therefore cannot be simultaneously 

performing invasive procedures or employed in a 

position where invasive procedures are likely (e.g., 

emergency room). First hand knowledge of ongoing 

activity is required (intermittent arms-length observation) 

but constant attendance is not.” See Medi- 

1403-03 (April 21, 2003), available at 

http://www.riverbendgba.com/vmedi/1403-03.html 


Rehabilitation Services–St. Luke’s Medical Center, 

Milwaukee, Wisconsin, No. A-05-02-00084, at 5 

(July 16, 2003). 

11 MIM § 3112.4.A. 


Rehabilitation Services–Central Florida Regional 

Hospital, Sanford, Florida, No. A-04-03-01005, at 6 

(November 3, 2003). 

13 MCIM § 35-25. Fiscal intermediary LMRPs for cardiac 

rehabilitation services often list a series of ICD- 

9 diagnosis codes that support medical necessity for 

cardiac rehabilitation services. 

14 See id. 

15 See HHS/OIG FY2004 Work Plan, at 6, available at 

http://oig.hhs.gov/publications/workplan.html#1. 

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10 Health Care Compliance Association • 888-580-8373 • www.hcca-info.org

(which one might expect), but because 

hospitals have taken on research compliance 

responsibilities under applicable federal 

regulations. The following three cases 

illustrate several ways in which research 

By Shelley L. Carlin 

compliance problems can give private 

Shelley Carlin is Senior Counsel with talizing on lapses in research compliance. 

parties new ways to sue. 

Sheeder & Welch, a Dallas-based law Increasingly, individuals are bringing private 

lawsuits for civil money damages 

In a 1992 case, a Pennsylvania state court 

firm that focuses on health care compliance 

and complex litigation matters. She against institutions, clinical investigators, 

held a hospital liable for civil battery 

(non-consensual touching or offensive 

may be reached at 214/747-9900 or at and Institutional Review Board (IRB) 2 

contact) for failing to get a patient’s 

shelley@sheederwelch.com. 1 

members, claiming that they have been 

informed consent for a surgical procedure 

injured by non-compliance with federal 

C 

involving an investigational device. 

regulations governing research. In addition, 

there have been several whistleblow- 

Prior 

ompliance officers at hospitals, 

to the decision in that case, there was no 

academic medical centers, 

authority under Pennsylvania law to hold 

physician practice groups, and er actions under the federal False Claims 

a non-physician liable for battery based 

other health care providers that engage in Act arising out of alleged failures to comply 

human subjects research are accustomed 

to the idea that government regulators 

are looking over their shoulders to ensure 

that people who volunteer for clinical trials 

and other research projects are treated 

legally and ethically. There are separate, 

detailed rules for compliance in these 

areas that differ from general compliance 

standards. 

The two primary sources of human subjects 

research regulation are the Common 

Rule, a set of regulations promulgated 

and enforced by the U.S. Department of 

Health and Human Services (HHS), and 

a set of regulations under the federal 

Food, Drug, & Cosmetics Act, governing 

clinical trials for drugs and devices, 

promulgated and enforced by the U.S. 

Food and Drug Administration (FDA). 

Both agencies issue regulations and guidance, 

and maintain professional audit 

and enforcement staffs, as part of their 

oversight of human subjects research. 

A compliance professional may, however, 

be less familiar with the fact that private 

citizens and plaintiffs’ attorneys are capi- 

with research regulations. 

Claims of non-compliance with 

research regulations in private party 

litigation 

Compliance with federal research regulations 

has arisen in private party litigation 

in at least two ways. First, plaintiffs have 

alleged, and judges and juries have 

agreed, that when providers–such as hospitals–participate 

in clinical trials, and 

thereby obligate themselves to comply 

with federal research regulations, they 

can be sued for claims that would not 

otherwise apply to them in a clinical care 

setting. Second, research subjects are 

more commonly using the failure to 

comply with research regulations and 

research ethics as a basis for claims of 

money damages in civil lawsuits. 

Research-related compliance duties 

expose institutions to new liability 

risks 

Hospitals that participate in research 

assume additional duties to patients, not 

because research may be more risky or 

promise less benefit than standard care 

on the theory that the patient did not 

give his or her informed consent for the 

procedure, and no hospital had ever been 

found liable to a patient under such a 

theory. The court decided that when the 

hospital signed up to participate in the 

study, it took on a new, independent 

duty under the federal research regulations 

to ensure that patients gave 

informed consent to the surgery in question. 

Thus, the hospital’s new compliance 

obligation gave rise to a new cause of 

action for plaintiffs in civil lawsuits. 

In a 1995 Illinois case, a state court 

found that a hospital was responsible for 

an informed consent failure when an 

investigator improperly substituted a 

consent form that had not been approved 

by the IRB for the approved form. 4 

Although the court concluded that hospitals 

generally have no duty to obtain 

informed consent from a surgical patient 

because it is the surgeon’s responsibility 

to obtain it, the hospital in this case not 

only had a duty to obtain the informed 

consent, but to ensure that the proper 



11 

May 2004

Preventing litigation...continued from page 11 

May 2004 

form was used as well. The court based 

its conclusion on that fact that the IRB, 

as required by federal regulations, conducted 

an initial and continuing review 

of the study. Again, since the hospital 

was participating in research and had 

assumed the related compliance duties, 

the court made an exception to the general 

rule that hospitals are not responsible 

for surgical consents. 

In a 1997 case in California, a state court 

found that a plaintiff could make a claim 

for negligence per se, based on a clinic’s 

and a surgeon’s failure to comply with 

laws and regulations governing research. 5 

Under the negligence per se doctrine, if 

the plaintiff can prove that a defendant 

violates a law, then the defendant’s conduct 

is presumptively negligent. In this 

case, therefore, if the plaintiff could 

demonstrate that (i) the defendants had 

failed to comply with the research regulations; 

(ii) the non-compliance caused the 

plaintiff’s injury; (iii) the regulations 

were intended to prevent the type of 

injury the plaintiff suffered; and (iv) the 

regulations were intended to protect persons 

such as the plaintiff, then the jury 

could find the defendants “negligent per 

se.” In fact, the court found that (i) the 

defendants had, at a minimum, failed to 

comply with the regulations by not giving 

the defendant a copy of the consent 

form he signed; (ii) there was evidence 

that the plaintiff might not have had the 

surgery if the consent process had been 

proper; (iii) the defendants agreed to 

comply with the laws for protecting 

human subjects when they signed on to 

be a study site; and (iv) patients in clinical 

investigations are the intended beneficiaries 

of the research statutes and regulations. 

These cases all illustrate the point that 

plaintiffs may pursue theories of negligence 

in a research setting that would not 

be available to them in a routine care setting, 

simply because investigators and 

institutions engaged in research have 

assumed new duties under the research 

regulations. For example, a hospital may 

not be liable for a consent failure if a 

non-employee surgeon performs a risky, 

invasive procedure without consent during 

clinical care, but the hospital may be 

liable for medical battery if a staff member 

draws a patient’s blood for research 

without consent. Institutions should be 

aware that a blameless act or omission in 

a clinical setting may be actionable in 

court in a research setting. Indeed, while 

major errors may not result in institutional 

liability in a clinical setting, relatively 

minor errors can result in institutional 

liability in a research setting. 

Research-related non-compliance can 

result in claims for money damages 

Non-compliance with research regulations 

and research ethics concerns are, 

unfortunately, familiar themes in government 

audit and enforcement actions. 

Compliance officers are no doubt aware 

that the FDA and HHS Office of 

Inspector General all too frequently cite 

investigators and IRBs for research compliance 

problems in warning and determination 

letters. Some common problems 

include lack of informed consent, 

failure to monitor the informed consent 

process, failure to provide adequate 

review of new and ongoing studies, failure 

to manage or disclose investigator 

conflicts of interest, and failure to adhere 

to study protocols. Study protocol violations 

often involve enrolling subjects who 

do not meet the inclusion/exclusion criteria, 

failing to report adverse events to 

the IRB and the FDA in a timely manner, 

and failing to perform all studymandated 

procedures and assessments. 

What is new is that all of these claims, 

and others as well, are showing up in private 

lawsuits against institutions, investigators, 

and individual IRB members, and 

that plaintiffs are asking for millions of 

dollars in damages. There were several 

high-profile human subjects research 

scandals between 1999 and 2003 in 

which research volunteers were killed or 

seriously injured. In response, the government 

has not only shut down research at 

several universities, but research volunteers 

and their representatives have filed a 

series of private lawsuits against institutions, 

investigators, and IRB members. 

These lawsuits allege, among other 

things, that failure to follow federal 

guidelines for the conduct of research is 

both actionable under federal law in a 

private lawsuit for civil money damages, 

and a violation of research subjects’ federal 

civil rights. The claims essentially fall 

into three categories: (i) failure to adhere 

to international standards for the conduct 

of human subjects research constitutes 

a breach of a study volunteer’s right 

to be treated with dignity; (ii) research 

subjects themselves, and not just the government, 

have a right to sue under the 

federal human subjects regulations; and 

(iii) failure to comply with the research 

regulations constitutes a violation of a 

study volunteer’s civil rights. 

To date, no federal or state court has 

explicitly recognized any of these specific 

private causes of action in a research 

injury case; however, parties to some of 

these cases have reached out-of-court settlements 

reported to be in the millions of 

dollars and several cases are still pending. 


One such case, which involves The Fred and had submitted fake reports on 

Hutchinson Cancer Research Center and research subjects that did not exist in 

three of its investigators, went to trial in order to get grant money. 

February of 2004 in a Washington state 

court and is ongoing as of this writing. In the second case, decided in 1998, a 

federal Court of Appeals held that a state 

Claims of non-compliance with research university could be sued in a whistleblower 

case under the False Claims Act. 7 

regulations in whistleblower suits 

under the False Claims Act 

In that case, the whistleblower claimed, 

Several research institutions have been among other things, that the university 

sued in qui tam, or whistleblower, actions had made false claims about its human 

under the federal False Claims Act in subjects protection program to the 

connection with federal research grants. National Institutes of Health in connection 

with a $19 million grant to study 

While research misconduct and fraudulent 

grants management can cause an organ transplantation. 

institution to run afoul of the False 

Claims Act in several different ways, The courts in these cases did not address 

recent whistleblowers have based their the substance of the claims brought by 

claims specifically on non-compliance the whistleblowers; however, institutions 

with the human subjects regulations. In that accept federal grant money should 

particular, the whistleblowers have recognize that non-compliance with the 

alleged that since federal research grants research regulations makes them vulnerable 

to these types of lawsuits. The False 

are conditioned on compliance with 

human subjects regulations, and grantees Claims Act provides for not only civil 

are required to certify that they are in money penalties, but also for treble damages 

and court costs. 

compliance, if a non-compliant institution 

files a false certification in order to 

obtain federal grant money, it has violated 

the False Claims Act. The following research compliance problems out of 

Some practical tips for keeping 

two cases support the notion that a relator 

can prosecute a whistleblower case 

the courtroom 

Research-related litigation is becoming 

against a research institution in connection 

with federal research grants. 

more common. Compliance officers can 

take steps to minimize the possibility of 

non-compliance, to discover any potential 

compliance issues, and to resolve 

In the first case, decided last year, the 

United States Supreme Court held that a 

them before subjects are harmed. These 

county in Illinois that operated a hospital 

steps may also help prevent researchrelated 

compliance issues from turning 

could be sued in a whistleblower action 

into litigation: 

under the False Claims Act. 6 The whistleblower 

was an employee who ran a study 

■ In both compliance training and 

under a National Institute of Drug Abuse auditing, recognize and emphasize the 

grant and was fired. She alleged, among differences between clinical care and 

other things, that the hospital had lied to research. The standards for care, institutional 

review, conflicts of interest, 

the granting agency about its compliance 

with human subjects research regulations, informed consent, privacy, reporting, 


and billing are different, and what is 

acceptable for clinical care may be 

inappropriate in a research setting. 

■ As part of your research compliance 

training program, remind investigators, 

study staff, and IRB members that 

non-compliance exposes them and 

your institution not only to government 

sanctions, but also to private 

party litigation. In other words, not 

only could your research program get 

fined or shut down by the government, 

but you and the people involved in the 

research program could be sued. 

Research staff and IRB members 

should be continually educated on 

human subjects protection principles. 

■ As part of your compliance audit plan, 

pay careful attention to the informed 

consent process for research. 

Specifically, ensure that (i) consent 

forms are adequate under the 

Common Rule and the FDA regulations 

(as applicable); (ii) the IRB 

process for approving consent forms is 

proper and conducted in accordance 

with the regulations as well as your 

institution’s own policies; (iii) the 

minutes of IRB meetings reflect the 

fact that the IRB has fully reviewed 

the consent form; (iv) investigators are 

using only the IRB-approved forms; 

(v) investigators have documented 

that all research subjects have given 

prospective informed consent to participate 

in a trial; and (vi) consent 

forms are updated, and subjects are reconsented, 

as needed, as trials progress 

and new risks are discovered. IRB 

members are specifically authorized 

under the FDA regulations to monitor 

the consent process; you may want to 


13 

May 2004

Preventing litigation...continued from page 13 

May 2004 

have IRB members sit in on some 

informed consent discussions between 

research staff and prospective subjects. 

■ As part of your compliance audit plan, 

monitor the progress of research trials 

to ensure that investigators can document 

that they are (i) following the 

IRB-approved study protocol for each 

subject in each study; (ii) adhering 

strictly to the inclusion and exclusion 

criteria for recruiting subjects; (iii) 

maintaining adequate records as 

required by federal regulations, your 

institutional policies, and the study 

protocol; and (iv) reporting adverse 

events and safety concerns to the IRB 

and the government as promptly as 

required. 

■ Establish, publicize, and vigorously 

monitor reporting procedures, which 

should certainly include designating 

individuals or offices, and/or establishing 

telephone hotlines or e-mail 

accounts, through which investigators, 

study staff, IRB members, and study 

volunteers can raise research-related 

concerns fully, promptly, and without 

fear of retaliation. ■ 

1 The author would like to thank Gloria Ortiz, associate 

attorney with Sheeder & Welch, for her research assistance. 

2 An IRB is a committee established under federal regulations 

that reviews human subjects research projects, 

including all such research sponsored or regulated by 

the federal government, to ensure that study volunteers 

are treated legally and ethically. 

3 Friter v. Iolab Corp., 607 A.2d 1111, 414 Pa.Super. 

622 (1992). 

4 Kus v. Sherman Hosp., 644 N.E.2d 1214, 268 

Ill.App.3d 771 (1995). 

5 Daum v. Spinecare Medical Group, 61 Cal.Rptr. 260, 

52 Cal.App.4th 1285 (1997). 

6 Cook County, Ill. v. U.S. ex rel. Chandler, 538 U.S. 119 

(2003). 

7 U.S. ex rel. Zissler v. Regents of University of Minnesota, 

154 F.3d 870 (8th Cir.) (1998). 

By Gabriel L. Imperato, Esq. 

Editor’s note: Gabriel L. Imperato is the payment and referral relationships with 

Managing Partner of the Fort Lauderdale prescribing physicians, was the TAP 

office of Broad and Cassel. He is certified Pharmaceutical case (TAP). This case 

as a specialist in health care law. He may not only focused on the misconduct of 

be reached by calling 954/745-5223 or pharmaceutical manufacturers, but also 

by email at gimperato@broadandcassel. the willingness of physicians to receive 

com 

remuneration in return for prescribing 

a specific drug (Lupron) manufactured 

The numerous enforcement by TAP, which is a prostate cancer drug 

actions against pharmaceutical administered to patients under the 

manufacturers in recent years supervision of physicians. It was a reimbursable 

prescription drug under the 

have called into question the legality of 

previously common payment arrangements 

with health care professionals percent (80%) of the urologists’ actual 

Medicare program, with payment at 80 

who prescribe drugs or order goods and charge for the drug or the average 

services under federal health care programs. 

These enforcement actions have pharmaceutical company. 

wholesale price (AWP) reported by the 

had wide ranging ramifications in the 

pharmaceutical industry, but also have The government alleged in the TAP 

direct application to the relationships case that the pharmaceutical manufacturer 

reported an AWP which was sig- 

between health care professionals and 

other health care industry players. This nificantly higher than the average sales 

includes medical device manufacturers, price which it offered to its physicians 

hospitals, home health agencies, nursing and other customers for Lupron. The 

homes, and any other providers or suppliers 

which rely on physician direction pharmaceutical manufacturer marketed 

government further alleged that the 

for the ordering of goods and services. the spread between the discounted 

Those health care organizations who price actually paid by physicians and 

fail to promote compliant practices and the significantly higher Medicare reimbursement 

based on the manufacturer’s 

relationships with health care professionals 

will be running a significant risk AWP as an inducement to physicians 

of liability resulting from criminal to order Lupron for their patients. The 

and/or civil enforcement actions under case also involved allegations that free 

the Anti-Kickback Statute, the Stark samples of Lupron were offered to 

Law, and the False Claims Act (FCA). physicians at no cost, which the physicians 

also billed directly to the 

The flagship case against the pharmaceutical 

industry, which highlighted its 

Medicare program for profitable reimbursement. 


GABRIEL L. IMPERATO 

This opportunity to bill the Medicare 

program at an amount greater than the 

price paid by the physicians and the 

ability of the physicians to retain the 

difference was alleged to be an item of 

value in return for ordering the specific 

drug, Lupron (as opposed to any of its 

competitor drug products, such as 

Zolodex). The government alleged that 

this opportunity to generate and receive 

this revenue based on the “spread” was 

a violation of the Federal Anti-Kickback 

Statute (the “Statute”). 

The TAP case also identified other 

practices and payment relationships 

with health care professionals which 

allegedly violated the Statute, such as 

the offering of free consulting services 

to physicians and physician practices, 

and money disguised as “educational 

grants,” which were, in fact, intended 

to be used for any purpose by prescribing 

physicians. There was also an allegation 

in the TAP case that a physician 

for a university medical plan was 

offered an “educational grant” to reverse 

a decision made on behalf of the health 

plan to only use the less expensive 

prostate drug of a competitor 

(Zolodex), instead of Lupron. 

lowed by numerous settlements with maceutical business. The case of U.S. 

pharmaceutical manufacturers resulting ex rel. Urbanek and Courtney v. 

from whistleblower cases which were Laboratory Corporation of America, is 

moved forward by the Federal government 

in parallel criminal and civil numerous allegations of improper rela- 

also a whistleblower case involving 

enforcement actions. Those cases tionships and payments from the clinical 

laboratory company to ordering 

included the Astra Zeneca settlement for 

$63.9 million in criminal restitution physicians. These improper relationships 

allegedly include the following: 

and $355 million in civil damages and 

penalties (involving price spread, free (1) providing free gloves, gowns, and 

drug samples, and educational grant other medical supplies; (2) providing 

inducements to ordering physicians); free computers, printers, and similar 

the Bayer AG settlement in the amount office equipment and supplies; (3) stationing 

a phlebotomist inside a physi- 

of $6 million in criminal restitution 

and $257 million in civil damages and cian’s office; (4) providing “professional 

penalties (failure to list drug with the courtesy” discounts to doctors and their 

Food and Drug Administration (FDA) families; and (5) waiving of network 

for private labeling commonly referred charges to managed care patients 

to as “lick-and-stick”); and the Glaxo referred by physicians. 

SmithKline settlement for civil payments 

in the amount of $87.6 million These cases demonstrate the growing 

(misreporting of best price and underpayment 

of Medicaid rebates and off with ordering health care professionals 

need for compliance in relationships 

label use not approved by the FDA). in all sectors of the health care industry. 

A number of recent judicial decisions 

These criminal and civil settlements have approved the use of the whistleblower 

provisions under the FCA to 

against pharmaceutical manufacturers 

have spawned additional whistleblower bring cases involving improper payment 

and referral relationships under 

cases and also additional enforcement 

actions involving relationships with the Anti-Kickback Statute and the 

health care professionals in other sectors Stark Law. This will only further the 

of the health care industry, including opportunities for whistleblowers to raise 

hospital and physician relations, medical 

device manufacturers, clinical labo- 

This type of case is now becoming a 

these issues in state and Federal courts. 

ratories, and home health agencies. fairly well-worn path in the Federal 

courts, but is also growing in importance 

in state courts as numerous states, 

The pending whistleblower case of U.S. 

et al v. Medco, et al., in the Eastern such as Florida, Louisiana, and New 

District of Pennsylvania, involves allegations 

of payments for inducement to suits by passing their own state false 

Mexico, have invited these types of 

pharmacy benefit managers to switch claims acts modeled after the Federal 

from one drug to another, but also FCA. 

involves numerous allegations relating 

to the integrity of prescriptions and the The pharmaceutical industry has 

The TAP enforcement action was fol- 

quality of care in the mail order phar- 


Health Care Compliance Association • 888-580-8373 • www.hcca-info.org 15 

May 2004

Relationships and the Pharma Code...continued from page 15 

May 2004 

16 

attempted to respond to this growing 

liability by enacting a voluntary code of 

conduct (the Pharma Code) to govern 

its relationships with health care professionals. 

The Pharma Code was disseminated 

in July 2002 and even received an 

endorsement from the Office of 

Inspector General of the United States 

Department of Health and Human 

Services (the OIG) in its Program 

Guidance for the Pharmaceutical 

Industry. The OIG noted that compliance 

with the Code was a positive step 

in ensuring compliance with the Anti- 

Kickback Statute in relationships with 

health care professionals, although it 

was not elevated to a safe harbor status. 

There is some question as to what effect 

the voluntary Pharma Code has had 

regarding relationships with health care 

professionals, even though it is intended 

to promote compliant practices. 

The Pharma Code allows for the following 

relationships with health care 

professionals: 

■ Informational presentations to health 

care professionals made by a representative 

of a pharmaceutical company 

which can be accompanied by 

moderately priced occasional meals 

in an educationally conducive setting 

■ Financial support given directly to 

sponsors of continuing medical education 

programs or other types of 

third-party conferences, but not 

given to the health care professional 

attending such programs 

■ Occasional gifts that primarily benefit 

patients, as long as they are valued 

under $100, such as practice-related 

gifts (anatomical model) or pens and 

notepads 

■ Consulting agreements with bona 

fide consultants which mirror 

Federal safe harbor provisions for 

personal services arrangements and 

also reasonable compensation and 

reimbursement for travel, lodging, 

and meals for such bona fide consultants 

■ Funding to allow health care professionals 

in training to attend major 

educational, scientific, or policymaking 

meetings with the selection 

of the health care professional and 

the conference left to the educational 

institution 

The types of activities which are specifically 

not allowed under the Pharma 

Code include the following: 

■ Anything provided or offered to a 

health care professional in exchange 

for prescribing or for a commitment 

to continue prescribing products 

■ Entertainment and recreational 

events, such as golf outings, visits to 

resorts, etc. 

■ Any financial remuneration not associated 

with bona fide services or 

expenses associated with bona fide 

services 

■ Non-cash items that are not practicerelated 

or that do not benefit 

patients and that are only intended 

for personal benefit 

■ No cash equivalents, such as gift certificates, 

etc. 

The legacy of recent enforcement 

actions and the high risk of whistleblower 

liability in connection with 

health care professional relationships 

clearly poses risks under the Anti- 

Kickback Statute and the Stark Law. An 

organization which provides “designat- 


ed health services” under the Stark Law 

(i.e., clinical laboratory, diagnostic 

imaging, home health, durable medical 

equipment) must be even more vigilant 

because of the strict liability nature of 

the Stark Law and the narrower exceptions 

for relationships with referring 

physicians. 

An example of how easy it is to be in 

violation of the Stark Law is reflected 

in the regulatory exception under the 

statute for non-cash payments to referral 

sources, which is limited to items of 

value no more than $300 a year. An 

item of value offered to a health care 

professional who is in a position to 

order a plan of home health care for a 

patient which exceeds $300 (such as a 

golf weekend) would violate the Stark 

Law (a strict liability statute), even 

though it may not violate the Anti- 

Kickback Statute. 

The risks of this liability are significant 

and growing, and organizations which 

fail to make a true effort at identifying 

these risks and forging compliant practices 

in their organizations may find 

themselves in the same place as the 

pharmaceutical manufacturers. ■ 

2004 Annual 

Compliance Survey 

The 2004 Annual Compliance 

Survey report is being published 

in April and will be mailed to all 

members in May. If you have any 

questions about the survey report, 

please call Erin O’Donnell at the 

HCCA office, 888/580-8373. ■

feature 

article 

Meet Allison Maney, HCCA Treasurer 

Editor’s note: The following interview was 

conducted by Al Josephs, HCCA President 

and Director of Corporate Compliance 

for Hillcrest Health System, in March 

2004 with Allison Maney, Director of 

Claims Research and Resolution, 

PacifiCare. 

AJ: Allison, I want to thank you for 

taking the time with me to discuss your 

experience. I also want to thank you for 

your contributions to HCCA. So, let 

me start by asking you what is your 

largest HCCA accomplishment? 

AM: As treasurer, I have had the 

opportunity to participate in the development 

of the HCCA financial statements. 

I have also been able to participate 

in the external audits and assist in 

developing the scope of the reviews. I 

have felt proud in the ability to volunteer 

with the HCCA. The time and 

effort has definitely paid off as I have 

developed indescribable relationship 

with folks that I may have never met. I 

am thankful for the HCCA experience 

and encourage all members to become 

actively involved. Thanks for the interviewing 

opportunity. 

Allison is Director of Claims Research 

and Resolution for Pacificare 

AJ: Thank you Allison. We appreciate 

all that you do. Now, please tell me 

what has been the most challenging 

part of being a compliance officer? 

AM: Convincing providers is the 

most challenging. Significant effort was 

spent on educating the professional staff 

about the compliance environment. 

Throughout the compliance implementation, 

it was rewarding to observe the 

change with the providers in accepting 

the compliance program. The providers 

have accepted the compliance culture and 

partnered with the program. 

AJ: How do you keep training interesting 

and effective? 

AM: Training provides an opportunity 

for compliance staff to utilize creative 

ideas. Pre-sampling the audience to 

develop the training strategy is a successful 

approach. Our Medical Director presented 

a very successful training idea. The 

Compliance Department drafted a 

memo regarding the compliance officer, 

plan, and strategy. The staff was presented 

with questions regarding the training 

document. All employees receiving 100% 

had the opportunity to participate in a 

raffle to win a day off from work. The 

response rate was over 90% including 

providers and staff. 

AJ: When conducting an internal investigation 

what is the most important criteria 

in selecting an outside legal counsel? 

AM: Experience of the legal firm is the 

most important criteria in selecting outside 

legal council. It is important to 

choose council based on their previous 

successful outcomes regarding the subject 

matter under scrutiny. In my compliance 

experience, different firms were utilized 

depending on the issue. Firms were 


specifically chosen for billing and coding 

issues whereas other firms were chosen 

for development and review of compliance 

policies. 

AJ: What advice do you have for those 

who struggle with getting physicians 

to change the way they bill or document? 

AM: As a compliance officer, it is 

important to remember that a provider’s 

first priority is the patient’s health and 

well being. Billing and coding are an 

after thought or “other duties as 

assigned”. The majority of providers did 

not receive excessive billing and coding 

training throughout medical school. The 

compliance staff should educate providers 

on the importance of appropriate coding. 

Appropriate coding decreases financial 

risk and captures all of the revenue 


17 

May 2004

Allison Maney 

deserved and earned. The compliance 

officer is responsible for educating the 

provider about the regulations and the 

potential risk of the following these regulations 

or guidelines. 

compliance has evolved into the day-today 

operations of management. Compliance 

is an additional check and gatekeeper 

to validate the operations are following 

the appropriate rules and regulations. 

May 2004 

18 

AJ: What is the most important component 

of a compliance program? 

AM: The most important component 

of a compliance program is documentation. 

If it is not documented, then the 

development is not substantiated. Our 

organization had the opportunity to have 

an OIG review. Our compliance plan 

took the extra steps to document the program 

and provided an opportunity to 

demonstrate the effort and accomplishments 

of fulfilling the seven compliance 

elements. This resulted in a >$20 million 

dollar settlement without a CIA. 

AJ: How often would you update your 

Code of Conduct and how often do you 

distribute it? 

AM: The Code of Conduct was updated 

annually. This is an excellent opportunity 

to continue emphasizing the importance 

of the compliance activity. The 

annual distribution provided an opportunity 

to continually revise the verbiage to 

meet the staff and providers expectations. 

Our code of conduct was revised based 

on the feedback from the staff that was 

obtained through survey and focus groups. 

AJ: How has compliance changed sense 

you started in 1997. 

AM: The job responsibilities have 

expanded to include HIPAA Privacy, 

Security and the monitoring of various 

regulations. I believe the largest change 

has been the acceptance of compliance 

efforts. In the early years, compliance was 

presented in a threatening way with a 

“big brother mentality”. Over the years, 

AJ: Governing boards are becoming 

more accountable for their organizations 

compliance efforts and yet compliance 

professionals may have very little time 

with the board. How can you make the 

best use of your time with the board? 

AM: Compliance was presented to the 

board in a format similar to the seven 

elements. The presentation was an 

opportunity to have the board evaluate 

the efforts in developing a successful 

plan. Our organization’s board was 

extremely interested and supportive in 

the compliance efforts. The report presentation 

included graphics to assist in 

summarizing the activities. 

AJ: If you have someone in administration 

that is reluctant to do something 

you need them to do what can you do to 

get them to change? 

AM: My approach is to directly confront 

any administrator, provider, or staff 

member who is reluctant to accept the 

compliance activities. I have had the 

experience of an external investigation. It 

is a very difficult, painful, and costly 

experience. It is important to educate the 

organization about the seriousness of 

complying with the rules and regulations. 

Employees need to understand that individuals 

have the same expectations and 

risk as large organizations. 

AJ: Do you worry about not getting to 

all of the potential problems and if 

so how do you prioritize them? 

AM: My advice is to “keep the ball 

rolling” (can you tell I played softball in 

my day). The compliance officer must 


AL JOSEPHS 

document the progress and development 

of the compliance efforts. Through this 

documentation, continuous improvement 

will be emanating. 

AJ: How long have you been involved 

in HCCA and what has been the number 

#1 benefit. 

AM: I have been a member of HCCA 

since 1998. The number #1 benefit has 

been the networking. I have met extremely 

knowledgeable colleagues that have a 

variety of backgrounds and experience. I 

have utilized these relationships in developing 

my compliance plans. The networking 

has definitely also paid off when 

I was searching for new job opportunities. 

AJ: How has your C.P.A. experience 

benefited you in developing compliance 

plans? 

AM: My accounting background has 

definitely been valuable in the documentation, 

auditing/monitoring, and investigation 

elements. The experience of performing 

internal audits directly correlates 

with the seven elements. I already had 

experience in drafting audit reports and 

tracking findings to resolution. As an 

accountant, we are good at follow 

through and “checking the box”. The 

compliance profession is a natural transition 

for accountants. ■

hefty fines can also be imposed for those 

who violate the Act’s provisions. (Some 

key requirements of the Sarbanes-Oxley 

Act are summarized in Exhibit 1.) 

By Catherine Sreckovich and Cheryl LeeVan 

Editor’s note: Catherine Sreckovich is uals–some of whom had concentrated 

Managing Director and Cheryl LeeVan is their retirement savings in the public 

Director with Tucker Alan - Navigant marketplace. (See table below) 

Consulting, Inc. They may be reached at 

312/849-9900. The authors were assisted In reaction to this group of scandals and 

by Richard Haynes and Diane Hasselmann their impact on the U.S. financial markets, 

in July of 2002, Congress passed the 

from Tucker Alan - Navigant Consulting, 

Inc. 

Sarbanes-Oxley Act–a law designed to 

help prevent corporate and accounting 

The Sarbanes-Oxley legislation of fraud as well as to help restore investor 

2002 was created in response to confidence in the public securities markets. 

As a result of this Act, many pub- 

1) allegations of accounting, 

reporting, and executive misconduct at licly financed companies and their auditors 

became generally subject to provi- 

companies including Enron, WorldCom, 

HealthSouth, Tenet Healthcare, HCA, sions designed to try to improve corporate 

and regulatory credibility, strengthen 

Adelphia, and Tyco and others as well as 

2) concerns as to regulatory oversight. auditor independence and avoid future 

These scandals highlighted significant collapses in corporate governance. The 

leadership failures that occurred within Act sought to: 1) improve the quality of a 

each of these companies and called into company’s accounting and disclosures; 2) 

question senior management’s responsibility 

for fair accounting and reporting. fair reporting and ethical behavior; 3) 

increase management’s responsibility for 

These scandals profoundly affected the strengthen auditor and director independence, 

and 4) strengthen regulatory 

public securities markets, as well, precipitating 

significant losses for many individ- 

oversight. Stiff criminal penalties and 

The health care industry has begun to 

experience the direct impact of Sarbanes- 

Oxley as publicly financed health care 

companies have worked quite vigorously 

to meet implementation deadlines for the 

Act’s provisions. However, a large portion 

of the health care industry–for example, 

not-for-profit organizations and many 

private for-profit companies–have generally 

not yet been directly affected by 

Sarbanes-Oxley in major ways. These 

entities should not believe, though, that 

they have escaped the responsibilities and 

consequences of Sarbanes-Oxley. If history 

and current regulatory attitudes are 

any indications of events to come, 

Sarbanes-Oxley will “spill-over” and will 

not stop short of the health care private 

and not-for-profit world. 

Lessons from the defense industry 

Health care is often described as a unique 

industry, comprised of many missiondriven 

professionals dedicated to helping 

individuals, whose health conditions are 

vulnerable and sometimes even life 


Company 

Enron 

WorldCom 

HealthSouth 

Tenet Healthcare 

HCA 

Adelphia 

Tyco 

Allegations 

Inflating revenues and shifting debt “off balance sheet” to overstate profits and mislead the public as 

well as shareholders and lenders. 

Accused of fraud for hiding losses in order to inflate profits. 

Overstating its earnings to mislead the public, shareholders and lenders and charged with tax fraud. 

Medicare billing fraud related to its “outlier” Federal support payments and submitting Medicare 

claims based on fraudulent patient information and performing medically unnecessary procedures. 

Paying illegal kickbacks to physicians and misreporting costs to the government. 

Excluding liabilities from its consolidated financial statements, falsifying earnings to meet Wall Street 

expectations and concealing corporate self-dealing with chief executives. 

Defrauding stockholders by failing to disclose corporate loans made to executives and insider stock 

trades and issuing bonuses to executives without the approval of Tyco’s Board of Directors 


19 

May 2004

The spill-over effect...continued from page 19 

May 2004 

20 

threatening. Because of the somewhat of the requirements contained in the 

unique burden that health care professionals 

face, health care professionals have sities were impacted by the spill-over 

Cost Accounting Standards. Even univer- 

traditionally considered their industry to after the Federal government, having discovered 

some over-billing of research 

be different from other industries. 1 Some 

health care professionals may unwisely grants at a university, began requiring 

assume that industry financial reform many colleges and universities to comply 

mandates–such as Sarbanes-Oxley–will with a majority of Cost Accounting 

impact only for-profit, public health care Standards. 

companies that aggressively compete for a 

share of capital in the securities markets. During the 1970s and 1980s, the U.S. 

While the health care industry is unique defense industry was heavily funded with 

in many respects, the experiences of other Federal dollars (still true and quite like 

industries that once believed themselves the health care industry today) through 

to be quite unique–for example, the cost reimbursement contracts as well as 

defense and electric power industries, progress payments on fixed price contracts. 

As Federal money began flowing 

among others, indicate that even relatively 

unique industries are not immune to into the U.S. defense industry, especially 

regulatory spill-over. Thus, some of this during the Vietnam conflict era, the 

perceived uniqueness is a bit illusory, Federal government has increased its 

more so especially when a significant portion 

of that industry’s revenues increas- 

over-billing. One of the Government’s 

attempts to address and prevent alleged 

ingly comes from Federal sources or State more successful programs in this regard 

monopolies of some kind. 

was the Department of Defense 

Voluntary Disclosure Program, implemented 

in 1986. This program allowed a 

The defense industry provides an example 

of how Federal regulation spilled-over to contractor to voluntarily report misconduct 

discovered by the contractor in ex- 

unintended recipients. In the 1970s, following 

a series of cost allocation pricing change for reduced penalties and fines. 3,4 

challenges and some alleged overcharging 

on government contracts, Congress mandated 

the development of accounting Similar to the defense industry during 

Health care 

guidelines for defense contractors, called the 1970s and 1980s, total Federal health 

Cost Accounting Standards. Cost 

care spending, through Medicare, 

Accounting Standards require government Medicaid, and other programs, has 

contractors to follow a set of accounting increased. 5 Heavy dependency on Federal 

rules for pricing. Although the government 

Cost Accounting Standards devel- 

health care or defense, especially vulnera- 

revenues leaves an industry, such as 

oped by the Cost Accounting Standards ble to political shifts of that revenue. 

Board were designed mainly for defense Furthermore, health care providers generally 

have low profit margins and are thin- 

contractors, these standards spilled-over, 

becoming used in other industries. 2 ly capitalized, which further increases 

financial vulnerability. 

As a result of this spill-over, many nondefense 

contracts became subject to some Moreover, in a current time of state fiscal 


CATHERINE SRECKOVICH 

crises and increasing medical cost 

growth, health care payers are actively 

seeking to reduce or avoid as much inefficiency 

as possible through activities 

such as identifying billing errors. These 

circumstances, coupled with the 

increased scrutiny from Sarbanes-Oxley 

as well as other Federal and State initiatives 

to reduce fraud and abuse, translate 

into somewhat risky circumstances for 

health care entities, especially any entities 

that are lax with such areas as internal 

control systems and financial reporting. 

Instead, health care entities, both private 

and public, for-profit and not-for-profit, 

large and small, must strive for better 

reporting communications, greater fairness 

in their financial reporting, as well as 

more compliant operations. Their Boards 

of Directors, at a minimum, will insist 

on that kind of improvement. 

It is noteworthy that compliance and 

regulation are not new to the health care 

industry. The over-billing challenges of 

the 1990s spurred numerous fraud and 

abuse investigations by the Department 

of Health and Human Services’ Office of 

Inspector General–as well as claims by 

plaintiffs for overbillings–and increased 

the health care industry’s focus, although 

tardy, on achieving improved payment 

accuracy.

CHERYL LEEVAN 

Those billing scandals could be said to 

have been a missed opportunity for the 

health care industry–one that began 30- 

40 years ago. When Federal Medicaid 

and Medicare dollars started flowing into 

the health care industry in the 1960s, the 

health care industry had an ideal opportunity 

to implement strong internal controls 

on such Federal reimbursement. 

However, in general, the health care 

industry did not then recognize the 

opportunity to develop adequate or 

strong controls among other possible 

improvements. Accordingly, to assure 

greater compliance, the Federal government 

much later imposed significant 

compliance regulations on the health care 

industry. 6 

Today, not-for-profit and private forprofit 

entities should recognize the passage 

of Sarbanes-Oxley legislation as 

another opportunity to self-regulate, and 

should recognize that failure to do so will 

likely result in even more Federal regulation 

in the future. Health care cannot 

afford to “miss the boat” again and repeat 

the compliance mistakes of the past. 

Where Is the spill-over beginning to 

happen? 

Not-for-profit and private for-profit 

organizations are already starting to experience 

Sarbanes-Oxley spill-over. Several envelope”). 

states are in the midst of passing legislation 

that would subject many private being used to develop and maintain 

■ Increased health care resources are 

companies and health care institutions to compliance programs, including organizational 

training, upgraded account- 

some of the provisions contained in 

Sarbanes-Oxley. New York, Massachusetts, 

Ohio, Pennsylvania, and California 

ing, reporting and control systems, as 

well as expanded auditing and oversight 

procedures. The additional costs 

are among the states that have proposed 

legislation for private companies and 

for such developments could well 

health care institutions that is similar to 

increase aggregate short run costs for 

Sarbanes-Oxley. For example, California 

providers. 8 

has introduced a bill that would require 

States are also expanding the scope of 

both public and private corporations to 

their monitoring activities to include the 

disclose whether they have adopted a 

corporate integrity of their health care 

code of ethics for senior management. 

contractors, many of which are private 

Further, the bill would require auditors 

companies. For example, some states 

of public and private corporations to 

now require ethics training for contractors, 

CEO signatures on financial and 

report on, among other things, alternative 

treatments of financial information 

non-financial performance reports, and 

under generally accepted accounting 

performance-based contracts for 

principles and on the financial impact of 

providers and managed care organizations. 

These requirements are in keeping 

these alternate treatments. 7 

with the spirit of some Sarbanes-Oxley 

As a result of the increased focus on 

provisions as well as other initiatives. The 

Sarbanes-Oxley issues in the health care 

Federal government is pushing to take a 

world, the following effects can already 

more active role in monitoring for regulatory 

and billing accuracy. Currently, for 

be seen: 

■ There is increased scrutiny of company 

conduct by stockholders, bond- 

assisting 27 states with a Federally-spon- 

example, the Federal government is 

holders, and employees (broadly stated, 

all are the “stakeholders”). As a Measurement pilot study that will serve 

sored Medicaid Payment Accuracy 

result, these stakeholders are demanding, 

increased evidence of accountabil- 

future. Federal pressures on state spend- 

as a model for mandated studies in the 

ity. This may necessitate greater ing will continue as the Federal government 

also scrutinizes state revenue maxi- 

reporting of financial information and 

mizing activities. 

non-financial information on such 

areas as quality of care. 

Also, recent Federal health care legislation 

is paralleling auditor independence 

■ The accountability and independence 

of Boards of Directors, as well as auditors, 

has been strengthened. 

rules contained in the Sarbanes-Oxley 

legislation. The U.S. Balanced Budget 

■ There are fewer health care providers Act (finalized in August 2003) mandates 

who appear to be implementing a separation between contractors who 

extensive Federal reimbursement maximization 

strategies (“pushing the 

Continued on page 

provide technical assistance to the state 

22 


21 

May 2004

The spill-over effect...continued from page 21 

Medicaid agency and those who evaluate 

the Medicaid managed care program. 

Just as a company’s independent auditor 

is proscribed from auditing a computer 

system that it has designed and installed 

or valuations it has prepared for the company, 

a Medicaid program evaluator cannot 

evaluate its own technical assistance. 

Where might the spill-over continue its 

move in the future? 

The recent focus on Sarbanes-Oxley provides 

a good opportunity for health care 

entities to further improve their corporate 

governance and compliance procedures 

and practices. History shows that 

self-regulation–not Federal regulation–is 

the best way to deal with legislative regulatory 

spill-over. If the health care industry 

does not self-regulate, there could be 

some potentially unpleasant consequences, 

including: 

■ Inability to attract and retain their 

share of skilled and dedicated people 

interested in working within health 

care. 

■ Increased difficulty for smaller forprofit 

as well as not-for-profit health 

care organizations in fund-raising 

efforts. 

■ Difficulty for organizations in the raising 

of capital through the public securities 

markets. 

■ Continuous negative public reaction 

to industry shortfalls instead of 

enjoying the advantages of having 

been proactive on improvements. 

■ Loss of political credibility for a 

health care industry that is also seeking 

reasonable liability limits, for 

example malpractice tort reform, 

through legislation. 

Again, history has shown that spill-over 

does occur after the enactment of major 

industry regulation. Although Sarbanes- 

Oxley may not have originally been 

written for non-profit or private forprofit 

health care providers, these entities 

can expect increased scrutiny into 

May 2004 

22 

Exhibit 1: Provisions Of the Sarbanes-Oxley Act 

Improve the quality of disclosures 

■ Financial statements should reflect “material correcting adjustments” identified by auditors. 

■ Material off-balance sheet transactions should be disclosed. 

■ Pro forma financial statements should be reconciled to Generally Accepted Accounting Principles-based financial statements. 

■ Management should formally assess internal control, and auditors must report on this assessment. 

■ Management should disclose whether it has adopted a code of ethics for its senior officers. 

Increase management’s responsibility 

■ Chief Executive Officers as well as Chief Financial Officers should verify the content of company financial statements. 

■ Management should not influence or deceive the company’s auditors. 

■ Whistleblowers gain some protection. 

■ If the company’s financial statements must be restated, the CEO and the CFO may have to forfeit bonuses and any profits 

realized from the sale of the company’s securities during the restatement period. 

■ The company can be limited in making personal loans to executive officers or directors. 

Strengthen auditor and director independence 

■ Audit Committees should be comprised of independent directors. 

■ Non-audit services provided by the auditors should be pre-approved by the Audit Committee. 

■ The non-audit services that can be provided by the firm’s auditors can be restricted, regardless of Audit Committee preapproval. 

Many consulting services have been limited, for example, financial information systems design and implementation, 

valuation services, and actuarial services. 

Strengthen regulatory oversight 

■ The Public Company Accounting Oversight Board (PCAOB) was created to more effectively regulate audit firms. 

■ The PCAOB has the authority to register auditing firms, establish auditing standards, and inspect and discipline the 

firms, if necessary. 


their accounting, reporting, and control 

practices as well as higher expectations for 

the quality of their reporting. Now is not 

a time for complacency. The health care 

industry has an excellent opportunity to 

try to improve its credibility with the 

Government, with the general public, and 

with those who receive care. Health care 

providers that work to improve accountability, 

report transparently, implement 

improved controls, and in other ways 

comply with Sarbanes-Oxley concepts 

will benefit. It is far better for health care 

providers to regulate themselves now 

rather than to wait until the government 

assumes the role of “policing” and further 

imposes more regulations. 

In an article to follow, we will present 

some recommendations on how 

providers might improve their readiness 

for the Sarbanes-Oxley spill-over effect 

including observations on some 

Comptroller General developments as 

well as Sentencing Commission views. ■ 

1 Indeed, health care is different. Both fighter pilots 

and health care professionals–although their missions 

are different–feel the unique burden of their duties 

and, therefore, view themselves as different from the 

rest of the population. 

2 Although the Cost Accounting Standards were not 

designed for the health care world, those standards 

were made a part of the Federal Employees Program 

Blue Cross-Blue Shield contract cost accounting. 

3 In the 1990s, the Department of Health and Human 

Services followed suit by instituting a somewhat similar 

program for health care providers. 

4 Another possible parallel might be the electric power 

industry; as new plant construction–especially nuclear 

plant construction–grew and grew, whistleblowing 

increased along with whistle blower protections. 

5 Prior to the 1980s, the health care industry historically 

relied very little on the public securities debt 

and equity markets for funding. Consequently, many 

health care entities avoided the stringent accounting 

and reporting requirements of the larger publicly 

financed companies. 

6 It is important to note that the industry has undertaken 

its own efforts to increase compliance and 

appears to have improved credibility with regulators 

and with the general public. 

7 For further discussion on state initiatives, see articles 

and commentary by Geoffrey Morgan, a partner at 

Michael Best & Friedrich LLP, at the company’s 

website, http://www.mbf-law.com. 

8 Many health care entities already struggle to “find” 

funding for their currently overstretched budgets– 

especially for the increased costs of regulatory compliance. 

To pay for these costs, it is likely that health 

care entities will need to develop additional revenue 

streams, cut costs otherwise or become more efficient. 

It is the authors’ view that the costs of 

increased compliance should be considered by payers 

as sound to some reasonable extent for reimbursement, 

regardless of whether these compliance efforts 

are the result of direct Federal government mandates 

or voluntary efforts undertaken by the health care 

entity. 

Medicaid Services (CMS), the new bill 

hopes to establish Medicare payments 

for covered drugs that more closely 

reflect the prices actually charged to 

physicians by their suppliers. Therefore, 

one such area of reform is the acquisition 

of Medicare Part B covered outpatient 

drugs and biologicals through a 

By Nisha Shajahan, MPH and Amirah Oni Ellis, MPH 

competitive bidding process. Currently, 

the Medicare reimbursement of Part B 

Editor’s note: Nisha Shajahan, MPH, is result of the sweeping overhaul to 

drugs and biologicals for physician’s are 

Associate Vice President, Regulatory Medicare with the introduction of the 

inflated since their acquisition costs are 

Consulting and Amirah Oni Ellis, MPH, Medicare Prescription Drug Improvement 

and Modernization Act of 2003, 

much lower than their reimbursement 

is an Associate with Strategic 

rate, which then results in increased copayments 

Management Systems, Inc. and may be the health care industry is already 

for beneficiaries. In an effort 

reached at 703/535-1412. 

buzzing about tackling significant to remediate this occurrence, the new 

W 

changes in reimbursement and the rise rule establishes an average sales price 

hile a vast number of of new compliance concerns. According (ASP) payment system which will 

changes will occur as a to the Centers for Medicare and 



23 

May 2004

MMA Part B...continued from page 23 

May 2004 

24 

replace the current average wholesale 

price (AWP) payment system, and a 

competitive acquisition program. This 

new program will most likely create 

opportunities for Pharmaceutical 

ed drugs and biologicals using the alternative 

ASP methodology. 

Impact on prospective contractors 

All entities considering participating in 

■ There will be a single payment 

amount determined for each competitively 

biddable drug in the designated 

area 

■ Payment amount will be based on 

Benefit Manager (PBMs) and specialty the competitive bidding process must 

the bids that are accepted 

pharmacies, and have a considerable be aware of the various requirements 

■ Contractors are permitted to bid on 

impact on providers, especially oncology 

specialties. 

eligible as a contractor. Prospective con- 

that the Act establishes in order to be 

a national or regional basis 

■ The bid refers to the “contractor’s 

tractors will compete for the acquisition 

offer to furnish a competitively biddable 

drug or biological for a partic- 

The competitive acquisition program is for no less than one competitively biddable 

drug or biological within each 

scheduled to be phased in 2006 and 

will serve as an alternative reimbursement 

method to the ASP model which category of covered drugs and biologi- 

■ The bid submitted by the contractor 

billing and payment code under each 

ular price and time period.” 

will begin in 2005. Physicians will then 

have the choice to annually elect to be 

reimbursed through the ASP model or 

purchase drugs through a pre-selected 

contractor, under the competitive 

acquisition program. 

cals. Awarded contracts will be three 

years in length. Contractors will be 

selected based on a range of factors 

including: 

Bidding process 

is to include all costs that are related 

to the delivery of the drug or biological 

to the physician, as well as the 

cost of dispensing the drug and shipping 

costs. HHS will pay the contractor 

directly: 

■ Multiple contracts can be awarded • Exclusions: Costs related to 

Currently, Medicare reimburses physicians 

for covered drugs and biologicals; 

however, the new legislation will require 

Medicare to reimburse contractors 

for the designated category area 

■ Selection of contractor for the distribution 

of drugs and biologicals is 

based on: 

administration of the drug or 

biological: 

- Wastage 

- Spillage 

directly, thus doing away with the 

“physician billing Medicare” practice for 

• Bid price in the category and 

area 

- Spoilage 

■ Payment for the competitively biddable 

such drugs and biologicals. These contractors 

• Bid price for the distribution 

drugs and biologicals should be 

will also be responsible for 

• Product integrity 

equal to 80% of the payment deter- 

obtaining applicable coinsurance and 

• Customer service 

mined in the computation of the bid 

deductibles. Based on their bids and 

• Distribution past experience payment amount 

other requirements, selected contractors 

• Other factors 

■ In certain cases the Secretary can 

will be awarded to supply a specified 

■ Contractors can submit bids and be refuse to award contracts or can terminate 

contracts 

category of drugs within a geographic 

awarded contracts for multiple areas 

area, which the legislation refers to as 

of the country 

competitive acquisition areas. Physicians 

will have a choice of at least two 

■ Contractor must: 

Distribution requirements 

• Acquire all of the drugs and biological 

■ The contractor must be able to 

contractors per drug category in a particular 

region. These categories are yet 

to be determined by CMS, but will 

exclude certain drugs and biologicals 

(e.g. certain vaccines) and any additional 

drugs and biologicals that are deemed 

products directly from 

the manufacturer or from a 

distributor who acquired the 

products directly from the 

manufacturer 

acquire and deliver the drug to the 

area specified 

■ The shipment must occur at least 

five days per week and the contractor 

must be able to deliver the drugs 

not likely to result in significant savings. 

CMS may reimburse these exclud- 

• Comply with any product 

integrity safeguards 

in emergency situations 

■ Procedures must be established to 


espond and resolve complaints by 

physicians and other individuals 

regarding the shipment of the drugs 

and biologicals 

■ Grievance and appeals process must 

be established 

■ Drugs are to be shipped to the physician 

be weighed heavily on an entities’ past 

experience with drug and biologic distribution, 

including product integrity 

and customer service, PBMs and manufacturers 

with distribution services will 

most likely be the interested in bidding 

for contractor slots. 

and not the patients 

Compliance implications 

• Exception: Individual currently 

Additionally, contractors must comply 

receives the drug or biological in 

with a Code of Conduct that includes 

their home or another nonphysician 

office 

standards relating to conflicts of interest, 

and all applicable provisions relating 

to prevention of fraud and abuse 

■ The contractor must have a prescription 

for the drugs or biologicals to be 

delivered 

consistent with HHS guidelines. Codes 

of Conduct are essentially a set of 

• Prescription is not required for 

each individual treatment 

guidelines that must be followed by the 

employees of the contractors. The standards 

• The physicians flexibility to 

write a prescription for a single 

treatment or a course of treatment 

does not change 

that are to be followed must be in 

compliance with the law and promote a 

sense of integrity within the company 

as well as prevent violations of the law 

■ Rules will be established to determine 

which drugs and biologicals 

can be re-supplied to the providers to 

ensure safe drug practices and adequate 

safeguards against fraud and 

abuse. Physicians must demonstrate 

that could jeopardize the well being of 

the beneficiaries, CMS, and contractors. 

Accordingly, this process to comply 

with a Code of Conduct will have 

to be audited and monitored. 

Prospective bidders must understand 

the rules of this new process in order to 

the following: 

maintain compliance. The Code of 

• Drugs and biologicals are immediately 

required 

Conduct is to be up-held by an organization 

and typically is established to 

• The physician could not have 

prevent compliance violations as well as 

anticipated the immediate need 

fraud and abuse. Furthermore, it will 

of the drugs or biologicals 

also help to put in place a method to 

• Contractor could not deliver the 

drugs or biologicals to the physician 

in a timely manner 

ensure that the competitive bidding 

process aligns with the current requirements. 

• Drugs or biologicals were administered 

in an emergency 

The HHS Office of the Inspector 

■ Adjustments can be made for payment 

for the drugs and biologicals 

that were billed but not administered 

General (OIG) has established compliance 

guidance for pharmaceutical manufacturers 

which serves as a good model 

for the organizations that are likely to 

Since part of the selection process will be competitive in the bidding process. 


Some of the risk areas that have been 

identified by the OIG include integrity 

of data used to establish government 

reimbursement and kickbacks and 

other illegal remuneration, which 

includes relationships with purchasers 

and their agents, relationships with 

physicians and other referral sources, 

relationships with sales agents, and the 

distribution of free drug samples. 

In addition, there are specific components 

that are necessary for corporate 

compliance programs to prove effective. 

One of the primary components 

includes a written standard of conduct. 

This Code of Conduct describes standards 

and serves as a guide for how the 

company does business externally as 

well as internally. One important aspect 

of the development of the Code of 

Conduct of a company is to develop 

this model for the company in a cooperative 

environment that includes the 

input of the Board of Directors as well 

as senior executives. According to the 

OIG, the Code of Conduct should 

include the following: the mission, 

goals and commitment to compliance 

of the organization, procedures for handling 

allegations, complaints and other 

compliance concerns, encouragement 

to report anonymous complaints to 

either the compliance officer or a hotline 

without fear of reprisal, affirmative 

duty of employees to report suspected 

violations, commitment to federal and 

state health care standards, billing and 

coding accuracy, medical necessity, protection 

of patient health information, 

patient admission, discharge, and transfer, 

quality of care and services, patient 

rights as well as best practices, which 

includes elements such as marketing 


25 

May 2004

May 2004 

26 

CHC 

The Healthcare Compliance Certification 

Board (HCCB) compliance certification 

examination is available in all 50 States. 

Join your peers and become Certified in 

Healthcare Compliance (CHC). 

CHC certification benefits: 

■ Enhances the credibility of the compliance practitioner 

■ Enhances the credibility of the compliance programs 

staffed by these certified professionals 

■ Assures that each certified compliance practitioner 

has the broad knowledge base necessary to perform 

the compliance function 

■ Establishes professional standards and status for compliance 

professionals 

■ Facilitates compliance work for compliance practitioners 

in dealing with other professionals in the 

industry, such as physicians and attorneys 

■ Demonstrates the hard work and dedication necessary 

to perform the compliance task 

CHC Certification, developed and managed by HCCB, 

became available June 26, 2000, since that time hundreds 

of your colleagues have become Certified in 

Healthcare Compliance. Linda Wolverton, CHC, 

Director, Compliance, Triad Hospitals, Inc. says that she 

sought CHC Certification because “...many knowledgeable 

people work in compliance, and I wanted my peers 

to recognize me as ‘one of their own’.” With certification 

she is “recognized as having taken the profession seriously, 

having met the national professional standard.” 

For more information on how you can become 

CHC Certified, please call 888/580-8373, 

email hccb@hcca-info.org, or visit the HCCA 

Website: http://www.hcca-info.org/Template. 

cfm?section=HCCB_Certification 

CERTIFIED IN 

HEALTHCARE 

COMPLIANCE 

The Compliance 

Professional’s Certification 

Congratulations on achieving 

CHC status! The Healthcare 

Compliance Certification Board 

announces that the following 

individuals have recently 

successfully completed the 

Certified in Healthcare 

Compliance (CHC) examination, 

thus earning CHC designation: 

Viatcheslav Alexeev, CHC 

Jean Audsley, CHC 

David Barton, CHC 

Linda Belcher, CHC 

David Blake, CHC 

Katrina Bracewell, CHC 

Veronica Celaya, CHC 

Smriti Chandola, CHC 

Tami Chartraw, CHC 

Janice Chase, CHC 

Denise Dach, CHC 

Leyla Erkan, CHC 

Terrisa Floyd, CHC 

Ronald George, CHC 

William Godburn, CHC 

Oshrat Goldberg, CHC 

David Greer, CHC 

David Haig, CHC 

Cambria Hammer, CHC 

Lisa Hearn-shumpert, CHC 

Hala Helm, CHC 

Pamela Henderson, CHC 

James Hodges, CHC 

Sally Howard, CHC 

Karen Huggett-vasquez, CHC 

Karen Ivy, CHC 

Cynthia Jackson, CHC 

Jan Jackson, CHC 

Rhonda Joseph, CHC 

Eric Kaminski, CHC 

Ryan Killeen, CHC 

Christopher Kutner, CHC 

Marianne Labahn, CHC 

Lisa Lawrence, CHC 

Marc Levin, CHC 

Mary Lushina, CHC 

Mary Mac Gran, CHC 

Donna Martin, CHC 

Kristen Mattingly, CHC 

John May, CHC 

Deborah Mayshark, CHC 

Neschla McCall, CHC 

Lynn Miller, CHC 

William Mooney, CHC 

Kathleen Mowry, CHC 

Sandra Nasello, CHC 

Michael Nye, CHC 

Abel Ortiz, CHC 

Steven Ortquist, CHC 

Akemi Otsuka, CHC 

Babette Pisacco, CHC 

Kathleen Postiglione, CHC 

Teri Price, CHC 

Allie Ray, CHC 

Kaye Reeves, CHC 

Barbara Rogers, CHC 

Teresa Rowe, CHC 

Maryann Schwab, CHC 

Pamela Seay, CHC 

Joyce Sklark, CHC 

Lyn Snow, CHC 

Elizabeth Strammiello, CHC 

Susan Theuns, CHC 

Myra Turnbow, CHC 

Daniel Vincent, CHC 

Susan Walberg, CHC 

Kenneth Walker, CHC 

Rhonda Walker, CHC 

Deborah Wilt, CHC 


MMA Part B...continued from page 25 

and billing practices. 

More to watch for... 

While the new competitive bidding 

program for drugs and pharmaceuticals 

is not scheduled to be implemented 

until 2006, the effects of this portion of 

the Prescription Drug, Improvement, 

and Modernization Act of 2003 will 

begin to affect potential contractors 

now. With this bill, physicians are being 

reimbursed for less than they were 

being reimbursed in the past, smaller 

“mom and pop” distributors may not 

be as successful as contractors. Such 

smaller distributors may not be able to 

competitively bid for these drugs and 

biologicals at rates that they can afford. 

Larger contractors will most likely benefit 

from this program because they can 

provide more drugs and biologicals for 

a lower cost. 

Contractors who are likely to become 

distributors will have to ensure that 

they fulfill the program requirements 

which have been established with this 

new law. The new requirement is more 

likely to have already been instituted by 

existing large distributors, PBM’s 

and/or manufacturers with distribution 

arms which may result in them proving 

more competitive in the bidding 

process. There are currently exceptions 

to the competitive bidding program 

and it will be interesting to see if more 

exceptions will be instituted by HHS to 

ensure accessibility to drugs and biologicals. 

■ 

Plan for the 

Compliance Institute 

2005 in New Orleans, 

April 17-20!

By Joseph J. Russo, Esq., and Chetan Deshmukh, MS, MBA 


JOSEPH J. RUSSO 

Editor’s note: Joseph J. Russo is President internal hospital guidelines, and numerous 

federal and state governmental regu- 

& General Counsel for HP3, Inc. Chetan 

Deshmukh is Director, Knowledge latory agencies. Further, hospitals and 

Management for HP3, Inc. You may contact 

either at 610/332-2990. 

utilizing comparative public data by 

physicians are now being benchmarked 

organizations such as healthgrades.com. 

The future of compliance education 

is moving from traditional 

classroom instruction cation and training have focused on 

Traditional methods of compliance edu- 

to e-learning and e-compliance. This transfer of knowledge in a classroom. 

movement is being fueled by increased The Education and Training departments 

utilization of the internet as well as significant 

technological advances in semination of such education. The edu- 

have typically been responsible for dis- 

Learning Management Systems (LMS) cation was carried out as part of the 

by health care organizations in the annual review process, orientation for 

United States and throughout the world. new employees, or as part of a more formal 

compliance education initiative. 

Education is the cornerstone of an effective 

compliance program. Effective edu- 

always been a challenge as has the avail- 

Scheduling of time and resources has 

cation on high risk compliance areas significantly 

reduces legal exposure relating edge. In addition, employees on the third 

ability of space for transfer of this knowl- 

to fraud and abuse issues such as the shift were always difficult to schedule. 

Federal False Claims Act, Stark, and the 

anti-kickback laws and regulations. In Until the advent of the technology revolution, 

the preferred method for delivery 

all of the voluntary compliance guidance 

issued to date, the Office of of this information was through traditional 

education in a classroom setting. 

Inspector General clearly emphasizes 

educational programs as a methodology Compliance education gradually moved 

to effectively train employees and minimize 

fraud and abuse exposure. 

tronic media through videos and more 

from an in-person instructor to elec- 

recently DVD’s. The technology revolution 

gave birth to the World Wide Web 

Moreover, education and training is 

now recognized as a key to organizational 

growth as well as compliance. This is ery of information effectively in a short 

which became the springboard for deliv- 

a greater issue in health care organizations 

due to the complex and ever allowed employees in a geographically 

period of time. Significantly, this 

changing regulatory landscape. For distant location, and even across the 

example, hospitals are being held to world, to access information utilizing a 

high standards of quality by the Joint standard platform. 

Commission on Accreditation for 

Hospital Organizations (JCAHO), Health care organizations are now leveraging 

the Internet to launch e-learning 

centers that disseminate knowledge 

quickly and cost effectively. Online 

learning centers that promote education 

and transfer of knowledge utilizing cutting 

edge technology concepts (i.e. 

SCORM or Shareable Content Object 

Reference Model) are gaining increased 

recognition. The basis of SCORM is the 

ability to share content and utilize multimedia 

technology to ensure the content 

is interactive. This is achieved through 

the use of graphics and media including 

audio and video, where appropriate. 

Access to the content is not limited by 

space or time as the content is readily 

available 24/7 throughout the year. 

The benefits of e-learning include the 

ability to centrally track the content and 

learner for purposes of compliance, use 

of bookmarks, immediate prescriptive 

feedback, and scoring of tests to ensure 

objective measurements in real time. 

Some of the additional benefits of selfpaced 

learning include: 

■ Education that is easily accessible 

■ Content that is standardized 

■ Flexibility and convenience of being 

able to access information wherever 

and whenever needed (just-in-time) 


27 

May 2004

The e-learning revolution...continued from page 27 

CHETAN DESHMUKH 

■ Can be cost-effective with substantial 

Return on Investment (ROI) 

Perhaps the greatest benefit to health 

care organizations is ensuring ongoing 

compliance education while providing 

the employees the ability to learn at 

their own pace. Employees can costeffectively 

learn about complex regulations, 

policies and procedures, standards 

of conduct, and the penalties and sanctions 

associated with non-compliance. 

Health care organizations planning to 

develop and launch e-learning should 

establish a focus group that includes key 

people such as the compliance officer 

and the directors of each practice area 

that will be affected. This process can 

become more complicated if facilities 

take on the added burden of hosting a 

Learning Management System (LMS), 

which is the primary platform for communication. 

An undertaking such as 

this must include key persons who are 

visible and respected within the organization. 

Health care organizations are focusing 

on e-learning as a methodology to deliver 

system-wide standardized education. 

E-learning enables facilities and departments 

to share information at all levels, 

including a top down approach and 

cross functionally. For example, the 

entire staff within the revenue cycle may 

be educated starting with the registration 

department, medical records, and 

the billing department. This ensures 

that both the front-end and back-end of 

the reimbursement process are receiving 

the same message, and appreciate each 

other’s role in the reimbursement cycle. 

Many facilities experienced the benefits 

of e-learning when they were confronted 

with the daunting task of educating 

employees regarding the Health 

Insurance Portability and Accountability 

Act of 1996 (HIPAA), and the complex 

privacy regulations enacted thereafter. 

Without leveraging the available tools 

such as Learning Management Systems 

and e-learning authored content, most 

facilities had to allocate a substantial 

amount of resources to deliver the education. 

Facilities that are large and small stand 

to benefit from the use of e-learning. 

Just as compliance issues and problems 

are not limited to facilities of any type 

or size, e-learning is an effective tool for 

both large and small facilities. 

The future of compliance education is 

positive as health care organizations 

move into the new age of e-learning and 

e-compliance. As health care organizations 

increase their technological capabilities 

and leverage existing technology, 

traditional classroom education will 

continue to be replaced by e-learning 

and e-compliance. This will result in 

increased compliance, reduced fraud 

and abuse exposure, as well as a more 

educated and well informed workforce 

in an ever-changing regulatory environment. 

■ 

May 2004 

28 

FOR 

Stark II, 

Phase II 

Interim 

Final Rule 

addressing physician self-referrals 

released 

The Centers for Medicare and 

Medicaid Services issued, on March 25, 

YOUR INFO 

the second phase of its final regulations 

addressing physician referrals to entities 

with which they have a financial relationship, 

according to their press 

release. This interim final regulation 

will protect beneficiaries and taxpayers 

from abusive referral patterns, while 

providing straightforward rules for 


physicians and providers to comply 

with the law. This new regulations was 

published in the March 26 issue of the 

Federal Register. To review the new regulation: 

http://a257.g.akamaitech.net/ 

7/257/2422/14mar20010800/edocket. 

access.gpo.gov/2004/pdf/04-6668.pdf 

For the complete press release:

http://www.cms.hhs.gov/media/press/ 

release.asp?Counter=985 

Tenet settles, pays $30.75 million 

On March 24, Tenet Healthcare 

Corporation announced that it and certain 

of its subsidiaries signed a definitive 

settlement agreement with the U.S. 

Department of Justice and other parties 

that ends an investigation of certain 

physician employment matters at one 

Tenet hospital in Florida as well as a 

federal transfer-discharge inquiry that 

involved substantially all Tenet hospitals. 

The settlement agreement includes 

a total payment by Tenet of $30.75 

million. For more from DOJ Press 

Release: http://www.usdoj.gov/opa/pr/ 

2004/March/04_civ_183.htm 

For more from Tenet Press Release: 

http://www.tenethealth.com/TenetHealth/ 

PressCenter 

Physician receives 57 month 

sentence for FDA fraud 

On March 24, U.S. Attorney for the 

Northern District of Alabama Alice H. 

Martin and Mark B. McClellan, 

Commissioner United States Food and 

Drug Administration (FDA), 

announced that Ann Campbell was 

sentenced by United States District 

Judge L. Scott Coogler to fifty-seven 

(57) months in prison, fined 

$557,251.22, and was given three (3) 

years supervised release after the prison 

term is served. Additionally, Campbell 

was ordered to make restitution to 

Aventis Pharma, Inc. in the amount of 

$925,774.61. on conviction of mail 

fraud. According to Alice H. Martin, 

the conviction resulted from Campbell’s 

actions as an Investigator conducting a 

drug trial for a new antibiotic drug. 

According to the government, 

Campbell falsified data relating to the 

number of persons participating in the 

drug trial. Campbell submitted the falsified 

data to Aventis Pharma, Inc, 

which was sponsoring the drug study to 

determine the safety and effectiveness 

of the new drug. For more: 

http://www.usdoj.gov/usao/aln/ 

Pages/newsreleasesmain.html 

Psychologist sentenced for defrauding 

Medicare 

On April 1, U.S. Attorney for the 

Northern District of Alabama Alice H. 

Martin announce that Dr. Todd Everett 

Walborn of Birmingham, Alabama was 

sentenced to 33 months in prison and 

ordered to pay $1,801,980 in restitution 

to Medicare. Walborn was given 

three years supervised release following 

his prison sentence. For more: 

http://www.usdoj.gov/usao/aln/Pages/ 

newsreleasesmain.html 

St. Mary’s Medical Center to pay 

$40,000 for dumping 

The Palm Beach Post reported on 

March 25, that “St. Mary’s Medical 

Center, the largest hospital in Palm 

Beach County, has agreed to pay a 

$40,000 fine to the federal government 

to settle allegations that it refused to 

provide emergency care for an uninsured 

patient seeking treatment for 

“suicidal thoughts” and alcohol abuse, 

The Palm Beach Post learned 

Wednesday.” 

CMS issues guidance for exceptions 

to specialty hospital moratorium 

On March 19, the Centers for 

Medicare & Medicaid Services 

announced details of its plan to implement 

a moratorium on physician 

investment in and referrals to certain 

specialty hospitals. Under the moratorium, 

a physician may not refer a patient 

to a specialty hospital in which he has 

an ownership or investment interest, 

and the hospital may not bill Medicare 

or any other entity for services provided 

as a result of a prohibited referral. 

Six podiatrists arrested for fraud 

On March 11, the Texas Attorney 

General announced that podiatrists 

James Naples, Frederick Day, Glenn 

Feeback, Philip Hahn, Gregg Petty, and 

John White were arrested and charged 

with health care fraud, racketeering, 

bribery, and obstruction of justice. Also 

charged were non-licensed associates 

Linda Velvin, Cynthia Capps, and 

Shannon Richardson. All were associated 

with New Boston General Hospital 

Inc. in New Boston, TX. For more: 

http://www.oag.state.tx.us/oagnews/release. 

php?id=399&PHPSESSID= 

6512f5e1fa9e62b50f3cd38e80710bef 

Health System to pay $1.3 million 

On March 2, US Attorney for the 

Northern District of Alabama Alice 

Martin announced that Baptist Health 

System, Inc. agreed to pay $1,300,000 

to the U.S. to settle a qui tam or 

whistleblower action brought by a former 

Baptist employee. For more: 

http://www.usdoj.gov/usao/aln/Pages/ 

newsreleasesmain.html 

Montefiore Medical Center settles 

On March 11, US Attorney for the 

Southern District of New York David 

N. Kelley announced that Montefiore 

Medical Center agreed to pay $12 million 

to settle False Claims Act suite. 

For more: http://www.usdoj.gov/usao/nys/ 

Press%20Releases/MARCH04/Montefiore 

%20Settle%20pr.pdf ■ 


29 

May 2004

May 2004 

The Old Days 

30 

ROY SNELL 

Our industry is not very old. Therefore, 

one would think that there is not much 

to talk about when describing the old days. However, things 

have changed so much in the past few years that there are 

some very interesting stories about the old days. Some 

believe “health care has been doing compliance for 20 years.” 

Given the fact that we have become the most fined industry 

in the history of planet earth, I don’t think it’s technically 

possible that the compliance effort started that long ago. 

Some believe that health care compliance got started when 

the U.S. Sentencing Commission Guidelines were written. 

Most would agree that the U.S.S.C. Guidelines were largely 

ignored by health care until the settlements started. 

When did it all start? 

There were a few settlements prior to 1995-96, but the rush 

of settlements began with the University of Pennsylvania and 

Thomas Jefferson University. What got our attention was the 

mandatory compliance program and the mandatory assignment 

of a compliance officer. Oh yes, there were also the 

multi-million dollar fines. What also got our attention was 

the fact that if you had made some effort in the compliance 

area, you would get treated differently if a problem arose. 

Excuses 

I got a real kick out of the excuses people made that prevented 

them from setting up a compliance program. The hospitals 

said: “it’s just those academic centers that can’t get it 

right. The enforcement community won’t bother us.” Then 

the hospitals started settling and the doctors said, “It’s just 

those hospitals. I knew they couldn’t get it right. The government 

won’t bother us.” Then the physicians started settling. 

Compliance officers’ warnings were ignored until their industry 

segment started settling. Eventually there was no segment 

left to say, “They won’t come after us.” 

Memorable moments 

Back in ‘95 and ‘96, I assembled the leadership of our organization 

to watch a video feed from an association that 

described what was going on. We 

sat and watched and listened to 

some of the compliance industry 

pioneers. To us, it was the beginning 

of compliance. It was like 

watching the beginning of time. It 

was like watching Adam and Eve, 

except it was Lew and Brent on the 

big screen. Lew Morris from the 

Office of Inspector General and Brent Saunders from Thomas 

Jefferson were bantering over the issues on the big screen. 

Lew made a reference to billing being as simple as picking 

food from a menu. Brent said if the regulations were as clear 

as a menu we wouldn’t be having these problems. Lew fired 

back, and the compliance industry was born. Ironically the 

same debate and the same arguments are being made seven 

years later. 

HCCA 

The Health Care Compliance Association started in 1996 

when Mary Dunnaway and I brought together some speakers 

and compliance officers for a meeting in Minneapolis. Brent 

Saunders spoke and Debbie Troklus was in the audience. 

Within 24 hours we had a name, a mission statement, 

President, Vice President, and a Second Vice President. When 

I asked Debbie to get involved she said “I am only an interim 

compliance officer and I have no idea what I am doing.” I 

told her, “You will fit right in because none of us know what 

we are doing.” To this day, no one has made a greater contribution 

to the compliance profession than Debbie Troklus. 

What a stroke of luck that she was there that day! Our association 

doesn’t do much patting itself on the back. In fact, we 

have only one award: the Pinnacle Award. In seven years we 

have given it out only once. It was given to Debbie. 

It’s been fun to watch 

We have come a long way and we have a long way to go. Our 

profession “popped up out of nowhere,” within an industry 

that has been around for many years. A lot has changed. 

Some things remain the same. It’s been a real treat to watch it 

evolve and it has been a great learning experience. It will be 

interesting to see what all this looks like ten years from now. 

My guess is that a lot will change and some things will remain 

the same. ■ 


Share Compliance Documents 

With Other HCCA Members... 

And win one of 12 Dell pocket PC’s 

Courtesy of: 

Announcing 

our 5th winner: 

SHERRY 

PARKER 

Each time you add a compliance document 

to the HCCA Website you will have 

an additional chance to win a Dell 

pocket PC* **, courtesy of Sheeder & 

Welch. Add 30 documents and 

you will have 30 chances to win 

each month for a period of 12 

months–November 2003 

to October 2004. One 

Pocket PC will be 

given away each 

month for 12 months. 

Any non-copyrighted 

compliance document will 

count, such as policies, procedures, 

forms, memos, presentations, educational 

tools, government documents, articles, white 

papers, or miscellaneous documents. Just visit 

eCommunities on the HCCA Website: 

www.hcca-info.org 

*No repeat winners. 

**HCCA staff members are not eligible. 


31 

May 2004

Compliance Auditor 

Gainesville, Florida 

Editor: 

Margaret R. Dragon, Director of Communications, HCCA, 781/593-4924, 

Margaret.dragon@hcca-info.org 

Publisher: 

Health Care Compliance Association, 888/580-8373 

Consulting Editors: 

Al Josephs, President, HCCA, 254/202-8620 

Roy Snell, CEO, HCCA, Roy.snell@hcca-info.org 

Design & Layout: 

Robin Taliesin, Raven Creative, 781/631-4639, robint@raven2.com 

Advertising: 

Erin O’Donnell, HCCA, 888/580-8373, Erin.odonnell@hcca-info.org 

We're committed to 

improving the quality 

of life including 

yours. 

HCCA Officers and Board of Directors: 

Al W. Josephs, CHC 

HCCA President 

Director of Corporate Compliance 

Hillcrest Health System 

Odell Guyton 

HCCA 1st Vice President 

Senior Corporate Attorney, 

Director of Compliance, 

US Legal-Finance & Operations 

Microsoft Corporation 

Daniel Roach, Esq. 

HCCA 2nd Vice President 

VP & Corporate Compliance Officer 

Catholic Healthcare West 

Allison Maney, CPA, CHC 

HCCA Treasurer 

Director of Claims Research and 

Resolution 

Pacificare 

Steven Ortquist 

HCCA Secretary 

VP of Ethics & Compliance, 

Chief Compliance Officer 

Banner Health System 

Alan Yuspeh, JD, MBA 

HCCA Imme. Past President 

Senior Vice President 

Ethics, Compliance & Corporate 

Responsibility 

HCA, Inc. 

Julene Brown, RN, BSN, CHC, CPC 

Billing Compliance Manager 

MeritCare Health System 

Britt Crewse, MBA, MHS 

Associate VP and Chief Compliance Officer 

Duke University Health System 

Shawn Y. DeGroot, CHC 

Vice President of Corporate Compliance 

Rapid City Regional Hospital 

Suzie Draper, BSN, RN 

Corporate Compliance Officer and Privacy 

Officer 

Intermountain Health Care 

Rory Jaffe, MD, MBA 


U.C. Davis Health System 

F. Lisa Murtha, Esq., CHC 

Principal 

Parente Randolph 

John Steiner, Jr., JD 


The Cleveland Clinic Health System 

Debbie Troklus, CHC 

Assistant Vice President for Health 

Affairs/Compliance 

University of Louisville, School of 

Medicine 

Sheryl Vacca, CHC 

Director, National Health Care Regulatory 

Practice, Deloitte & Touche 

Greg Warner, CHC 

Director for Compliance 

Mayo Foundation 

We constantly push the envelope to improve lives in new ways. That's 

why Shands HealthCare, based out of Gainesville, Florida, is one of the 

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Requirements include either a business-related Bachelor's Degree with 

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May 2004 

32 

CEO/Executive Director: 

Roy Snell, CHC 

Health Care Compliance Association 

Counsel: 

Keith Halleland, Esq. 

Halleland Lewis Nilan Sipkins & Johnson 

Compliance Today (CT) (ISSN 1523-8466) is published by the Health Care Compliance 

Association (HCCA), 5780 Lincoln Drive, Suite 120, Minneapolis, MN 55436. Subscription rate 

is $357 a year for non-members. Periodicals postage-paid at Minneapolis, MN 55436. Postmaster: 

Send address changes to Compliance Today, 5780 Lincoln Drive, Suite 120, Minneapolis, 

MN 55436. Copyright 2004 the Health Care Compliance Association. All rights reserved. Printed 

in the USA. Except where specifically encouraged, no part of this publication may be reproduced, 

in any form or by any means without prior written consent of the HCCA. For subscription information 

and advertising rates, call HCCA at 888/580-8373. Send press releases to M. Dragon, PO 

Box 197, Nahant, MA 01908. Opinions expressed are not those of this publication or the HCCA. 

Mention of products and services does not constitute endorsement. Neither the HCCA nor CT is 

engaged in rendering legal or other professional services. If such assistance is needed, readers should 

consult professional counsel or other professional advisors for specific legal or ethical questions. 

We offer an excellent compensation and benefits package along with 

relocation assistance. For further information about opportunities 

and qualifications, visit our website at www.shands.org ("Jobs at 

Shands") and apply online, or call Jeannie J. Poon, PHR, Human 

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poonjj@shands.ufl.edu • Drug-Free Workplace 

Shands HealthCare...Life in progress. 

EOE M/F/D/V DFW 

www.shands.org 


Health Care 

Compliance 

Association 

presents 

PHYSICIAN PRACTICE 

COMPLIANCE CONFERENCE 

October 7- 8, 2004 

SIR FRANCIS DRAKE HOTEL - SAN FRANCISCO, CA 

2004 PROGRAM WILL FEATURE: 

NATIONAL EXPERTS ON PHYSICIAN’S LEGAL AND 

REGULATORY COMPLIANCE ISSUES 

PROGRAM TOPICS APPLICABLE TO BOTH LARGE 

AND SMALL PHYSICIAN GROUP PRACTICES 

COMPLIANCE PROGRAM DESIGN, 

AUDIT AND MONITORING, AND 

HOT TRENDS IN ENFORCEMENT 

SAVE THE DATE! 

33

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Coding • Documentation 

Compliance • Audits 

Billing Disputes 

Negotiation • Analysis 

Expert Witness 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CALL: 1 - 8 6 6 - H P 3 - 4 2 3 1 

w w w. h p 3 . c o m 

 

 

34

Medicare compliance 

is a big burden 

for your laboratory. 

Let HSC provide the 

ongoing support you need. 

Since 1987, Health Systems Concepts, Inc., has been 

performing compliance and charge master reviews for 

hospitals and independent laboratories. 

We developed the HSC Compliance Subscription 

Program to provide laboratory staff with expert 

answers to Medicare coding and billing questions year 

long for a low-cost, annual subscription fee. It's simple, 

timely, and efficient, bringing you the expertise of top 

coding and reimbursement professionals, as well as 

specialized legal expertise. 

HSC has the proven expertise to: 

• Review your charge master 

billing codes 

• Validate electronic 

processes and systems 

• Review compliance-related 

procedures 

• Guide the development of 

a custom compliance plan 

that includes procedures 

and staff training 

• Train your laboratory 

compliance coordinator 

• Conduct compliance audits 

• Assist you if Medicare audit 

challenges should arise 

Get ongoing coding and billing support. 

Call HSC at 407-774-5291. 

1307 Sweetwater Club Boulevard 

Longwood, FL 32779-2141 

Phone: 407.774.5291 

info@hsc-clc.com 

35

36

Let HCCA help 

you with your 

HIPAA training! 

The release of individually identifiable health 

information can be disastrous to your patients, 

your organization and your reputation. Let HCCA 

assist you in educating your staff for HIPAA with 

Privacy Matters, a professionally produced video-based 

training program that is informative, engaging and 

cost-effective. 

The program presents ten case studies in which health 

care employees are confronted with potential or actual 

privacy compliance concerns. After viewing each scene, 

participants discuss the situation and develop a plan of 

action for resolving the concern using their own organization’s 

policies and standards on the topic. Privacy 

Matters gives your employees: 

• A clear understanding of your organization’s commitment 

to balance the rights of your patients with the 

needs of the healthcare community to share individually 

identifiable health information. 

• A review of your organization’s expectations, standards, 

policies and procedures as they relate to maintaining 

the privacy of patients’ individually identifiable 

health information. 

• The skills for recognizing and resolving privacy related 

issues and compliance concerns. 

• An increased appreciation of 

their personal and professional 

commitment to comply with 

your organization’s privacy 

standards, benefitting your 

patients and your organization. 

KIT INCLUDES: 

19 Minute Video with On-screen Instructor and Ten Case Studies. 

Case Study Topics include: 

■ Covered Health Information ■ Patient Rights ■ Business 

Associates ■ Electronic Transmission of Patient Information 

■ Wrongful Disclosure ■ Misplaced or Lost Information ■ Public 

Discussions ■ Third Party Requests for Information ■ Public 

Displays of Information ■ Handling Requests for Patient 

Information 

Session Leader’s Guide including: 

■ Fully Reproducible Participant Worksheets for Each Case Study 

■ Fully Reproducible Handout with Problem Solving Model 

■ Fully Reproducible Appendices including: Attendance Sign-In 

Sheet; Certification Form; Course Evaluation; Wallet Card; Poster 

The video is closed captioned for the hearing impaired. 

ORDER FORM 

Yes! Send me my kit today: 

❏ HCCA Member: $345/kit 

❏ Non-Member: $395/kit 

❏ Join and Order: $545 

Price includes regular shipping by UPS Ground. 

Call 888/580-8373 to arrange for special shipping or quantity 

discounts. 

TOTAL: 

Please type or print: 

FIRST NAME 

PLACE OF EMPLOYMENT 

TITLE 

STREET 

LAST NAME 

CITY STATE ZIP 

DAYTIME PHONE ( ) 

FAX ( ) 

PAYMENT INFORMATION: 

❏ Check enclosed 

❏ Charge my credit card: 

❏ MasterCard ❏ VISA ❏ American Express 

ACCOUNT NO. 

NAME ON CARD 

A VIDEO- 

BASED 

TRAINING 

PROGRAM 

SIGNATURE EXP. DATE / 

Federal Tax ID: 23-2882664 

Prices subject to change without notice. 

Please make your check payable to HCCA. Mail to HCCA, 5780 

Lincoln Drive, Suite 120, Minneapolis, MN 55436 

Or fax (credit card orders only) to 952/988-0146. 

For information call 888/580-8373. 

ccc/CTmay04 

37

American Health Lawyers Association 

and 

Health Care Compliance Association 

presents 

FRAUD AND COMPLIANCE FORUM 

September 26-28, 2004 

Renaissance Harborplace Hotel • Baltimore, MD 

PLAN NOW TO ATTEND 

REGISTER BY JUNE 1st AND SAVE 

Don't miss the Fraud and Compliance Forum designed specifically 

for compliance officers and health attorneys who must advise their 

clients and institutions on the latest developments in fraud and 

abuse and compliance issues. The program will provide legal 

analysis and practical guidance on issues such as: 

• Stark II Phase II Regulations 

• EMTALA 

• Legal Ethics 

• Fraud and Abuse Issues for 

Physicians, Long Term Care 

Facilities, Managed Care 

Organizations, Hospitals and 

Health Systems and Pharmaceutical Manufacturers 

• Research Compliance 

• Auditing and Monitoring Compliance Plans 

• Internal Investigations 

Early Registration Discounts! 

Register before June 1st 

$750 AHLA/HCCA Member 

$695 each additional AHLA/HCCA Member 

$925 Non-Member 

To register visit us online at: www.hcca-info.org 

For questions call HCCA at: (888) 580-8373 

39

Now that HIPAA is here, 

the real challenge has just begun. 

With HIPAA Privacy Guide and HIPAA Security Guide CCH helps you make 

smart compliance decisions now, so you won’t have to worry about it later. 

CCH’s HIPAA Privacy Guide offers a greater breadth and depth of expert information 

to quickly streamline your understanding, assessment and implementation of 

the HIPAA Privacy Rules. It also provides you unique online access to late-breaking 

HIPAA news and updates, electronic HIPAA forms, policies, procedures and 

guidance on state laws that supercede national HIPAA regulations. 

CCH’s HIPAA Security Guide follows suit by delivering complete expert guidance 

and commentary on the physical, administrative and technical aspects of meeting 

HIPAA Security requirements. It also provides exclusive online access to HIPAA 

Security forms, policies and procedures, which can be downloaded and customized. 

For more information or to order call 888 224 7377 or visit health.cch.com 

© 2004 CCH INCORPORATED. All rights reserved. 

41

Look for the 

NAID Certified Logo 

Finally – Audited Compliance Standards 

for Records Destruction Companies. 

Records destruction contractors that are certified by the National Association 

for Information Destruction (NAID) have gone beyond claims and promises by 

submitting to a close examination of every aspect of their security. NAID asks 

the right questions and verifies the relevant facts to ensure the records destruction 

contractor you hire is doing the job you’re paying them to do. By ensuring their 

compliance, NAID Certification ensures your compliance. 

www.naidonline.org/certified

MC Strategies – Consulting 

Facilitating performance 

and compliance. 

WebInservice ® – Training 

Improving efficiency 

through knowledge. 

HCPCS/CPT, APC, ICD-9. No wonder 

you have to be compliant to the letter. 

At MC Strategies, we can help you get there. Our consultants provide comprehensive 

assessments, such as Chargemaster reviews that help you identify billing issues 

and ensure HCPCS/CPT accuracy. And APC validations that include CPT and ICD-9 

accuracy verification. But helping you get compliant is only part of what we do. 

Our WebInservice ® online training features the industry‘s most comprehensive set 

of compliance curricula. Our EduCode ® Compliance curriculum is a practical yet 

extremely informative program that covers general compliance as well as the highlytechnical 

and high-risk areas of billing and coding compliance. And because all 

WebInservice training is delivered online, you can rest assured that you‘re tapping 

into the most efficient and cost-effective training method available today. 

Achieving compliance today is a complex task. And it takes more than knowing 

the basics, but rather, knowing it all from A to Z. To learn more, log onto 

www.mcstrategies.com or call us at 800-999-6274. 

46

HCCB Compliance Certification 

may be the missing piece as a compliance professional. 

Linda Wolverton, CHC, 

Director, Compliance, 

Triad Hospitals, Inc. says 

that she sought CHC 

Certification because 

"...many knowledgeable 

people work 

in compliance, and I 

wanted my peers to 

recognize me as 

‘one of their own’." 

With certification she is 

"recognized as having taken 

the profession seriously 

having met the national 

professional standard." 

The Compliance Professional’s Certification 

CHC Certification, which is developed and 

managed by The Healthcare Compliance 

Certification Board (HCCB), became available 

June 26, 2000. Since that time, hundreds of 

your colleagues have become Certified in 

Healthcare Compliance. 

CHC Certification Benefits: 

❚ Enhances the credibility of the compliance 

practitioner 

❚ Enhances the credibility of the compliance 

programs staffed by these certified 

professionals 

❚ Assures that each certified compliance 

practitioner has the broad knowledge base 

necessary to perform the compliance function 

❚ Establishes professional standards and status 

for compliance professionals 

❚ Facilitates compliance work for compliance 

practitioners in dealing with other professionals 

in the industry, such as physicians and attorneys 

❚ Demonstrates the hard work and dedication 

necessary to perform the compliance task 

For more information on how you can become 

CHC Certified, please call 888/580-8373 or 

email hccb@hcca-info.org or visit the HCCA 

Website: http://www.hcca-info.org/Template. 

cfm?section=HCCB_Certification 

The HCCB Compliance Certification Examination 

is available in all 50 U.S. States. Join your peers 

& become Certified in Healthcare Compliance (CHC).

Meet - Health Care Compliance Association

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