MD - Health Care Compliance Association

Volume Eight 

Number One 

January 2006 

Published Monthly 

Meet 

Greg Jones 

Law Enforcement Liaison, 

Prescription Drug Benefit, 

CMS’s Program Integrity Group

At the end of January, 

the Health Care 

Compliance Association 

will move to its new 

headquarters located at: 

6500 Barrie Road, 

Suite 250 

Minneapolis, MN 55435 

While our address 

will change, our telephone 

and fax numbers will 

remain the same: 

Toll-free phone: 

888/580-8373 

Local phone: 

952/988-0141 

Fax: 

952/988-0146 

And you can always 

reach us via e-mail at 

info@hcca-info.org 

or on our Web site at 

www.hcca-info.org

ASK 

ON 

THE 

LEADERSHIP 

ONCALENDAR 

JOHN ASKS THE HCCA 

LEADERSHIP YOUR QUESTIONS 

JOHN FALCETANO 

Editor’s note: Beginning with this issue 

of Compliance Today, HCCA will 

feature this column—John Asks the 

HCCA Leadership Your Questions. 

John Falcetano, Chief Audit/Compliance Officer for University 

Health Systems of Eastern Carolina and a long-time member of 

HCCA, knows that members frequently have good questions that they 

would like to ask leadership, but for some reason or another, they are 

never afforded the opportunity. This column has been created to 

afford them that opportunity. Members may submit their questions to 

John and and he will publish the HCCA leadership response in a subsequent 

issue of Compliance Today. If you would like to ask a question 

of leadership, please submit your question via e-mail to 

Jfalcetano@cox.net 

Question: What is the best way for a member to study for the CHC 

examination Is there some type of training offered to prepare a 

candidate and if so, what types of topics are covered in the training 

sessions 

Leadership’s Response from Debbie Troklus: The best prep for 

the CHC certification exam is to attend one of the HCCA’s Academies 

(basic and advanced), although the Academies are not required to sit for 

the exam. The Academies, which are offered five times a year, cover all 

topics that are on the exam. 

The exam is based on the seven elements of an effective compliance 

program, as outlined by the Federal Sentencing Commission. The 

HCCB Candidate Handbook actually reviews in great detail the content 

outline for each of the elements. It is a good idea to review the 

content and determine in what areas an individual feels weak, and then 

study those particular areas. 

I would advise reading the Health Care Compliance Professional’s 

Manual and Compliance 101. The HCCA also has a practice test on 

its Web site as well as a practice test in the HCCB Candidate 

Handbook. 

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

2006 CONFERENCES (BY STATE): 

Anchorage, AK 

■ Alaska Area Meeting 

July 13-14 

Scottsdale, AZ 

■ Compliance Academy 

June 5-9 

Los Angeles, CA 

■ Compliance Academy 

February 6-10 

San Francisco, CA 

■ Advanced Academy 

June 19-23 

San Diego, CA 

■ West Coast Area Meeting 

July 28 

Denver, CO 

■ Mountain Area Meeting 

August 25 

Orlando, FL 

■ South Atlantic Area Meeting 

January 27 

Atlanta, GA 

■ Southeast Area Meeting 

February 10 

Honolulu, HI 

■ Hawaii Area Meeting 

October 19-20 

Chicago, IL 

■ North Central Area Meeting 

October 6 

Baltimore, MD 

■ Northeast Area Meeting 

March 3 

Boston, MA 

■ New England Area Meeting 

September 8 

Detroit, MI 

■ Upper North Central Area Meeting 

June 16 

Minneapolis, MN 

■ Upper Midwest Area Meeting 

September 15 

Kansas City, MO 

■ Midwest Area Meeting 

August 4 

Las Vegas, NV 

■ 10th Anniversary Compliance 

Institute, Caesars Palace 

April 23-26 

■ 3rd Annual Research Conference 

September 17-19 

Pittsburgh, PA 

■ Mid Atlantic Area Meeting 

September 29 

Nashville, TN 

■ South Central Area Meeting 

November 10 

Dallas, TX 

■ Southwest Area Meeting 

February 17 

Seattle, WA 

■ Pacific Northwest Area Meeting 

June 2 

NATIONAL CORPORATE 

COMPLIANCE AND ETHICS WEEK 

■ May 21-27 

INSIDE 

2 HCCA New 

Headquarters 

3 Ask Leadership 

4 OIG 2006 Work Plan 

5 HCCA Audio 

Conferences 

9 Improving revenue 

15 Meet Greg Jones 

17 OIG issues draft 

compliance 

guidance 

20 Letter from the CEO 

23 HCCA seeks your 

contributions 

24 Nonprofit, tax-exempt 

organizations 

29 NDC numbers, drug 

claims, and FCA 

31 A new value 

proposition 

32 Introducing Alan 

Pierce 

34 HIPAA EDI 835 

37 CHC Certification 

38 OIG roadmap for 

effective compliance 

45 New HCCA Members 

3 

January 2006

defendants. Further, during this same period, a 

total of 459 defendants were convicted for 

health care fraud related crimes. In 2004, the 

DOJ also pursued 868 new civil health care 

fraud investigations and filed complaints or 

intervened in 269 civil health care cases. 

By Sidney Summers Welch and Sara Kay Wheeler 

Editor’s note: Ms. Sidney Summers 

Welch and Ms. Sara Kay Wheeler are 

partners in the Atlanta office of Powell 

Goldstein LLP where they focus their 

practices exclusively in the area of health 

law. Ms. Welch may be reached by telephone 

at 404/572-6754 or by e-mail at 

swelch@pogolaw.com. Ms. Wheeler may 

be reached a by telephone at 404/572- 

6905 or by e-mail at swheeler@pogolaw.com. 

The authors would like to 

thank Kinshasa K. Williams for her 

assistance in preparing this article. Ms. 

Williams is an associate in the office of 

Powell Goldstein LLP, where she practices 

in the firm’s Health Care Group. 

On November 16, 2005, the United 

States Department of Health and 

Human Services (HHS), Office of 

Inspector General (OIG), published its Fiscal 

Year 2006 Work Plan. 1 The primary purpose 

of the Work Plan is to articulate to the 

provider and supplier community the areas of 

highest risk in the programs and activities 

administered by HHS and to provide a road 

map of areas in which providers can expect 

the OIG to pursue enforcement activities. 

With the staggering financial recoveries 

achieved by the U.S. Department of Justice 

(DOJ) and HHS in recent years, health care 

organizations transacting business with the 

federal health care programs should review 

this publication to identify any vulnerabilities 

that may pertain to their operations. In combination 

with the OIG’s series of Compliance 

Program Guidance (CPGs) for various industry 

sectors, such as hospitals, physicians, and 

pharmaceutical companies, 2 compliance officers 

should view the Work Plan as an annual 

guide for updating and for effectively focusing 

to update and their organization’s internal 

compliance efforts, particularly auditing projects 

designed to measure risk. Since the Work 

Plan covers a wide variety of issues and 

provider categories, the purpose of this article 

is to highlight those issues that may be most 

relevant to hospitals and physicians. 

The enforcement environment 

is intense 

To put the usefulness of the Work Plan in context, 

it is first helpful to consider the ongoing 

efforts and successes of HHS and the DOJ to 

combat health care fraud and abuse. In 2004 

alone, HHS and the DOJ won or negotiated 

more than $1.5 billion in enforcement 

actions. 3 Also in 2004, the U.S. Attorneys’ 

Offices opened 1,002 new criminal health care 

fraud investigations involving 1,685 potential 

defendants; federal prosecutors handled more 

than 1,625 criminal health care fraud investigations 

involving 2,361 defendants; and filed 

criminal charges in 395 cases involving 646 

With the increase in enforcement and criminal 

actions for health care fraud and abuse, it 

has become increasingly important for organizations 

to pay close attention to issues 

proactively raised by either HHS or DOJ, 

such as those listed in the OIG’s Work Plan. 

It is also important for providers to recognize 

that many of the target areas articulated in 

the Work Plan are often initially identified in 

OIG and DOJ enforcement actions. For 

example, by the end of fiscal year 2004, several 

False Claims Act settlements were 

reached in cases involving the submission of 

dialysis claims. Correspondingly, the 2006 

Work Plan identifies a “new area” of interest 

as payment for “observation services” versus 

“inpatient admissions” for dialysis services. 4 

Work Plan—a critical compliance tool 

As a general matter, a well-designed effective 

compliance program will identify and reduce 

risk, improve internal controls, and measure its 

own effectiveness. First, an organization must 

identify those risks deriving from its relationship 

with federal and state health care programs. 

This process will involve a proactive 

and prospective examination of the risk for 

abuse that exists within the organization. 

Second, as an organization identifies and 

assesses its risk it must take action to fortify 

internal controls and processes to minimize 

those risks. Third, the organization must evaluate 

on an ongoing basis whether it has been 

successful in addressing those risks. The Work 

Plan serves as an excellent resource on which 

compliance officers may review their organizations’ 

compliance objectives to align or realign 

Continued on page 6 

January 2006 

4 

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

Join us for the following 

HCCA Audio 

Conferences 

Get the latest “how-to” information—tools and advice you 

can use daily without even leaving your office! Register on 

the HCCA Web site—www.hcca-info.org. You will receive an 

e-mail a few days before the conference with any conference 

handouts, and dial-in information and instructions. 

➤ 

➤ Medicare Coverage Review 

Speakers: Lisa Murtha and Ryan Meade 

January 12 and 19 

➤ 

➤ Medicare Part D 

Speakers: James G. Sheehan and David Bloch 

January 23 

HCCA Audio Conferences are a fast 

and easy way to aquire HCCB CEUs! 

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

5

OIG 2006 Work Plan ...continued from page 4 

their compliance goals with those issues important 

to HHS for the upcoming fiscal year. 

Compliance officers should use the Work Plan 

to identify and focus their compliance efforts 

on those areas of potential concern or risk that 

are most relevant to their specific organization. 

Such risk areas will naturally differ across 

provider categories and operations such that 

the compliance strategies that will need to be 

pursued will also differ. However, because the 

OIG’s efforts to address program vulnerabilities 

is an evolving, on-going, year-round 

process, compliance officers efforts should not 

be limited to the areas addressed by the Work 

Plan in their effort to assess risk. 

OIG 2006 Work Plan 

The fiscal year 2006 Work Plan is divided 

into four sections. The first three sections 

consist of ongoing and proposed work relating 

to each of the major program operating 

divisions of HHS, including CMS, the public 

health agencies, and the Administration 

for Children, Families, and Aging. The 

fourth section contains projects that cut 

across HHS programs, including state and 

local government use of federal funds, and 

the functional areas of HHS. 

Risk areas for hospitals—The 2006 Work 

Plan contains many areas that have been of 

interest to the OIG in previous years. Of the 

twenty-five focus areas listed for Medicare 

and Medicaid Hospitals in the 2006 Work 

Plan, only seven of these areas are new issues 

that were not previously identified in other 

Work Plans. 

New focus areas 

The OIG has added the following new focus 

areas to the 2006 Work Plan: 

■ Adjustments for Graduate Medical 

Education Payments—The OIG will 

determine if audit adjustments for direct 

and indirect graduate medical education 

that fiscal intermediaries make while settling 

Medicare cost reports were properly reflected 

in revised Medicare reimbursement. 

■ Payments for Observation Services 

versus Inpatient Admissions for 

Dialysis Services—As noted previously, 

the OIG will evaluate whether payments 

made for inpatient admissions in connection 

with dialysis services were consistent 

with the level of care needed as documented 

in physicians’ orders. 

■ Inpatient Hospital Payments for New 

Technologies—The OIG will examine 

the costs associated with new devices and 

technologies to determine if reimbursement 

to hospitals is appropriate. 

■ Inpatient Psychiatric Hospitals—The 

OIG is interested in whether payments to 

psychiatric hospitals under the prospective 

payment system have been made in accordance 

with the Medicare laws and regulations. 

Specifically, the OIG will examine 

outlier payments and payments made for 

interrupted stays. 

■ Outpatient Department Payments— 

The OIG will also review the appropriateness 

of payments made to hospital outpatient 

departments, especially those made 

for multiple procedures, repeat procedures, 

and global surgeries. 

■ Unbundling of Hospital Outpatient 

Services—The 2006 Work Plan indicates 

that the OIG intends to determine the 

extent to which hospitals and other 

providers are submitting claims for services 

that should be bundled into outpatient 

services. Medicare prohibits the unbundling 

of hospital services to include outpatient as 

well as inpatient services since the practice 

could lead to unnecessary Medicare 

expenditures. 

■ “Inpatient Only” Services Performed in 

an Outpatient Setting—The OIG will 

further determine if Medicare payments 

for certain services provided in an outpatient 

setting are appropriately being 

denied when Medicare covers the service 

as “inpatient only.” The OIG is also concerned 

about the extent to which 

Medicare beneficiaries are held liable for 

denied inpatient claims for these services. 

Recurring focus areas in the 

2006 Work Plan 

The following are recurring focus areas contained 

in the 2006 Work Plan that may be of 

importance to hospitals in the upcoming year: 

■ Inpatient Prospective Payment System 

Wage Indices—Continuing its pursuit of 

a concern first identified in 2005 Work 

Plan, the OIG in 2006 will examine 

whether hospital and Medicare controls 

are adequate to ensure the accuracy of the 

hospital wage data used for calculating 

wage indices for the inpatient prospective 

payment system. The thrust of this project 

is to determine the effect on the 

Medicare program in terms of potentially 

incorrect DRG reimbursement. 

■ Rebates Paid to Hospitals—This year, the 

OIG will continue efforts to determine 

whether hospitals are properly identifying 

purchase credits as a separate line item in 

their Medicare cost reports. Rebates paid 

to hospitals were also a concern cited in 

the Fiscal Year 2006 Work Plan. 

■ Outpatient Outlier and Other Charge- 

Related Issues—Consistent with the 

agency’s long time concern listed in 2003, 

2004, and 2005 Work Plans, the OIG will 

again in 2006 continue its efforts to determine 

whether outlier payments to hospital 

outpatient departments were made in 

accordance with applicable Medicare rules 

and whether current Medicare reimbursement 

mechanisms appropriately reimburse 

providers as intended. 

■ Hospital Reporting of Restraint Related 

Deaths—Also an issue in 2005, the OIG 

January 2006 

6 


in 2006 will assess hospital compliance 

with the Medicare conditions of participation, 

which require hospitals to report all 

patient deaths that may have been caused 

by restraints or seclusions. 

■ Medicaid Diagnosis-Related Group 

Payment Window—A long-time issue 

since 2003, Medicaid diagnosis-related 

group payment window was an issue previously 

reviewed by the OIG in the 

Medicare program. The OIG found that 

hospitals had improperly submitted separate 

Medicare billings for inpatient-stayrelated 

laboratory and other services performed 

within three days of admission. 

The OIG will determine whether prospective 

payment system hospitals submitted 

Medicaid claims for inpatient-stay-related 

laboratory and other services within three 

days of the hospital admission and the 

potential cost savings that would result 

from State prohibition of this practice. 

While this effort may have a more immediate 

effect on state Medicaid agencies, the 

notification is important for hospitals participating 

in state Medicaid programs. 

■ Hospital Eligibility for Disproportionate 

Share Hospital (DSH) Payments—As in 

fiscal year 2005, the OIG will continue to 

determine whether States are appropriately 

determining hospitals’ eligibility for 

Medicaid DSH payments. 

Risk areas for physicians and 

physician practices 

The 2006 Work Plan’s focus areas for physicians 

and other health professionals reflect 

some recurring themes from last year’s Work 

Plan. With the exception of two new focus 

areas—”Payment to Providers for Initial 

Preventive Physical Examinations” and 

“Potential Duplicate Physical Therapy 

Claims”—all of the focus areas identified in 

this section of the 2006 Work Plan were 

identified in the 2005 Work Plan. 

The Medicare Modernization Act added coverage 

under Part B for an initial preventive physical 

examination, including a screening EKG for 

new Medicare beneficiaries effective January 1, 

2005. Medicare is interested in evaluating the 

impact of these exams on payments and physician 

billing practices since physicians have the 

opportunity to claim higher payment under 

code G0244 for services that already may have 

been performed in a past evaluation and management 

visit. Furthermore, these exams must 

include certain documented components, 

including height and weight measurements, 

blood pressure, medical and social history 

review, an assessment for the potential for 

depression, and an evaluation of functioning 

ability. For potential duplicate physical therapy 

claims, Medicare is interested in determining 

whether audits are adequately identifying potential 

duplicate physical therapy claims submitted 

to Part A and Part B contractors, in follow-up 

to a fraud alert issued in May 2004 by CMS. 

The issue of “Long Distance” Physician Claims, 

specifically regarding the provision of services 

for an ongoing illness at a practice well outside 

of the beneficiary’s location, appears to be a persistent 

area of concern, dating back to 2003. 

The recurring physician-specific focus areas 

identified by the 2006 Work Plan include 

the following: 

■ Propriety of contractual relationships 

between billing companies and physicians 

and their impact on physicians’ billings 

■ Improper Medicare payments for physicians 

employed by the VA while those 

physicians also billed for services rendered 

at other hospitals during the time the same 

physicians were on duty at a VA hospital 

■ Compliance of care plan oversight in the 

hospice setting with Medicare regulations 

■ Inappropriate orders or performance of 

services by physicians excluded from federal 

health care programs 

■ Compliance of in-office pathology services 

with Medicare Part B requirements and 

relationships between physicians providing 

in-office pathology services and outside 

pathology companies 

■ Appropriateness of professional and technical 

component billing for cardiography 

and echocardiography services, including 

using the 26 modifier where the physician 

performs the professional interpretation 

separately from the technical component 

■ Medical necessity, adequate documentation, 

and physician certification statements for 

physical and occupation therapy services 

that improve or restore functions, prevent 

further disability and relieve symptoms 

■ Evaluating medical necessity and billing 

compliance for Part B mental health services 

provided in physicians’ offices 

■ Assessing medical necessity and billing 

compliance for wound care services billed 

by physicians 

A number of focus areas identified outside of 

the “Medicare Physicians and Other Health 

Professionals” section of the 2006 Work Plan 

are applicable to physicians and their practices. 

Physicians should be aware of these 

“hot spots,” and, to the extent they are applicable 

or common to their practice, these 

issues should be addressed by and incorporated 

into their compliance efforts for 2006. 

These areas include focus on the following: 

■ Medical necessity and simultaneous 

implantation of coronary artery stents 

■ Medical necessity, adequate support, and 

actual provision of rehabilitation and 

infusion therapy services in the skilled 

nursing facility setting 

■ Medical necessity and excessive billing of 

imaging and laboratory services in nursing 

homes 

■ Oversight of hospice providers 

■ Documented medical necessity of therapeutic 

footwear 



7 

January 2006

OIG 2006 Work Plan ...continued from page 7 

■ Documented medical necessity and actual 

receipt of durable medical equipment 

■ Medicare drug reimbursement generally, 

including focus on acquisition and reimbursement 

under the average sales price, 

oral antiemetic medications, and duplicate 

payments for Part B drugs 

■ Prior approval for services provided, physician 

supervision, and licensure of personnel 

performing tests in Independent 

Diagnostic Testing Facilities (IDTFs) 

■ Documented medical necessity for appropriate 

services provided in Comprehensive 

Outpatient Rehabilitation Facilities 

(CORFs) 

■ Part B payments for inpatient radiology 

services 

■ Pricing of laboratory services provided to 

Medicare patients vs. patients covered by 

other payors 

■ Controls for identifying inappropriate 

payments for or utilization of covered preventive 

care services 

■ Physicians’ roles in over prescribing 

OxyContin and other prescription drugs 

Finally, in addition to these focus areas, in 

light of the recent advisory opinions, fraud 

alerts, corporate integrity agreements, and 

ongoing investigations, physicians should take 

the opportunity in 2006 to catalogue their 

current relationships with other providers and 

suppliers in the health care industry and consult 

qualified counsel to determine whether 

those relationships are compliant with federal 

and state laws, particularly the federal Anti- 

Kickback Statute and Stark II. ■ 

1. The OIG Fiscal Year 2006 Work Plan is available at 

http://www.oig.hhs.gov/publications/docs/workplan/2006/ 

WorkPlanFY2006.pdf 

2. The OIG first issued a CPG for hospitals in 1998 (“1998 

CPG”). See OIG Compliance Program Guidance for 

Hospitals, 63 Fed. Reg. 8987 (February 23, 1998). The 1998 

CPG was primarily intended to encourage hospitals to design 

and implement corporate compliance plans and programs. As a 

supplement to this early guidance, the OIG issued the 

“Supplemental Compliance Program Guidance for Hospitals” 

on January 31, 2005 (“Supplemental CPG”). See OIG 

Supplemental Compliance program Guidance for Hospitals, 70 

Fed. Reg. 4858 (January 31, 2005). The Supplemental CPG is 

focused on measuring and improving the effectiveness of existing 

compliance efforts, identifies specific fraud and abuse risk 

areas that hospitals should actively monitor, and describes the 

OIG’s expectations regarding compliance program design and 

guidelines for monitoring existing compliance programs. 

3. See HHS and DOJ, Health Care Fraud and Abuse Control 

Program (HCFAC) Annual Report For FY 2004 available at 

http://www.oig.hhs.gov/publications/docs/hcfac/hcfacreport2004.htm. 

During 2004, the federal government won or 

negotiated approximately $605 million in judgments and settlements, 

and it attained additional administrative impositions in 

health care fraud cases and proceedings. The Medicare Trust 

Fund received transfers of more than $1.51 billion during this 

period as a result of these efforts, as well as those of preceding 

years, and an additional $99 million in federal Medicaid money 

was similarly transferred to the Centers for Medicare and 

Medicaid Services (CMS) as a result of these efforts. The 

HCFAC account has returned over $7.3 billion to the Medicare 

Trust Fund since the inception of the program in 1997. 

4. Specifically, in the 2006 Work Plan, the OIG noted that during 

a recent audit it found that hospitals admitted patients for 

dialysis treatment, which lasted from 24 to 48 hours in which 

medical reviewers indicated that the stays were for the purpose 

of observation rather than treatment. The CMS Intermediary 

Manual requires the physician’s order to clearly state that the 

level of care the patient requires; e.g., “admission to inpatient 

status” or “admission to observation status.” Accordingly, the 

OIG intends in 2006 to examine whether payments made for 

“inpatient admissions” related to dialysis services were appropriate 

given the physicians’ orders in the case. 

Helpful Hints 

Eight steps to take in using the OIG 

Work Plan in your compliance program 

■ Review the table of contents. It lists 

the specific topics of concern of the 

OIG by the type of organization 

■ Highlight those areas that are potential 

applicable concerns and high priorities 

for your organization 

■ Review, in detail, the OIG’s concerns 

with the specific risk area 

■ Analyze your organization’s 

compliance program based on 

those stated concerns 

■ Determine whether your organization’s 

compliance program is meeting its 

established objectives and addressing 

these particular risk areas for your 

organization 

■ Discuss this analysis with key individuals 

of the organization’s compliance 

team to focus your compliance program 

on the specific areas of interest 

of the OIG for the coming year 

■ Educate the organization’s staff about 

these identified risk areas 

■ Ensure that an effective monitoring 

system is established and put in place 

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January 2006 

8 


By Susan C. L. Theuns 

Editor’s note: Susan C. L. Theuns, It is at this point where many providers have 

PA-C, CPC, CHC, is Operations difficulty understanding how they personally 

Administrator & Compliance Director expect that medical necessity has been met 

with MedStar Physician Partners. She and yet Medicare does not agree with them. 

may be reached by telephone at 

That’s because the determination of “medical 

443/725-8713. 

necessity” is not provider driven. Medical 

necessity is established by Congress, the U.S. 

There are a variety of ways that a Department of Health and Human Services 

compliance program can improve (DHHS) and the Centers for Medicare and 

the bottom line. One way is to Medicaid Services (CMS). Keeping this point 

avoid expenses, such as being proactive with in perspective will help you follow the general 

schematic of the process when dealing 

coding audits to save you from fines and 

penalties. Identifying high-level coders can with ABNs in the office practice setting. 

also save you unwanted payer audits and possible 

refunding. But one way to actually Additionally, an ABN must be completed 

improve revenue is through the proper use of before the service has been provided. That 

Advance Beneficiary Notices (ABNs). means that the office must be organized and 

know their providers’ protocols and paradigms 

when seeing scheduled patients. 

Proper completion and use of ABNs can 

■ reduce write-offs 

■ improve cash flow 

The ABN form 

■ recoup potential or real lost revenue ABN forms have actually been around for 

more than 20 years. The federal government 

What is an ABN 

has since developed the official ABN form, 

An ABN is actually a waiver of liability that which is available at www.cms.hhs.gov 

shifts the financial responsibility directly to the /medicare/bni/. CMS makes them available 

patient. Most providers are contracted with in both English and Spanish as well as a general 

use form and laboratory services form. 

Medicare and are required to “accept assignment.” 

The ABN allows a provider to bill the For simplicity, this article will be focusing on 

patient if the service provided is not covered by the general use form. The version on this 

Medicare (in other words, coverage is denied). Web site, June 2002, is the only version that 

In situations where Medicare does not cover a providers should be using currently. Note that 

service for lack of “medical necessity” or due to there are requirements when reproducing this 

frequency guidelines, the ABN form notifies form—chiefly that the content remains the 

the patient in advance of receiving the service same and that the font is a minimum of 12 

that non-coverage is likely. Note that ABNs are point so that it is more readily readable. The 

not needed for covered services or “sick visits.” form number is CMS-R-131-G. 

Performing an ABN audit 

Initially, the easiest way to audit your ABN 

use is to run a billing report for the use of 

the –GA modifier. The –GA modifier signifies 

that a signed ABN has been obtained 

and tells the payor (Medicare), that you have 

an ABN and will be balance-billing the 

patient if Medicare denies payment for the 

service. Once you have the report (I would 

suggest limiting the time to a six-month period), 

you can randomly select five or 10 uses 

of the –GA modifier per provider. In theory, 

the medical office should be able to produce 

a copy of the ABN for the corresponding use 

of the ABN. 

If the office is able to produce the corresponding 

ABN, that’s a positive step. If they cannot—that 

is indicative of a key problem that 

needs to be addressed immediately. Of the 

ABNs that they are able to produce, look at 

the fields that are required to be completed, 

see if they chose option 1 or option 2, and 

whether or not the form has been signed and 

dated. Having the ABN is only the first step; 

many problems arise from there. In order for 

it to be a legal document, all the necessary 

fields need to be completed, an option must 

be checked off, and it must be both dated 

and signed. 

What if they refuse to sign 

Many patients, when faced with signing a 

form that will make them financially responsible, 

will simply refuse. If they are refusing 

the service, then document their refusal. 

However, most of the time, they want the 

service but just don’t want to sign the form. 

Patients think if they don’t sign the form but 

get the service, it will be free. If they have 

said that they want the service but refuse to 

sign, simply fill out the ABN as you normally 

would, check off option 1 (“yes, I want the 

service”) and have a staff member who wit- 



9 

January 2006

Improving revenue through compliance ...continued from page 9 

nessed the refusal to sign, sign the form. The 

witness can write “pt. refused to sign” on the 

form and then sign and date it themselves. 

This makes the form as legally binding as if 

the patient had signed the form. 

Initial audit results 

Our initial audit, which was run on both 

medical sites and billing clients, yielded poor 

results. All site/billing clients failed the audit. 

Some of the problems encountered included: 

■ Not using federal form CMS-R-131 G 

■ Unable to produce the ABN 

■ Essential field elements not completed 

■ No options checked off 

■ Estimated cost not filled in 

■ Form not signed or not dated 

As a corrective action plan, an aggressive 

mandatory training program schedule was 

made and all sites, along with numerous 

clients, were trained on the proper use of 

ABNs. A reference guide was developed as a 

tool to help in the decision-making of when 

to use an ABN and the corresponding modifiers. 

Reminder stickers for the –GA and 

–GY modifiers were given to data entry personnel 

to place on their monitors. 

Use of Modifiers –GA & –GY 

One of the problems revealed by the audit 

was that data entry staff did not know how 

or when to append the appropriate modifiers. 

Since most of the sites and many of the 

clients perform this function at the medical 

office, it was imperative to educate these staff 

members on the modifiers. 

The –GA modifier signifies that an ABN has 

been signed. Any service provided where 

medical necessity may be in question should 

have an ABN signed and be billed with the 

–GA (see Figure 1: ABN Reference 

Guide on page 13). An example would be 

an EKG performed as part of a preventive 

care visit for a patient with hypertension. 

The fact that the patient has hypertension as 

a secondary diagnosis (with the primary diagnosis 

as V70.0 routine PE) may be enough 

for Medicare to reimburse for the EKG. 

However, since it is being done as part of a 

routine PE, it may not be covered. Another 

example would be a patient receiving a pneumonia 

vaccine. This particular vaccine is a 

once-in-a-lifetime benefit under Medicare. 

So, if the patient is 80 and had a pneumonia 

vaccine when he or she was 65, or had one 

previously from another provider and doesn’t 

remember, the claim will be denied. 

Therefore, this vaccine should also have an 

ABN obtained and be billed with the –GA 

modifier. In this case, it is more than the 

service that would be given away should it 

turn out that the patient already received the 

once-in-a-lifetime—the initial outlay of cash 

by the practice for purchasing the vaccine 

would also be lost. For vaccines and injectables, 

the administration for the vaccine 

should also be billed with the –GA modifier. 

Any exams, tests, or services that have frequency 

requirements should also have an 

ABN obtained to safeguard your ability to 

balance bill if the claim is denied. An example 

of such a situation would be a screening 

pelvic/breast exam (G0101) and pap smear 

(Q0091). This is a covered benefit only every 

two years. If you are performing this annually 

or the patient had it done elsewhere and 

you don’t know about it, then you will lose 

the revenue without a signed ABN and claim 

billed with the –GA. 

An ABN does not have to be completed for 

services that are statutorily non-covered (see 

Figure 1 on page 13). In the situations 

where statutorily non-covered services are 

performed, the data entry person needs to 

append the –GY modifier, signifying that it 

is excluded as a Medicare benefit. Using the 

–GY will fulfill the “demand bill” requirement 

and allow a medical office to collect 

payment for the service(s) at the time of service 

(just as you would collect a co-payment 

on the same day as a visit). Claims billed 

with the –GY will be denied by Medicare 

and allow balance-billing the patient if payment 

was not collected up-front. An example 

would be for a routine or annual physical. 

This service is statutorily non-covered by 

Medicare, so you would bill the 99387 (new 

patient) or 99397 (established) with the –GY 

modifier and collect payment up-front. The 

caveats here are (1) if the patient has additional 

commercial insurance, the preventive 

care visit may be covered, so wait for a denial 

before balance-billing, and (2) although the 

PE itself is non-covered, you will still need to 

obtain an ABN for any screening tests that 

are performed as part of the physical i.e., 

EKG, PPD, vaccines etc. 

Re-audit in six months 

After the staffs received their initial training, 

a second audit was run at 6 months. 

Expectations were high that there would be 

vast improvements and that everyone would 

pass. Unfortunately, this did not happen. 

However, there were improvements in that 

the –GA modifier was being used more often 

and offices were able to produce a corresponding 

ABN in most cases. 

Phase 2 of the ABN training was now in 

effect. All errors from the second ABN audit 

were compiled and analyzed. They were broken 

down into two areas: form completion 

and modifier use. With the details of the 

audit errors, an ABN Refresher Program was 

developed. 

The errors included: 

■ Some sites still could not produce an 

ABN when the –GA modifier was used 

■ ABNs were used for covered services and 

sick visits 

January 2006 

10 


■ ABNs were used for preventive care exams (this is statutorily 

non-covered) 

■ Forms were not completed fully (missing critical elements such 

as services, reason, option, estimated cost, signature/date) 

■ Some client offices decided not to use ABNs 

The last error on the list is an interesting one. It really is not a matter 

of choice as to whether or not an office uses an ABN. The Office 

of the Inspector General (OIG) may consider failure to use ABNs or 

to balance-bill to be inducements for patients. Inducements resulting 

in a Stark II violation as a perceived kick-back may result in civil 

monetary penalties. True, CMS is more interested in recouping its 

own lost revenue rather than the lost revenue of a provider, but that 

does not make it any less of an infraction. 

Revise the corrective action plan 

Using the errors from the re-audit, a revised corrective action plan 

and training program was developed. Beginning with the form 

errors, each line of the form was incorporated into the training program 

with examples of “do’s and don’ts.” For example: the 

BECAUSE section was often completed incorrectly with ICD-9 

codes or written diagnoses instead of the reason why the provider 

thought the service may not be covered. This and other form completion 

problems with the SERVICES and BECAUSE sections led 

to the development of a modified ABN that already has services 

and reasons available for check-off. The use of a modified form 

with check-off boxes enables a provider to: 

■ prompt the proper use of the ABN 

■ increase readability by limiting handwritten items 

■ improve efficiency by making it faster and easier to complete 

these sections 

■ improve accuracy 

The modifications can be customized to the services offered by the 

office or specialty without compromising the integrity of the form 

(see Figure 2 for a sample modified form on page 14). 

The training program addressed each section and provided examples 

of when to use and not use the ABN. The refresher program 

was also offered to all staff members from registration personnel, 

clinical staff (including providers), and check-out/data-entry clerks. 

It was clear from the second audit results that there needed to be a 

full awareness and coordination among all of these people in order 

to make the use of ABNs successful. 



January 2006 

11


In addition, the ABN Reference Guide was 

revised with added services examples given 

and estimated costs listed. Some of these 

were prompted by reviewing the services 

billed for Medicare patients such as the PPD 

(purified protein derivative skin test for 

tuberculosis screening). Many Medicare 

patents at a particular office were being seen 

for pre-admission physicals for assisted living 

admissions. Since the PPD is being performed 

as a screening test and not due to 

exposure, it is not expected to be covered. 

This and any EKGs or other admission tests 

made mandatory by the assisted living facility 

are not always deemed as “medically necessary” 

by Medicare. Without an ABN being 

obtained, the bills for these services would all 

have to be written off. 

Another common error was that neither 

option had been checked off by the patient 

(option 1 “yes, I want the service”, or option 

2 “no, I don’t want the service”). The staff 

was instructed to remind patients or to check 

off option 1 in the patient’s presence if they 

neglected to do so when they were signing 

and dating the form. The document is not 

valid without an option checked or without a 

date and signature. 

Bundled services 

ABNs should not be used for “bundled services.” 

Bundled services are certain services 

that Medicare considers to be included in the 

visit or procedure provided. Examples of 

bundled services are: 

■ Dip urinalysis (81002 etc.) 

■ Pulse oximetry (94760) 

■ Peak flow 

■ Conscious sedation (99141) 

■ Some prolonged services codes (99358- 

99359) 

Connecting the dots 

The ABN should be attached to the chart or 

encounter form (superbill) of any Medicare 

patient being seen. This should be done at 

registration. Even a sick patient often ends up 

with potentially non-covered services being 

performed “while they are there.” A sick visit 

is often the opportunity used by either 

patient or provider to receive additional services, 

like screening tests or immunizations. 

The medical assistant or nurse should have 

the form ready for when the patient is in the 

exam room and before any questionable services 

are performed. It is imperative that the 

services and reason (BECAUSE section) be 

completed prior to the patient receiving the 

services since it is up to the patient as to 

whether or not they want any potentially 

non-covered services. This is a CMS requirement 

as well. Providers can add to or 

append the items on the form as they see fit 

in the course of their encounter with the 

patient. Use of a reference guide can aid in 

choosing which services may apply and can 

also aid in supplying the estimated cost on 

the form. 

Now that you have a completed and signed 

ABN, what do you do The clinical staff 

needs to make sure that the form makes it 

along with the encounter form/superbill to 

the check out person or data entry clerk. 

Here they can determine what is statutorily 

non-covered (-GY modifier needs to be 

added) or what needs to be billed with the - 

GA modifier (items listed in the SERVICES 

section of the ABN). The CPT or HCPCS 

code(s) and ICD-9 code(s) should be linked 

appropriately, modifiers appended as indicated, 

and monies collected for any statutorily 

non-covered services at this point. 

When under a CAP agreement with 

Medicare 

The new Competitive Acquisition Program 

(CAP) was scheduled to open for enrollment 

in the fall of 2005. However, a combination 

of vendor non-interest and national disasters 

has now pushed back the process until tentatively 

summer 2006. If and when this goes 

into effect, providers who have signed up for 

the program may be responsible for getting 

ABNs signed for a third party i.e., a pharmaceutical 

distributor. Therefore, it is important 

to learn how to successfully execute a proper 

ABN so that providers will be prepared to 

take on this function for a third party in the 

future. Unless the structure of the proposed 

CAP agreement changes significantly, be 

ready to gear up. 

Conclusions 

A properly executed ABN will: 

■ Allow you to balance-bill the patient 

■ Help recoup otherwise lost revenue 

■ Reduce write-offs 

■ Improve cash collection, cash flow, and 

revenue 

Although the use of ABNs may seem to be a 

burdensome task, the end result will be a 

boost to your bottom line. Education, training, 

and coordination of staff can make for 

an organized effort that will reap positive 

benefits. ■ 

Contact Us! 

http://www.hcca-info.org 

info@hcca-info.org 

Fax: (952) 988-0146 

HCCA 

5780 Lincoln Drive, Suite 120 


Phone: 888-580-8373 

To learn how to place an advertisment in 

Compliance Today, contact Margaret 

Dragon: 

e-mail: margaret.dragon@hcca-info.org 

phone: 781-593-4924 

January 2006 

12 


Figure 1: ABN Reference Guide 

Services that may require an ABN (use the –GA modifier) 

■ Medically unnecessary services (clue may be dx is a V-code, but 

not all V-codes) 

■ Most screening tests/services (even covered screenings have 

frequency requirements) 

■ Baseline EKG (93000 $28 or 93005, $19) 

■ EKG as part of a routine physical (93000 $28 or 93005, $19) 

■ Digital Rectal Exam (DRE) for prostate screening (G0102, usually 

done as part of a routine PE) more often than Q12mo., $23 

■ Pap smear (Q0091, $42) more often than Q2yrs. 

■ Visit for well woman exam (E/M code eg G0101, $39) more often 

than Q2yrs. 

■ Removal of skin tags or other benign lesions for cosmetic reasons 

11200 $73, 11201, $18 

■ Screening flexible sigmoidoscopy (G0104, $131 and G0106, $147) 

more often than Q5yr. 

■ PPD for TB screening 86580, $18 

■ B12 injections (frequency & medical necessity are issues) 

J3420, $5 

■ Contraception injectables i.e. DepoProvera J1055 

■ Most vaccines w/o medical necessity (e.g. prophylactic tetanus 

or Td) 

■ Vaccines beyond the frequency guidelines (e.g. peumonia vaccine 

is a once in a lifetime benefit). NOTE: most vaccines are not covered 

and should be billed with the –GY modifier (no ABN needed). 

■ Welcome to Medicare Visit (G0034, $101)—within 6 months of 

eligibility 

■ EKG with the Welcome to Medicare Visit (G0366, $28)—within 6 

months of eligibility 

Services that do NOT require an ABN or a modifier: 

■ Sick visits 

Services that do NOT require an ABN but need a –GY modifier: 

■ Preventive Care Visits i.e. routine or annual physical/PE (99387 or 

99397) 

■ Most screening tests/services if “statutorily non-covered” 

■ Vaccines for travel or non-covered vaccines (e.g. Hepatitis A) 

■ Administration of travel/non-covered vaccines (90471 or 90472) 

Cosmetic surgery 

■ Pre-Op exam for cosmetic surgery plus any tests performed as 

pre-op 

■ Services provided to immediate relatives (any & all services if 

patient is related to M.D., D.O. or mid-level) 

NOTE: This list is for reference only and is not all-inclusive. 

Fees used are for example only and are based on Medicare 

rates in the mid-Atlantic, 2005. 


13 

January 2006


Figure 2: Advance Beneficiary Notice (ABN) Form 

January 2006 

14 


feature 

article 

Editor’s note: This interview with Greg 

Jones was conducted by Roy Snell, 

HCCA CEO in early December 2005. 

For general Medicare information, 

including the Prescription Drug Benefit, 

please contact 1-800-MEDICARE or 

visit our website at www.medicare.gov. 

To report any suspected Fraud, Waste, 

and Abuse in the Medicare Part D 

Prescription Drug program, please 

contact 1-877-7SAFERX or e-mail 

MEDICinfo@healthintegrity.org 

Office of Counsel to the Inspector General 

where I was responsible for negotiating and 

monitoring Corporate Integrity Agreements 

(CIA) for a wide range of health care 

provider types, including hospitals and pharmaceutical 

manufacturers. In that role I regularly 

conducted site visits to providers operating 

under CIAs. Conducting site visits was 

my favorite part of that job because it gave 

me the opportunity to see first hand how 

various providers were implementing and 

maintaining their compliance programs. 

Meet Greg Jones 

Law Enforcement Liaison– 

Prescription Drug Benefit–Program Integrity Group, 

Centers for Medicare & Medicaid Services 

RS: Greg, what is your title, and would 

you briefly describe your responsibilities with 

the Centers for Medicare and Medicaid 

Services 

GJ: I am the Law Enforcement Liaison for 

the Division of Medicare Modernization Act 

Integrity within the Program Integrity Group. 

My primary responsibility is to coordinate 

with law enforcement on program integrity 

matters related to the Part D prescription 

drug benefit. In addition, I am the Team 

Lead on developing CMS’s Fraud, Waste, 

and Abuse Guidance for the Part D Plans. 

RS: What is your background and 

previous work experience 

GJ: Formerly, I was with the Department 

of Health and Human Services (HHS), 

At the OIG I also had the pleasure of working 

closely with HCCA to coordinate 

Government-Industry outreach and education 

efforts which included two separate 

industry roundtables. 

Prior to transferring to the Office of Counsel 

to the Inspector General, I was with the 

OIG’s Atlanta Office of Evaluation and 

Inspections where I led national studies 

uncovering over $8M in fraud, waste, and 

abuse in the Medicare program. 

RS: So tell us about your first year at CMS. 

GJ: This is a very exciting time at CMS; 

the implementation of the Medicare 

Modernization Act, including the drug benefit, 

is the most significant change to the 

Medicare program since its inception in 

1965. It truly is an honor and an amazing 

professional growth experience to be a part 

of this historic event. 

I started in March 2005 and have been going 

full speed since day one. My first project was 

reviewing the compliance plan and business 


integrity sections of the Part D Plan applications. 

Collectively, our division reviewed over 

400 Part D Plan applications. I spent this 

summer training the OIG’s investigators, FBI 

agents, and Assistant United States Attorney’s 

about the drug benefit to help prepare them 

to investigate and prosecute potential fraud, 

waste, and abuse in the drug benefit. Most of 

my time this Fall has been spent drafting the 

Fraud, Waste, and Abuse Guidance for the 

Part D Plans. These are just the highlights— 

in between I’ve also been learning about the 

intricacies of the drug benefit, keeping track 

and following up on various Part D complaints, 

and assisting with the planning of 


15 

January 2006

Meet Greg Jones ...continued from page 15 

several conferences. Despite the fast pace, 

which is stressful at times, it has been a very 

positive and fulfilling experience. 

RS: Having previously worked in the 

HHS Office of Inspector General, how was 

the transition to CMS 

GJ: Coming to CMS has given me the 

opportunity to learn about the policy and 

operational side of Medicare and see what it 

takes to run the day-to-day operations of 

what is essentially the largest insurance program 

in the world. In that regard it is definitely 

a different perspective. 

At the same time, however, it has been great to 

work collaboratively with my former colleagues 

to prepare for the implementation of the drug 

benefit. My experience at the OIG has been 

invaluable in having an “eye” for identifying 

potential vulnerabilities in the drug benefit and 

it also helps me understand the needs of the 

OIG and our other law enforcement partners 

such as the Department of Justice. 

RS: Tell us the status of the Fraud, Waste, 

and Abuse summary that was published in 

June 2005. 

GJ: As most of your members know, we 

released for public comment an eight page 

Fraud, Waste, and Abuse Summary document 

in June 2005. Since then we have spent time 

reviewing the public comments and working 

with policy experts within the agency, as well 

as the law enforcement community, to develop 

a much more comprehensive document. 

We expect to release for public comment the 

more detailed document in January 2006, 

and hope to finalize it by early Spring 2006. 

RS: You have a lot on your plate these days 

with Medicare Part D implementation. I know 

this is a big question and we probably don’t 

have enough room for a complete answer, but 

if you had to put together a list, what are the 

main issues health care compliance officers 

need to know about Medicare Part D (fraud 

and abuse, training, policies and procedures) 

GJ: Well, three things come to mind: 

■ The role of the plans themselves in overseeing 

their downstream subcontractors 

involved in the delivery of the drug 

benefit 

■ The role and responsibilities of the 

Compliance Officer at each plan 

■ The need to develop an audit workplan to 

monitor for efficient and accurate delivery 

of the Part D benefit 

I encourage all your members to pay special 

attention to these sections in the Fraud, 

Waste, and Abuse Guidance document and 

provide feedback to us during the public 

commenting period. 

RS: Would you share with us some of the 

Medicare Part D challenges 

GJ: One area we are paying particular 

attention to at this time is marketing. All 

Part D Plans are required to ensure that marketing 

activities—whether they initiate from 

paid marketing employees or independent 

agents—comply with the Marketing 

Guidelines. To date, CMS has received complaints 

alleging that agents have: 

■ Offered beneficiaries a cash payment as an 

inducement to enroll in Part D 

■ Conducted unsolicited door-to-door sales 

■ Stated that the agent works for or is contracted 

with the Social Security 

Administration or CMS 

■ Misrepresented the product being 

marketed as an approved Part D Plan 

when it actually is a Medigap policy or 

non-Medicare drug plan 

■ Misrepresented the Prescription Drug 

Plan being marketed 

■ Requested beneficiary information or 

check numbers, which may be a prelude 

to identity theft 

■ Asking beneficiaries to pay “up front” 

premiums 

Organizations found to violate CMS’s 

Marketing Guidelines will be placed under a 

corrective action plan (CAP). If the organization 

fails to correct the deficiency under the 

CAP, then intermediate sanctions such as a 

freezing of marketing and enrollment may be 

imposed. If after the imposition of intermediate 

sanctions the problem has not been 

corrected, a Civil Money Penalty may be 

imposed or the organization’s contract may 

be terminated. Cases appearing to be potentially 

fraudulent will be referred to the OIG. 

Protecting beneficiaries from aggressive marketing 

tactics is something we take very serious 

and plan to monitor closely. 

RS: Tell us about the Medicare Drug 

Integrity Contractors (MEDICs). 

GJ: The MEDICs are companies CMS is 

contracting with to assist us in combating 

fraud, waste, and abuse in the Medicare Part 

D prescription drug benefit. 

RS: What are some of the activities a 

MEDIC may perform 

GJ: The MEDICs will: 

■ Analyze data to identify problems that 

indicate fraud or abuse may be occurring 

■ Conduct complaint investigations 

■ Develop and refer cases to the appropriate 

law enforcement agency as needed; and 

■ Support ongoing law enforcement 

investigations. 

Our Enrollment and Eligibility MEDIC, 

“Health Integrity, LLC” is operational and 

their primary focus is to investigate Part D 

complaints, which at this time are mostly 

issues related to enrollment, eligibility 

determination, and marketing. 

RS: Will the Medicare Part D Manual 

include information about fraud 

January 2006 

16 


GJ: Yes. The Fraud, Waste, and Abuse 

Guidance document is scheduled to be a 

chapter in the Part D Plan Manual. 

RS: What has the CMS Program Integrity 

Group been doing to prepare for the implementation 

of the drug benefit 

GJ: I see our strategy as a three-prong 

approach that includes: 

1. Contracting with the MEDICs 

2. Reviewing and providing comments on 

CMS’s Part D regulation, policies, and 

subregulatory guidance and developing 

our own Fraud, Waste and Abuse 

Guidance document. 

3. Coordinating with our partners in the law 

enforcement community such as the OIG, 

DOJ, FBI, States, and many other government 

agencies, as well as private organizations 

such as HCCA, to collaborate on 

approaches to address and combat fraud, 

waste, and abuse in the Part D prescription 

drug benefit. 

4. Lastly, we have spent a lot of time speaking 

with experts, which includes some 

recent hires at CMS with direct industry 

experience, to educate ourselves about the 

pharmaceutical drug industry. This has 

been invaluable and I believe puts us in a 

much better position to ensure the integrity 

of the Part D prescription drug benefit 

and the Medicare Trust Fund. 

For general Medicare information, 

including the Prescription Drug Benefit, 

please contact 1-800-MEDICARE or 

visit our website at www.medicare.gov. 

To report any suspected Fraud, Waste, 

and Abuse in the Medicare Part D 

Prescription Drug program, please 

contact 1-877-7SAFERX or e-mail 

EDICinfo@healthintegrity.org ■ 

By Michelle Wilcox DeBarge and Amanda Littell 

Editor’s note: Michelle Wilcox DeBarge, 

JD, is a Partner and Amanda Littell, JD, 

MPH, an Associate in the law firm of 

Wiggin and Dana. Michelle Wilcox 

DeBarge may be reached by telephone at 

860/297-3702 or by e-mail at mdebarge 

@wiggin.com, and Amanda Littell may 

be reached by telephone at 203/498- 

4529 or by e-mail at alittell@wiggin.com. 

On November 28, 2005, the Office 

of the Inspector General (OIG) 

for the U.S. Department of 

Health and Human Services issued draft 

compliance guidance (Guidance) for recipients 

of extramural research awards from the 

National Institutes of Health (NIH) and 

other agencies of the U.S. Public Health 

Service (PHS) See 70 Fed. Reg. 71,312. 

The Guidance highlights the following three 

risk areas for recipients of PHS awards: 

1. Time and effort reporting 

2. Properly allocating charges to award projects 

3. Reporting of financial support from other 

sources 

The Guidance also adds an eighth element to 

the OIG’s standard seven elements for an 

effective compliance program: defining roles 

and responsibilities and assigning oversight 

responsibility. 

Scope of guidance 

With the goal of preventing the submission of 

erroneous claims and combating fraud and 

abuse in federal health care programs, the 

OIG in the last several years has developed a 

series of compliance program guidance aimed 

at various segments of the health care industry. 

This guidance encourages development of 

an internal compliance infrastructure and 

organizational control to help monitor and 

ensure compliance with applicable laws. The 

guidance also lists specific risk areas applicable 

and of potential concern to the respective 

industry segments. An organization’s establishment 

of a compliance program in line with 

the compliance program guidance is voluntary, 

but highly recommended by the OIG. 

Although there has been a notable increase in 

governmental enforcement actions and 

whistleblower cases related to grant compliance 

and administration, the publication of 

the Guidance is the first official word from 

the OIG on the issue of research compliance 

program elements. The OIG had published a 

notice on September 5, 2003 soliciting information 

and recommendations for developing 

compliance program guidance for recipients 

of NIH research grants. Based on comments 

to that notice, the OIG published the 

Guidance for the purpose of offering a 

“checklist” of items that the OIG believes are 

critical for developing compliance programs 

or refining an existing compliance program. 

The OIG also expresses its view in the 

Guidance that all research institutions would 

benefit from compliance programs to foster a 

“culture of compliance” that begins at the 



17 

January 2006

OIG issues draft guidance ...continued from page 17 

administration or management level and 

permeates the organization. 

The OIG expands the scope of its Guidance 

beyond that stated in the 2003 notice to other 

biomedical and behavioral research awards 

from the public health agencies of the U.S. 

Department of Health and Human Services, 

including the Agency for Health Research and 

Quality, the Agency for Toxic Substances and 

Disease Registry, the Health Resources and 

Services Administration, the Indian Health 

Service, the Centers for Disease Control and 

Prevention, the Substance Abuse and Mental 

Health Services Administration, and the Food 

and Drug Administration. The Guidance is 

relevant for colleges, universities, and other 

recipients of public funds that conduct biomedical 

and behavioral research. The 

Guidance is intended to apply broadly to all 

PHS awards, which includes cooperative 

agreements and certain contracts that are not 

governed by federal procurement laws and 

regulations, as defined at 45 C.F.R. § 74.2. 

The Guidance focuses on grant compliance 

and administration issues governed by the 

statutes and regulations that affect the “allowability” 

of costs. However, the OIG recognizes 

that the research community uses the term 

“compliance” broadly to include areas such as 

human and animal subject research, conflicts 

of interest, research misconduct and intellectual 

property issues; the OIG states that an institution 

may find it beneficial to adopt the 

principles and standards in the Guidance in 

connection with these other regulatory areas. 

Risk areas 

The OIG highlights the following three primary 

risk areas, while also cautioning that 

they are not intended to be exhaustive of 

potential risk areas. 

Time and Effort Reporting—The OIG 

identifies time and effort reporting as a “critical” 

compliance issue and emphasizes that time and 

effort expended on a project must be accurately 

reported. This is especially important given that 

compensation for a researcher’s personal services—including 

direct salary and fringe benefits— 

is usually a significant cost of a research project. 

Moreover, many researchers have multiple 

responsibilities. For example, researchers may 

also be involved in teaching and clinical work, 

and these separate responsibilities may be challenging 

to distinguish and measure. The failure 

to accurately report the percentage of time 

devoted to projects could lead to overcharges to 

funding sources and, in certain circumstances, 

to civil or criminal fraud investigations. 

The OIG focuses specifically in the Guidance 

on false reports of the amount of time devoted 

to a project. The OIG states, for example, that 

it is unacceptable for a researcher to report in 

award applications to three different awarding 

agencies that the researcher will spend 50% of 

his or her time on each of the awards. The 

OIG also states that it is unacceptable for 

researchers to report an aggregate “commitment 

of effort” in excess of 100% of the researcher’s 

time, citing, as an example, that it would be 

improper to report to one awarding agency that 

70% of the researcher’s time will be spent on an 

award when 50% of the researcher’s time will 

be spent on clinical responsibilities. 

Properly allocating charges to award 

projects—The Guidance states that research 

institutions must properly allocate charges to 

award projects. To ensure this, institutions 

must have an accounting system that properly 

separates the amount of funding from each 

funding source. Institutions must not permit 

a principal investigator to “bank” or “trade” 

award funds among grants. As an example of 

improper allocation of charges, the OIG cites 

the allocation of cost on various federal 

research awards from overspent accounts to 

under-spent accounts, with the purpose of 

maximizing federal reimbursement and 

avoiding the refunding of unused grant proceeds 

from those under-spent accounts. 

Reporting financial support from other 

sources—The OIG emphasizes that reporting 

financial support from other sources is critical 

to PHS’s decisions with respect to whether and 

to what extent to fund a particular project. 

The reporting of other financial support is 

required by the application for funding (PHS- 

398), which includes a certification by both 

the principal investigator and the research 

institution that all statements in the application 

are true, complete and accurate to the best 

of their knowledge. The OIG states that a failure 

to accurately report all sources of financial 

support may lead to double-charging of both 

award funds and Medicare (and other payors) 

for the same service. 

Compliance program elements 

Standard Seven Elements of an Effective 

Compliance Program—The OIG recognizes 

that some institutions have separate 

compliance programs for their various areas of 

regulated activity, but encourages institutions 

to integrate their compliance efforts by eliminating 

overlapping systems or by developing a 

single compliance program covering all compliance 

areas. Regardless of the structure of an 

institution’s compliance program, the 

Guidance recommends establishing the same 

seven elements of compliance programs to 

address PHS research awards compliance that 

the OIG has recommended in the past for 

other segments of the health care industry. 

The OIG’s discussion of these seven elements 

is very similar to the OIG’s other compliance 

program guidance; accordingly, for purposes 

of this article, we primarily highlight below 

the OIG comments in the Guidance that are 

specific to research compliance. 


January 2006 

18 


■ There will be Compliance experts from 

government, vendors, outside counsel, 

consultants, and academics. 

Just the facts: 

Roy Snell 

Here are the facts about HCCA’s 2006 Compliance Institute. 

■ It will mark our 10th Anniversary. 

■ It is our first time in Las Vegas with the Compliance Institute. 

■ We will print 1,080,000 pieces of paper. 

■ There will also be Compliance experts 

from audit, education, transcription, 

coding, billing, auditing, and ethics. 

■ Approximately 60 % of the speakers will not have spoken the year 

before. 

Keep reading—there’s more: 

■ Special tracks for HIPAA, Quality of Care, Research/IRB, 

Physician Transactions, SOX, Rural Hospital, Auditing and 

Monitoring, Hot Topics, General Compliance and Tax 

Exemption/Charity Care. 

■ We will occupy 2,845 room nights. 

■ 20 staff will manage the conference. 

■ Industry Immersion for Academic Medical Centers, Long-Term 

Care, Large Health Care Systems, Payor/Managed Care, Medical 

Device, and Physician Group Practice. 

■ There will be 200 speakers. 

■ There will be 95 sessions. 

■ The U.S. Department of Health and Human Services Inspector 

General is speaking at the Compliance Institute. 

■ There will be presenters from the Centers for Medicare and 

Medicaid Services (CMS), U.S. Department of Justice (DOJ), 

Department of Health and Human Services (DHHS), Office of 

Inspector General (OIG), Joint Commission on Accreditation of 

Healthcare Organizations (JCAHO), and the U. S. Sentencing 

Commission (USSC). 

■ Pre-conference: Compliance 101, HIPAA 101, Medicare Part D, 

Auditing/Monitoring, and more. 

■ Post-conference: Laboratory, Auditing/Monitoring, Quality of 

Care. 

■ Auditing/Monitoring and Privacy Officer Round Tables. 

■ And endless networking opportunities! 

We have come a long way. It is simply amazing. Help us celebrate our 

10th year! Hope to see you there. 

■ It is the largest health care compliance conference in the world. 

■ Five (5) compliance achievement awards will be given out 

Sunday night. 

■ Five (5) laptops will be given away. 

■ There will be 60 vendors. 

January 2006 

20 


:: OVER 200 SPEAKERS 

NEW THIS YEAR :: 

SPECIALIZED 

SESSION TRACKS 

■ SOX 

■ Hot Topics 

■ Physician 

Transaction 

■ HIPAA 

HCCA’S 10 TH 

ANNIVERSARY 

COMPLIANCE INSTITUTE :: 

Don’t gamble on the success of your compliance program! 

April 23–26, 2006 

Caesars Palace, Las Vegas, NV 

■ Rural Hospital 

■ Auditing & 

Monitoring 

■ Quality of Care 

■ Research/IRB 

■ General 

Compliance 

■ Tax Exemption/ 

Charity Care 

Sessions at the HCCA 2006 Compliance Institute will offer 

the latest compliance information on the hottest topics and 

current events in compliance. The program will feature 

multiple HIPAA and compliance sessions and specialized 

session tracks. Industry immersion sessions for a variety 

of health care segments are also being planned. 

BROAD SPECTRUM OF SPEAKERS 

Representing Policymakers, Enforcement Officials, Practicing 

Lawyers, Active Compliance and Privacy Officers 

Save $425! 

Early Bird rate extended 

to January 20! 

visit our Web site at 

www.hcca-info.org 

to register 

CONTINUING EDUCATION CREDITS: AAPC ACCME ACHE ACMPE AHIMA ANCC HCCB MCLE NAB NASBA

Here’s your chance to share your expertise 

and get a chance to win..... 

HCCA is seeking your contributions! 

Dear Compliance Professionals, 

HCCA is seeking contributions for a new manual on auditing and monitoring. 

Here’s a great opportunity to contribute to the association—and 

get a chance to win a laptop, a portable DVD player, or receive 

free registration for the HCCA Compliance Institute. 

We are asking health care professionals to share their tools and 

success stories that have aided their auditing and monitoring 

programs. We are interested in all aspects of auditing and 

monitoring. (If you would like, identifying information can 

be removed, so your organization can remain anonymous.) 

Everyone who submits materials will be entered into a 

drawing to win a laptop, a portable DVD 

player, or free registration to the Institute 

on April 23–26 in Las Vegas. You will be 

entered into the drawing for each audit tool 

you submit (i.e., two audit tool submissions 

equals two entries). Authors of accepted 

materials will be listed as contributors in the 

manual, if they wish. 

We look forward to receiving contributions 

from you. For more information or to make 

a contribution, contact Alan Pierce at 

888-580-8373, ext. 245, or alan.pierce@hcca-info.org. 

Thank you, 

Alan Pierce 

Editor/Product Manager 

Meet 

Alan Pierce 

See page 32 


January 2006 

23

Concerns about abuses in the nonprofit sector 

arising out of charitable organizations 

allegedly formed to benefit victims of 

tragedies such as 9/11 and tsunami relief 

have led to efforts to apply a version of SOX 

to nonprofits. Evidence of this scrutiny has 

arisen on both the administrative and legislative 

fronts. At the state level, California, 

Massachusetts, and New York are key states 

which have publicly pushed for heightened 

scrutiny, with Governor Arnold 

Schwarzenegger firing the first salvo by signing 

California S.B. 1262, entitled the 

California Nonprofit Integrity Act of 2004, 

effective January 1, 2005 (California Act). 

The California Act added corporate accountability 

provisions to existing California 

reporting requirements for charities. While 

the filing, registration, and reporting provisions 

of the new California statute do not 

apply to hospitals, 2 other provisions may still 

apply. For example, the California Act 

requires nonprofit corporations to have audit 

committees with detailed requirements on 

their composition. 3 More rigid requirements 

on fundraising, and a required annual compensation 

review, are also part of the 

California Act. 4 

Editor’s note: Albert Y. Lin is an associate 

in the law firm of Brown McCarroll, 

LLP, in Austin, Texas. Mr. Lin may be 

reached by e-mail at alin@mailbmc.com 

or by telephone at 512/703-5726. 

By now most compliance officers 

are well aware of the 2002 

Sarbanes-Oxley legislation (SOX), 

which imposed far greater accountability, 

financial reporting, independence, and governance 

principles on corporations than ever 

before. With the possible exception of document 

retention requirements and whistleblower 

protections, SOX technically applies 

only to publicly held companies. Nonprofit 

companies—in particular, nonprofit taxexempt 

health care entities—should be aware 

of proposed federal legislation that may soon 

increase accountability of their top-level 

management and executive boards and 

impose SOX-like burdens upon their compliance 

professionals. 

While transgressions of nonprofit organizations 

have not yet reached the level of notoriety 

as Enron and WorldCom, the potential 

for such abuse exists since nonprofits have 

such a major financial impact in the world 

economy (with one estimate of total worldwide 

nonprofit expenditures at $1.6 trillion 

in 2002). Moreover, the nonprofit health 

care sector makes up a significant portion of 

By Albert Y. Lin 

that figure. According to a 2003 report by 

the National Center for Charitable Statistics, 

13.2 percent of all “501(c)(3)” organizations 

in the United States are in the health care 

industry. Of the nation’s nearly 5,000 hospitals, 

approximately 85% are nonprofits. 1 

In Massachusetts, state Attorney General 

Tom Reilly introduced the “Act to Promote 

the Financial Integrity of Public Charities” in 

May 2005. 5 The Massachusetts proposal contains 

SOX-like provisions such as annual certification 

of financial statements submitted 

to the state attorney general, a required audit 

committee if audited financials are required 

under state law, a requirement for reasonable 

compensation and prohibited excessive compensation 

to insiders, whistleblowing provisions, 

and increased penalties of $5,000 for 

violations of the new law. Similarly, in New 

York, Attorney General Eliot Spitzer has 

actively called for statutory SOX extensions 

to nonprofits, such as state laws mandating 

required financial statement and internal 

control certifications by nonprofit CEOs. 

Current proposed New York legislation 

appears to take a less severe approach, 

although the state Web site on charities has 

increased transparency by permitting searches 

for nonprofits that have failed to comply 

with basic state filing requirements. 

Other states have proposed or passed laws 

with similar SOX concepts. 6 Maine passed 

“An Act to Strengthen the Charitable 

Solicitations Act” in 2004, which imposed 

notice and approval requirements when nonprofits 

engage in “conversion” transactions 

(transfers of assets from a public charity to 

non-public charities) imposed specific limitations 

on the number of board members who 

can be “financially interested,” and requires 

audited financial statements for every nonprofit. 

That same year, New Hampshire 

passed a new law that requires nonprofits 

with revenues of $500,000 or more to file 

the most recent audited financial report with 

the state attorney general. 7 Compliance officers 

should carefully review their state’s 

January 2006 

24 


espective nonprofit law compliance responsibilities, 

as state approaches vary greatly. 

Developing federal activity impacting 

nonprofits 

Enforcement activity and legislation at the federal 

level is moving along at a fairly rapid pace 

as well. In 2004, the IRS announced it would 

be targeting more than 2,000 tax-exempt 

organizations for examination, with special 

attention directed towards executive compensation 

within such tax-exempt entities. 8 

That same year, U.S. Senators Charles Grassley 

(R-IA) and Max Baucus (D-MT) of the Senate 

Finance Committee requested the Independent 

Sector, a coalition of 500 charities, to consider 

and recommend actions to improve governance, 

ethical conduct, and accountability in 

the nonprofit sector. This study, entitled 

“Strengthening Transparency, Governance, and 

Accountability of Charitable Organizations,” 

was issued in June 2005 (the Sector Report). 9 

Senator Grassley is expected to introduce legislation 

that will incorporate proposals suggested 

by the Sector Report (introduction plans in 

September 2005 were delayed, no doubt due 

to the Hurricane Katrina crisis that required 

emergency legislation). 

Proposed principles of the Sector 

Report 

The following key principles within the Sector 

Report may eventually be components of the 

new laws. Governing members of tax-exempt 

health care organizations should be aware of 

these new requirements, which may increase 

their accounting and oversight responsibilities. 

Note that the following discussion highlights 

only proposals recommended by the Sector 

Report; adherence to these proposals before 

they become law may be viewed, as with 

SOX in general, as a “best practices” strategy 

that, if followed, could pay off in the long 

run even if the practices do become required 

by federal law. 

Increased monitoring effectiveness and 

signature requirements. Tax-exempt organizations 

with more than $25,000 in annual 

gross receipts must file IRS Form 990 

(Annual Information Return), which discloses 

all pertinent financial information, typically 

in more detail than for-profit federal tax 

returns. 10 The Sector Report reveals that too 

many Form 990s are inaccurate or incomplete, 

and sometimes reveal little useful information. 

The inability to interpret such 

reports leads to ineffectiveness in enforcement. 

The disclosures required on the face of 

Form 990 are arguably too vague and open 

to interpretation. For example, the current 

Form 990 requires that revenue be broken 

into “program service revenue,” “management 

and general,” and “fundraising” components. 

Possible revisions would make it 

clearer what is expected to be within classifications. 

For example, the key program 

achievements of the tax-exempt entity could 

be disclosed on the first page (rather than 

buried in a supporting schedule behind the 

second page). Form 1023 (Application for 

Recognition of Tax-Exempt Status) for 

501(c)(3) organizations was recently updated 

to reflect many principles later set forth in 

the Sector Report; as such Form 990 revisions 

are likely. Form 1023, for example, asks 

if the entity has a conflict of interest policy, 

but nonetheless mentions that such a policy 

is not required. This type of hesitant questioning 

may be changed; it should be clearer, 

for example, that conflicts of interest policies 

are generally required for tax-exempt health 

care organizations due to various administrative 

rulings, if not by explicit statute. 

The Sector Report also recommends mandatory 

electronic filing of Form 990s. And currently, 

while any authorized officer may sign 

the Form 990; proposed legislation is likely 

to require the chief executive officer or chief 

financial officer to sign it, in a nod to SOX’s 

requirement that for-profit top officers certify 

the financial statements 

Current IRS rules only provide for late filing 

penalties; the proposed legislation would 

lend far more urgency to Form 990 filings if 

the IRS heeds the Sector Report’s recommendation 

of automatic suspension of an organization’s 

tax-exempt status after two consecutive 

failures to file Form 990. 

Form 990 is a critical monitoring device for 

ensuring compliance with tax-exempt laws 

and regulations, and the Sector Report urges 

that tax-exempt organizations pay close 

attention to its preparation and filing. It is 

suggested that health care entities avoid a 

“less is better” approach in Form 990, and 

instead move toward detailed and coherent 

disclosure in Form 990. Filed Form 990s for 

virtually all charitable organizations are now 

easily available online, thus the ease of public 

scrutiny should be considered as an additional 

motivation for accurate and timely filings. 

Increased audit activity for tax-exempt 

organizations. The Sector Report also suggests 

mandatory internal review of the taxexempt 

purposes of charitable organizations, 

with additional IRS audits serving as the 

motivating force. Currently, there is no effective 

way to determine whether or not an 

organization has substantially changed its mission 

or governance structure, apart from a 

general plea in the determination letter and a 

check-the-box question in Form 990 asking if 

governing documents have changed. The 

Sector Report therefore recommends that 

Congress allocate additional resources for 

audits and reviews of the annual Form 990s. It 

is hoped that increasing the effectiveness of 



January 2006 

25

The trend toward increased corporate... ...continued from page 25 

Form 990s would encourage organizations to 

conduct self-review of corporate governance 

activities in connection with more detailed 

Form 990s. For example, organizations should 

thoroughly review organizational documents 

(articles of incorporation, bylaws, compensation 

practices, policies, etc.) once every five 

years, and preferably more frequently. 

Formal audits of financial statements 

and operations. This proposal will likely be 

met with strong resistance due to the costs of 

a formal financial audit. Currently, organizations 

receiving federal funding of $500,000 

or more must perform annual audits, but 

apart from this requirement, no audit 

requirement exists beyond any state requirements. 

The Sector Report urges that charitable 

organizations with $1 million or more in 

total annual revenues attach an audited 

financial statement to the Form 990s. 

Organizations with at least $250,000 and 

under $1 million in annual revenues would 

have their financial statements reviewed (but 

not audited) by a certified public accountant. 

If the nonprofit health care organization currently 

generates all financial statements internally, 

serious thought might be given to 

retaining independent auditors in the same 

manner as SOX requires for public companies. 

In the current environment, the benefits 

and relative security offered by a competent, 

independent audit may very well outweigh 

the costs of the audit. 

Adoption of a formal conflict of interest 

policy. This aspirational suggestion is likely 

to be proposed and the nonprofit health care 

organization should not wait for it to become 

law. As mentioned earlier, current IRS policies 

strongly suggest, but do not quite 

require, tax-exempt organizations to adopt a 

standard conflict of interest policy. These 

policies provide for such procedures as 

recusal of “interested” board members (such 

as when the board determines compensation 

or approval of contracts which indirectly 

benefit the board member). The Sector 

Report suggests making conflict of interest 

policies mandatory for all tax-exempt organizations. 

The cost of a conflict of interest policy 

is relatively minimal; the IRS has a standard 

conflict of interest policy that is easily 

adopted by the board and applicable among 

most health care organizations. 11 

The presence of a conflict of interest policy is 

critical since the Sector Report highlights 

executive compensation within charitable 

organizations as an issue, motivated by media 

reports of high salaries and loans to executives. 

Within the health care industry, the adoption 

and documented observance of a conflict of 

interest policy, as well as documented reference 

to salary studies of comparable organizations, 

can help shift the burden of proof if the 

level of compensation is questioned. 

Increasing the use of audit committees. 

It is suggested that far too few nonprofits 

establish formal audit committees with 

required financial expertise. Often, those 

who serve on charitable boards are motivated 

by the mission of the organization and as 

such, financial expertise is often lacking. 

Particularly within the health care field, at 

least one board member well-versed in 

finance (preferably with the certified public 

accountant or similar designation) should 

serve on the committee. 

If necessary, a non-voting, advisory committee 

may be established. Unfortunately, no federal 

law addresses the role of audit committees 

within charitable organizations; to date, 

only California has required audit committees 

(for charitable corporations with revenues in 

excess of $2 million). The Sector Report proposes 

educating nonprofits on the importance 

of the audit function, but does not recommend 

an outright requirement at the federal 

level, acknowledging the costs involved. The 

organization should consider its board composition 

and ascertain whether a minimum 

level of financial expertise is present on the 

board, and if not, it should consider adding 

board members or advisors accordingly. 

Congress should pass legislation to define 

and regulate donor-advised funds. Donoradvised 

funds are sizeable funds maintained 

by a single public charity, and donors are 

able to direct where the donor-advised fund 

distributes their contributions. Health care 

organizations may frequently receive sizeable 

contributions from donor-advised funds. 

Unfortunately, there is little statutory guidance 

on how these funds operate and solicit 

contributions. 

The proposals urge a statutory definition of 

“donor-advised funds,” as well as more specific 

rules on how quickly funds must be distributed 

out to the eventual charitable recipient. 

The new rules may also specifically prohibit 

the donor from receiving any substantial 

benefit as a result of a particular grant 

recommendation. 

Incorporation of federal tax standards. 

Currently there is not enough overlap and too 

much inconsistency between tax-exempt rules 

as imposed by the IRS and state nonprofit 

rules. Texas, for example, has its own standards 

for determining exemption from state franchise, 

property, and sales tax that are not necessarily 

consistent with federal income tax 

exemptions. Texas also has its own hospital 

community benefits report, and such reports 

could arguably be coordinated with IRS 

authorities. The Sector Report calls for 

increased sharing of information between state 

and federal officials (typically, the state attor- 


January 2006 

28 


suffix that identifies package size (e.g., the 

number of pills in a bottle) and drug strength. 

Given the vast number of prescriptions that will 

be filled and processing fees that will be paid, it 

is vital that claims submissions and payments be 

electronic. In order to submit those claims electronically, 

retail pharmacies are required to use 

the full eleven-digit NDC number. 

By Edwin D. Rauzi 

Editor’s note: Edwin D. Rauzi is a partner ■ Under the Medicare Modernization Act, a 

in Davis Wright Tremaine LLP’s Seattle drug that is not on the formulary of the particular 

plan is “not a covered Part D drug” 

office. He focuses his practice on Health 

Care matters, designing and implementing 

corporate compliance plans; advising sentation that is made in reckless disre- 

■ Under the False Claims Act, a false repre- 

corporate compliance officers. He may be gard of the truth and in support of a 

reached by telephone at 206/622-3150 claim for payment that includes federal 

dollars may be subject to a penalty of 

The Medicare Prescription Drug 

$10,000 per claim 

Benefit begins on January 1, 2006. ■ Under the Health Insurance Portability 

Just about everyone in the health care and Accountability Act of 1996, only 

delivery system will soon be asked to sign a contract 

(and probably several) based on the new sets” may be submitted electronically 

transactions that include approved “code 

benefit. The contracts are likely to be tendered 

with inadequate time for review and no meaningful 

opportunity to negotiate. Succumbing to amoxicillin, a generic and common antibiot- 

To illustrate, consider a prescription for 

the expedient approach, however, may put your ic. A drug is a generic because it does not 

organization in peril of violating the False matter who manufactures it or how many 

Claims Act—not once, but on a recurring basis. pills come in the bottle. From the clinical and 

pharmacy perspective, therefore, it does not 

There is a design flaw in the electronic claims matter whether the drug is manufactured by 

submission process that makes compliance Glaxo SmithKline (GSK) or Teva. Under the 

for many organizations virtually impossible. Medicare Modernization Act, however, a drug 

That design flaw is the use of eleven-digit that is not on the formulary of the particular 

National Drug Code (NDC) numbers to drug plan is not a covered Part D drug. 

describe generic drugs that are dispensed. 

That level of precision is nearly impossible to If you consult the Red Book, the pharmacy 

attain, and is at odds with the very nature of industry resource list of all NDC assigned numbers, 

you will see literally hundreds of NDC 

generic drugs and accepted clinical practices. 

numbers associated with that drug. Hundreds of 

Three propositions that originate in three numbers exist because, in addition to a different 

federal laws are central to understanding five-number NDC prefix for each manufacturer 

what may go wrong: 

or repackager of the drug, there is a six-digit 

For hospitals, the rule is not yet clear, but the 

trend is clearly toward using NDC numbers 

for one simple reason: there is no comprehensive 

alternative. When the code set was first 

introduced, hospitals were able to prevail upon 

regulators to allow them to continue to use the 

old HCPCS “J” codes. Those “J” codes, however, 

are limited to the small subset of drugs 

that were covered by Part B of Medicare. With 

the expansion of the Medicare benefit to cover 

virtually all prescription drugs, there simply is 

no “J” code that can be used. Providers will 

have to use the full eleven-digit code for all 

prescriptions filled, a time-consuming process 

fraught with potential for error. 

Hence, as proposed, the claims submission 

process anticipates perfection to the eleventhdigit 

on claims submissions. There are two 

exacerbating factors that render that expectation 

unrealistic: automated dispensing and 

the proliferation of plans (and formularies) 

the MMA promotes. 

Many pharmacies use Pyxis or similar 

machines to dispense drugs. Those machines 

use bins to hold large amounts of pills. Once 

pills from more than one manufacturer are 

mixed in the bins, it is impossible for the 

machine to tell when pills with one NDC 

number end, and another begins. Even more 

problematic is the idea that a prescription of 

30 generic pills would be identified as 14 

from one manufacturer and 16 from another. 



January 2006 

29

Administrative “complification” ...continued from page 29 

Publisher: 

Health Care Compliance Association, 888-580-8373 

Executive Editor: 

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

Contributing Editor: 

Odell Guyton, President, HCCA, 888-580-8373 

Layout: 

Sarah Anondson, HCCA, 888-580-8373, sarah.anondson@hcca-info.org 

Story Editor: 

Margaret R. Dragon, HCCA, 781-593-4924, margaret.dragon@hcca-info.org 

Advertising: 

Margaret R. Dragon, HCCA, 888-580-8373, info@hcca-info.org 

HCCA Officers: 

Odell Guyton 

HCCA President 

Senior Corporate Attorney, 

Director of Compliance, 

U.S. Legal–Finance & Operations 

Microsoft Corporation 

Daniel Roach, Esq. 

HCCA 1st Vice President 

VP & Corporate Compliance Officer 

Catholic Healthcare West 

Steven Ortquist, CHC 

HCCA 2nd Vice President 

Senior Vice President, Ethics and 

Compliance/Chief Compliance Officer 

Tenet Healthcare Corporation 

Rory Jaffe, MD, MBA, CHC 

HCCA Treasurer 

Executive Director–Medical Services 

University of California 

Julene Brown, RN, BSN, CHC, CPC 

HCCA Secretary 

MeritCare Health System 

Al W. Josephs, CHC 

HCCA Immediate Past President 

Senior Director Policies and Training 


Cynthia Boyd, MD, FACP, MBA 

Chief Compliance Officer 

Rush University Medical Center 

CEO/Executive Director: 

Roy Snell, CHC 

Health Care Compliance Association 

Board of Directors: 

Anne Doyle 

Director, Corporate Learning and 

Organizational Development 

Tufts Health Plan 

F. Lisa Murtha, Esq., CHC 

Managing Director 

Huron Consulting Group 

Frank Sheeder 

Partner 

Brown McCarroll, LLP 

John Steiner, Jr., JD 

Chief Compliance Officer 

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 

Cheryl Wagonhurst 

Outgoing, Chief Compliance Officer 


Greg Warner, CHC 

Director for Compliance 

Mayo Foundation 

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 Margaret 

Dragon at 781-593-4924. 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. 

For example, If the plan’s formulary specifies GSK amoxicillin, and 

the pharmacy dispenses the same drug manufactured by Teva, one 

of two things may happen: first, the pharmacy may submit a claim 

that includes the NDC number for GSK amoxicillin (which could 

later be characterized by a whistleblower or regulator as a false 

claim); or second, the pharmacy may submit a claim that includes 

the NDC number for Teva amoxicillin (which will not be paid). 

The MMA is also designed to encourage competition. Each of the 

competing plans is required to define its own formulary. A pharmacy 

that deals with several drug plans, in theory, will be required to 

dispense only the brand of generics each plan includes on its formulary; 

pills from other manufacturers are not covered Part D drugs. 

As another example, consider the plight of the long-term care pharmacy 

serving several nursing and assisted living facilities. Even if all 

residents of one facility choose the same plan (and formulary), it is 

unlikely all the other facilities the pharmacy serves will do the 

same. The generic drug on the formulary for one pharmacy may 

not be on the formulary for the other plan. If the automated dispensing 

machine is full of Teva amoxicillin, that is what all of the 

residents of all of the facilities are going to receive (which is both 

clinically appropriate and consistent with federal policy to promote 

the use of generics). Technically, however, some of the prescriptions 

dispensed that day will not be covered by Medicare. 

None of this is necessary in order for members of prescription 

drug plans to get access to generic drugs. Unfortunately, the “fix” 

is either the development of a new code set to describe generic 

drugs or federal legislation. Completion of either process is not 

likely by the end of this year. 

Under the current design of the Prescription Drug Benefit, 

providers who dispense drugs are thus faced with a difficult 

choice. Those who obligate themselves to submit electronic claims 

with eleven-digit numbers take on an impossible task. Those who 

insist on manual claims—which identify the generic but not the 

manufacturer and bottle size—may be rebuffed or, at a minimum, 

encounter delays in payment. 

Providers need to publicize this issue with prescription drug plans 

and regulators alike, or whistleblowers may turn out to be one of 

the prime beneficiaries of the new prescription drug benefit. ■ 

January 2006 

30 


By José A. Tabuena 

JOSÉ A. TABUENA 

Editor’s note: José A. Tabuena is with the 

Forensic & Dispute Services practice of 

Deloitte Financial Advisory Services and 

assists organizations in the development 

and assessment of corporate compliance 

and anti-fraud programs. He is currently 

an Assistant Editor with Compliance & 

Ethics for The Society of Corporate 

Compliance and Ethics (SCCE). This article 

was originally published in Compliance 

& Ethics (Vol. 1, No. 2), page 10, 

November 2004. HCCA members interested 

in learning more about Compliance & 

Ethics can visit the SCCE Web site at: 

www.corporatecompliance.org or e-mail 

José at jtabuena@deloitte.com 

How did “internal control” 

become such a catch phrase in 

the current business climate For 

the experienced auditor, the terminology and 

underlying concepts, though frequently used, 

are deceptively simple and often ill-defined 

or applied in an assumptive manner. 

Just what are internal controls and what can 

happen to a company’s performance (and 

stock) if the controls aren’t very good Often 

it is not well understood that a compliance 

and/or antifraud program itself serves as a 

broad form of internal control. Certainly the 

features of such programs can comprise the 

fundamentals of a company’s internal control 

system. 

In certain highly regulated industries (including 

health care, defense contractors, financial 

institutions), an ethics-based compliance or 

integrity program headed by a compliance 

officer with senior management responsibility, 

have produced an established track record 

for the processes called for in the corporate 

governance reforms. Yet the recent legislation 

and resulting standards, though touting useful 

principles, still fail to recognize or emphasize 

a compliance program as an essential element 

for enhancing corporate governance. 1 

The changing legal and regulatory environment 

is encouraging companies to do what 

compliance officers and internal auditors have 

been striving to accomplish for some time— 

namely to consider compliance and fraud prevention 

programs as a significant part of an 

organization’s internal controls. To a growing 

extent, regulators and investors are demanding 

proactive compliance and fraud control programs 

characterized by an emphasis on the 

timely detection of fraud or other misconduct. 

The changing mindset places greater emphasis 

on internal controls, and particularly in the 

United States, the Committee of Sponsoring 

Organizations of the Treadway Commission 

(COSO) internal control framework. 

This fundamental shift presents an opportunity 

for ethics and compliance officers to 

become more actively involved in corporate 

governance matters and to demonstrate tangible 

value to an organization. For the compliance 

function, which may have been chafing 

under ambiguous accountabilities and perhaps 

perceptions that compliance programs 

only contribute burdensome processes, the 

environment is encouraging greater expectations 

to support efforts to combat corporate 

fraud and misconduct. Although there are 

some studies indicating that compliance and 

antifraud programs can pay for themselves 2 it 

has been a challenge for a compliance program 

to show value beyond the prevention of 

uncertain regulatory fines and penalties. 

Sarbanes-Oxley (SOX) and corresponding regulatory 

changes have raised the stakes for senior 

management and the board of directors. 

What follows is a discussion on how a compliance 

function can contribute to meeting the 

new requirements to assess the effectiveness of 

internal controls over financial reporting, 

while simultaneously laying the groundwork 

for documenting and demonstrating the effectiveness 

of the compliance program. This is 

unquestionably an opportune time to embrace 

the new financial governance standards as a 

bridge to overall compliance excellence. 



January 2006 

31

Editor’s note: This interview with Alan 

Pierce, HCCA’s Editor/Product 

Manager, took place in late November 

2005 and was conducted by Margaret 

Dragon. Alan may be contacted at 

888/580-8373 and by e-mail at 

alan.pierce@hcca-info.org. 

MD: Alan, would you tell our readers 

about your writing and editing background 

AP: Most of my writing and editing experience 

has come from newspapers. I started my 

career as a reporter at a small daily newspaper 

in Creston, Iowa, where I covered school board, 

city council, and county board meetings. I also 

covered law enforcement and the fire department, 

so I’ve seen more than my share of car 

accidents, house fires, and trials. Later, I 

became an assistant editor at the Ottumwa 

Courier. I supervised two reporters who worked 

out of our news bureaus, and I edited articles 

written by correspondents who possessed various 

degrees of ability. However, I continued to 

write, because the newspaper had a small staff. 

The journalism background has helped me 

tremendously in my later positions. Working in 

newspapers forced me to master a lot of information 

quickly and then turn around and produce 

accurate and clear articles. That skill 

helped my in my previous job as a children’s 

book author and editor. In 18 months, I wrote 

19 history books that were roughly 5,000 

words each. My newspaper background has 

helped me as an editor at HCCA where I must 

grasp the complexity of health care compliance. 

did you decide to move into the compliance 

field 

AP: I joined HCCA on September 6, 

2005.The challenge of this position and the 

subject matter intrigued me. Essentially, I am 

responsible for developing products for a 

field that is relatively new. I wasn’t an expert 

on a lot of issues I wrote about as a reporter, 

but I try to learn. I’m learning now. I’m 

always learning. 

MD: Tell us how do you go about developing 

product ideas and would it be helpful 

for members to email their ideas to you 

AP: I’ve been attending conferences and 

asking compliance professionals questions 

about what types of products would benefit 

them. I try to stay up on the trends in the 

industry. But really, I need assistance from 

members. It’s similar to being a reporter. I can 

attend meetings and ask people questions, but 

the compliance professionals are out in the 

field and they encounter compliance issues 

every day. I encourage them to send me ideas 

about products. To me, generating and sharing 

ideas are largely what HCCA is about. 

MD: How do you research a product and 

determine its viability 

AP: Some ideas come from conferences 

I’ve attended. I try to discern important 

issues and develop products that address key 

concerns. I also look to the HCCA survey as 

a guide to see what the priorities are for compliance 

professionals. 

ALAN PIERCE 

AP: I expect to contact members more in 

the future as HCCA plans new products. 

Right now, I’m focusing on finishing products 

that were started when I joined HCCA. 

MD: What products are you currently 

developing for HCCA 

AP: We are developing several products. 

First, Debbie Troklus is updating HCCA’s 

Compliance 101 book. The book is popular 

with members and is a necessary resource for 

people working in health care compliance. I 

think they will be pleased with the new version. 

Second, HCCA is developing an 

Auditing and Monitoring Manual. This manual 

will be comprised of tools and policies 

submitted by members and it will be a superb 

resource for professionals who are starting an 

auditing and monitoring program or are 

wanting to improve their program. Third, we 

plan to offer pay-per-view white papers on 

the Web site and at conferences. I envision 

these publications to run 20 to 50 pages. 

MD: When is the target date for these 

products to be available for purchase 

AP: My goal is to have these products 

available in time for the Compliance 

Institute in April. 

January 2006 

32 

MD: When did you join the HCCA staff, 

what intrigued you about the work, and why 

MD: Will you contact members to conduct 

research or to get their help 


MD: What help could HCCA members 

provide to you in developing these products

AP: As far as the Auditing and 

Monitoring Manual, I encourage members to 

send me auditing and monitoring tools and 

policies. Several members have been very 

generous and cooperative, and I appreciate 

their efforts. Some people have asked me to 

be more specific about what types of tools 

HCCA is looking for. I hesitate to be more 

specific because when I have given examples 

of material I am looking for, members 

assume I am not interested in other areas of 

auditing and monitoring. That is not the 

case. I am seeking tools that have helped 

members with their programs and that 

would benefit others. Also, I can always 

use ideas and writers for white papers and 

books. 

MD: What is the time commitment for 

those volunteering to help 

AP: The time commitment depends on 

the project. For the Auditing and Monitoring 

Manual members have taken tools and policies 

that are already developed and e-mailed 

those to me. Writing a white paper would 

take more time, but HCCA has an editor to 

assist with the process. 

MD: If a member would like to be 

involved, but can’t make a substantial time 

commitment, what contributions to this 

product development could they provide 

AP: Members can always contribute 

ideas. I encourage members to call me or 

e-mail me with ideas. If there is an issue that 

is crying out for discussion in a book or 

paper I want to hear about it. 

MD: Will you conduct any focus groups 

during the Compliance Institute to learn from 

what products our members will most benefit 

AP: That’s a good question. I might 

distribute questionnaires at the Compliance 

Institute to learn more about the kinds of 

products members want. 

MD: What is the best way for members 

to contact you 

AP: They can e-mail me at 

alan.pierce@hcca-info.org or call me at 

888-580-8373 ext. 245. ■ 

The trend toward increased corporate... 

...continued from page 28 

ney general has oversight responsibilities for 

nonprofits). Organizations should be prepared 

for quicker investigative actions from state and 

federal authorities in response to reported 

abuses within tax-exempt organizations. 

It is clear that with the growing impact of 

charities and nonprofits following the recent 

Katrina devastation, legislators will face 

much more public pressure to (i) pass legislation 

that increases nonprofit accountability, 

and (ii) ensure that the benefits of taxexempt 

organizations are directed toward the 

bona fide charitable purposes and goodwill 

of the general community. Those in the 

nonprofit, tax-exempt health care compliance 

area should keep abreast of such developments 

and prepare for heightened compliance 

requirements. At the very least, compliance 

professionals should conduct self-audits 

to see if their organization reflects problems 

highlighted by the Sector Report, and 

address any shortcomings accordingly. ■ 

1. Julie Appleby, “Non-profit Hospitals’ Top Salaries May Be 

Due for a Check-Up,” USA Today, Money Section (Sept. 

9, 2004), available at www.usatoday.com/money/industries/ 

health/2004-09-29-nonprofit-salaries_x.htm#POE= 

click-refer 

2. Cal. Gov’t Code § 12583. 

3. Section 12586 in part reads as follows: 

If it is a corporation, have an audit committee appointed 

by the board of directors. The audit committee may 

include persons who are not members of the board of 

directors, but the member or members of the audit committee 

shall not include any members of the staff, including 

the president or chief executive officer and the treasurer 

or chief financial officer. If the corporation has a 

finance committee, it must be separate from the audit 

committee. Members of the finance committee may serve 

on the audit committee; however, the chairperson of the 


audit committee may not be a member of the finance 

committee and members of the finance committee shall 

constitute less than one-half of the membership of the 

audit committee. Members of the audit committee shall 

not receive any compensation from the corporation in 

excess of the compensation, if any, received by members of 

the board of directors for service on the board and shall 

not have a material financial interest in any entity doing 

business with the corporation. 

4. Cal. Gov’t Code § 12586(g). 

5. A copy of the Massachusetts proposal is available at 

www.ago.state.ma.us/sp.cfmpageid=2059 

6. Maine LD 1691 (Mar. 10, 2004). A white paper discussion 

of the Maine laws is available at www.nonprofitmaine.org/ 

documents/LD1770Sum.pdf. The National Council of 

Nonprofit Associations monitors activity within nonprofit 

law development, and helpful 2004 and 2005 surveys of 

state legislation—whether passed or not—can be downloaded 

at 

www.ncna.org/index.cfmfuseaction=Page.viewPage&page 

Id=555 

7. New Hampshire H.B. 1408 (Jun. 11, 2004), available at 

www.gencourt.state.nh.us/legislation/2004/HB1408.html 

8. IRS News Release 2004-106 (Aug. 10, 2004). 

9. Supra, n.2. 

10. Note that churches and governmental entities are generally 

exempt from Form 990 filings; this will include hospitals 

that are essentially “owned” by local hospital districts. 

11. Available at http://www.irs.gov/pub/irs-utl/topice00.pdf 

HCCA’s 8th Annual 

Compliance Survey 

HCCA conducted its annual member 

survey online from December 5, 2005, 

to January 5, 2006. 

This survey provides important benchmarking 

data for the entire industry. 

This research tracks the growth of 

corporate compliance programs and 

positions, and looks at issues facing 

compliance officers and their staffs. 

This important research also gives us 

information on compliance education 

and training as well as compliance 

staff salary levels. 

The 8th Annual Survey will be released 

at the HCCA’s 10th Anniversary 

Compliance Institute in Las Vegas and 

will be mailed to all HCCA members. 

January 2006 

33

By Celeste Daye and Sou Chon Young 

Editor’s note: Celeste Daye is Director Up to now, whoever had the most “muscle” 

of Patient Accounting with Dana Farber had the ability to make others conform to 

Cancer Institute, and Sou Chon Young their “language,” by customizing their system, 

building interfaces or creating new 

is a Health Care Industries Consultant 

with PricewaterhouseCoopers. 

work. Rather then utilizing technology to 

Mr. Young may be reached by e-mail improve processes, workflows were created to 

at sou.chon.young@us.pwc.com 

accommodate technology. 

It was January 2003 when the 

HIPAA has given the industry the opportunities 

not only to review our workflows but 

Health Insurance Portability and 

Accountability Act (HIPAA) 835 also to shave off non-value added (NVA) 

Transaction Code Set (TCS) project at steps, which will reduce costs and improve 

Dana Farber Cancer Institute (DFCI) efficiency. DFCI saw this opportunity and 

started; it was to be a short three- to sixmonth 

engagement working to configure a didn’t anticipate was the complexity involved 

wanted to capitalize on HIPAA. What we 

few new modules in the legacy patient with becoming compliant and adopting the 

accounting system and bring the highest HIPAA 835 TCS, as well as the additional 

revenue payors live with the 835 HIPAA1 opportunities that the 835 would provide. 

Transaction Code Set. Two years later we 

are finally live with all of these major Experience 

payors and there is still plenty of work DFCI’s legacy patient accounting system had 

related to the 835 TCS. 

come out with a few new modules and functionality 

such as the EDI Toolkit, Line Item 

October 2002 was the mandated live date Payment Posting, and Rejection Subsystem, 

(October 2003 if you filed for an extension) which needed to be configured, tested, and 

set by the Department of Health and moved into live. At the same time, some payors 

had their own implementation guides in 

Human Services, but most of the industry is 

still not using the 835 TCS. 

addition to the ANSI X12N 835 

Implementation Guide (IG), which needed 

Intent 

to be taken into consideration when configuring 

the legacy patient accounting system. 

One of the goals of HIPAA was to simplify 

the health care business. What seemed like Most of this work seemed straightforward 

common sense, to simplify communication but given all the different components, it was 

within the health care industry, has finally only a matter of time before we ran into 

been put down into a plan: standardization. some significant roadblocks. 

Negative experiences 

Patient Accounting System Vendor 

We quickly realized we had a challenge ahead 

of us when the vendor documentation was 

incomplete or incorrect, functionality was 

not working properly and others were changing 

as we tested, and some major components 

of the 835 files were not incorporated 

into the system. The vendor had unknowingly 

made us a beta site; and after several conference 

calls with the vendor’s senior management, 

a support team was dedicated to DFCI 

to address some of the problems we were 

encountering. Despite all of this, the vendor 

was one of the early adopters of the HIPAA 

TCS and had sophisticated systems in place. 

Payors 

Like most providers, we scheduled Medicare 

first on the list for these reasons: 

■ Medicare is the biggest payor with the 

highest revenue in DFCI’s book of business 

■ Medicare already had the most experience 

using the standard code sets, which are 

part of the ANSI X12N 

■ There were threats and fines for those 

who did not adopt the TCS (specifically 

the 837), so we decided to test in parallel 

the two TCS 

Again, we quickly realized we had a challenge 

ahead of us. For one, there was little or no 

response from their EDI support team; we 

were on our own. After much analysis and 

testing we were able to handle some of the 

nuances Medicare had, such as cost outliers, 

PLB interpretation, and using certain reason 

codes inconsistently (i.e., to report both a contractual 

allowance in some instances and then 

denials in others). Now, a system can be configured 

for binary decisions (yes/no) but usually 

cannot “think” without additional logic 

and parameters created and set into place; so 

we began a discussion about a “pre-processor” 

January 2006 

34 


that would provide the intelligence and handle 

some of these non-standard situations. 

Each payor we activated had its own nuances 

and idiosyncrasies. Issues ranged from limitations 

in the payors’ legacy system that led to 

difficulty translating proprietary codes into 

the HIPAA compliant codes or taking codes 

from primary payors and passing them 

through, to having different interpretations 

of the IG, all of which we had to overcome. 

The ship had set sail and there was no turning 

back; we had to make things work. 

We are still challenged by the multiple interpretations 

of the same claim adjustment reason 

code (CARC), the inconsistency in which 

an individual payor may report the frequency 

in which it changes its files. And our inability 

to recognize when changes are being made 

makes the work extremely challenging. 

Positive experiences by stakeholder 

To help develop collaboration between 

payors and providers 

Many of us know that with anything new, 

several unforeseen issues arise—what some 

might call opportunities. For example, the 

issues encountered when testing with payors 

created an opportunity to work collaboratively 

with some local payors. Subcommittees 

were established, which provided a forum for 

addressing issues with those working hands 

on. Not only were new relationships formed 

and old ones strengthened, but also trust 

increased and (silos) and walls began to 

come down. 

Historically, payors and providers were seen 

as being on opposing sides, but much less so 

now, at least not from the EDI perspective. 

For example, when DFCI encountered an 

issue with the local Blue Cross Blue Shield 

(BCBS) 835 file, we worked with a representative 

and the company’s EDI team, which 

held weekly meetings for local providers to 

understand issues providers were having. 

They not only listened but they also worked 

with us to come up with a solution. Several 

months later they were able to come through 

and shortly afterwards we flipped the switch 

and converted from the old proprietary format 

to the 835 with them. 

Harvard Pilgrim Health Plan also held weekly 

calls for users/testers to discuss issues, to ask 

questions, and to share experiences with one 

another. These types of calls also helped form 

relationships among the provider community. 

As the industry moved toward the new EDI 

world, it forced processes to be reviewed in 

order to integrate EDI, which provided the 

opportunity to improve processes and 

remove NVA steps. 

Denial management 

Another opportunity that presented itself in 

implementing the 835 was the ability to create 

a denial management program. Since payors 

are now required to use the same denial 

codes (CARC), denial reports could be generated 

for all payors that DFCI posts with the 

835 file. PricewaterhouseCoopers has such a 

product, TurboDM, utilizing the 835 TCS to 

standardize denial reports and work-lists. 

Prior to HIPAA, DFCI had denial reports 

but crosswalks had to be built for each 

payor’s proprietary denial codes. These lists 

of codes were not only cumbersome to maintain 

but they required additional manual 

intervention to integrate each payor into one 

standard report. 

Performance improvement 

When analyzing 835 files prior to go live, 

several other issues were uncovered. It ranged 

from contracting, to claim creation and edits, 

to coding, and ran the whole gamut as far as 

the revenue cycle was concerned. The 835 is 

full of information and if tapped into can 

reveal so many areas for performance 

improvement, specifically surrounding the 

revenue cycle. Some examples are: 

■ Coding—HCPC code and modifiers 

■ Payment—DRG and APC payments 

(depending on if payor is sending back 

information) 

■ Contracting: 

– Allowed and contractual amounts 

– Bundling 

– High-level payment analysis 

■ Billing 

In addition, we had hoped customized 

processors built to handle payor specific 

file/tape formats, prior to HIPAA TCS, can 

now be sunset, which will reduce maintenance 

for the IT staff. The return on investment 

(ROI) is large, both from a tangible 

and intangible prospective. Short-term ROI 

involves reducing full-time employee’s 

(FTE’s) dedicated to manual cash and denial 

posting; automation of denial workflows is 

now a possibility. Now add to that compliance 

benefits such as reduced cost for archiving 

(paper versus electronic) and ease of 

locating an electronic remittance versus a 

paper remittance advice. The list goes on— 

the benefits are endless as we move into the 

EDI world. 

Future 

The journey has just begun. As the industry 

works toward tightening the implementation 

guides (such as version 4050 and 5010) and 

further collaboration, we will fully realize the 

simplification intended when first mandated. 

In addition, an entity or board will need to 

surface to govern and lead the rest of the 

industry (such as HHS, WEDI, etc.) and 

impose penalties on those who do not work 



January 2006 

35

OIG issues draft guidance ...continued from page 18 

■ Written Policies and Procedures. The 

OIG recommends that every institution 

develop and distribute written policies and 

procedures addressing compliance with 

federal award requirements. The policies 

and procedures should be provided to all 

faculty members and other employees that 

are affected by them, to students that may 

be conducting research with federal awards, 

and to any agents or contractors who furnish 

services in connection with federal 

research awards. As in past compliance program 

guidance, the OIG recommends that 

the institution develop a code of conduct 

and that there be involvement of senior 

management of the institution, such as the 

board of regents and president. 

■ Designation of a Compliance Officer 

and a Compliance Committee. The 

compliance officer should report directly to 

the institution’s president and should have 

direct access to the board of regents or 

other governing body, senior administration 

officials, and legal counsel. For larger 

institutions, the compliance officer could 

also report to the provost or official with 

similar high-level responsibility for the 

oversight of research administration. 

■ Conducting Effective Training. The 

OIG states that it is important to train 

appropriate administrators, both at the institution 

and department levels, faculty 

(including principal investigators), other 

staff, and contractors on award administration 

and other award program requirements. 

It may be helpful to involve faculty, such as 

principal investigators, in developing training 

programs to promote buy-in with the 

compliance program. Administrative personnel 

who manage award funding should 

receive specialized training on federal cost 

principles and grant administration regulations 

and policies. Employees who are 

involved with clinical research should receive 

training in the protection of human subjects, 

the IRB process, and the responsible 

conduct of research. The OIG suggests that 

institutions consider relaying in the training 

actual examples of compliance problems at 

the institution or other institutions, typically 

without any identifying information. 

■ Developing Effective Lines of 

Communication. University officials, 

department chairpersons, or other supervisors 

should serve as the first line of communication 

for compliance issues. The 

OIG’s other standard recommended communication 

methods should also be considered, 

such as hotlines, e-mails, newsletters, 

and suggestion boxes, at least one of 

which should allow employees to report 

matters on an anonymous basis. 

■ Auditing and Monitoring. The OIG 

notes that all institutions that spend 

$500,000 or more in federal awards are 

required to have a “non-federal entity” single 

audit. This is usually in addition to an 

institution’s annual financial statement 

audit. As in other compliance program 

guidance, the OIG also recommends conducting 

internal audits and risk assessments 

to identify other risk areas. The OIG 

emphasizes that external auditors should be 

considered when there is a particular problem 

or risk area that needs attention. 

■ Disciplinary Guidelines. The OIG recommends 

similar disciplinary policies and 

sanctions as it has recommended in past 

guidance. 

■ Responding and Developing Corrective 

Action Plans. The OIG recommends similar 

policies for investigating and responding 

to alleged violations of the compliance program 

or applicable federal or state laws as it 

has recommended in past guidance. 

The new eighth element. The OIG has 

added an eighth element that it considers 

“especially important” for an effective compliance 

program at a research institution. The 

eighth element requires the institution to 

define roles and responsibilities and assign 

oversight responsibility for research activities. 

Institutions should delineate responsibilities for 

all individuals involved in federally supported 

research, including research administration and 

department personnel, and principal investigators 

and others engaged in research. The OIG 

notes that, since PHS regulations define the 

institution as the “responsible legal entity” that 

certifies statutory and regulatory compliance, 

clearly defined roles and responsibilities will 

assist institutions in fulfilling their certifications 

of compliance and assist in protecting 

institutions against allegations of wrongful 

conduct. The Guidance recommends including 

roles and responsibilities in the institution’s 

written policies and procedures and in its formal 

training and education program. 

Conclusion 

The Guidance currently is in draft form. 

Comments on the Guidance are due to OIG 

by January 30, 2006. After considering all comments, 

the OIG will prepare a final version for 

publication in the Federal Register. Until then, 

recipients of awards from PHS should review 

the draft Guidance in light of their current 

policies, procedures, and practices and begin to 

consider the ways in which the information in 

the Guidance may help improve the recipient’s 

research compliance efforts. The Guidance is 

helpful both regarding grant management and 

other regulatory areas affecting the research 

enterprise, such as human subject protections, 

research misconduct, and conflicts of interest. 

For additional general information on research 

compliance issues, the Guidance includes a 

bibliography that identifies literature on 

research compliance issues, including guidance 

on establishing a compliance program. ■ 

The information in this article does not constitute legal advice, 

which can only be obtained through personal consultation with an 

attorney. The information published here is believed to be accurate 

at the time of publication, but is subject to change and does 

not purport to be a complete statement of all relevant issues . 

January 2006 

36 


Case study of Dana Farber Cancer Institute 

...continued from page 35 

toward the common goal. Without any penalty or 

enforcement, the industry will move at a much 

slower pace. 

The landscape is constantly changing and two other paradigm 

shifts such as consumerism and pay-for-performance 

are looming on the horizon. In our opinion, leveraging 

the HIPAA TCS and complying with the security 

and privacy rules will be essential in adoption of these 

new paradigms. 

But before we get ahead of ourselves, we all need to do 

a better job about voicing issues from the trenches and 

expressing them to organizations such as WEDI, CMS, 

HHS, etc. to further reduce the chaos it has created 

and work better toward true simplification. We hope 

that this article has shed some light on and has motivated 

you to look further into adopting the HIPAA TCS 

or to plow forward despite the challenges. 

Summary 

As with any situation, one can view it as a problem or 

an opportunity. DFCI and PwC viewed HIPAA as an 

opportunity. Together we have moved into the HIPAA 

world and we look forward to additional opportunities 

to come. Along the way, we’ve built some great relationships 

with some payors and have learned some great 

lessons. Some of these didn’t even deal with HIPAA, 

payors, or patient accounting. Project management, 

working internally with IT and vendors were all part 

of the mix. 

All in all, we have all benefited and moved one step 

further in reducing cost and simplifying administration 

within health care. ■ 

1. HIPAA—Health Insurance Portability and Accountability Act of 1996. 

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 

CERTIFIED IN 

HEALTHCARE 

COMPLIANCE 

The Compliance 

Professional’s Certification 

Congratulations on achieving 

CHC status! The Health Care Compliance 

Certification Board announces that the following 

individuals have recently 

successfully completed the Certified in 

Healthcare Compliance (CHC) examination, 

earning CHC designation: 

Samuel L. Alfano 

April Ileen Andrews-Singh 

Anthony P. Angelo 

David James Behinfar 

James Canino 

Patricia Ann. Combs 

Mary Lucille Crumbaker 

Caron R. Cullen 

Charlotte Renee Dokes 

James Alexander 

Donaldson 

Anne Therese Dosch 

Kim E. Edwards 

James Joseph Ferriter 

Levoy Golden Haight 

Carrie A. Hardie 

Lorenzo Alan Henderson 

Kristan Ann Holt 

Kristy M. Johnson 

Steve C. Kilgore 

Indus M. Kreutz 

Jack Lay 

Linda J. Lemay 

Edward G. Longazel 

Rebecca Lynn Massey 

Peggy Ann Mccurry 

Lori A. Moon 

Madonna C. Moranville 

John Robert Outlaw 

Lise D. Rauzi 

Dana Kathleen Reid 

Kate Riley 

Deborah Gayle Rodgers 

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, 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.” 

Brenadette A. Schwab 

Susan B. Scutt 

Neil Edward Shields 

Angela Eakes Solomon 

Linda L. Stratton 

Kristine Marie Tomzik 

Pat Wagner 

Robert L. Wamsley 

Robin Lee Wilcox 

Karen K. Wilson 

Cathy A. Wolfe 

Ami Zumkhawala-Cook 

Veronica Angulo 

Timothy Barker 

Janet Berkel 

Marvin Capehart 

Sara Ann Desmond 

Kathleen A. Dimaggio 

Kathleen Gallegos 

Patricia Hansen 

Lee Harrison 

Andrea M. Kuhlen 

Samuel Kofi Kyeremeh 

Latour Rey Lafferty 

Mary P. Luthy 

Donald Ray Martin 

Melanie Benitez Roberts 

Connie Sweeney 

Nina Viloria 

Susan Lee Waterman 

Christopher Parella 

Betty Bibbins 

For more information on how you can become CHC Certified, please call 

888-580-8373, e-mail hccb@hcca-info.org, or visit the HCCA Web site at 

www.hcca-info.org and click on the HCCB Certification button on the left. 


37 

January 2006

By Lawrence A. Fogel and Joseph M. Watt 

Editor’s note: Lawrence A. Fogel, guidance documents for hospitals, including 

principal, and Joseph M. Watt, partner, the February 23, 1998, Federal Register and 

are both members of BKD Health Care the January 31, 2005, Federal Register. 

Group, a division of BKD, LLP, in 

Kansas City, Missouri, which serves thousands 

of health care providers nationwide. the OIG acknowledged that effective compli- 

In the OIG’s original compliance guidance, 

Mr. Fogel and Mr. Watt consult with ance programs provide the following benefits: 

clients on a broad spectrum of corporate ■ Enable hospitals to ensure that false or 

integrity solutions. Contact the authors at inaccurate claims are not being submitted 

lfogel@bkd.com or jwatt@bkd.com 

to government and private payors 

■ Assist hospitals in identifying weaknesses 

United States hospitals cannot and internal systems and management 

blame the federal government for ■ Demonstrate to employees and the community 

that the hospital is strongly committed 

a lack of guidance on developing 

and maintaining effective compliance programs. 

To the contrary, the Office of ■ Provide a more accurate view of employee 

to honest and responsible corporate conduct 

Inspector General (OIG) has provided written 

guidance as a roadmap for hospitals to abuse 

and contract behavior related to fraud and 

operate effective compliance programs. ■ Identify and prevent criminal and 

unethical conduct 

Some hospitals seem unconcerned about effective 

compliance programs. Many hospitals program to meet the hospitals specific 

■ Enable hospitals to conform the compliance 

assume just having a compliance program needs 

offers sufficient protection. In reality, ineffective 

compliance programs offer little or no ■ Create a centralized process for distribut- 

■ Improve the quality of patient care 

protection to hospitals that commit compliance 

violations, detected or not, well after seri- 

rules and regulations pertaining to fraud 

ing information on relevant health care 

ous damage occurs. Effective compliance programs 

may enable hospitals to avoid compli- 

■ Encourage employees to report potential 

and abuse 

ance violations or detect them early enough to problems 

mitigate serious damages. Furthermore, government 

agencies may be more lenient with gation of alleged misconduct 

■ Provide for prompt and thorough investi- 

hospitals that operate effective compliance ■ Provide for immediate and appropriate 

programs even if cited for a violation. 

corrective action 

■ Reduce the loss to the government 

Guidance is available and accessible. The from compliance violations through early 

OIG has published two primary compliance detection and reporting 

LAWRENCE A. FOGEL 

According to the OIG, the following seven 

elements should be included in compliance 

programs: 

1. Develop and distribute written standards of 

conduct and written polices and procedures 

2. Designate a chief compliance officer and 

compliance committee 

3. Develop and implement effective education 

and training programs 

4. Maintain a hotline or other processes to 

receive complaints 

5. Respond systematically to allegations and 

improper or unlawful activities and 

enforce appropriate disciplinary actions 

6. Use audits or other monitoring techniques 

to monitor compliance 

7. Investigate and resolve identified systematic 

problems 

To evaluate compliance program effectiveness, 

the OIG recommends hospitals perform periodic 

reviews, at least annually, to determine if 

the seven compliance elements have been satisfied. 

Documentation supporting compliance 

activities should demonstrate the compliance 

program operated effectively. Reviewers should 

be independent of physicians and line management. 

The compliance review team should: 

■ Conduct on-site reviews 

■ Interview personnel involved in 

management, operations coding, claims 

development submission, etc. 

January 2006 

38 


JOSEPH M. WATT 

■ Solicit staff and employees’ impressions 

using questionnaires 

■ Review medical and financial records and 

other source documents 

■ Review written materials and documentation 

prepared by the hospital 

■ Analyze trends 

Despite the 1998 guidance, many hospitals 

have yet to perform periodic compliance effectiveness 

reviews. Consequently, the OIG published 

supplemental compliance guidance for 

hospitals in the January 31, 2005, Federal 

Register. In it, the OIG states there must be a 

commitment to active involvement of organizational 

leadership for every compliance program. 

The OIG expects a hospital’s leadership 

to promote a culture of values and rewards for 

prevention, detection, and resolution of compliance 

problems. Hospitals are expected to 

develop a culture that values compliance from 

the top down and fosters compliance from the 

bottom up. The OIG believes such an organizational 

culture is the foundation of an effective 

compliance program. The OIG recommends 

compliance program effectiveness be 

evaluated based on outcome indicators such as 

monitoring and evaluating billing and coding 

error rates and identifying overpayments. 

In addition to evaluating outcome indicators, 

the OIG recommends hospitals evaluate the 

seven elements through probing questions, 

including, but not limited to, the following: 

1. Compliance officer and committee 

■ Does the compliance department have a 

clear, well-crafted mission 

■ Is the compliance department properly 

organized 

■ Does the compliance department have 

sufficient resources 

■ Is there an active compliance committee, 

comprised of trained representatives 

from each of the relevant functioning 

departments 

■ Does the compliance officer have direct 

access to the governing body, CEO and 

legal counsel 

■ Does the compliance officer have a good 

working relationship with other key 

operational areas 

■ Does the compliance officer make regular 

reports to the board of directors and senior 

management 

2. Development of compliance polices 

and procedures 

■ Are policies and procedures clearly written 

■ Does the hospital monitor compliance 

with internal policies and procedures 

■ Have the standards of conduct been distributed 

to all members of the board of 

directors, officers, managers, employees, 

contractors, medical and clinical staff 

■ Has the hospital developed and implemented 

a risk assessment tool 

■ Does the risk assessment tool include an 

evaluation of federal health care program 

requirements 

3. Open lines of communication 

■ Has the hospital promoted a culture 

encouraging open communication without 

fear of retribution 

■ Has the hospital established an anonymous 

hotline or similar reporting mechanism 

■ Is the hotline or other reporting mechanism 

well publicized 

■ Are all instances of potential fraud and 

abuse investigated 

■ Are results of the investigation shared 

with the governing body and relevant 

departments 

4. Appropriate training and education 

■ Does the hospital provide qualified 

trainers 

■ Does the hospital conduct annual 

compliance training 

■ Is the training both general in nature and 

specific to pertinent staff responsibilities 

■ Does the hospital evaluate the contents of 

its education program annually 

■ Has the hospital kept current with 

changes in federal health care program 

requirements 

■ Does the hospital seek feedback after each 

training session to identify strengths and 

weaknesses of the compliance program 

■ Does the hospital administer post-training 

tests 

■ Has the hospital’s governing body been 

provided with appropriate training 

■ Has the hospital properly documented 

who has completed the training 

5. Internal monitoring and auditing 

■ Is the audit work plan reevaluated annually 

■ Does the work plan address the appropriate 

levels of concern 

■ Does the work plan include an assessment 

of billing systems 

■ Is the role of the auditors clearly 

established and are coding and auditing 

personnel independent and qualified 

■ Has the hospital evaluated the error rates 

identified in the annual audits 

■ Does the audit include a review of all 

billing documentation, including clinical 

documentation 



January 2006 

39

The OIG’s roadmap for effective compliance programs ...continued from page 39 

6. Response to detected deficiencies 

■ Has the hospital created a response team 

to evaluate detected deficiencies 

■ Are all deficiencies thoroughly and 

promptly investigated 

■ Are corrective actions taken to resolve 

compliance violations 

■ Are subsequent periodic reviews performed 

to verify that corrective actions 

have eliminated compliance problems 

■ Are overpayments promptly identified and 

returned to the fiscal intermediary or 

other payors 

■ Are compliance violations promptly reported 

to the appropriate law enforcement 

agency, if required 

7. Enforcement of disciplinary standards 

■ Are disciplinary standards publicized to all 

hospital personnel 

■ Are disciplinary standards consistently 

enforced throughout the organization 

■ Are enforcement actions of disciplinary 

standards properly documented 

■ Are employees, contractors, medical and 

clinical staff checked routinely against the 

government sanctions list 

In summary, there are at least three ways a 

hospital can evaluate the effectiveness of its 

compliance programs. The first is for the hospital 

to conduct an internal review using its 

own personnel. Note: The OIG cautions that 

the reviewers should be independent of linemanagement. 

In other words, the reviews 

should be conducted as independently and 

objectively as possible. 

The second way is to utilize external consultants. 

This generally provides an independent 

and objective evaluation of the compliance 

program’s ability to meet the seven elements 

required for effective compliance programs. 

The third way is through a government 

investigation. Government investigators have 

the right to request copies of the compliance 

plan and standards of conduct and to review 

the hospital’s compliance activities to determine 

if the compliance program is effective. 

Without a doubt, hospitals should perform 

their own compliance effectiveness reviews at 

least annually to evaluate if their compliance 

programs are operating properly. The OIG has 

provided a good roadmap of its expectations 

for an effective compliance program. Now, 

hospitals are in the driver’s seat to develop and 

maintain effective compliance programs. ■ 

A new value proposition ...continued from page 31 

Legal and regulatory context 

The emerging control frameworks converge 

for the purposes of SOX section 404 and the 

development of compliance programs. 

Another common denominator is the focus 

on antifraud programs and controls. Each of 

the standards establishes criteria for evaluating 

such controls from a distinct vantage point. 

The COSO framework 3 establishes criteria for 

internal control over financial reporting which 

forms the basis of management and auditor 

obligations under SOX 404. The standards 

under the amended U.S. Sentencing 

Guidelines for Organizations are designed to 

address what prosecutors and courts look for 

in determining whether an organization has 

exercised due diligence in establishing a program 

to prevent and deter violations of law. 

The listing requirements of the stock 

exchanges define certain control standards in 

greater detail. Still, the various criteria share 

similar characteristics that can be organized 

under the overall COSO framework. 

Sarbanes-Oxley and ensuing 

regulations and standards 

Reaffirming the obvious, Sarbanes-Oxley is 

focusing attention on standards that will have 

far-reaching governance and control expectations 

on organizational compliance systems. It 

is now abundantly clear that many of the principles 

found in Sarbanes-Oxley overlap and 

complement existing compliance guidances, 

and those principles are being further adopted 

and enhanced by other regulatory authorities. 

To further restate what is well known, the 

credibility of public company financial reporting 

was undermined following a string of corporate 

accounting scandals. These events led 

to a number of proposals to improve the 

financial reporting process and restore investor 

confidence. In 2002, Congress passed the 

Sarbanes-Oxley Act 4 to improve the integrity 

of financial reporting and to restore public 

confidence. Subsequently, the Securities and 

Exchange Commission (SEC), various stock 

exchanges, and the National Association of 

Securities Dealers adopted rules and regulations 

mandating processes tailored to meet the 

requirements of the new law. 

Failures in internal control, particularly over 

financial reporting, were among the specific 

concerns addressed by Congress in SOX. 5 

Congress required that management affirmatively 

report on a company’s internal control 

over financial reporting, and that auditors 

attest to the accuracy of management’s report. 

The Act thus created the Public Company 

Accounting Oversight Board (PCAOB) to 

oversee the audits of public companies. 

Organizations use internal controls as safeguards 

and checks on a variety of processes 

January 2006 

40 


including the three objectives set forth under 

COSO: financial reporting, operating efficiency 

and effectiveness, and compliance 

with applicable laws and regulations. Most 

companies and their auditors will use the 

COSO framework, which has been deemed 

suitable by the PCAOB for purposes of management’s 

assessment. 6 The COSO integrated 

framework includes five components of 

internal control (Control Environment, Risk 

Assessment, Control Activities, Information 

and Communication, and Monitoring) that 

are also acknowledged by the PCAOB. 

SOX refers explicitly to controls related to the 

prevention, identification and detection of 

fraud. And the PCAOB repeatedly notes that 

strong internal controls provide better opportunities 

to detect and deter fraud. 7 Although 

antifraud programs and controls must include 

all five components of COSO, special 

emphasis is placed on the control environment, 

8 such as tone at the top, because of its 

pervasive effect on the achievement of many 

overall objectives of control criteria. 

Amendments to the Organizational 

Sentencing Guidelines 

Prior to SOX, the U.S. Sentencing 

Commission adopted the Federal Sentencing 

Guidelines (FSG) which introduced the 

seven criteria for management of ethics and 

compliance risk, 9 and that have served as the 

primary framework for compliance program 

effectiveness. The FSG and COSO frameworks 

share many characteristics. Much of 

the FSG criteria are contained in the components 

of COSO, especially under the control 

environment. However, a main distinction is 

that as a practical matter, the FSG only 

requires evaluation of its elements when a 

company is seeking to mitigate penalties for 

corporate misconduct. Additionally, if a 

Department of Justice attorney finds that a 

truly effective compliance program has been 

implemented, this “may result in a decision 

to charge only the corporation’s employees 

and agents” and not the organization itself. 10 

This year the U.S. Sentencing Commission 

voted to amend the existing guidelines. 11 

These amendments narrow even further the 

differences between the Guidelines and the 

COSO framework. Many of the same forces 

that led to the Sarbanes-Oxley requirements 

had led to the initiation of the FSG and the 

new amendments. 

The amendments approved by the 

Commission make the standards for compliance 

and ethics programs more rigorous and 

put greater responsibility on boards of directors 

and executives for the oversight and 

management of such programs. Board directors 

and senior management must now take 

active roles in the content and operation of 

ethics and compliance programs. Similarly, 

SOX devotes considerable attention on how 

to ensure adequate board and management 

oversight. 

Significantly, the FSG states that the organization 

must issue standards of conduct and 

internal control systems that reduce criminal 

activity and detect and prevent violations 

of law. Just like SOX, the organizational sentencing 

guidelines recognize the value of 

internal controls and view them as an essential 

feature of an effective compliance program. 

Under the FSG, internal controls are 

tied to risk assessment and monitoring activities—also 

to COSO components. 

The value proposition 

As noted, many of the attributes of the 

COSO components and their points of focus 

implicate a compliance program under the 

organizational sentencing guidelines. The 

amendments to the FSG are therefore a 

means for a compliance officer to get more 

involved in Sarbanes-Oxley compliance. The 

function is pivotal because many of the compliance 

processes undertaken by the compliance 

program can be applied to the SOX 

internal control requirements. 

Yet in most cases, SOX is managed out of a 

unit under the purview of the controller’s 

office or internal audit. And most of those 

outside a compliance or legal department are 

unaware of the compliance standards under 

the FSG. As a result, many in charge of managing 

SOX 404 implementation or assessment 

are not familiar with the elements of 

effective compliance processes. 

What should be apparent is that involvement 

in the SOX internal control process can set 

the stage for demonstrating compliance effectiveness 

to mitigate penalties if the occurrence 

of fraud or corporate misconduct 

should occur. Given the overlap between the 

FSG and SOX, it makes sense to leverage 

and integrate compliance program activities 

with those of SOX internal control implementation 

and assessment. What are likely to 

emerge are the best practice standards that 

for organizations can also serve as a demonstration 

of compliance program effectiveness 

to the government. 

The following are areas of opportunities for 

an organization contemplating a formal compliance 

program, or for an existing compliance 

officer to consider: 

Integration of control processes. There is 

often a tendency to compartmentalize compliance 

responsibilities (e.g., SOX, FSG, industryspecific 

legal mandates, etc.). But consider the 

benefits to managing these processes with similar 

controls and technology. Otherwise organizations 

can face inefficient and ultimately fragmented 

compliance processes. A compliance 



January 2006 

41

A new value proposition ...continued from page 41 

officer responsible for coordinating all compliance 

efforts can result in an integrated and more 

effective compliance program. 

Although SOX 404 focuses on the COSO 

objective of the reliability of financial reporting, 

there are areas where there will be overlap with 

internal controls over operations and compliance 

with applicable regulations. 12 Some compliance 

controls may be relevant to financial 

reporting, thus there is the prospect of including 

the COSO compliance objective with SOX 

financial reporting control efforts to further 

drive business performance. A compliance officer 

can also play a role in a company’s disclosure 

controls and procedures under SOX section 

302, particularly non-financial information that 

is required by the SEC to be divulged. 

Moreover, for complex industries, an ineffective 

regulatory compliance function in which violations 

of laws and regulations could have a material 

effect on the reliability of financial reporting 

is said to be regarded as at least a significant 

deficiency and a strong indicator of a material 

weakness under the new auditing standard. 13 

Reliance on compliance work and activities 

by external auditors. Another opportunity 

arises from the flexibility that public 

auditors are afforded under the new auditing 

standard established by the PCAOB, to use 

the work of others when evaluating internal 

control effectiveness. The PCAOB notes that 

this is “strong encouragement for companies 

to develop high-quality internal audit, compliance, 

and other such functions” 14 (emphasis 

added). Accordingly the work of the compliance 

program can serve a dual purpose in 

supporting an efficient audit of internal control, 

while providing documentation of the 

effectiveness of the compliance program itself. 

Areas of overlap under COSO. A significant 

area of overlap between SOX 404 and 

the FSG involves control environment objectives 

under COSO. Several control environment 

factors entail activities that have become 

the province of the compliance program. For 

example, the integrity and ethical values 

attribute involves the code of conduct which 

is a compliance program responsibility where 

the function exists. The hotline is often managed 

by the compliance department and can 

be viewed as a control environment and/or 

information and communication factor. 

Training on the code of conduct and fraud 

areas is considered an attribute under information 

and communication. Many of the human 

resource policies and practices attributes under 

the control environment entail features of a 

compliance program under the FSG (e.g., 

employee background checks, appropriate 

incentives, and disciplinary practices). 

A new provision of the organizational sentencing 

guidelines is the importance of performing 

on-going risk assessments on the 

likelihood of compliance violations, and to 

use those results to modify features of the 

compliance program, and to prioritize compliance 

resources and activities. Again, this is 

similar to the expectations for fraud control 

under COSO and the PCAOB. 

If you can’t beat them, join them. In the 

health care and pharmaceutical industries and 

other highly regulated business sectors, compliance 

programs and senior compliance officers 

have become customary and an expectation 

of government regulators and enforcement 

agencies. Congress and government 

agencies have even made clear their perspective 

that a compliance function should be 

freestanding from the general counsel and the 

finance functions. 15 Not surprisingly, compliance 

programs did not become the norm 

until they were foisted on several organizations 

through agreements with the government 

known as corporate integrity agreements 

(CIA). The enforcement of the False 

Claims Act in health care resulted in CIAs 

that have mandated compliance programs, 

which essentially track the elements of an 

effective compliance program under the FSG. 

Interestingly, the SEC has started to require 

certain compliance measures, such as the 

appointment of a compliance officer, in a settlement 

through a consent judgment. 16 

Already in response to the mutual fund scandals, 

we’ve seen the SEC issue a new rule 

requiring registered investment companies 

and advisors to designate a chief compliance 

officer, and to have ethics codes and policies 

and procedures designed to prevent violations 

of securities laws. 

So an additional benefit of being able to 

demonstrate the existence of an effective 

compliance program is that the SEC or other 

enforcement agency will be less likely to 

impose one on the program and/or will 

reduce the scope and extent of the CIA 

terms. Of course, this is in addition to the 

mitigation of penalties under the FSG for 

having an effective compliance program. The 

burdens of a mandated program are heavy 

indeed (annual reporting obligations, retention 

of an independent review organization, 

penalties for CIA failures, etc.). 

Finally—Effectiveness 

It has been implied in this discussion, that the 

existence of a compliance program with the 

features described in the FSG will constitute 

an effective one. In truth, it remains to be 

better defined what the government will 

accept as proof of an effective program. 

Unfortunately, data from the U.S. Sentencing 

Commission is somewhat limited in demonstrating 

any trends that the FSG may have on 

reducing penalties and influencing corporate 

behavior, and it is empirically difficult to test 

its impact. 17 Given the growing awareness of 

ethics and compliance programs, one might 

January 2006 

42 


expect a measurable impact of compliance 

program effectiveness on an organization’s 

financial reputation—however the direct 

impact is unclear. 18 

Nonetheless it is clear there is growing awareness 

of the value of a compliance program. 

With the amended organizational guidelines 

coming into effect, it is expected that more 

specific methods for assessing and measuring 

effectiveness will result. Today’s leading 

companies are expected not only to produce 

superior goods and services but to adhere to 

basic ethical principles and exercise principled 

judgment in carrying out their affairs— 

including accepting responsibility for misdeeds. 

19 New standards for corporate performance 

are emerging that encompass both 

financial and moral dimensions. 

If features of a compliance program that are 

reviewed under SOX 404 and PCAOB 

Auditing Standard Number 2 can pass 

muster with management’s own assessment, 

and the review of the public auditor, then a 

case can be made that those aspects of the 

compliance program are indeed effective. 

The more a compliance officer is integrated 

into SOX 404 efforts, and a compliance program 

is considered part of a company’s overall 

internal control framework, the more likely 

that concrete underlying structure and 

process measures can be gathered to validate 

the effectiveness and value of the program. 

At a minimum, the internal control work 

done for SOX 404 can be part of the regular 

review of the compliance program to assess 

how it is functioning. 

Internal controls are defined broadly and 

encompass more than financial reporting—it 

extend to every significant goal a company 

has established. The importance and relevance 

of a compliance program and officer 

should not be underestimated as the relationship 

between internal controls and management’s 

responsibilities becomes increasingly 

clear. ■ 

1. Gary W. Thompson, “Multifaceted Approach to Corporate 

Governance Reform: The Role of Corporate Compliance 

Programs and Officers” in Prevention of Corporate 

Liability, Vol. 11, No. 8, 09/15/2003, pp. 97-99, 100 

(Washington, D.C., BNA, Inc.). 

2. See e.g., Insurance Fraud: The Quiet Catastrophe 

(Insurance Research and Publications, Conning and 

Company, 1996), an insurance industry study which 

defined return on investment (ROI) as the ratio of money 

saved to money spent fighting fraud, and found an average 

ROI of $6.88 (Referenced by the Coalition Against 

Insurance Fraud at 

www.insurancefraud.org/rc_research_set.html); Seizing the 

Opportunity, Part One: Benchmarking Compliance 

Programmes (Corporate Executive Board, General Counsel 

Roundtable, 2003), which found that each additional dollar 

spent on compliance, returns $5.21 on average. Also, the 

National Healthcare Anti-Fraud Association purportedly 

maintains information of the ROI of the special investigations 

units of its member organizations. (See reference to 

Annual Anti-Fraud Management Survey Report at 

www.nhcaa.org/about_nhcaa/). 

3. COSO issued Internal Control—Integrated Framework in 

1992, and recently issued Enterprise Risk Management— 

Integrated Framework. More information on COSO and its 

frameworks can be found at http://www.coso.org/. 

4. Sarbanes-Oxley Act, 15 U.S.C. §7202 (2002). In particular, 

see the internal control requirements under §404 of SOX. 

5. PCAOB Release No. 2004-001 (March 9, 2004), p. 2. 

6. PCAOB Auditing Standard No. 2, para. 14. 

7. PCAOB Release No. 2004-001 (March 9, 2004) pp. 4, 24; 

Auditing Standard No. 2, paras. 24, 25, 40, 53, 115. 

8. PCAOB Auditing Standard No. 2, paras. 25, 52, 53. 

9. U.S. Sentencing Commission Guidelines, Guidelines 

Manual, 8A1.2, comment note 3(k)(7). 

10. Federal Prosecutions of Business Organizations (the 

Thompson Memo), United States Attorneys’ Manual, 

Department of Justice, Title 9 (Criminal Resource Manual), 

No. 162, VII-B. See 

http://www.usdoj.gov/usao/eousa/foia_reading_room/usam/t 

itle9/crm00162.htm. 

11. The amendments go into effect on November 1, 2004, 

unless Congress disapproves. An executive summary and the 

full report of the amendments can be found at the U.S. 

Sentencing Commission Web site located at www.ussc.gov. 

The case Blakely v. Washington has raised issues about the 

constitutionality of the federal sentencing guidelines. The 

U.S. Supreme Court has heard two cases on the use of the 

sentencing guidelines. 

12. See PCAOB Auditing Standard No. 2, para. 15. 

13. PCAOB Auditing Standard No. 2, para. 140. 

14. PCAOB Release No. 2004-001 (March 9, 2004), p. 19. 

15. Guidance provided by the United States Department of 

Health and Human Services’ Office of the Inspector 

General (OIG) indicates that it is “not advisable for the 

compliance function to be subordinate to . . . the general 

counsel or controller or similar financial officer” which can 

be found in the voluntary compliance program guidances 

issued by the OIG (see http://oig.hhs.gov/fraud/complianceguidance.html). 

U.S. Senator Grassley has stated there 

is an inherent conflict with the compliance officer and general 

counsel being the same person (see Grassley investigates 

Tenet Health care’s Use of Federal Tax Dollars, September 

25, 2003, letter to Tenet Healthcare Corporation). 

16. See Gary W. Thompson, “Is the SEC Learning to Spell CIA: 

The Prospect of Mandated Corporate Compliance in SEC 

Enforcement Actions” in Corporate Accountability Report, 

Vol. 1, No. 34, 09/19/2003, pp. 920-921 (Washington, 

D.C., BNA, Inc.). 

17. See discussion on the sentencing data and the impact of the 

FSG in the Report of the Ad Hoc Advisory Group on the 

Organizational Sentencing Guidelines (October 7, 2003). 

The report can be found at the U.S. Sentencing 

Commission website located at www.ussc.gov. 

18. The link between corporate profits and corporate citizenship 

has been studied for decades without resolution. Some surveys 

have found that customer loyalty, employee retention 

and reputation are positively impacted by corporate responsibility. 

See Joshua Daniel Margolis and James Patrick 

Walsh, People and Profits The Search for a Link Between a 

Company’s Social and Financial Performance (Mahwah, NJ: 

Lawrence Erlbaum Associates Publishers, 2001) which summarizes 

studies utilizing various accounting, market, and 

outcome indicators. 

19. See generally Lynn Sharp Paine, Value Shift: Why 

Companies Must Merge Social and Financial Imperatives to 

Achieve Superior Performance (New York, NY: McGraw- 

Hill, 2003), for discussion on how companies are being 

measured against performance standards that are qualitatively 

different from those in the past. 

Register Now! 

HCCA 

COMPLIANCE 

ACADEMIES 

■ March 20-23, 2006 

Hilton Dallas 

Lincoln Centre 

Dallas, TX 

■ June 5-8, 2006 

Hilton Scottsdale 

Resort & Villas 

Scottsdale, AZ 

For more information 

or to register, visit 

HCCA’s Web site at 

www.hcca-info.org or call 

HCCA at 888-580-8373. 


January 2006 

43

The Health Care Compliance Association 

welcomes the following new members and 

organizations. Please update any contact 

information using the Member Center on 

the Web site, or e-mail Karrie Hakenson 

(karrie.hakenson@hcca-info.org) with 

changes or corrections. 

Puerto Rico 

■ Juan R. Arbona, PhD, JD, Abbott 

Laboratories PR, Inc 

Texas 

■ Diana Adams, RRA, Inc 

■ Joy Biddy, Medical Clinic of Houston, L.L.P. 

■ Nancy B. Bowman, USMD Hospital at 

Arlington 

■ Elaine Carroll, City of Austin 

■ Joy Choate, DFB Pharmaceuticals Inc 

■ Mark D. Chouteau, Brown McCarroll LLP 

■ Sharlene Daniels, MAHS, City of Austin 

Hospital District 

■ Hal Davis, Memorial Health System 

■ Jackie Davis-Willett, TERM Billing Inc 

■ Shannon De La Paz, Memorial Hermann 

Healthcare System 

■ CarolAnn Dixon, Hopkins County 

Memorial Hosp 

■ Kristen Dozier, Intermedix, Inc 

■ Elizabeth Esparza, Austin Cancer Centers 

■ Sylvia Fletcher, RN, MSN, Doctors Hosp 

Dallas 

■ Cindy Foley, Texas Back Institute Research 

Foundation 

■ Adele Giles, MBA, Nix Health Care System 

■ Krista Lee Guerra, Brown McCarroll, LLP 

■ Sharon Haynie, CHRISTUS Health 

■ Brad Hicks, FIRSTCARE 

■ Dianna D. Johnson, Austin Radiological 

Association 

■ Ken A. Johnson, Quest Diagnostics 

■ Jack Keller, HealthTexas Medical Group 

■ Jeff Keyser, Encysive Pharmaceuticals 

■ Rebecca Komkov, Seton Healthcare 

Network 

■ Michael Eric Kreck, Texas Tech Univ. HSC 

■ Philip LeBlanc, CPA, Valley Baptist Hlth Sys 

■ Jason Mattern, Intermedix, Inc 

■ Jeremy Mattern, Intermedix, Inc 

■ Jennifer Mazzone, VA North Texas Health 

Care System 

■ Melissa McCall, CPC, Texas Tech Univ Hlth 

Sciences Ctr, Odessa 

■ Sheila McDaniel 

■ William McDonald, CHRISTUS Health 

■ Dorrie McMillan, N TX Affiliated Med Grp 

■ Mary Ann Missman, CHRISTUS Health 

■ Wanda J. Murphy, MSN, Bellaire Med Ctr 

■ Donna Ohnmeiss, TBI Research Fnd 

■ Ann Marie Paradowski, Tomball Regional 

■ Nicholas Parish, CPC, Per-Se Technologies 

■ Carol Phelps, Texas Health Resources 

■ Scott Reichel, BA, Intermedix, Inc 

■ Jane Rogers, RHIA, UT Southwestern 

Mancrief Cancer Ctr 

■ Leonard Rosenfeld, Tenet, Santa Barbara 

■ Julie G. Rowell, Wilson Memorial Hosp Dist 

■ Sandra Saunders, Thomason Hospital 

■ Stuart Schroeder, BBS, MPA, Medical Arts 

Clinic 

■ Michael Sherwood, Triad Hospitals Inc 

■ Laura Silva, TX Tech Univ Health Sci Ctr 

■ Mathew Spencer, TX Tech Univ Health Sci 

Ctr 

■ H Allen Strickland, BBA, JD, McKenna 

Hlth Sys 

■ Cindy Strzelecki, MBA, RN, Methodist 

Hlthcare Sys of San Antonio LLP 

■ Deborah Terry, CHRISTUS Health 

■ Diane Thomas, UTHSCSA 

■ Molly Tomlin, Texas Home Health 

■ Roberta Vanderburg, Hopkins County 

Memorial Hosp 

■ Javier Vergne-Morell, 

■ Eric J. Weatherford, JD, Brown McCarroll, 

LLP 

■ Jeff B. Wieters, BS, RHIA, Department 

Veterans Affairs 

Utah 

■ Victoria Holzman, Uintah Basin Medical 

Center 

■ Robyn Johns, Med USA Inc 

■ Marie Smith, LDS Hospital 

Vermont 

■ Mary Lou Beaulieu, Northwestern Med Ctr 

■ Robert Soucy, Retreat Healthcare 

■ David J. Spielman, J.D., C.H.C., Paul, 

Frank & Collins PC 

Virginia 

■ George Butler, Bon Secours Virginia 

HealthSource 

■ James L. Haines, American Healthcare, LLC 

■ William Keating, Navigant Consulting, Inc 

■ William T. Keevan, Navigant Consulting, 

Inc 


■ Katheine W. Keith, MHA, Inova Health Sys 

■ Mary Laboy, Riverside Health System 

■ Mary O’Bryant, Fauquier Hospital 

■ David C. Pribble, Obici Health System 

■ Robin Scott, Dept of Veteran Affairs 

■ Debra Thompson, ValueOptions, Inc 

■ Jean O. Worthman, VCO Medical Cntr 

Washington 

■ Bradley J. Berg, Foster Pepper & Shefelman 

PLLC 

■ Harold W. Brockman, MBA, Kittitas Valley 

Community Hosp 

■ Rob Brown, Univ of WA Medical Cntr 

■ David L. Corn, Harrison Memorial Hosp 

■ April Durland, First Choice Health 

■ Brent R. Eller, Davis Wright Tremaine, LLP 

■ Lisa George, Providence Everett Medical Ctr 

■ Deborah Hassler, MS, Central Wash. Hosp 

■ Debra Ann Jinkens, VA Medical Center 

■ Christopher J. Knapp, Anderson Hunter 

■ Debbie L. Miller, RHIT, Seattle Cancer Care 

Alliance 

■ Lori Nomura, Foster Pepper & Shefelman 

■ Kim Oland, Virginia Mason Medical Ctr 

■ Kate Riley, PhD, Univ of Washington 

■ Bekki Sanchez, Harborview Medical Ctr 

■ Debbie Sather, Group Health Cooperative 

■ Beth Ann Saul, Seattle Cancer Care Alliance 

■ Gayle Seyl, Virginia Mason Medical Ctr 

■ Bradley Sharman, Jr., Virginia Mason 

Med Cntr 

■ Bill Smith, CliniTech Information Resources 

■ Chuck P. Stillwaggon, Orthopedics 

Northwest, PLLC 

■ Susan Treiber, Ossur Generation II 

■ Brandi Varnell, RN, Community Hlth Ctr 

of Snohomish County 

■ Robert Wamsley, AA, Empire Health Svcs 

■ Becky Williams, Davis Wright Tremaine LLP 

West Virginia 

■ Carole A. Bachtel, VA Medical Center 

■ Heather Caldwell, MBA, St Mary’s Med Ctr 

■ Sara P. Marks, Ultimate Hlth Svcs Inc 

■ Donna Perkins, VA Medical Center 

■ Tara Steed Marsh, Univ Health Associates 

Wisconsin 

■ Judith Clay, VA Medical Center 

■ Gail Coleman, Elder Care of Wisconsin, Inc 

■ Nancy E. Faber, WI IL Senior Housing, Inc 

■ Kathy Johnson, Dean Health Plan 

■ Sheryl Krueger Dix, BSN, RN, CPHQ, 

Froedtert & Community Health 

January 2006 

45

New HCCA Members ...continued from page 45 

January 2006 

46 

■ Andrea McElroy, Beverly Enterprise 

■ Kenneth Schelfhout, VA Medical Ctr 

■ Steve Schreiner, MBA, MC Strategies 

■ J Paul Spencer, CPC, CPC-H, Integrated 

Billing Systems 

Wyoming 

■ Debra Cummings, Torrington Community 

Hosp - Banner Health 

■ Joseph Devin, Banner Health Washakie 

Medical Ctr 

■ Andy Fitzgerald, Campbell County 

Memorial Hospital 

■ Ed Johlman, Platte County Memorial 

Hospital 

The following individuals joined HCCA 

between May and October 2005: 

Alabama 

■ Tedra Bonar, MSHA, MBA, HealthSouth 

Corp 

■ Connie Davis, Decatur General Hospital 

■ Crystal Hicks, RN, MSN, CPC, UAHSF 

Alaska 

■ David Garrison, SEARHC 

■ Teri L. Johnson, RT(R)(M)(CT),CNMT, 

Alaska Open Imaging Center 

■ Karen Pedersen, Southcentral Fondation 

■ Aleita Sirevog, Ketchikan Indian 

Community 

■ Jeanette Pauline Stubbend, Southcentral 

Foundation 

Arizona 

■ Lee Coffman, MAOM, Planned Parenthood 

of Central & North AZ 

■ Amber L A Iglesias, CPC, CPC-H, Univ 

Physicians Healthcare 

■ Roland Knox, Mt Graham Regional Med 

Ctr 

■ Nancy Milner, Yavapai Regional Medical 

Center 

■ Cheryl J. Murphy, Sierra Vista Regional 

Hlth Ctr 

■ Kristen Rosati, Coppersmith, Gordon, 

Schermer, Owens & Nelson, PLC 

■ Cynthia Sehr, Doctors Community 

Healthcare Corp 

Arkansas 

■ Sandra Nugent, HSC Medical Center 

California 

■ Sunday Aigboboh 

■ Veronica Angulo, MPH, Kaiser Permanente 

■ Donovan L. Ayers, Blue Shield of CA 

■ Ken Ayers, Kaiser Permanente 

■ Lee Beck, Team Health 

■ John Stanley Bokosky, St. Joseph Hospital 

■ Anita Booker, MPA, San Mateo Medical Ctr 

■ Robin Bowe, Kern Medical Ctr 

■ Stephen Campbell, Cymetrix 

■ Richard J. Carter, PhD, R Carter & 

Associates 

■ Nicholas R. Caster, BS, Palo Alto Medical 

Foundation 

■ William E. Chaltraw, Baker Manock & 

Jensen 

■ Jay D. Christensen, Christensen & Auer 

■ Julianne Chun, City of Hope Nat’l Med Ctr 

■ David Coronado, Navigant Consulting 

■ Debra Dansky Pierce, Mact Health Board 

Inc 

■ Holly Delaney, CPMC 

■ Dennis Demetre, AMG-SIU 

■ Londa Freeman, Kaiser Permanente 

■ Laurie P. Frye, MPH, Sequoia Community 

Health Centers 

■ Ana Marino Ghosh, Dept of Public Hlth, 

City & Co of SF 

■ Michael Gillis, UC Davis Medical Ctr 

■ Geoffrey A. Goodman, Murphy Austin 

Adams Schoenfeld, LLP 

■ Rohit Gupta, Deloitte & Touche 

■ Laurie Hanvey, Alvarado Hospital Medical 

Center/SDRI 

■ Lee Harrison, Pioneers Memorial Hospital 

■ Sima Hartounian, Kasier Permanente 

■ Karah Herdman, JD, Allergan Inc 

■ Maureen Hewitt, Episcopal Homes 

Foundation 

■ Hilde Hithe, Kaiser Permanente 

■ Leah D. Hunter, RN, BS, Livingston 

Memorial Visiting Nurse Assoc 

■ Claudia Kanne, Glendale Adventist Med Ctr 

■ Arlette Kendall, North Bay Healthcare 

■ Kate L. Kingsley, KLKingsley LLC 

■ Harris F. Koenig, Centinela Freeman 

HealthSystems 

■ Andrea Kuhlen, Imperial County Behavioral 

Health 

■ Kofi Kyeremeh, Golden Technology, Inc 

■ David M. Levine, UC Davis Health System 

■ Rafael Eric Maristela, RHIT, CCS, Aptium 

Oncology - Cedars Sinai Outpatient Cancer 

Ctr 

■ Jan Martin, County of Orange 


■ Susan M. Muscarella, RN, Kaiser 

Permanente 

■ Matthew Navigato, Sinaiko Healthcare 

Consulting Inc 

■ Diane Ott, Kaiser Permanente 

■ Laura Padilla, MHA, Kaiser Foundation 

Operations 

■ Kathy Perkins-Smerdel, BS, Pomona Valley 

Hosp Med Ctr 

■ Diane Petitti, Amylin Pharmaceuticals Inc 

■ Karl Porter, CHC, Napa County Probation 

Department 

■ Gary Ray, Abramson Church & Stave LLP 

■ May Rebischung, Kaiser Permanente 

■ Jackie Rittenhouse, Kaiser, National 

Compliance 

■ Michele L. Robinson, Kaiser Permanente 

■ John L. Rosenthal, LA Care Health Plan 

■ Celia Ryan, RN, MSHA, Kaiser Permanente 

■ Bophasy Saukam, San Joaquin Co 

Behavioral Health Svcs 

■ Marilyn Schmidt, Kaiser Permanente 

■ Debra M. Schultz, Casa Colina Inc 

■ Roxanne Shaw, Kaiser Permanente 

■ Allan Siefkin, MD, Univ of CA Davis Hlth 

System 

■ Tracy L. Skinner, Kaiser Permanente 

■ Randy Snowden, Health & Human Svcs 

Agency 

■ Maria Stauceanu, Care More Medical 

Management Co. 

■ Amy Tronolone, Dameron Hosp 

■ Kelly L. Turner 

■ Marisa J. Uribe, California Health Plan 

■ Alicia Vasquez 

■ Rebecca Velie, Evercare ASO Contracts 

■ Dee Warrington, Lifemasters 

■ Susan L. Waterman, CPC, CareMore 

Medical Enterprises 

■ Rachel Weber, Kaiser Permanente 

■ Rita Williams, Kaiser Permanente 

■ Karen Nicolai Winnett, Preston Gates & 

Ellis LLP 

■ Phyllis Marie Winston 

■ Kelly Wittmeyer, Sutter Health 

■ Kenneth Yood, JD, MPH, Paul Hastings 

Janofsky & Walker ■

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C ORPORATE C OMPLIANCE & ETHICS: 

G UIDANCE FOR E NGAGING Y OUR B OARD 

“This video provides an 

overview of the Board’s 

role in compliance.” 

Odell Guyton 

Senior Corporate Attorney, 

Director of Compliance, 

Microsoft Corporation 

www.corporatecompliance.org 

“It’s pretty clear that 

the best compliance 

program in the world 

is meaningless, even if 

it’s funded with a good 

well-meaning compliance 

officer, if the leadership 

of the company is not 

behind it and isn’t 

supportive.” 

Bringing the vision of 

leadership together 

with a compliant and 

ethical culture 

Honorable 

Michael E. Horowitz 

Commissioner, United 

States Sentencing 

Commission 

ORDER TODAY! 

Name: 

Title: 

Company: 

Address: 

City: 

Total Payment $ ______________ 

Invoice Me 

Purchase Order # _____________ 

Check/Money Order 

VISA MasterCard American Express 

Number 

Exp. Date 

Non-Members $395 

SCCE/HCCA Members $345 

State: 

Phone: 

Fax: 

E-mail: 

Mail to: 

SCCE 

5780 Lincoln Drive, Suite 120 


Phone: (888) 277-4977 

Zip: 

Name of Card Holder 

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Code: CT1104 

Please make check payable to: 

Society of Corporate Compliance and Ethics (SCCE) 

FAX: (952) 988-0146 

Online: www.corporatecompliance.org 

E-mail: info@corporatecompliance.org

MD - Health Care Compliance Association

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