Increased Focus on Compliance Puts Pressure On Labs

There is a growing host of legislation and agency interventions combating potential fraud and waste in healthcare, including: the Patient Protection and Affordable Care Act (PPACA), the Fraud Enforcement and Recovery Act (FERA) and Recovery Audit Contractors (RAC) among others. As much as $20 billion has been recovered by the government through its healthcare fraud enforcement activities since 1996. The Office of Inspector General (OIG) of the US Department of Health & Human Services (DHHS) reports that the government recovers $6.80 for every dollar it spends on enforcement. Obviously, the government has a powerful financial incentive to expand its fraud prevention budget and activity.

The government has shifted its focus from “pay and chase” enforcement to front-end detection when it comes to unearthing fraud, abuse, and waste, in the hope that identifying specific trends and billing circumstances will more readily identify aberrational and fraudulent activities. For laboratories, the shift from “reliable evidence of fraud” to a “credible allegation of fraud” as the threshold for suspending payments may force more settlements, regardless of the strength of evidence of fraudulent or abusive activity, or the laboratory’s proof to the contrary. Once revenues and principle funding sources are shut off through Medicare and Medicaid programs, laboratories are compelled to settle rather than shut down.

With the government’s increased enforcement efforts and arsenal, the need for a comprehensive and highly effective compliance plan has never been greater. With the passage of PPACA in March 2010, a compliance program is now a legal requirement for providers participating in Medicare or Medicaid programs. A defined compliance program is also essential for clinical laboratories to survive and succeed, as well as for lab owners looking to exit the industry through a merger or acquisition. In the recent past, investors have walked away from substantial transactions because of compliance problems, and some labs have been unable to sell for the same reasons.

In light of this intensified scrutiny facing laboratories and other healthcare providers, failure to devote sufficient resources to a strong compliance program puts the laboratory and its investors, management, and employees at heightened risk. To protect the interest of all stakeholders, clinical laboratories must invest in an effective compliance plan that incorporates the OIG’s recommended requirements. The recommendations include the following key components, taken from Federal Sentencing Guidelines:

• Establish a compliance officer and compliance committee
• Create a written standard of conduct as well as written policies and procedures pertaining to specific areas of operation
• Design education and training programs for affected employees
• Build a process for receiving complaints
• Produce a system to respond to allegations of improper conduct and impose appropriate discipline
• Develop an auditing and monitoring mechanism
• Write a plan for responding to detected offenses and implementing corrective action

Compliance plans are now legally mandated for any lab that participates in the Medicare, Medicaid, and CHIP programs. Beyond meeting that new legal requirement, laboratories must develop and maintain “living” compliance programs. A “paper” plan that has not been fully integrated within the lab organization is likely to be more incriminating than helpful. Billing compliance requires clear and current billing policies and procedures, as well as highly trained billing personnel. Billing irregularities should be identified and addressed as they occur and, if possible, before claims are posted. In addition to constant and careful monitoring, it is imperative that laboratories utilize an appropriate billing system to manage this effort.

A good billing and revenue cycle management system will automatically trigger alerts if any requested actions regarding a claim are questionable or non-compliant. The system should also provide clear documentation and reports to provide the necessary information and analytics required for audits, potential merger and acquisition, or investment due diligence.  The Software as a Service (SaaS) model is especially valuable for helping ensure compliance, because the software is automatically updated on an ongoing basis to incorporate ever-changing regulatory and payor rules. One of the key strengths of the XiFin RPM medical billing system is that it enables providers to retain complete control over their billing processes and priorities, yet through a sophisticated system of automated checks and balances ensure compliance. The Council of Ethical Organizations (a non-profit compliance “watchdog” group) has recommended XiFin as “The only laboratory billing solution that provides a practical means for managing compliance requirements.”

For a more detailed analysis of the complexities of regulatory compliance for laboratories, see this article in Compliance Today written by Rina Wolf, Vice President of Commercialization Strategies, Consulting & Industry Affairs, XiFin, Inc. and David Gee, a Partner at the Garvey Schubert Barer law firm in Seattle, Washington.