Draft OIG Supplemental Compliance Program Guidance for Nursing Facilities, 20680-20696 [E8-7993]

Agencies

• DEPARTMENT OF HEALTH AND HUMAN SERVICES
• Office of Inspector General
• Inspector General Office, Health and Human Services Department

[Federal Register Volume 73, Number 74 (Wednesday, April 16, 2008)]
[Notices]
[Pages 20680-20696]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-7993]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General


Draft OIG Supplemental Compliance Program Guidance for Nursing 
Facilities

AGENCY: Office of Inspector General (OIG), HHS.

ACTION: Proposed notice.

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SUMMARY: This Federal Register proposed notice seeks the comments of 
interested parties on a draft supplemental compliance program guidance 
(CPG) for nursing facilities developed by the Office of Inspector 
General (OIG). When OIG publishes the final version of this guidance, 
it will supplement OIG's prior CPG for nursing facilities issued in 
2000. This proposed notice contains new compliance recommendations and 
an expanded discussion of risk areas. The proposed notice takes into 
account Medicare and Medicaid nursing facility payment systems and 
regulations, evolving industry practices, current enforcement 
priorities (including the Government's heightened focus on quality of 
care), and lessons learned in the area of nursing facility compliance. 
When published, the final supplemental CPG will provide voluntary 
guidelines to assist nursing facilities in identifying significant risk 
areas and in evaluating and, as necessary, refining ongoing compliance 
efforts.

DATES: To ensure consideration, comments must be delivered to the 
address provided below by no later than 5 p.m. on June 2, 2008.

ADDRESSES: When commenting, please refer to file code OIG-126-PN. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission. You may submit comments in one of three 
ways (no duplicates, please):
    1. Electronically. You may submit comments electronically on 
specific recommendations and suggestions through the Federal 
eRulemaking Portal at https://www.regulations.gov. (Attachments should 
be in Microsoft Word, if possible.)
    2. By regular, express, or overnight mail. You may send written 
comments to the following address: Office of Inspector General, 
Department of Health and Human Services, Attention: OIG-126-PN, Room 
5246, Cohen Building, 330 Independence Avenue, SW., Washington, DC 
20201. Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By hand or courier. If you prefer, you may deliver, by hand or 
courier, your written comments before the close of the comment period 
to Office of Inspector General, Department of Health and Human 
Services, Cohen Building, 330 Independence Avenue, SW., Washington, DC 
20201. Because access to the interior of the Cohen Building is not 
readily available to persons without Federal Government identification, 
commenters are encouraged to schedule their delivery with one of our 
staff members at (202) 358-3141.
    Inspection of Public Comments: All comments received before the end 
of the comment period are available for viewing by the public. All 
comments will be posted on https://www.regulations.gov as soon as 
possible after they have been received. Comments received timely will 
also be available for public inspection as they are received at Office 
of Inspector General, Department of Health and Human Services, Cohen 
Building, 330 Independence Avenue, SW., Washington, DC 20201, Monday 
through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an 
appointment to view public comments, phone (202) 619-0335.

FOR FURTHER INFORMATION CONTACT: Amanda Walker, Associate Counsel, 
Office of Counsel to the Inspector General, (202) 619-0335; or 
Catherine Hess, Senior Counsel, Office of Counsel to the Inspector 
General, (202) 619-1306.

Background

    Beginning in 1998, OIG embarked on a major initiative to engage the 
private health care community in preventing the submission of erroneous 
claims and in combating fraud and abuse in the Federal health care 
programs through voluntary compliance efforts. As part of that 
initiative, OIG has developed a series of CPGs directed at the 
following segments of the health care industry:

[[Page 20681]]

hospitals; clinical laboratories; home health agencies; third-party 
billing companies; the durable medical equipment, prosthetics, 
orthotics, and supply industry; hospices; Medicare Advantage (formerly 
known as Medicare+Choice) organizations; nursing facilities; ambulance 
suppliers; physicians; and pharmaceutical manufacturers.\1\ It is our 
intent that CPGs encourage the development and use of internal controls 
to monitor adherence to applicable statutes, regulations, and program 
requirements. The suggestions made in these CPGs are not mandatory, and 
nursing facilities should not view the CPGs as exhaustive discussions 
of beneficial compliance practices or relevant risk areas.
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    \1\ Copies of the CPG's are available on our Web site at https://
www.oig.hhs.gov/fraud/complianceguidance.html.
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    OIG originally published a CPG for the nursing facility industry on 
March 16, 2000.\2\ Since that time, there have been significant changes 
in the way nursing facilities deliver, and are reimbursed for, health 
care services, as well as significant changes in the Federal 
enforcement environment and increased concerns about quality of care in 
nursing facilities. In response to these developments, and in an effort 
to receive initial input on this guidance from interested parties, OIG 
published a notice in the Federal Register on January 24, 2008 seeking 
stakeholder comments.\3\ We received four comments, primarily from 
trade associations, generally suggesting that any guidance recognize 
flexibility and ``scalability'' concerns due to variations in nursing 
facility sizes, and encouraging a focus on resident safety and employee 
screening. Some comments included legislative recommendations, which 
are beyond the authority of this office.
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    \2\ See 65 FR 14289 (March 16, 2000), ``Publication of the OIG 
Compliance Program Guidance for Nursing Facilities,'' (2000 Nursing 
Facility CPG) available on our Web site at https://oig.hhs.gov/
authorities/docs/cpgnf.pdf.
    \3\ See 73 FR 4248 (January 24, 2008), ``Solicitation of 
Information and Recommendations for Revising the Compliance Program 
Guidance for Nursing Facilities,'' available on our Web site at 
https://oig.hhs.gov/authorities/docs/08/CPG_Nursing_Facility_
Solicitation.pdf.
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    To ensure full and meaningful input from all interested parties, we 
are publishing this supplemental CPG in draft form with a 45-day 
comment period. We are soliciting comments on all aspects of the draft 
CPG. We are particularly interested in suggestions for section IV, 
relating to structural elements for nursing facility compliance 
programs, as well as self-assessment of compliance programs' 
effectiveness by nursing facilities.\4\ Specifically, we are interested 
in suggestions regarding whether our original recommendations for the 
basic elements of a compliance program should be updated, and, if so, 
how? \5\ We are also seeking suggestions regarding specific measures of 
compliance program effectiveness tailored to nursing facilities. For 
example, we are considering including measures similar to those in the 
Supplemental Hospital CPG and would like comments on the usefulness of 
that approach and on the specific effectiveness questions that might be 
included.
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    \4\ See e.g., 70 FR 4858, 4874 (January 31, 2005), ``OIG 
Supplemental Compliance Program Guidance for Hospitals,'' 
(Supplemental Hospital CPG) available on our Web site at https://
oig.hhs.gov/fraud/docs/complianceguidance/
012705HospSupplementalGuidance.pdf.
    \5\ See 2000 Nursing Facility CPG, supra note 2.
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    We will review comments received within the above-cited timeframe, 
incorporate recommendations as appropriate, and prepare a final version 
of the guidance for publication in the Federal Register. The final 
version of the guidance will also be available on our Web site.

Draft OIG Supplemental Compliance Program Guidance for Nursing 
Facilities

I. Introduction

    Continuing its efforts to promote voluntary compliance programs for 
the health care industry, the Office of Inspector General (OIG) of the 
Department of Health and Human Services (Department) publishes this 
Supplemental Compliance Program Guidance (CPG) for Nursing 
Facilities.\6\ This document supplements, rather than replaces, OIG's 
2000 Nursing Facility CPG, which addressed the fundamentals of 
establishing an effective compliance program for this industry. \7\
    Neither this supplemental CPG, nor the original 2000 Nursing 
Facility CPG, is a model compliance program. Rather, the two documents 
collectively offer a set of guidelines that nursing facilities should 
consider when developing and implementing a new compliance program or 
evaluating an existing one. We are mindful that many nursing facilities 
have already devoted substantial time and resources to compliance 
efforts. For those nursing facilities with existing compliance 
programs, this document may serve as a roadmap for updating or refining 
their compliance plans. For facilities with emerging compliance 
programs, this supplemental CPG, read in conjunction with the 2000 
Nursing Facility CPG, should facilitate discussions among facility 
leadership regarding the inclusion of specific compliance components 
and risk areas.
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    \6\ For purposes of convenience in this guidance, the term 
``nursing facility'' or ``facility'' includes a skilled nursing 
facility (SNF) and a nursing facility (NF) that meet the 
requirements of sections 1819 and 1919 of the Social Security Act 
(Act) (42 U.S.C. 1395i-3, 1396r), respectively, as well as entities 
that own or operate such facilities. Where appropriate, we 
distinguish SNFs from NFs. While long-term care providers other than 
SNFs or NFs, such as assisted living facilities, should find this 
CPG useful, we recognize that they may be subject to different laws, 
rules, and regulations and, accordingly, may have different or 
additional risk areas and may need to adopt different compliance 
strategies. We encourage all long-term care providers to establish 
and maintain effective compliance programs.
    \7\See 2000 Nursing Facility CPG, supra note 2.
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    In drafting this supplemental CPG, we considered, among other 
things, the public comments; relevant OIG and Centers for Medicare & 
Medicaid Services (CMS) statutory and regulatory authorities (including 
CMS's regulations governing long-term care facilities at 42 CFR part 
483, CMS transmittals, program memoranda, and other guidance, and the 
Federal fraud and abuse statutes, together with the anti-kickback safe 
harbor regulations and preambles); other OIG guidance (such as OIG 
advisory opinions, special fraud alerts, bulletins, and other public 
documents); experience gained from investigations conducted by OIG's 
Office of Investigations, the Department of Justice (DOJ), and the 
State Medicaid Fraud Control Units; and relevant reports issued by 
OIG's Office of Audit Services and Office of Evaluation and 
Inspections. We also consulted with CMS, DOJ, and nursing facility 
resident advocates.
A. Benefits of a Compliance Program
    A successful compliance program addresses the public and private 
sectors' common goals of reducing fraud and abuse, enhancing health 
care providers' operations, improving the quality of health care 
services, and reducing their overall cost. Meeting these goals benefits 
the nursing facility industry, the government, and residents alike. 
Compliance programs help nursing facilities fulfill their legal duty to 
provide quality care; to refrain from submitting false or inaccurate 
claims or cost information to the Federal health care programs; and to 
avoid engaging in other illegal practices.
    A nursing facility may gain important additional benefits by 
voluntarily implementing a compliance program, including:
     Demonstrating the nursing facility's commitment to honest 
and responsible corporate conduct;

[[Page 20682]]

     Increasing the likelihood of preventing unlawful and 
unethical behavior, or identifying and correcting such behavior at an 
early stage;
     Encouraging employees and others to report potential 
problems, which permits appropriate internal inquiry and corrective 
action and reduces the risk of False Claims Act lawsuits, and 
administrative sanctions (e.g., penalties, assessments, and exclusion), 
as well as State actions;
     Minimizing financial loss to the government and taxpayers, 
as well as corresponding financial loss to the nursing facility;
     Enhancing resident satisfaction and safety through the 
delivery of improved quality of care; and
     Improving the nursing facility's reputation for integrity 
and quality, increasing its market competitiveness and reputation in 
the community.
    OIG recognizes that implementation of a compliance program may not 
entirely eliminate improper or unethical conduct from nursing facility 
operations. However, an effective compliance program demonstrates a 
nursing facility's good faith effort to comply with applicable 
statutes, regulations, and other Federal health care program 
requirements, and may significantly reduce the risk of unlawful conduct 
and corresponding sanctions.
B. Application of Compliance Program Guidance
    Given the diversity of the nursing facility industry, there is no 
single ''best'' nursing facility compliance program. OIG recognizes the 
complexities of the nursing facility industry and the differences among 
facilities. Some nursing facilities are small and may have limited 
resources to devote to compliance measures; others are affiliated with 
well-established, large, multi-facility organizations with a widely 
dispersed work force and significant resources to devote to compliance.
    Accordingly, OIG does not intend this supplemental CPG to be a 
``one-size-fits-all'' guidance. OIG strongly encourages nursing 
facilities to identify and focus their compliance efforts on those 
areas of potential concern or risk that are most relevant to their 
organizations. Compliance measures adopted by a nursing facility to 
address identified risk areas should be tailored to fit the unique 
environment of the facility (including its structure, operations, 
resources, the needs of its resident population, and prior enforcement 
experience). In short, OIG recommends that each nursing facility adapt 
the objectives and principles underlying this guidance to its own 
particular circumstances.
    In section II below, for contextual purposes, we provide a brief 
overview of the reimbursement system. In section III, entitled ``Fraud 
and Abuse Risk Areas,'' we present several fraud and abuse risk areas 
that are particularly relevant to the nursing facility industry. Each 
nursing facility should carefully examine these risk areas and identify 
those that potentially affect it. Next, in section IV, ``Other 
Compliance Considerations,'' we offer recommendations for establishing 
an ethical culture and for assessing and improving an existing 
compliance program. Finally, in section V, ``Self-Reporting,'' we set 
forth the actions nursing facilities should take if they discover 
credible evidence of misconduct.

II. Reimbursement Overview

    We begin with a brief overview of Medicare and Medicaid 
reimbursement for nursing facilities as context for the subsequent risk 
areas section. This overview is intended to be a summary only. It does 
not establish or interpret any program rules or regulations. Nursing 
facilities are advised to consult the relevant program's payment, 
coverage, and participation rules, regulations, and guidance, which 
change frequently. Any questions regarding payment, coverage, or 
participation in the Medicare or Medicaid programs should be directed 
to the relevant contractor, carrier, CMS office, or State Medicaid 
agency.
A. Medicare
    Medicare reimbursement to SNFs and NFs depends on several factors, 
including the character of the facility, the beneficiary's 
circumstances, and the type of items and services provided. Generally 
speaking, SNFs are Medicare-certified facilities that provide extended 
skilled-nursing or rehabilitative care under Medicare Part A. They are 
typically reimbursed under Part A for the costs of most items and 
services, including room, board, and ancillary items and services. In 
some circumstances (discussed further below), SNFs may receive payment 
under Medicare Part B. Facilities that are not SNFs are not reimbursed 
under Part A. They may be reimbursed for some items and services under 
Part B.
    Medicare pays SNFs under a prospective payment system (PPS) for 
beneficiaries covered by the Part A extended care benefit.\8\ Covered 
beneficiaries are those who require skilled-nursing or rehabilitation 
services and receive the services from a Medicare certified SNF after a 
qualifying hospital stay of at least three days.\9\ The PPS rate is a 
fixed, per diem rate.\10\ The maximum benefit is 100 days per ``spell 
of illness.'' \11\
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    \8\ Section 1888(e) of the Act (42 U.S.C. 1395yy(e)) (noting the 
PPS rate applied to services provided on or after July 1, 1998). See 
also CMS, ``Consolidated Billing,'' available on CMS's Web site at 
https://www.cms.hhs.gov/SNFPPS/05_ConsolidatedBilling.asp.
    \9\ Sections 1812(a)(2) and 1861(i) of the Act (42 U.S.C. 
1395d(a)(2), 1395x(i)).
    \10\ Section 1888(e) of the Act (42 U.S.C. 1395yy(e)).
    \11\ Section 1812(a)(2)(A) of the Act (42 U.S.C. 
1395d(a)(2)(A)).
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    The PPS per diem rate is adjusted per resident to ensure that the 
level of payment made for a particular resident reflects the resource 
intensity that would typically be associated with that resident's 
clinical condition.\12\ This methodology, referred to as the Resource 
Utilization Group (RUG) classification system, currently in version 
RUG-III, uses beneficiary assessment data extrapolated from the Minimum 
Data Set (MDS) to assign beneficiaries to one of the RUG-III 
groups.\13\ The MDS is composed of data variables for each resident, 
including diagnoses, treatments, and an evaluation of the resident's 
functional status, which are collected via a Resident Assessment 
Instrument (RAI).\14\ Such assessments are conducted at established 
intervals throughout a resident's stay. The resident's RUG assignment 
and payment rate are then adjusted accordingly for each interval.\15\
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    \12\ Section 1888(e)(4)(G)(i) of the Act (42 U.S.C. 
1395yy(e)(4)(G)(i)).
    \13\ Id.
    \14\ Sections 1819(b)(3) and 1919(b)(3) of the Act (42 U.S.C. 
1395i-3(b)(3), 1396r(b)(3)), and their implementing regulation, 42 
CFR 483.20, require nursing facilities participating in the Medicare 
or Medicaid programs to use a standardized RAI to assess each 
nursing facility resident's strengths and needs.
    \15\ See id.
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    The PPS payments cover virtually all of the SNF's costs for 
furnishing services to Medicare beneficiaries covered under Part A. 
Under the ``consolidated billing'' rules, SNFs bill Medicare for most 
of the services provided to Medicare beneficiaries in SNF stays covered 
under Part A, including items and services that outside practitioners 
and suppliers provide under arrangement with the SNF.\16\ The SNF is 
responsible for paying the outside practitioners and suppliers for 
these services.\17\ Services covered by this consolidated billing

[[Page 20683]]

requirement include, by way of example, physical therapy, occupational 
therapy, and speech therapy services; certain non-self-administered 
drugs and supplies furnished ``incident to'' a physician's services 
(e.g., ointments, bandages, and oxygen); braces and orthotics; and the 
technical component of most diagnostic tests.\18\ These items and 
services must be billed to Medicare by the SNF.\19\
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    \16\ Sections 1842(b)(6)(E) and 1862(a)(18) of the Act (42 
U.S.C. 1395u, 1395aa); Consolidated Billing, supra note 8.
    \17\ See id.
    \18\ Section 1888(e) of the Act (42 U.S.C. 1395yy); Consolidated 
Billing, supra note 8.
    \19\ Id.
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    The consolidated billing requirement does not apply to a small 
number of excluded services, such as physician professional fees and 
certain ambulance services.\20\ These excluded services are separately 
billable to Part B, by the individual or entity furnishing the service. 
For example, professional services furnished personally by a physician 
to a Part A SNF resident are excluded from consolidated billing, and 
are billed by the physician to the Part B carrier.\21\
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    \20\ Id.
    \21\ Id.
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    Some Medicare beneficiaries reside in a Medicare-certified SNF, but 
are not eligible for Part A extended care benefits (e.g., a beneficiary 
who did not have a qualifying hospital stay of at least three days or a 
beneficiary who has exhausted his or her Part A benefit). These 
beneficiaries--sometimes described as being in ``non-covered Part A 
stays''--may still be eligible for Part B coverage of certain 
individual services. Consolidated billing would not apply to such 
individual services, with the exception of therapy services.\22\ 
Physical therapy, occupational therapy, and speech language pathology 
services furnished to SNF residents are always subject to consolidated 
billing.\23\ Claims for therapy services furnished during a non-covered 
Part A stay must be submitted to Medicare by the SNF itself.\24\ Thus, 
according to CMS guidance, the SNF is reimbursed under the Medicare fee 
schedule for the therapy services, and is responsible for reimbursing 
the therapy provider.\25\
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    \22\ Section 1888(e)(2)(A) of the Act (42 U.S.C. 
1395yy(e)(2)(A)); CMS, ``MLN Matter SE0518,'' available on CMS's Web 
site at https://www.cms.hhs.gov/MLNMattersArticles/downloads/
SE0518.pdf.
    \23\ Id.
    \24\ MLN Matter SE0518, supra note 22.
    \25\ Id.
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    When a beneficiary resides in a nursing facility (or part thereof) 
that is not certified as an SNF by Medicare, the beneficiary is not 
considered an SNF resident for Medicare billing purposes.\26\ 
Accordingly, ancillary services, including therapy services, are not 
subject to consolidated billing.\27\ Either the supplier of the 
ancillary service or the facility may bill the Medicare carrier for the 
Part B items and services directly.\28\ In these circumstances, it is 
the joint responsibility of the facility and the supplier to ensure 
that only one of them bills Medicare.
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    \26\ Id.
    \27\ Id.
    \28\ Id.
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    Part B coverage for durable medical equipment (DME) presents 
special circumstances because the benefit extends only to items 
furnished for use in a patient's home.\29\ DME furnished for use in an 
SNF or in certain other facilities providing skilled care is not 
covered by Part B. Instead, such DME is covered by the Part A PPS 
payment or applicable inpatient payment.\30\ In some cases, NFs that 
are not SNFs can be considered a ``home'' for purposes of DME coverage 
under Part B.\31\
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    \29\ Section 1861(n) of the Act (42 U.S.C. 1395x(n)).
    \30\ Section 1861(h)(5) of the Act (42 U.S.C. 1395x(h)(5)).
    \31\ Section 1861(n) of the Act (42 U.S.C. 1395x(n)).
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B. Medicaid
    Medicaid provides another means for nursing facility residents to 
pay for skilled-nursing care, as well as room and board in a nursing 
facility certified by the Government to provide services to Medicaid 
beneficiaries. Medicaid is a State and Federal program that covers 
certain groups of low-income and medically-needy people. Medicaid also 
helps residents dually eligible for Medicare and Medicaid pay their 
Medicare premiums and cost-sharing amounts. Because Medicaid 
eligibility criteria, coverage limitations, and reimbursement rates are 
established at the State level, there is significant variation across 
the nation. Many States, however, offer a flat daily rate that covers 
room, board, and routine care for Medicaid beneficiaries.

III. Fraud and Abuse Risk Areas

    This section should assist nursing facilities in their efforts to 
identify areas of their operations that present potential risks of 
liability under several key Federal fraud and abuse statutes and 
regulations. This section focuses on areas that are currently of 
concern to the enforcement community and is not intended to address all 
potential risk areas for nursing facilities. The identification of a 
particular practice or activity in this section is not intended to 
imply that the practice or activity is necessarily illegal in all 
circumstances or that it may not have a valid or lawful purpose. This 
section addresses the following areas of significant concern for 
nursing facilities: quality of care; submission of accurate claims; 
Federal anti-kickback statute; other risk areas; and Health Insurance 
Portability and Accountability Act of 1996 (HIPAA) privacy and security 
rules.
    This guidance does not create any new law or legal obligations, and 
the discussions in this guidance are not intended to present detailed 
or comprehensive summaries of lawful or unlawful activity. This 
guidance is not intended as a substitute for consultation with CMS, a 
facility's fiscal intermediary or Program Safeguard Contractor, a State 
Medicaid agency, or other relevant State agencies with respect to the 
application and interpretation of payment, coverage, licensure, or 
other provisions that are subject to change. Rather, this guidance 
should be used as a starting point for a nursing facility's legal 
review of its particular practices and for development or refinement of 
policies and procedures to reduce or eliminate potential risk.
A. Quality of Care
    By 2030, the number of older Americans is estimated to rise to 71 
million,\32\ making the aging of the U.S. population ``one of the major 
public health challenges we face in the 21st century.'' \33\ In 
addressing this challenge, a national focus on the quality of health 
care is emerging.
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    \32\ Centers for Disease Control and Prevention (CDC), ``The 
State of Aging and Health in America 2007,'' available on CDC's Web 
site at https://www.cdc.gov/aging/pdf/saha_2007.pdf.
    \33\ Id. (quoting Julie Louise Gerberding, M.D., MPH, Director, 
Centers for Disease Control and Prevention, U.S. Department of 
Health and Human Services).
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    In cases that involve failure of care on a systemic and widespread 
basis, the nursing facility may be liable for submitting false claims 
for reimbursement to the Government under the Federal False Claims Act, 
the Civil Monetary Penalties Law (CMPL), or other authorities that 
address false and fraudulent claims or statements made to the 
Government.\34\ Thus,

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compliance with applicable quality of care standards and regulations is 
essential for the lawful behavior and success of nursing facilities.
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    \34\ ``Listening Session: Abuse of Our Elders: How We Can Stop 
It: Hearing Before the Senate Special Committee on Aging,'' 110th 
Congress (2007) (testimony of Gregory Demske, Assistant Inspector 
General for Legal Affairs, Office of Inspector General, U.S. 
Department of Health and Human Services ), available at https://
aging.senate.gov/events/hr178gd.pdf; see also 18 U.S.C. 287 
(concerning false, fictitious or fraudulent claims); 18 U.S.C. 1001 
(concerning statements or entries generally); 18 U.S.C. 1035 
(concerning false statements relating to health care matters); 18 
U.S.C. 1347 (concerning health care fraud); 18 U.S.C. 1516 
(concerning obstruction of a Federal audit); the Federal False 
Claims Act (31 U.S.C. 3729-3733); section 1128A of the Act (42 
U.S.C. 1320a-7a) (concerning civil monetary penalties); section 
1128B(c) of the Act (42 U.S.C. 1320a-7b(c)) (concerning false 
statements or representations with respect to condition or operation 
of institutions). In addition to the Federal criminal, civil, and 
administrative liability for false claims and kickback violations 
outlined in this CPG, nursing facilities also face exposure under 
State laws, including criminal, civil, and administrative sanctions.
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    Although many nursing facilities make quality a priority, 
facilities that fail to do so, and consequently fail to deliver quality 
health care, risk becoming the target of governmental investigations. 
Highlighted below are common risk areas associated with the delivery of 
quality health care to nursing facility residents that frequently arise 
in enforcement cases.
    These include sufficient staffing, comprehensive care plans, 
appropriate use of psychotropic medications, medication management, and 
resident safety. This list is not exhaustive. Moreover, nursing 
facilities should recognize that these issues are often inter-related. 
Nursing facilities that attempt to address one issue will often find 
that they must address other areas as well. The risk areas identified 
in sections III.B. (Submission of Accurate Claims), III.C. (Anti-
Kickback), and III.D. (Other Risk Areas) below are also intertwined 
with quality of care risk areas and should be considered as well.
    As a starting point, nursing facilities should familiarize 
themselves with 42 CFR part 483 (part 483), which sets forth the 
principal requirements for nursing facility participation in the 
Medicare and Medicaid programs. It is essential that key members of the 
organization understand these requirements and support their facility's 
commitment to compliance with these regulations. Targeted training for 
care providers, managers, administrative staff, officers, and directors 
on the requirements of part 483 will enable nursing facilities to 
ensure that they are fulfilling their obligation to provide quality 
health care.\35\
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    \35\ The requirement to deliver quality health care is a 
continuing obligation for nursing facilities. As regulations change, 
so too should the training. Therefore, this recommendation envisions 
more than an initial employee ``orientation'' training on the 
nursing facility's obligations to provide quality health care. CMS 
has multiple resources available to assist nursing facilities in 
developing training programs. See CMS, ``Sharing Innovations in 
Quality, Resources for Long Term Care,'' available on CMS's Web site 
at https://siq.air.org/default.aspx; CMS, ``Skilled Nursing 
Facilities/Long-Term Care Open Door Forum,'' available on CMS's Web 
site at https://www.cms.hhs.gov/OpenDoorForums/25_ODF_SNFLTC.asp; 
CMS, State Operations Manual, available on CMS's Web site at https://
www.cms.hhs.gov/Manuals/IOM/list.asp; see also Medicare Quality 
Improvement Community, ``Medicare Quality Improvement,'' available 
at https://www.medqic.org. Nursing facilities may also find it useful 
to review the CMS Quality Improvement Organizations Statement of 
Work, available at https://www.cms.hhs.gov/QualityImprovementOrgs/
04_9thsow.asp.
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1. Sufficient Staffing
    OIG is aware of facilities that have systematically failed to 
provide staff in sufficient numbers and with appropriate clinical 
expertise to serve their residents. Although most facilities strive to 
provide sufficient staff, nursing facilities must be mindful that 
Federal law requires sufficient staffing necessary to attain or 
maintain the highest practicable physical, mental, and psychosocial 
well-being of residents.\36\ Thus, staffing numbers and staff 
competency are critical.
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    \36\ Sections 1819(b)(4)(A) and 1919(b)(4)(A) of the Act (42 
U.S.C. 1395i-3(b)(4)(A), 1396r(b)(4)(A)); 42 CFR 483.30.
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    The relationship between staff ratios, staff competency, and 
quality of care is complex.\37\ No single staffing model will suit 
every facility. A staffing model that works in a nursing facility today 
may not meet the facility's needs in the future. Nursing facilities, 
therefore, are strongly encouraged to assess their staffing patterns 
regularly to evaluate whether they have sufficient staff who are 
competent to care for the unique acuity levels of their residents.
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    \37\ For example, State nursing facility staffing standards, 
which exist for the majority of States, vary in types of regulated 
staff, the ratios of staff, and the facilities to which the 
regulations apply. See Jane Tilly, et al., ``State Experiences with 
Minimum Nursing Staff Ratios for Nursing Facilities: Findings from 
Case Studies of Eight States'' (November 2003) (joint paper by The 
Urban Institute and the Department), available at https://
aspe.hhs.gov/daltcp/reports/8statees.htm.
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    Important considerations for assessing staffing models include, 
among others, staff skill levels, staff-to-resident ratios, staff 
turnover,\38\ staffing schedules, disciplinary records, payroll 
records, timesheets, and adverse event reports (e.g., falls or adverse 
drug events), as well as interviews with staff, residents, and 
residents' family or legal guardians. Facilities should ensure that the 
methods used to assess staffing accurately measure actual ``on-the-
floor'' staff rather than theoretical ``on-paper'' staff. For example, 
payroll records that reflect actual hours and days worked may be more 
useful than prospectively generated staff schedules.
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    \38\ Nursing facilities operate in an environment of high staff 
turnover where it is difficult to attract, train, and retain an 
adequate workforce. Turnover among nurse aides, who provide most of 
the hands-on care in nursing facilities, means that residents are 
constantly receiving care from new staff who often lack experience 
and knowledge of individual residents. Furthermore, research 
correlates staff shortages and insufficient training with 
substandard care. See OIG, OEI Report OEI-01-04-00070, ``Emerging 
Practices in Nursing Homes,'' March 2005, available on our Web site 
at https://oig.hhs.gov/oei/reports/oei-01-04-00070.pdf (reviewing 
emerging practices that nursing facility administrators believe 
reduce their staff turnover).
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2. Comprehensive Resident Care Plans
    Development of comprehensive resident care plans is essential to 
reducing risk. Prior OIG reports revealed that a significant percentage 
of resident care plans did not reflect residents' actual care 
needs.\39\ Through its enforcement and compliance monitoring 
activities, OIG continues to see insufficient care plans and their 
impact on residents as a risk area for nursing facilities.
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    \39\ See, e.g., OIG, OEI Report OEI-02-99-00040, ``Nursing Home 
Resident Assessment Quality of Care,'' January 2001, available on 
our Web site at https://oig.hhs.gov/oei/reports/oei-02-99-00040.pdf.
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    Medicare and Medicaid regulations require nursing facilities to 
develop a comprehensive care plan for each resident that addresses the 
medical, nursing, and mental and psychosocial needs for each resident 
and includes reasonable objectives and timetables.\40\ Nursing 
facilities should ensure that care planning includes all disciplines 
involved in the resident's care.\41\ Perfunctory meetings or plans 
developed without the full clinical team may create less than 
comprehensive resident-centered care plans. Inadequately prepared plans 
make it less likely that residents will receive coordinated, 
multidisciplinary care. Insufficient plans jeopardize residents' well-
being and risk the provision of inadequate care, medically unnecessary 
care services, or medically inappropriate services.
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    \40\ 42 CFR 483.20(k).
    \41\ 42 CFR 483.20(k)(2)(ii) (requiring an interdisciplinary 
team, including the physician, a registered nurse with 
responsibility for the resident, and other disciplines involved in 
the resident's care).
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    To reduce these risks, nursing facilities should design measures to 
ensure an interdisciplinary and comprehensive approach to developing 
care plans. Basic steps, such as appropriately scheduling meetings to 
accommodate the full interdisciplinary team, completing all clinical 
assessments before the meeting is convened,\42\ opening lines of

[[Page 20685]]

communication between direct care providers and interdisciplinary team 
members, involving the resident and the residents' family members or 
legal guardian,\43\ and documenting the length and content of each 
meeting, may assist facilities with meeting this requirement.
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    \42\ Nursing facilities with residents with mental illness or 
mental retardation should ensure that they have the Preadmission 
Screening and Resident Review (PASRR) screens for their residents. 
See 42 CFR 483.20(m). In addition, for residents who do not require 
specialized services, facilities should ensure that they are 
providing the ``services of lesser intensity'' as set forth in CMS 
regulations. See 42 CFR 483.120(c). Care plan meetings can provide 
nursing facilities with an ideal opportunity to ensure that these 
obligations are met.
    \43\ Where possible, residents and their family members or legal 
guardians should be included in the development of care and 
treatment plans. Unless the resident has been declared incompetent 
or otherwise found to be incapacitated under State law, the resident 
has a right to participate in his or her care planning and 
treatment, as well as in the changes in care or treatment. 42 CFR 
483.10(d)(3).
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    Another risk area related to care plans includes the involvement of 
attending physicians in resident care. Although the role and 
responsibilities of attending physicians are governed by specific 
regulations,\44\ the nursing facility also has a critical role--
ensuring that a physician supervises each resident's care.\45\ 
Facilities must also include the attending physician in the development 
of the resident's care plan.\46\ To fulfill these requirements, 
facilities should develop processes to ensure physician involvement in 
resident care, including regular resident visits that involve a 
meaningful evaluation of the resident.\47\ In addition, facilities 
should develop systems to ensure that irregularities noted during drug 
regimen reviews are reported to attending physicians.\48\
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    \44\ See, e.g., 42 CFR 483.40(b), (c), (e).
    \45\ 42 CFR 483.40(a).
    \46\ 42 CFR 483.20(k)(2)(ii).
    \47\ 42 CFR 483.40 (detailing physician services); 42 CFR 483.20 
(detailing facility's role in resident assessments and care plan 
coordination). Although physicians may delegate some tasks to 
physician assistants, nurse practitioners, or clinical nurse 
specialists, as permitted by regulations, facilities must still 
ensure that physicians supervise the care of residents. 42 CFR 
483.40.
    \48\ See 42 CFR 483.60(c).
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3. Appropriate Use of Psychotropic Medications
    Based on our enforcement and compliance monitoring activities, OIG 
has identified inappropriate use of psychotropic medications for 
residents as a risk area in at least two ways--the prohibition against 
inappropriate use of chemical restraints and the requirement to avoid 
unnecessary drug usage.
    Facilities have affirmative obligations to ensure appropriate use 
of psychotropic medications. Specifically, nursing facilities must 
ensure that psychopharmacological practices comport with Federal 
regulations and generally accepted professional standards.\49\ The 
facility is responsible for the quality of drug therapy provided in the 
facility. Facilities are prohibited from using any medication as a 
means of chemical restraint for ``purposes of discipline or 
convenience, and not required to treat the resident's medical 
symptoms.'' \50\ In addition, resident drug regimens must be free from 
unnecessary drugs.\51\ For residents who specifically require 
antipsychotic medications, CMS regulations also require, unless 
contraindicated, that residents receive gradual dose reductions and 
behavioral interventions aimed at reducing medication use.\52\
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    \49\ See, e.g., 42 CFR 483.20(k)(3) (requiring services that are 
``provided or arranged by the facility'' to comport with 
professional standards of quality); 42 CFR 483.25 (requiring 
facilities to provide necessary care and services, including the 
resident's right to be free of unnecessary drugs); 42 CFR 483.75(b) 
(requiring facilities to provide services in compliance ``with all 
applicable Federal, State, and local laws, regulations, and codes, 
and with accepted professional standards and principles * * *'').
    \50\ 42 CFR 483.13(a).
    \51\ 42 CFR 483.25(l)(1). An unnecessary drug includes any 
medication, including psychotropic medications, that is excessive in 
dose, used excessively in duration, used without adequate 
monitoring, used without adequate indications for its use, used in 
the presence of adverse consequences, or any combination thereof. 
Id.
    \52\ 42 CFR 483.25(l)(2).
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    In light of these requirements, nursing facilities should ensure 
that there is an adequate indication for the use of the medication and 
should carefully monitor, document, and review the use of each 
resident's psychotropic drugs. Compliance measures could include 
educating care providers regarding appropriate monitoring and 
documentation practices and auditing drug regimen reviews \53\ and 
resident care plans to determine if they incorporate an assessment of 
the resident's ``medical, nursing, and mental and psychosocial needs,'' 
\54\ including the need for psychotropic medications for a specific 
medical condition.\55\ The care providers should analyze the outcomes 
of the provision of care with the results of the drug regimen reviews, 
progress notes, and monitoring of the resident's behaviors.
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    \53\ 42 CFR 483.60(c).
    \54\ 42 CFR 483.20(k).
    \55\ 42 CFR 483.25(l)(2).
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4. Medication Management
    The Act requires nursing facilities to provide ``pharmaceutical 
services (including procedures that assure accurate acquiring, 
receiving, dispensing, and administering of all drugs and biologicals) 
to meet the needs of each resident.'' \56\ Nursing facilities should be 
mindful of potential quality of care problems when adopting and 
implementing policies and procedures to provide these services. A 
failure to manage pharmaceutical services properly can seriously 
jeopardize resident safety, and even result in resident deaths.
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    \56\ Sections 1819(b)(4)(A)(iii) and 1919(b)(4)(A)(iii) of the 
Act (42 U.S.C. 1395i-3(b)(4)(A)(iii) and 1396r(b)(4)(A)(iii)). In 
addition, under 42 CFR 483.60, SNFs and NFs must ``provide routine 
and emergency drugs and biologicals to [their] residents, or obtain 
them under an agreement described in [section] 483.75(h) * * *.'' 
Nursing facilities must meet this obligation even if a pharmacy 
charges a Medicare Part D copayment to a dual eligible beneficiary 
who cannot afford to pay the copayment. See CMS, Question & Answer 
ID 7042, available on CMS's Web site at https://
questions.cms.hhs.gov.
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    Nursing facilities can promote compliance by having in place proper 
medication management processes--including appropriate training of 
staff involved in all aspects of pharmaceutical care in the nursing 
facility--that advance patient safety, minimize adverse drug 
interactions, and ensure that irregularities in a resident's drug 
regimen are promptly discovered and addressed. These kinds of policies 
and procedures may also safeguard against potential tainting of 
pharmaceutical decisions by improper kickbacks.\57\
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    \57\ For further discussion of the anti-kickback statute, see 
section III.C. below.
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    CMS regulations require that nursing facilities employ or obtain 
the services of a licensed pharmacist to ``provide consultation on all 
aspects of the provision of pharmacy services in the facility.'' \58\ 
The drug regimen of each resident must be reviewed at least once a 
month by a licensed pharmacist, who must report any irregularities 
discovered in a resident's drug regimen to the attending physician and 
the director of nursing.\59\ Consultant pharmacists are also required 
to: (1) ``[e]stablish a system of records of receipt and disposition of 
all controlled drugs * * *;'' and (2) ``[d]etermine that drug records 
are in order and that an account of all controlled drugs is maintained 
and periodically reconciled.'' \60\
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    \58\ 42 CFR 483.60(b)(1).
    \59\ 42 CFR 483.60(c).
    \60\ 42 CFR 483.60(b)(2), (3).
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    In many cases, the consultant pharmacists working in nursing 
facilities are provided by long-term care pharmacies in arrangements to 
furnish drugs and supplies to the nursing facility, often on an 
exclusive basis. Long-term care pharmacies have purchasing agreements 
with pharmaceutical manufacturers and contracts with health plans. As a 
result of these agreements and contracts, long-term care pharmacies may 
prefer that nursing facility customers use some drugs over others. A 
consultant pharmacist provided by a long-term care

[[Page 20686]]

pharmacy may be in a position to influence prescriptions in a manner 
that benefits the long-term care pharmacy. The consultant pharmacist 
may face a potential conflict of interest if a drug prescribed for a 
resident is not one preferred by the long-term care pharmacy.
    To minimize these risks and improve compliance with CMS 
regulations, nursing facilities should commit to robust training and 
monitoring on a regular basis of all staff involved in prescribing, 
administering, and managing pharmaceuticals, including all consultant 
pharmacists. The training should familiarize staff with proper 
medication management techniques. It should also educate staff on the 
legal prohibition against accepting anything of value from a pharmacy 
or pharmaceutical manufacturer to influence the choice of a drug for a 
resident or to switch a resident from one drug to another. Nursing 
facilities should implement policies and procedures for maintaining 
accurate drug records and tracking medications. In addition, nursing 
facilities should consider monitoring drug records for patterns that 
may indicate inappropriate drug switching or steering.
    Nursing facilities should also review the total compensation paid 
to consultant pharmacists (whether under contract with a long-term care 
pharmacy or employed directly by the nursing facility) to ensure that 
the compensation is not structured in any manner that reflects the 
volume or value of particular drugs prescribed for, or administered to, 
patients. Nursing facilities should establish policies that make clear 
that all prescribing must be based principally on clinical efficacy and 
appropriateness \61\ and that drug switches should not be made by a 
pharmacist without authorization from the attending physician, medical 
director, or other licensed prescriber (except for generic 
substitutions where permitted by State law).
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    \61\ The determination of clinical efficacy and appropriateness 
of the particular drugs should precede, and be paramount to, the 
consideration of costs.
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5. Resident Safety
    Nursing facility residents have a legal right to be free from abuse 
and neglect.\62\ Facilities should take steps to ensure that they are 
protecting their residents from these risks.\63\ Of particular concern 
is harm caused by staff and fellow residents.\64\
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    \62\ Sections 1819 and 1919 of the Act (42 U.S.C. 1351i-3 and 
1396r); 42 CFR 483.10; see also 42 CFR 483.15 and 483.25.
    \63\ See id.
    \64\ For an overview of research relating to resident abuse and 
neglect, see Catherine Hawes, Ph.D., ``Elder Abuse in Residential 
Long-Term Care Settings: What is Known and What Information is 
Needed?,'' in Elder Mistreatment: Abuse, Neglect, and Exploitation 
in an Aging America (National Research Council, 2003); U.S. 
Government Accountability Office (GAO), GAO Report GAO-02-312, 
``Nursing Homes: More Can Be Done to Protect Residents from Abuse,'' 
March 2002, available on GAO's Web site at https://www.gao.gov/
new.items/d02312.pdf; Administration on Aging, Elder Abuse Web site, 
available at https://www.aoa.gov/eldfam/Elder_Rights/Elder_Abuse/
Elder_Abuse.asp.
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(a) Promoting Resident Safety
    Federal regulations mandate that nursing facilities develop and 
implement policies and procedures to prohibit mistreatment, neglect, 
and abuse of residents.\65\ Facilities must also thoroughly investigate 
and report incidents to law enforcement, as required by State laws.\66\ 
Although experts continue to debate the most effective systems for 
enhancing the reporting, investigation, and prosecution of nursing 
facility resident abuse, an effective compliance program recognizes the 
value of a demonstrated internal commitment to eliminating resident 
abuse.\67\ An effective compliance program will include policies, 
procedures, and practices to prevent, investigate, and respond to 
instances of potential resident abuse, neglect, or mistreatment, 
including injuries resulting from staff-on-resident abuse and neglect, 
resident-on-resident abuse, and abuse from unknown causes.
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    \65\ 42 CFR 483.13(c); see also 42 CFR 483.13(a).
    \66\ Id.
    \67\ Under State mandatory reporting statutes, persons such as 
health care professionals, human service professionals, clergy, law 
enforcement, and financial professionals may have a legal obligation 
to make a formal report to law enforcement officials or a central 
reporting agency if they suspect that a nursing facility resident is 
being abused or neglected. To ensure compliance with these statutes, 
nursing facilities should consider training relating to compliance 
with their relevant States' laws. Nursing facilities can also assist 
by providing ready access to law enforcement contact information.
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    Confidential reporting is a key component of an effective resident 
safety program. Such a mechanism enables staff, contractors, residents, 
family members, visitors, and others to report threats, abuse, 
mistreatment, and other safety concerns confidentially to senior staff 
empowered to take immediate action. Posters, brochures, and online 
resources that encourage readers to report suspected safety problems to 
senior facility staff are commonly used. Another commonly used 
compliance component for reporting violations is a dedicated hotline 
where staff, contractors, residents, family members, visitors, and 
others with concerns can report suspicions. Regardless of the reporting 
vehicle, ideally coverage for reporting and addressing resident safety 
issues would be on a constant basis (i.e., 24 hours per day/7 days per 
week). Moreover, nursing facilities should make clear to caregivers, 
facility staff, and residents that the facility is committed to 
protecting those who make reports from retaliation.
    Facilities may also want to consider a program to engage everyone 
who comes in contact with nursing facility residents--whether health 
care professionals, administrative, and custodial staff, family and 
friends, visiting therapists, or community members--in the mission of 
protecting residents. Such a program could include specialized training 
for everyone who interacts on a regular basis with residents on 
recognizing warning signs of neglect or abuse and on effective methods 
to communicate with potentially fearful residents in a way likely to 
induce candid self-reporting of neglect or abuse.\68\
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    \68\ Facilities could explore partnering with the ombudsmen and 
other consumer advocates in sponsoring or participating in special 
training programs designed to prevent abuse. See ``Elder Justice: 
Protecting Seniors from Abuse and Neglect: Hearing Before the Senate 
Committee on Finance,'' 107th Congress (2002) (testimony of 
Catherine Hawes, Ph.D., titled ``Elder Abuse in Residential Long-
Term Care Facilities: What is Known About the Prevalence, Causes, 
and Prevention''), available at https://finance.senate.gov/hearings/
testimony/061802chtest.pdf.
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(b) Resident Interactions
    The nursing facility industry, resident advocacy groups, and law 
enforcement are becoming increasingly concerned about resident abuse 
committed by fellow residents. Abuse can occur as a result of the 
failure to properly screen and assess, or the failure of staff to 
monitor, residents at risk for aggressive behavior. Such failures can 
jeopardize both the resident with aggressive behaviors and the resident 
who may be victimized.
    Heightened awareness and monitoring for abuse are crucial to 
eradicating resident-on-resident abuse. Nursing facilities can advance 
their mission to provide a safe environment for residents through 
targeted education relating to resident-on-resident abuse (particularly 
for staff with responsibilities for admission evaluations). Thorough 
resident assessments, comprehensive care plans, periodic resident 
assessments, and proper staffing assignments, would also assist nursing

[[Page 20687]]

facilities in their mission to provide a safe environment for 
residents.
(c) Staff Screening
    Nursing facilities cannot employ individuals ``[f]ound guilty of 
abusing, neglecting, or mistreating residents,'' or individuals with 
``a finding entered into [a] State nurse aide registry concerning 
abuse, neglect, mistreatment of residents or misappropriation of their 
property.'' \69\ Effective recruitment, screening, and training of care 
providers are essential to ensure a viable workforce. Although no pre-
employment background screening can provide nursing facilities with 
absolute assurances that a job applicant will not commit a crime in the 
future, nursing facilities must make reasonable efforts to ensure that 
they have a workforce that will maintain the safety of their residents.
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    \69\ 42 CFR 483.13(c)(1)(ii).
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    Commonly, nursing facilities screen potential employees against 
criminal record databases. OIG is aware that there is a ``great 
diversity in the way States systematically identify, report, and 
investigate suspected abuse.'' \70\ Nonetheless, a comprehensive 
examination of a prospective employee's criminal record in all States 
in which the person has worked or resided may provide a greater degree 
of protection for residents.\71\
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    \70\ OIG, Audit Report A-12-12-97-0003, ``Safeguarding Long-Term 
Care Residents,'' September 1998, available on our Web site at 
https://oig.hhs.gov/oas/reports/aoa/d9700003.pdf.
    \71\ Because there is no one central repository for criminal 
records, there is a significant limitation to searching the criminal 
record databases only for the State in which the facility is 
located. A better practice may be to search databases for all States 
in which the applicant resided or was employed.
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    Verification of education, licensing, certifications, and training 
for care providers can also assist nursing facilities in their efforts 
to ensure patients are provided with qualified and skilled caregivers. 
Many States have requirements that nursing facilities conduct these 
checks for all professional care providers, such as therapists, medical 
directors, and nurses. Federal regulations require a nursing facility 
to check its State nurse aide registry to ensure that potential hires 
for nurse aide positions have met competency evaluation requirements or 
are otherwise excepted from registration requirements.\72\ In addition, 
the facility must also check every State nurse aide registry it 
``believes will include information'' on the individual.\73\ To ensure 
compliance with this requirement, facilities should have mechanisms in 
place to identify which State registries they must examine.
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    \72\ 42 CFR 483.75(e)(5).
    \73\ 42 CFR 483.75(e)(6).
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B. Submission of Accurate Claims
    Nursing facilities must submit accurate claims to Federal health 
care programs. Examples of false or fraudulent claims include claims 
for items not provided or not provided as claimed, claims for services 
that are not medically necessary, and claims when there has been a 
failure of care. Submitting false claims, or causing false claims to be 
submitted, to Medicare or Medicaid may subject the individual, the 
entity, or both to criminal prosecution, civil penalties including 
treble damages, and exclusion from participation in Federal health care 
programs.
    Common and longstanding risks associated with claims preparation 
and submission include duplicate billing, insufficient documentation, 
and false or fraudulent cost reports. While nursing facilities should 
continue to be vigilant with respect to these important risk areas, we 
believe these risk areas are relatively well-understood in the 
industry, and therefore they are not specifically addressed in this 
section.
    As reimbursement systems have evolved, OIG has uncovered other 
types of fraudulent transactions related to the provision of health 
care services to residents of nursing facilities reimbursed by Medicare 
and Medicaid. In this section, we will discuss some of these risk 
areas. This list is not exhaustive. It is intended to assist facilities 
in evaluating their own risk areas. In addition, section III.A. above 
outlines other regulatory requirements that, if not met, may subject 
nursing facilities to potential liability for submission of false or 
fraudulent claims.
1. Proper Reporting of Resident Case-Mix by SNFs
    We are aware of instances in which SNFs have improperly upcoded 
resident RUG assignments.\74\ The method of classifying a resident into 
the correct RUG, through resident assessments, requires accurate and 
comprehensive reporting about a resident's conditions and needs. 
Inaccurate reporting of data could result in the misrepresentation of 
the resident's status, the submission of false claims, and potential 
enforcement actions. Therefore, we have identified the assessment, 
reporting, and evaluation of resident case-mix data as a significant 
risk area for SNFs.\75\
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    \74\ A 2006 OIG report found that 22 percent of claims were 
upcoded, representing $542 million in potential overpayments for FY 
2002. OIG, OEI Report OEI-02-02-00830, ``A Review of Nursing 
Facility Resource Utilization Groups,'' February 2006, available on 
our Web site at https://oig.hhs.gov/oei/reports/oei-02-02-00830.pdf.
    \75\ To the extent a State Medicaid program relies upon RUG 
classification, or a variation of this system, to calculate its 
reimbursement rate, nursing facilities, as defined in section 1919 
of the Act (42 U.S.C. 1396r), should be aware of this risk area as 
well.
---------------------------------------------