Kusserow on Compliance: Ongoing auditing and monitoring of high risk areas—16 tips for compliance officers

By Steve Forman, CPA

In its various guidance documents, the OIG has repeated stressed the importance of ongoing monitoring and auditing of high-risk areas, yet there remains considerable confusion regarding the differences between the two; and who has responsibility for them. The following addresses this issue and provide tips for consideration by compliance officers in meeting the challenge of this key compliance program element.

Ongoing monitoring

Ongoing monitoring is a program manager’s responsibility, not the compliance officer’s. It entails establishing and maintaining controls and metrics to determine on a continuous basis whether operations comply with established policies, procedures, regulations or laws and whether significant risks are being adequately addressed and mitigated. This includes keeping current with changes in rules, regulations, and applicable laws; developing internal controls, policies, and procedures to comply with them; training staff on these rules; and taking active steps in monitoring or verifying compliance with these new guidelines. Ongoing monitoring should be designed to test for inconsistencies, duplication, errors, policy violations, missing approvals, incomplete data, dollar or volume limit errors, or other possible breakdowns in internal controls. Monitoring techniques may include sampling protocols that permit program managers to identify and review variations from an established baseline.

Ongoing auditing

Ongoing auditing is reviewing the ongoing monitoring process. In essence, it is a spot check. The review must be independent and objective, which means that it should be done by people external to the program area being audited. The compliance office, internal or external audits, other program managers, outside consultants, or any combination thereof can be used to conduct ongoing auditing. The objective of the audit should be to verify that program managers are properly carrying out their monitoring responsibilities and to recommend where internal control mechanisms can be improved. This includes confirming that controls are in place and functioning as they were intended or identifying weaknesses in the program that need to be addressed. In any case, the compliance officer should ensure that both the monitoring and auditing is taking place and doing what it should be doing. The compliance officer should also verify that corrective actions taken as a result of audits are timely, effective, and sustainable.  This should also be an ongoing focus of any management level compliance committee or board level compliance committee.

Tips: 16 Questions for compliance officers

  1. Has a compliance audit plan been developed to verify that ongoing monitoring and auditing are addressing compliance high-risk areas?
  2. Have program managers identified and listed all compliance high-risks areas related to their operational areas? Many such risks are found in the OIG guidance, work-plans, fraud alerts, advisory opinions, audits, and enforcement priorities. In addition it is useful to monitor Medicare contractor activities (e.g. RACs, ZPICs, etc.), industry news, PERM reports, and PEPPER data, etc.
  3. Are program managers engaged in assessing high-risk areas within their operations?
  4. Are high-risk areas ranked in terms of level of risk, probability of risk exposure, and impact or damage from a risk area?
  5. Do you also consider high impact, low probability risks?
  6. Have program managers developed and implemented monitoring plans to address all identified risk areas?
  7. Are all compliance risks areas being tested and reviewed on an ongoing basis?
  8. Is there priority given to address areas of highest risk?
  9. Have program managers calculated the potential damage for a risk failure, including the potential scale of direct and indirect financial consequences (i.e., liability, penalties, etc.), as well as whether they have established the likelihood of a risk event, taking into consideration whether the area is a current enforcement priority (e.g., improper physician arrangements)?
  10. Does ongoing auditing verify monitoring by program managers is taking place to addresses adequacy of the internal controls (e.g. policies/procedures) to reduce likelihood of that an unwanted event will occur in high risk areas?
  11. Has ongoing auditing validated that ongoing monitoring is effective in achieving the desired objectives?
  12. Have corrective action plans have been instituted for all risk area deficiencies identified by ongoing monitoring or auditing?
  13. Is there a process by which corrective action measures taken are working as intended?
  14. Are results of monitoring and auditing included as regular agenda items for management and board level compliance committees?
  15. Have compliance experts been engaged to independently evaluate the effectiveness of a compliance program, inasmuch as the OIG identifies it as a program that should be part of ongoing auditing. Place special emphasis in the scope of work on reviewing whether high-risk areas are being properly addressed.
  16. Do you periodically evaluate that effectiveness of the risk assessment program?

 

Steve Forman, CPA is the Senior Vice President of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening. His comments in this blog reflect experience of over 35 years, having served as Director of Management Operations for the OIG, 10 years as VP for Audit and Compliance for a major health system, and as a compliance consultant for many healthcare organizations. Mr. Forman has published widely on this subject.

 

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of SM.

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Copyright © 2017 Strategic Management Services, LLC. Published with permission.

Kusserow on Compliance: DOJ reports more than two-thirds of $4B civil fraud recoveries in 2017 from health sector

In an end of the year report, the Department of Justice (DOJ) Civil Division announced that it recovered over $3.7 billion from civil False Claims Act (FCA) cases for the fiscal year. Significantly, nearly two thirds of the total settlements and judgments involved the health care industry, including drug companies, hospitals, pharmacies, laboratories, and physicians. What is really noteworthy is the fact that ninety-three percent of the total came from qui tam relators (whistleblower) cases, whose rewards amounted to almost $400 million. There were 491 new such health care cases filed during the year at a rate of about ten per week. The great majority of civil fraud cases implicated the Anti-Kickback Statute. Also most major settlements with DOJ are referred to the HHS Office of Inspector General (OIG) for Corporate Integrity Agreements.

It is noted that settlements for 2017 were $1 billion less than 2016. This is the eighth consecutive year that the department’s civil health care fraud settlements and judgments have been the leading area of settlements and judgments, exceeding $2 billion. The recoveries reported reflect only federal losses and they were instrumental in recovering additional millions of dollars for state Medicaid programs. The largest recoveries involving the health care industry this past year came from Shire Pharmaceuticals LLC which paid $350 million; drug manufacturer Mylan Inc. which paid approximately $465 million; Life Care Centers of America Inc. and its owner which agreed to pay $145 million; and eClinicalWorks (ECW) and certain of its employees which paid $155 million.

In second place in terms of industry recoveries was $543 million from housing and mortgage fraud cases, which was only about twenty percent of the level for the health care sector. In third place was the Defense arena which had cases that resulted in $220 million in settlements and recoveries, which is only about one tenth the level of the health care sector.

The “Yates Memo” emphasized DOJ’s intent to focus on “individual accountability for corporate wrongdoing” through civil and criminal enforcement actions. This emphasis on singling out individual recoveries was in evidence this last year with DOJ recovering $60 million directly from individuals, without joint and several liability with any corporate entity. The DOJ identified several individual owners and executives of private corporations agreed to be held jointly and severally liable for settlement payments.

The DOJ obtained more than $3.7 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending September 2017.

Recoveries since 1986, when Congress substantially strengthened the FCA, now total more than $56 billion.

 

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2017 Strategic Management Services, LLC. Published with permission.

Kusserow on Compliance: Tips for getting the most from your CIA

This was the title of a section in a presentation by Laura Ellis, HHS Office of Inspector General (OIG) Senior Counsel, at the recent Health Care Compliance Association (HCCA) Compliance Institute, where she explained that the settlement process is very lengthy, and that compliance officers should spend that time period preparing for what is to come. Even before matters are referred to the OIG for settlement negotiations, the matter will have been with the Department of Justice (DOJ) for a long time.  It is only after the DOJ turns matters over to the OIG that the agency determines whether or not a corporate integrity agreement (CIA) is necessary, and if so, what terms and condition should be included in the agreement.  Ellis stated that negotiations with the OIG may take up to a year before a CIA emerges.   It is during this rather long lead-up period that the compliance officer should be very busy preparing for what is to come.  Ellis offered a number of suggestions for the compliance officer to follow while this process is underway, including:

Thomas Herrmann, J.D., was previously responsible for negotiating CIAs on behalf of the OIG and in providing monitors with a number of years’ consulting experience, working with more than a dozen clients with CIAs and as an Independent Review Organization (IRO). He agreed with the Ellis statement about the long lead time before a CIA is signed, and that the compliance officer should not waste that valuable time.  Once executed, the clock begins ticking and a lot has to be accomplished in a relatively short time.   Among the most important tasks needing immediate attention is finding and vetting potential outside experts to be the IRO and, in some cases, compliance experts for the Board and quality monitors. The responsibility for selecting these experts lies with the organization, not the OIG.  This may take a lot of time and warrants serious consideration as in all likelihood, the organization will have them for five years.  A mistake in selection will come back to haunt the organization and may aggravate matters with the OIG.  The compliance officer should be very much involved in finding and selecting the right experts with the right expertise.   The more experience the firm selected has in performing this type of work, the less likely there will be problems.  An experienced firm won’t have the learning curve of an inexpert firm that oftentimes adds cost to the engagement and results in poor reports to the OIG.  For an organization that is already in hot water with the DOJ and OIG, this kind of complicating matter is not wanted.

Carrie Kusserow has over 15 years’ compliance officer and consultant experience, and was brought in to be the compliance officer to an organization under a CIA while Laura Ellis was the monitor. Kusserow echoes Ellis’ advice to organizations to take steps to “get the most out of the money” expended on these resources. The more expert they are in the health care sector, the better.  The more experience the individuals assigned to do the work have, particularly experience with the OIG, the better.   The one thing to avoid is hiring an IRO and then paying it to learn about the type of work being done by the organization or how to interact with the OIG. Having top-notch experts can impart considerable added value from prior experience of doing this kind of work. She also pointed out that once these outside experts are engaged, there is another lag period before they begin their work and again when they present reports on the results of their work.  It is a huge mistake to allow these gap periods to elapse without doing serious preparation work.  It is important to begin planning at the earliest date for what is needed to meet CIA terms and conditions, which will assist in this effort, and development of a project plan for execution.   The planning process and timelines for meeting CIA requirements will have to take into account when reports by the IRO, and possibly the compliance expert, are due to the OIG.

Steve Forman, CPA, has over 35 years’ experience, having served as both as a compliance officer and as an IRO many times, and as a compliance expert four times under a CIA. He advises compliance officers that one step that cannot be undertaken too soon is getting the Executive/Management Compliance Committee and Board Compliance Committee involved. They need to understand fully in practical and operational terms their personal obligations, along with what is needed from them to meet CIA obligations.   He also strongly recommends at the first indication that a CIA may be in the future to begin reviewing posted agreements on the OIG website, especially those that involve similar types of organizations.   One point of caution is that the OIG has been changing CIAs significantly as to new requirements, conditions, and certifications by board members and executives. Information derived from these reviews should be translated into a plan of action to ensure the organization is in tune with what the OIG will expect.  He strongly suggests that compliance officers consider engage compliance experts to do two things:

  1. Have the compliance program conduct an independent evaluation and act on findings and recommendations. Having such a report with evidence of correcting any deficiencies can be invaluable evidence to the OIG in making a determination as to whether a CIA is necessary and, if so, mitigating terms and conditions. It will be looking for this evidence.
  2. Once a CIA is executed, immediately engage experts to conduct a mock audit to test the terms and conditions that must be met under the CIA and to have them addressed before the IRO or compliance expert under the CIA begins work.

Taking these two steps can avoid a lot of problems, expenditures and complications under a CIA. The OIG takes evidence of independent experts serious. That is why they rely upon them as IROs, Compliance Experts, and Quality Monitors.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Google+ or LinkedIn.

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Copyright © 2017 Strategic Management Services, LLC. Published with permission.

Kusserow on Compliance: Compliance officers should have active roles in CIA negotiations

Laura Ellis, HHS Office of Inspector General (OIG) Senior Counsel, has a reputation for managing the most difficult and complicated corporate integrity agreements (CIAs) on behalf of the OIG. At the recent Health Care Compliance Association (HCCA) Compliance Institute, she urged compliance officers not to sit on the sidelines while a CIA is being negotiated with the OIG.   They should be actively involved in all facets of negotiation and should not wait to be involved until the agreement is signed and put into effect. She reminded everyone that once the CIA is signed, the compliance officer will be the face of the company to the OIG, not the attorneys.   From years of experience, she has found attorneys negotiating terms and conditions of a CIA often don’t have the operational experience to fully understand all the implications of what is being committed to in terms and obligation. As a result, it is not uncommon for attorneys to come back to the OIG after a CIA has been executed to try to renegotiate points.   This is triggered as result of management and the compliance officer realizing what is involved in meeting the terms and condition.   Ellis stated that the OIG is not inclined to reopen CIA negotiations.  The mistake was not having the compliance officer on the front end of negotiations and present during the negotiation process.  As the CIA settlement process takes shape, the compliance officer needs to:

  • be part of the negotiations;
  • review and comment on all drafts;
  • create a basic plan from the draft to determine what it takes to meet obligations;
  • conduct a min-gap assessment of what it takes to do what the CIA would require;
  • begin work on implementation strategies; and
  • start the process to determine resource needs to meet obligations.

Ellis also made the point that attitude matters once a CIA is in place, and compliance officers should work with the monitor in an open and honest way. A positive working relationship between the monitor and the compliance officer is to everyone’s best interest.  The earlier in the process that they get to know each other, the better.

Thomas Herrmann, J.D., was previously responsible on behalf of the OIG for negotiating CIAs and providing monitors, and subsequently gained many years of consulting experience working with more than a dozen clients with CIAs and as an independent review organization (IRO).  He says that what many fail to understand is that, although the OIG is involved in the Department of Justice (DOJ) settlement process, a different OIG attorney will be assigned as negotiator for the CIA.  Once the agreement is executed, it is passed on to a different OIG attorney to be the monitor to assure compliance with the terms of the CIA.   A very common mistake is for attorneys to deal with issues handled by someone earlier in the process, or in effect, re-litigate.  This is a big mistake.  The OIG will not re-litigate or interpret decisions made by the DOJ.  At the same time, the OIG monitor is definitely disinclined to deal with issues that were or should have been addressed with the OIG negotiator.  Herrmann goes on to explains that the OIG views the organization’s legal counsel as filling an adversarial role, but once things are executed, the OIG does not want to continue dealing with the advocate.  The focus of the relationship with the OIG should be on meeting the terms of the CIA. Herrmann sees it as a huge mistake for the legal counsel to continue making arguments or try to modify terms with the monitor, as this frequently leads to aggravation of matters and creates additional problems for the organization.  The monitor wants to deal with how the organization will meet its obligations, and that means working with the compliance officer to determine how the terms and conditions of the CIA will be fulfilled.  It behooves compliance officers to get to know their monitor as quickly as possible, evidence their commitment, and exhibit an attitude to work out what it takes to get the job done.

Carrie Kusserow has over 15 years’ compliance officer and consultant experience; in fact, she was brought in to be the compliance officer to an organization under a CIA while Laura Ellis was the monitor. Her experience with Ellis was precisely what Ellis explained during her presentation.   Maintaining the focus on meeting the obligations of the agreement is very important for credibility and permits ironing out of issues. By listening carefully and responding to Ellis’ questions openly in a forthright manner, Kusserow developed a very good working relationship.  This made work easier for everyone.  Compliance officers need to listen carefully to what the monitor expresses, working as needed and then immediately following up to report actions taken. The focus must stay on getting the job done to the satisfaction of the OIG.  It is also critical that the compliance officer at all times be “straight up” and honest with the OIG.  If this is done, then a bond of trust can be developed that can iron out details that are sure to arise. This can permit seeking non-adversarial clarification of terms and conditions. On the other hand, failing to develop a proper working relationship with the monitor can result in lack of understanding and increased work for everyone. As such, as soon as the CIA is signed, the compliance officer should come into direct contact with the OIG monitor.

Suzanne Castaldo, J.D., has worked both as a litigator and compliance consultant dealing with numerous organizations with CIAs. She confirmed what Ellis noted about attorneys negotiating with the OIG without active involvement of either management or the compliance officer. In almost every case, it has created avoidable issues.  She strongly recommends that anyone engaging a law firm to assist with CIA negotiations insist on including knowledgeable members of management and the compliance officer in all meetings with the OIG.  All terms that are being negotiated should be reviewed and assessed by them to understand all implications and resulting work obligations. Many attorneys will not find this to their liking and may argue against it.   However, not being part of this process reminds one of “arriving at the dance after it is over.”

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2017 Strategic Management Services, LLC. Published with permission.