Hayes' Healthcare Blog

False Claims Act Penalties Doubling: Time to Beef Up Your Compliance Program

Posted by Robert Freedman on September 28, 2016 at 9:00 AM

If you mistakenly submit a single claim that results in a $100 government over reimbursement, you could now be subject to a penaltymdaudit compliance programs of over $20,000, according to the lawyers at Mintz Levin, specialists in healthcare law.[1] And that’s for every single claim.

To quote Alec Baldwin’s character in the famous Glengarry Glenn Ross monologue, “Have I got your attention now?”

The Department of Justice recently passed an interim final rule that has nearly doubled the civil penalties under the False Claims Act (FCA) from an already oppressive $5500 minimum to $11,000 maximum per claim to a minimum of $10,781 and maximum of $21,562. The increases – which went into effect August 1 - are the result of a “catch-up” clause in the 2015 Adjustment Act that amended the Federal Civil Penalties Inflation Adjustment Act of 1990.

The act mandates agency heads to adjust civil monetary penalties based on the difference between the Consumer Price Index in October of the year they were established and October 2015. After this initial catch-up, agencies must make additional annual adjustments, so the costs are only going to increase from these new dizzying heights.

The impact for the healthcare industry is seismic. The cost of any slip up in Medicare and Medicaid claims can be financially disastrous and the doubling of penalties means a doubling of “whistleblower” rewards, so organizations can expect increased scrutiny from employees, former employees and competitors looking to cash in.

To make matters worse, because of the sharing of Medicaid costs, the act incentivizes individual states to pass FCA laws in addition to Federal statutes. The pressure on healthcare organizations to “get it right” when it comes to claims submittal has never been greater. With the financial stakes ratcheted even higher, it may be time to refocus your efforts on compliance.

Here are five ideas to help strengthen your compliance program.

  1. Update your policies and procedures

It may be obvious, but the best way to avoid costly penalties is to prevent erroneous claims in the first place. To do that, you need to have a controlled process in place for capturing, documenting and reporting clinical codes throughout your operation.

If you don’t have a set of documented procedures for handling this important process, it’s time to develop one. Leverage the knowledge and expertise of all stakeholders to ensure the policies and procedures you create will effectively keep your process under control.

If you already have procedures in place, chances are you haven’t reviewed them in a while. Again, involve the team that operates under these procedures on a regular basis to conduct an in-depth review. Eliminate procedures that are no longer relevant, update the ones that are, and add new ones for new processes, systems, or equipment that may have been added to your operation.

Whether creating or updating your policies and procedures, it’s critical to conduct a training program to make sure everyone is familiar with them and will use them on a daily basis.

  1. Increase your inspections

There’s no mystery as to how to uncover a greater number of non-compliance issues: perform more inspections. That can be a challenge for resource-constrained compliance teams who struggle to keep up with a regular audit schedule.

The most effective way to meet the requirement for increased audits is by working smarter, not harder. Implementing an automated auditing solution is one way to accomplish that goal. Automating the audit process allows you to increase the depth and breadth of your audits, provide quicker and easier data access and analysis and develop timely action plans.

Using automated auditing enables you to conduct more frequent tests to yield more accurate results more reflective of your overall activity. Audit automaton eliminates the manual aspects of the process, enabling analysis of a wider breadth of cases. The resulting analysis more easily reveals patterns and causes of issues. Once root cause is identified, it is then a much easier next step to solve the issue by either modifying the process or adding additional staff training.

Not only does audit automation allow you to review more cases in a shorter amount of time, it can also free up resources to focus on educating providers in your organization. You can then concentrate on trying to prevent non-compliance from happening in the first place rather than devoting your efforts to uncovering them after they occur.

  1. Implement risk-based auditing

Constrained auditing resources limit the extent and number of areas that your compliance team can review at any given time, hampering their ability to proactively identify and assess many of the issues they encounter on an ongoing basis. Lack of resources also diminishes the compliance group’s ability to evaluate issues in a timely manner, identify patterns and get to root causes.

To overcome these limitations and meet the increased risk of non-compliance, you should consider moving from reactive, scheduled audits to a proactive, risk-based audit program. You can reap huge benefits by moving to risk-based audits, but the transition can be difficult. More organizations have therefore recognized the importance of leveraging analytics to implement an effective risk-based audit approach.

Risk-based analytics allows you to be more proactive in identifying areas that are subject to review. But that is only the first step. Once you identify these areas, you can use an analytics-based program to help move beyond identification to managing these risks with the goal of minimizing or eliminating them. This will greatly reduce your risk of compliance problems that could result in massive fines under the new FCA penalty limits.

  1. Institute continuous monitoring

Another important way to avoid compliance issues is to institute a continuous monitoring program. Analytics can be critical here as well by providing the flexibility to enhance monitoring of your ongoing operational activities and allowing you to execute the compliance responsibility more effectively. A robust analytics tool allows you to design dashboards to incorporate specific areas of potential risks and helps your compliance group identify issues that are outside the norm or predetermined standards.

Monitoring tools are invaluable when you are trying to evaluate the many variables prevalent in your organization. A monitoring dashboard allows you to dial tolerance levels up or down in each area and define parameters for your particular needs. This flexibility also enables you to keep an eye on risk areas that have already been addressed but which you want to make sure are under control and performing within set expectations on an ongoing basis. It allows you to evaluate trends and activities over time, something not possible with discrete audits conducted at scheduled intervals. 

Ongoing monitoring with an analytics program can keep potential risk areas front and center and provide feedback to the key stakeholders responsible for making improvements. It is not simply a “one and wait until next year” program that can often be the case with a traditional schedule-based audit program.

  1. Expand your resource base

A common refrain for many compliance groups is limitations caused by resource constraints. To carry out more inspections and focus on more risk areas does require more resources, but you don’t have to be limited by the size of your internal staff.

One of the issues with a comprehensive, automated analytics program is that it can reveal more issues than you are capable of handling in-house. Many have decided they would rather limit exposure to these issues rather than devote the resources necessary to investigate them. That can be extremely shortsighted, especially in light of the increased FCA penalties. Just because you aren’t aware of an incorrect claim doesn’t relieve your burden of responsibility.

If you have issues, you need to know about them quickly and find them yourselves, before a government agency does. Uncovering and repaying these faulty claims within the 60-day remediation window can minimize your financial risk considerably.

One way to address your lack of in-house resources is to contract third party interim help to deal with issues as they arise. Look for a partner who can step in and easily work within your compliance toolset to lighten the workload. Your increased inspections, continuous monitoring and risk-based auditing program will uncover anomalies which you can investigate using a third party vendor. With fines doubling to more than $20,000 per claim, the money spent to uncover claims errors will be well worth it.

Avoiding the increased penalties is critical to maintaining the financial health of your organization. The heightened financial exposure makes your compliance program more important than ever. Devoting the resources needed to stay in compliance may be the wisest investment you can make.

For more information on how you can build up your compliance program, please download our road map, 5 Ways Analytics Power Risk-Based Audit Program.

Mdaudit compliance programs

 Download Roadmap

[1] Already Enormous False Claims Act Penalties Set to Increase, by Brian P. Dunphy & Samantha P. Kingsbury, Mintz Levin  Health Law and Policy blog, May 6, 2016

Topics: billing compliance software, mdaudit, compliance programs

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