The Department of Health and Human Services (HHS) has issued its final set of guidelines for physicians in individual and small group practices to follow in billing for Medicare, Medicaid, and other federal health care.

The set of guidelines, one of a series of such "guidances" from the department’s Office of Inspector General (OIG), was published in the October 5 Federal Register. All of the guidances are intended to assist health care providers in designing programs for voluntary compliance with federal reimbursement requirements.

Such voluntary compliance programs have emerged over the last few years in response to the federal government’s stepped-up effort to reduce innocent billing errors and to prosecute outright fraud and abuse in health care claims. The new guidance emphasizes that HHS does not question the honesty of the majority of physicians, but merely wishes to engage their help in protecting the integrity of federal health care programs.

Physicians are not legally subject to "criminal, civil, or administrative penalties for innocent errors, or even negligence," according to the new guidance. Nor will they be penalized if they do not establish a formal compliance program. Only offenses committed with "actual knowledge of the falsity of the claim, reckless disregard, or deliberate ignorance of the falsity of the claim" are subject to penalties under the False Claims Act, the government’s main enforcement tool. Providers who make a good faith effort to report billing errors—even fraudulent claims—and voluntarily return funds can often escape penalties.

The new guidance spells out seven components of a standard compliance program:

• Conduct periodic internal audits.

• Draw up written standards and procedures.

• Designate a compliance officer.

• Train staff in practice standards and procedures.

• Investigate allegations and disclose incidents to governmental agencies.

• Develop open lines of communication. • Enforce disciplinary standards through well-publicized guidelines.

Unlike larger health service organizations, physicians in solo or small group practices are not expected to implement all seven components, at least not all at once. The new guidance outlines a stepped approach to setting up a compliance program. Dealing with a practice’s past billing problems, for example, would be a good first step. The size and resources of the practice would determine the extent of the compliance program.

This more flexible approach partially satisfies the objections to the draft guidance from APA, the AMA, and other organizations representing physicians. Left unchanged from the June draft is the broad scope of the guidelines—the seven elements of a compliance program already required of large health care institutions and systems.

In its press release announcing the final guidance, the AMA noted that just what is required of individual practitioners remains unclear. That uncertainty has already begun a feeding frenzy of consultants preying on doctors who think they will have to pay for a professionally designed program to comply with HHS-OIG requirements, according to the AMA press release. To avoid the need for consultants, the AMA plans to have a model compliance plan available to physicians by the end of the year.

In its response to the June draft, APA pointed out that an effective compliance plan must be based on several types of information, such as coverage policies and up-to-date comprehensive coding and billing instructions. Such information is not readily available and puts individual practitioners at a disadvantage. Larger organizations, by comparison, can afford consultants and compliance officers to compile a resource manual, as recommended in the guidance.

APA’s complaint appears to be addressed in the final guidance. The OIG and the Health Care Financing Administration (HCFA) are compiling a list of their basic documents that could be included in a binder to be used by a physician’s staff for reference and training. The list, which is expected to be completed by late fall, will be posted on the OIG and HCFA Web sites. It will also be publicized through physician organizations.

Another APA concern, the privacy of patient records used for auditing and retaining medical records, is addressed in a footnote. The note recommends that because of variations in state and federal rules governing privacy and retention of records, physicians should check with medical societies and professional associations for local requirements. The APA suggestion that psychiatric records be redacted before being audited appears to have been ignored.

The new guidance identifies four areas in which the OIG has focused its investigation and audits: proper coding and billing; ensuring that services are reasonable and necessary; proper documentation; and avoiding improper inducements, kickbacks, and self-referrals. Other risks are outlined in appendices.

Although voluntary, setting up a compliance program is clearly encouraged by HHS. The department’s inspector general views self-disclosure of possible wrong-doing as a mitigating factor when making recommendations to prosecuting agencies. Self-reporting can minimize the cost and disruption of a full-scale audit and investigation. Information on the protocol for self-disclosure followed by the OIG is also included in the new guidance.