Compliance Perspectives: It’s Time to Look Forward: Make a List and Check It Twice

Among the many tasks that a laboratory compliance officer must carry out, planning for upcoming compliance issues and anticipating regulatory challenges is as important as any other. This task is essential for a variety of other interdependent tasks the compliance officers must oversee or plan for, including budgeting, human resources, education and training, and continually upgrading their own skills and knowledge. In some cases, the compliance officer will have to choose whether to develop the necessary expertise internally or hire a consultant to help with some of these tasks. Developing the necessary expertise and skills internally holds far more potential to provide the greatest benefit to the laboratory. If the compliance officer decides to use a consultant or seek help from outside the laboratory, the selection of the person or firm is the next most important decision.

Making a List Is a Good First Step
Often, making a list is a good way to focus on the issues that need to be addressed as a means to make sure all things are covered and nothing is missed. Even better, make the list dynamic so that the compliance officer can add to it or add new information as items develop or change throughout the year. Think of the Health and Human Services Office of Inspector General’s (OIG) annual work plan as a template.

Here is a list of newer issues laboratory compliance officers will have to face during 2015 and beyond, in addition to operating and overseeing the existing compliance activities:

  • Changes to the way pricing and fees will be determined for clinical laboratory services, with possible significant reductions (this includes continued attacks and revisions to the Physician Fee Schedule for pathology services and molecular and genetic testing);
  • Sophisticated use of data mining and intelligent computer technology, including predictive algorithms to detect fraudulent providers or suspicious claims and to deny potential problematic claims before they are paid;
  • New cases and prosecutions in the area of anti-kickback and physician self-referral brought mainly by whistleblowers;
  • The government’s push for transparency in the health care industry, including laboratory services, which brings new scrutiny to the industry from the outside;
  • Unrelenting advances in the technology and methods of testing that enable physicians and others to more effectively detect, monitor, and treat disease.

Overview and Methods
In this article, we will discuss each item on the list and provide some guidance to compliance officers concerning how urgent they are and what the complicating issues or challenges are. We will then try to provide some guidance on how to deal with them, keeping in mind that how a particular laboratory deals with any of the items discussed will, to a large part, depend on the laboratory’s systems, resources, and knowledge; what kind of laboratory it is; and the setting (hospital or independent, rural, nursing home, etc.).

For our purposes here, there is an assumption that the laboratory has a robust compliance program and the compliance officer is generally aware of the underlying rules and regulations of whatever the issue might be. For instance, when discussing fee schedule changes, there is an assumption that the compliance officer has some idea of the changes that are coming. Further, there is an assumption that the compliance program is active and that the laboratory is operating a comprehensive audit and monitoring program.

One of the general principles or themes throughout this article is its global view of the items or issues presented, with the understanding that it is more than likely that changes to the details may occur before implementation but the general, overall issue will not go away. For instance, there is no doubt that some kind of changes to the laboratory and pathology fee schedules or methods of payment will occur since such changes are required by law. The government expects that whatever changes occur will result in either lower utilization, lower payment, or both. Understanding that as a basic and valid premise will help compliance officers interpret this information correctly as it applies to their own laboratories or responsibilities.

Reimbursement Changes
Options for fee schedule change that the government has expressed an interest in, besides just ratcheting fees down as aggressively as possible, include bundled payments similar to those used for prospective payment systems in hospitals and basing the reimbursements on fees paid by other kinds of payers in the laboratory industry’s market. Most likely the changes will result in reduced payment amounts. At this point, regulations have been proposed that provide a general overview of the way this will happen. The Centers for Medicare and Medicaid Services (CMS) intends to rebase the Clinical Laboratory Fee Schedule on fees paid by other payers for laboratory services. However, just last year we were looking at rebasing the fee schedule to account for technological changes that CMS assumes reduced the cost of providing some testing. Many thought that we would be dealing with that in 2015, and yet, here we are today looking at a very different method of rebasing the fee schedule.

For our purposes, it is not important how a new system will actually work but rather how a change this significant will affect compliance issues and when the compliance officer should expect to have to deal with these changes. Reducing the fee schedules will present some challenges in resources available, which often results in budget cuts in the laboratory. Developing a new fee schedule entirely and including data and pricing information provided by laboratories has its own challenges and compliance issues.

Compliance officers will have to deal with the lower reimbursement issues in the first quarter and throughout the year. For the other area of concern, rebasing the fee schedule on market payments, compliance officers should spend the first month of 2015 making certain the current information of the changes are thoroughly understood. Later in the year, but still in the first six months, the first sets of details will be published about the changes and the laboratory will have to begin preparing for whatever is required. Compliance issues will emerge during this time, and the compliance officer can prepare to make certain that all in the laboratory understand them and what needs to be done.

While we are fairly certain that bundled payments in some form are in our future because it is a payment method the government already uses and favors, it is unlikely that there will be much activity in the independent laboratory in 2015.

The Use of Sophisticated Techniques
CMS and the OIG have been touting predictive modeling and data mining techniques as two of the more important tools they have been given to help them meet their responsibilities to prevent fraud and abuse and reduce payment errors. Demonstration projects have given the agencies a way to actually deploy these tools and learn how to best employ them. These tools have allowed them to create some pretty sophisticated reviews of data, such as comparative billing reports, they can ultimately use to find laboratories that are outliers or have aberrant billing patterns. The data can point CMS to areas where lots of billing errors are made by many different kinds of laboratories or to find a single provider who represents a billing outlier that needs to be reviewed more closely. In the first case, the data can be used to determine where improvements need to be made in their own systems. This same data can be used to focus educational efforts for providers, one of CMS’s other major areas of responsibility that should lead to fewer claim errors and better compliance. The other side of that coin is the benefits auditors and prosecutors can derive from the data to obtain refunds where claims were improperly paid.

Laboratory compliance officers should use this same data in their own audits and self-monitors to set benchmarks for their laboratories to help keep them in compliance. This is an area of current activity, so the compliance officer needs to get a handle on this as early in 2015 as possible. Laboratory compliance officers should plan for adding an information technology expert, or gaining priority access to one, for their compliance team and make sure they have appropriate computers, access, and equipment to allow them to take best advantage of the government’s data to compare to their own. This individual will eventually become a key person to help overturn government demands for refunds and to support the internal auditing and monitoring processes.

Anti-Kickback, Stark, and Whistleblowers
The number of anti-kickback and physician self-referral (Stark) cases has been on the rise for several consecutive years, as was recently reported in a Department of Justice report to Congress. These cases usually are the result of whistleblower activities, but in recent years, more have been a result of self-reporting by the institution or provider involved. These cases become false claims cases with significant settlement amounts and, in some cases, criminal indictments and exclusions. Laboratory compliance officers should review all of the laboratory’s practices that have implications for these two sets of regulations, including discounts to referral sources, leases, and rental of space or equipment from referrals sources; placement of laboratory employees in the offices of referral sources; gifts and entertainment for referrals sources; and any contracts for services where the laboratory pays a referral source or physician for a service they are providing. These are generally complex and serious problems, and the laboratory compliance officer should not take this on alone. As a way to prepare for potential problems in this area, compliance officers will need to make certain they have access to competent and knowledgeable legal counsel to help with these issues and a written policy for dealing with whistleblowers. This is ongoing, and the compliance officer should plan on spending resources with short notice in this compliance area as problems tend to arise with little notice.

The new public scrutiny resulting from the government’s push for transparency in the health care industry creates both opportunities and challenges. This is an area where the laboratory compliance officer can expect problems beginning in the first quarter and continuing throughout the year. To prepare for issues that may arise out of this, the laboratory compliance officer should review the data already available and analyze their laboratory’s data to determine if they represent an outlier in any way. The compliance officer should also monitor the release of new information or reports and analyze those as well. These are likely to be public media kinds of issues in some cases, so the compliance officer needs to understand how the laboratory normally deals with public issues. Finally, the compliance officer should develop benchmarks that can be readily used to help others understand what any given report means for the laboratory. This is a first-quarter item and then ongoing throughout the year as more data becomes available.

New Tests and Methods and the FDA
The field of laboratory testing is developing remarkably fast. New, expensive, and often not well reimbursed tests and methods become available nearly every week. Customers of the laboratory, including patients and other laboratories, sometimes demand the laboratory make a new test available. Generally speaking, the compliance areas that are going to be greatly impacted by this are laboratory-developed tests (LDTs) and reimbursement for new tests.

Selecting the correct code or codes for a new test can be a challenge, and then getting them reimbursed adds another layer. Often, this is not an area where the compliance officer has a lot of technical knowledge, which complicates the problem even further. This is ongoing as the new coding system has been around now for a while, but the compliance officer still needs to make sure there is review for code selection by a technical expert in the methods being used to perform the test.
Compliance officers need to become familiar with the Food and Drug Administration’s (FDA) rules and regulations and how they apply to LDTs even if the laboratory does not actually perform them. This is a first of the year item because the FDA’s outreach and education on the new guidance for LDTs has already begun. Compliance officers need to be familiar with how the FDA works and what their labs’ involvement will be.

Being a laboratory compliance officer is a challenging and often thankless job. It requires a person who is willing to look forward and backward all of the time, keep an open mind, and remain calm and self-possessed in the most violent storms. In many cases, the compliance officer is dealing with problems or issues that are fairly routine and basically benign. In other cases, hopefully very rare cases, the compliance officer is dealing with a problem that ultimately could result in the demise of the laboratory or a person spending time in jail. Compliance officers must be mindful of the business and financial impact on the laboratory, as well as the compliance implications, of their decisions and recommendations when making them. In addition, there are certain conflict of interest issues to be recognized and addressed. It is this two-sided blade that makes the profession constantly interesting and constantly difficult at the same time.


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