Compliance Perspectives

How to Audit the Effectiveness of Your Lab Compliance Plan

If you’re reading this, it’s a pretty good bet that you’ve put a compliance plan into place at your lab. But just how effective is it? To answer this crucial question, you must consider not only what your compliance plan says but how it’s implemented. After all, even the most carefully drafted of plans can lose their effectiveness over time if they’re not scrupulously monitored, measured and adjusted. Here’s a strategy you can use to evaluate how well your own compliance plan is working.

The 3 Key Indicators of Lab Compliance Plan Effectiveness

Internal monitoring and prompt corrective action are two of the seven critical elements of an effective lab compliance program listed in the OIG guidelines first published back in 1997 and revised in 1998. The key to carrying out those activities is to focus on those other elements. Specifically, audits and compliance plan assessment should focus on three key indicators.

The 7 Elements of an Effective Lab Compliance Program
  1. Written policies, procedures and standards of conduct
  2. Establishment of a compliance officer and committee
  3. Ongoing compliance training and education
  4. Effective lines of communication
  5. Disciplinary guidelines for enforcement
  6. Internal monitoring and auditing
  7. Prompt response to offenses and corrective action plans

1. Compliance Education and Training

Effectiveness of compliance education and training is critical and requires the existence of, at a minimum:

  • Initial training and orientation of new lab employees;
  • Annual training on core compliance topics like kickbacks, medical necessity and reporting of violations;
  • Annual training on special topics based on regulatory developments, such as genetic testing, COVID-19 and PAMA data reporting and telemedicine;
  • Periodic training on high-risk issues, e.g., lab policies on providing gifts and entertainment to physicians and other referral sources for marketing representatives; and
  • Just-in-time training when policies and procedures change.

Verify that all forms of training are documented and verified for effectiveness, e.g., via quizzes to measure how well trainees understood the materials. Simple acknowledgement of receiving and understanding of training by trainees is generally insufficient to prove that training actually sunk in, experts caution.

2. Internal Communication

Be sure to focus on whether effective lines of communication are in place and are actually being used by lab employees. Best Practice: Internal communication systems should include three elements, including a mechanism for employees to:

  • Discuss compliance issues or concerns with an immediate supervisor;
  • Go over the supervisor’s head and report concerns to a manager or directly to the compliance officer, if necessary; and
  • Report issues or concerns anonymously on a 24/7 basis such as a compliance hotline.

Of course, simply having these mechanisms isn’t enough without implementing measures to promote their use, including ensuring that employees are aware of the lines of communication and that supervisors and managers are approachable. It’s also critically important to have and scrupulously implement a clear and strongly worded anti-retaliation policy. Last but not least, there should be a way to loop back with employees who report compliance problems to let them know what you’re doing to investigate their concerns. After all, failure to ensure employees that you’re taking reported violations seriously is a surefire recipe for whistleblower lawsuits.

3. High-Risk Issues

When auditing the effectiveness of your lab compliance plan, focus on high-risk issues like:

Order/Report/Bill review: Review lab requisitions and orders, reports, claim forms and attached documents (including any Medicare secondary payor forms) to ensure that what the provider ordered matches what was billed, including reflex testing. Verify that the ICD-10 code on the requisition or order matches the claim and that, if necessary, a proper advanced beneficiary notice was executed.

Standing orders: Review standing orders to ensure they meet OIG standards with regard to patient specificity in terms of tests ordered and time intervals. Verify that all standing orders are signed by the provider that authorized them and that those orders were reviewed or renewed no less than once a year.

Custom profiles: Review the custom profile authorization form to ensure that it contains all of the required details and effectively notifies the ordering provider the components of each profile and how much each individual item costs. Verify that each profile component is medically necessary and that the provider signs an annual notification form for the panel.

Three-day payment window: Hospital and outreach labs that are wholly owned or operated by the hospital should review inpatient admission reports and lab test orders to verify that testing was performed on inpatients within three days (and not 72 hours) of admission and that testing was billed as a separate claim under Part B, rather than rolled into the Part A diagnosis related group.

PAMA and COVID-19 reporting: Verify that your lab has met its reporting obligations with respect to both pricing information for tests performed and demographic and other patient and information required by the new COVID-19 CMS COVID-19 test reporting rules that took effect in August 2020.

CPT/HCPCS coding: Go over your procedures for maintaining current and accurate CPT and HCPCS codes and that new tests and diagnostic methods, including but not limited to those for COVID-19, are being correctly coded and communicated to the billing system.

Test utilization: Review the top 30 tests ordered in the past 12 months vis-à-vis the top 30 tests ordered in the 12 months before that. Did any of those increase by more than 10 percent year to year? If so, ensure that you can justify and document the reason(s) for the increase recognizing that government auditors will see the increase as a red flag.

Marketing issues: Review marketing brochures, client supply reports, contracts with ordering physicians and other referral sources, test requisitions, test directories, marketing expense reports and client fee schedules to verify that:

  • Marketing materials are clear and not in any way misleading;
  • Supplies sent to clients are appropriate for the volume of tests ordered;
  • Payments under leases, phlebotomy services agreements and other contracts with referral sources are at fair market value, properly executed and in accordance with all applicable Stark Law and Anti-Kickback Statute (AKS) exceptions and safe harbors;
  • Requisitions offer providers clear choices about which tests to order; land
  • Any gifts and “non-monetary compensation” to referral sources meet Stark and AKS standards.

Exclusion checks: Last but not least, review federal exclusion databases to ensure none of your current employees, vendors, clients or other business affiliates are listed on them. Make sure your checks account for and provide the necessary disclosures under the strict CMS Medicare affiliates exclusion rules that took effect in 2019. See “The New CMS Medicare Exclusion Rules & How to Comply,” Lab Compliance Advisor, (LCA), Oct. 28, 2019.


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