Effective compliance programs are an essential tool for identifying and mitigating audit risks. Due to the recently imposed mandatory compliance requirements in the Patient Protection and Affordable Care Act of 2010 (PPACA), the lack of an effective compliance program also could be a risk in itself.

The PPACA requires skilled nursing facilities (SNFs), as a condition of participation, to have a compliance program in place by March 2013. Because compliance with this condition is a prerequisite for payment, noncompliance could result in denied claims and pose a future audit risk for SNFs. Failure to meet the conditions of participation also has been used in the past as a basis for liability under the False Claims Act.

More specifically, section 6102 of the PPACA requires compliance and ethics programs to be implemented in all SNFs, which will be allowed flexibility in tailoring them based on the size and scope of services provided by each facility. But the programs must be followed by all employees and agents of the SNF and prove effective in the prevention and detection of criminal, civil and administrative violations. The programs also must identify and involve specific individuals with authority and resources who are assigned to oversee compliance.

Caution in Delegating

As part of implementing its programs, each organization must exercise due care in delegating authority so as not to hand control to individuals whom the SNF knew or should have known may a propensity to engage in criminal, civil or administrative violations. Furthermore, if an offense is detected, the organization must respond appropriately.  Each SNF must take steps to educate its employees about its programs, and will be required to make efforts to achieve compliance with the standards it promulgates. A periodic reassessment of the programs and the implementation of any necessary changes also will be a required component.

Regulations addressing additional requirements for the programs have yet to be released by Secretary of Health and Human Services (HHS) Kathleen Sebelius, but they are required to be issued within two years of the PPACA’s passage.

Compliance Program

SNFs also will be required to comply with the compliance program requirements promulgated pursuant to Section 6401(a) of the act, which includes all providers enrolled in Medicare, Medicaid and CHIP.

While a final rule has not yet been issued, a proposed approach and solicitation of comments in connection with the mandatory compliance program provisions were released in the Federal Register on Feb. 2. The solicitation of comments aims to gain input from various industry stakeholders about the proposed provisions.  Specifically, HHS is seeking comments about the use of the elements of an effective compliance program as set forth in Chapter 8 of the U.S. Federal Sentencing Guidelines Manual. These core elements are based on the idea of preventing, detecting and correcting behavior that is detrimental to compliance with applicable laws and ethical standards within a facility or organization.  HHS is looking to see how providers with compliance plans currently in place have integrated these elements. Moreover, the solicitation seeks to find any other elements beyond those set forth in the sentencing guidelines that should be integrated into future regulations.

The solicitation also seeks to generate comments on several other issues. Input related to the costs and benefits of compliance programs, the type of systems providers will need to implement effective programs, as well as the extent to which providers integrate the use of consultants, review organizations and auditors in their efforts all were sought in the recent solicitation. It is important to note that HHS indicated that it does not intend to finalize the compliance plan requirements in this final rule, but instead will continue with further rulemaking and issue proposals in the future.

Prepare Now

SNFs need to prepare themselves now for the changes ahead in the compliance landscape. Even if facilities currently have compliance programs in place, the administration should look to see that they are effective and contain all of the elements set forth in the statute and associated regulations, once published.


The sharp focus on SNFs in healthcare reform legislation also may reflect an indication of increased scrutiny on SNFs by the various audit contractors. As such, it is vital for SNF providers and administrators to increase compliance efforts.

An effective compliance program not only will help facilities to meet the conditions of participation, but also to identify and rectify potential audit risk areas.

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About the Authors

Andrew B. Wachler is the principal of Wachler & Associates, P.C.  He graduated Cum Laude from the University of Michigan in 1974 and was the recipient of the William J. Branstom Award. He graduated Cum Laude from Wayne State University Law School in 1978. Mr. Wachler has been practicing healthcare and business law for over 25 years and has been defending Medicare and other third party payor audits since 1980.  Mr. Wachler counsels healthcare providers and organizations nationwide in a variety of legal matters.  He writes and speaks nationally to professional organizations and other entities on a variety of healthcare legal topics.

Amy K. Fehnis a partner at Wachler & Associates, P.C.Ms. Fehn is a former registered nurse who has been counseling healthcare providers for the past eleven years on regulatory and compliance matters and frequently defends providers in RAC and other Medicare audits.

Jennifer Colagiovanni is an attorney at Wachler & Associates, P.C.  Ms. Colagiovanni graduated with Distinction from the University of Michigan and Cum Laude from Wayne State University Law School.  Upon graduation, Ms. Colagiovanni was nominated to the Order of the Coif. Ms. Colagiovanni devotes a substantial portion of her practice to defending Medicare and other third party payer audits on behalf of providers and suppliers.  She is a member of the State Bar of Michigan Health Care Law Section.

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