Healthcare Reform Law and Mandatory Compliance Programs

April 16, 2011

With the passage of the Patient Protection and Affordable Care Act of 2010, as amended by the HealthCare Education Reconciliation Act of 2010 (the Healthcare Reform Law), Congress for the first time has mandated that a broad range of providers, suppliers, and physicians adopt a compliance and ethics program. Smaller physician practices, other small providers and suppliers may feel the impact of these new compliance program obligations most acutely given that many, if not most, larger healthcare providers already have some form of compliance program.

But large and small providers alike will need to be more vigilant in their compliance program efforts inasmuch as the new law will undoubtedly “raise the bar” for healthcare compliance measures. A failure to implement certain core compliance program features will create additional opportunities for regulatory and law enforcement scrutiny, as well as potential False Claims Act liability for failure to prevent or identify improper federal healthcare program claims and payments. The existence or lack of robust provider compliance program controls, when paired with the stronger sanctions and expanded application of the federal False Claims Act, Civil Monetary Penalties Law, and Anti-Kickback Law, will subject healthcare providers to an enhanced focus in fraud and abuse inquiries and prosecutions by the government.

For the last 12 years, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) has promoted the voluntary adoption of compliance programs throughout the healthcare industry by the development and promulgation of compliance guidance tailored to specific healthcare industry segments. Additionally, the OIG has settled hundreds of matters involving civil fraud allegations, using mandatory contractual compliance program obligations in the form of Corporate Integrity Agreements (CIAs) and other similar settlement documents that reflect OIG’s perspective on appropriate elements and activities of a compliance program. These compliance program guidances and CIAs will undoubtedly serve as important guideposts to HHS as it considers which compliance program elements shall be required in the future.

The Healthcare Reform Law creates a new opportunity for HHS and its Inspector General to promulgate regulations that impose on most healthcare providers and suppliers a form of compliance program intended to be “effective in preventing and detecting criminal, civil, and administrative violations” under the Medicare and Medicaid laws.

The Healthcare Reform Law’s compliance program mandates are divided into two categories: (1) nursing facilities and (2) all other providers/suppliers. The nursing facility compliance program provisions in the Healthcare Reform Law are far more detailed and contain an implementation timeline detailed below, whereas Congress did not set forth in the legislation any time frame for other healthcare provider/supplier compliance program implementation, leaving it to the discretion of HHS.

At a recent conference for healthcare compliance officers, an official with the Centers for Medicare & Medicaid Services (CMS) publicly confirmed that, in accordance with this delegated authority that gives the HHS Secretary (the Secretary) discretion to prioritize certain industry sectors over others, it expects to issue the mandatory compliance program requirements on a rolling basis. So physicians, stay tuned – you are going to have to implement a compliance plan at some point in time.

Reed Tinsley, CPA is a Houston-based CPA, Certified Valuation Analyst, and Certified Healthcare Business Consultant. He works closely with physicians, medical groups, and other healthcare entities with managed care contracting issues, operational and financial management, strategic planning, and growth strategies. His entire practice is concentrated in the health care industry. Please visit

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