Compliance programs studied for effectiveness
PricewaterhouseCoopers legal and health care industry experts — along with faculty at the University of California-Los Angeles (UCLA) School of Public Health’s department of health sciences — are making it possible for the first time to measure effectiveness of compliance programs in the nation’s hospitals.
The accounting and consulting giant is conducting a two-year study to create the basis for initiating an industry standard for effective compliance in health care organizations, says PricewaterhouseCoopers partner Lori Richardson-Pelliccioni, JD, MPH, principal investigator. She will collaborate with UCLA’s department of health services faculty.
She says this is the first empirical research to identify best practices in compliance programs and study their relationships to effective compliance as defined by billing accuracy and employee awareness of compliance regulations. While compliance programs have long been a mainstay in business and industry, the practice is relatively new to health care. "Generally, compliance programs have been in hospitals for less than 10 years," she says. "Consequently, few substantive benchmarks to measure effectiveness have been established."
As federal and state governments, as well as accrediting organizations, step up their surveillance of the health care industry, hospital administrators and board members alike are focusing on the risk management role that measuring compliance effectiveness plays. Stuart O. Schweitzer, professor of health services at UCLA and former researcher for the National Institutes of Health and the Health Care Financing Administration, says the PricewaterhouseCoopers project should yield an effective way to determine when a compliance program is working and when it’s not.
"Until now the instruments for detecting fraud in health care have been very crude and not very effective," he says. "The U.S. General Accounting Office [GAO] estimates that about 10% of all health care expenditures in the U.S. are lost to fraud. So if the GAO is close to being correct, the loss is in the neighborhood of $85 billion per year."
Vague and untested
Schweitzer says the model compliance program developed by the U.S. Department of Justice is vague and untested. There is no evidence that health care organizations that have a compliance program consistent with Justice Department guidelines are any less likely to have fraudulent billings than an organization that has no such compliance program in place, he says. "If this study is successful in identifying characteristics of effective compliance then, without a doubt, this PricewaterhouseCoopers/UCLA model will become a useful tool both for institutions that endeavor to reduce fraud and for the Justice Department to better determine criteria for prosecuting and sentencing," he says.
The Federal Sentencing Guidelines, used to construct the model compliance program, identify these seven areas that should be included in a comprehensive compliance program:
- compliance standards and procedures;
- oversight responsibilities;
- delegation of authority;
- training and education;
- monitoring and auditing;
- enforcement and discipline;
- response and prevention.
The study began with a literature review of 18,381 current articles relating to compliance programs, corporate compliance effectiveness, corporate integrity agreements, and federal sentencing guidelines. This literature review included such industries as health care, banking, defense, insurance, and environmental services. The review yielded 593 compliance principles that two expert panels then developed into 137 indicators of effectiveness.
Next, four data collection instruments were created: the Indicator Questionnaire, the Employee Awareness Questionnaire, the Physician Awareness Questionnaire, and the Billing Accuracy Review database, which looked at both coding and billing accuracy. The Indicator Questionnaire assessed the existence of defined attributes of compliance and processes regarding the seven elements. It was administered via face-to-face interviews with up to seven senior management representatives at each of the randomly selected subject hospitals. These interviewees included the CEO, general counsel, member of the board of directors, compliance officer, director of human resources, audit manager, and department head.
The self-administered Employee and Physician Awareness Questionnaires assessed the level of employee and physician knowledge about their health care organization’s compliance program and the level of their substantive knowledge about compliance. The 50-member pool of respondents included 25 from clinical and administrative departments and 25 physicians.
Using the Billing Accuracy Review database, coders conducted a retrospective billing review of 100 inpatient and 100 outpatient claims for selected Medicare and Medicaid services rendered between March 1999 and February 2000. Inpatient billing included a random sample of admissions. The outpatient billing review addressed encounters in one of the following areas: covered ambulatory surgery, emergency, outpatient ancillary, observation, and clinic visits. Both types of visits were evaluated for coding appropriateness and claims accuracy.
The 30-subject sample was stratified according to small hospitals of 50-99 beds, medium hospitals with 100-249 beds, and large hospitals with 250 or more beds. Medium-sized hospitals made up 43.5% of the study, followed by 28.6% in the large range and 27.9% in the small category.
With the first empirical study of compliance effectiveness in hospitals being finalized, the next step is to seek industry adoption of Compliance Effectiveness Standards, as well as endorsement by at least two federal governing bodies. Both the Department of Health and Human Services and the U.S. Sentencing Commission will be invited to participate in discussions that seek to establish a minimum standard for effective compliance in health care organizations. Health care industry input in this process will be achieved through the Health Care Compliance Association, an organization begun in 1997 to champion ethical practices and compliance standards in the health care community and to provide resources for compliance officers and others who share its principles.
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