Are you keeping up on your reading from the FY 2027 hospital inpatient prospective payment system (IPPS) Final Rule? True, it is close to 900 pages of Federal Register fine print, (https://www.govinfo.gov/content/pkg/FR-2026-08-04/pdf/2026-15833.pdf ) but there are four areas that prepared compliance professionals should be aware of. This blog takes you through the highlights of those important sections. 

What Does the Final Rule Mean for Your Organization? 

This release updates Medicare payment rates and policies for acute care and long-term care hospitals, with some starting as soon as January 1, 2027, so it’s definitely time to start paying close attention. 

1: Expansion of Comprehensive Care for Joint Replacement (CJR) Model 

The original CJR Model ran from April 2016 through December 2024 and according to CMS, it produced the needed results. The most recent evaluation of performance years six and seven (2021-2023) showed that the CJR Model produced an estimated $112.7 million in net savings while maintaining quality of care. 

Now, the CMS Innovation Center is expanding the model nationally, including in U.S. Territories, starting January 1, 2028. The expanded model, called CJR-X, will focus on improving care and reducing spending for Medicare beneficiaries undergoing lower extremity joint replacement (LEJR) procedures.  

CJR-X Mandatory Requirements for Some Acute Care Hospitals 

Participating hospitals will be held accountable for spending and quality of care during an inpatient stay or hospital outpatient procedure and for the 90 days following hospital discharge.  With some exceptions, the CJR–X Model will be mandatory for acute care hospitals paid under IPPS and Outpatient Prospective Payment Systems (OPPS).  

Multiple Modifications to CJR Model 

CJR–X also includes modifications to the CJR Model. The Final Rule confirms multiple policies for CJR-X.  These include: 

• January 1, 2028 start date 
• Acute care hospitals as participant and accountable entity 
• LEJR as the episode of care 
• Five quality measures and a composite quality score (CQS) to assess quality performance  
• Regional risk-adjusted target prices that include capped normalization and trend factors 
• Pricing-specific policies for certain hospitals, such as low-volume and safety net hospitals 
• Provider and beneficiary overlap permitted with most models 
• Allows participant hospitals to have financial arrangements 
• Waives certain Medicare program requirements 
• Permits beneficiary-identifiable and regional aggregated data sharing 
• Options for Alternative Payment Model (APM) participation  

Though compliance professionals aren’t likely to be named the implementation lead of these efforts at their hospital, they should still be aware of how these changes will affect reimbursement, quality reporting and allowances for financial arrangements. 

To learn more now and in the future about the CJR-X Model, stay tuned at https://www.cms.gov/priorities/innovation/innovation-models/cjr-x 

2: Organ Acquisition Costs 

Compliance professionals working in or with organizations providing organ acquisition services need to be aware of these changes and ensure policies, procedures and any auditing activity is adjusted accordingly. 

• The Final Rule outlines payment policies for organ acquisition and reasonable cost, as well as reimbursement appeals for Independent Organ Procurement Organizations (IOPOs) and Histocompatibility Laboratories (HCLs).   
• The Final Rule solidifies the proposal to clarify and codify certain longstanding policies on allowable costs under Medicare’s reasonable cost principles for all provider types, including public education for organ procurement organizations.  
• Additionally, it finalizes the proposal to clarify and codify Medicare’s longstanding policies for allocating overhead costs across all provider types.  
• Lastly, the final rule codifies the CMS administrator’s discretionary review of reimbursement appeals for IOPOs and HCLs.  

As HHS OIG states in their General Program Compliance Guidance, “One of the best ways to identify fraud and abuse risks is to follow the money.” Understanding the flow of money related to organ acquisition is one of those areas to add to the list for “following the money.” 

3. Quality, Quality, Quality. 

Quality of care is another area that the HHS OIG has been shining a light on for compliance professionals in recent years. Though it’s unlikely compliance professionals will take over quality of care programs in hospitals, OIG expects tight partnerships. Also expected is a general understanding by compliance departments of the work that hospitals’ quality of care teams perform. 

Specifically, OIG said, “Entities should incorporate quality and patient safety oversight into their compliance programs. Integrating quality and patient safety oversight into compliance processes can alert the entity of quality and patient safety concerns and enable the entity to mitigate risk of patient harm.” 

Quality Reporting and Compliance Impact 

The IPPS Final Rule has a lot to say about quality reporting. Although compliance professionals aren’t on the front line for some changes, they should ensure quality teams are aware and have a plan to address any potential impact.  

Quality-related highlights include: 

1. Adoption of three new measures: 

• Excess Days in Acute Care After Hospitalization for Diabetes measure beginning with the FY 2029 payment determination 
• Hospital Harm-Postoperative Venous Thromboembolism electronic clinical quality measure (eCQM) beginning with the FY 2030 payment determination 
• Advance Care Planning eCQM beginning with the FY 2030 payment determination 

2. Removal of three measures, beginning with FY 2030 payment determination:  

• Venous Thromboembolism Prophylaxis eCQM 
• Intensive Care Unit Venous Thromboembolism Prophylaxis eCQM 
• Discharged on Antithrombotic Therapy eCQM 

3. Modifications to three measures beginning with the FY 2028 payment determination. All are related to Excess Days in Acute Care after Hospitalization for: 

• Acute Myocardial Infarction 
• Heart Failure 
• Pneumonia 

4. Five modified mortality measures beginning with the FY 2028 payment determination.  Each relates to the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate following: 

• Acute Myocardial Infarction Hospitalization  
• Heart Failure Hospitalization 
• Pneumonia Hospitalization  
• Chronic Obstructive Pulmonary Disease Hospitalization  
• Coronary Artery Bypass Graft Surgery  

4: Promoting Interoperability of Certified Electronic Health Record Technology 

The Medicare Promoting Interoperability Program encourages eligible hospitals and critical access hospitals to adopt, implement, upgrade and demonstrate meaningful use of certified electronic health record technology (CEHRT). 

In this Final Rule, CMS confirmed policies to: 

• Remove and revise certain criteria to align with proposals made by the Office of the National Coordinator for Health IT 
• Remove certain attestations  
• Delay removal of the following two measures: (i) Support Electronic Referral Loops by Sending Health Information and (ii) Support Electronic Referral Loops by Receiving and Reconciling Health Information  
• Modify the Electronic Prior Authorization measure as an optional bonus measure for the EHR reporting period in CY 2027 and mandatory beginning with the EHR reporting period in CY 2028 
• Add the Unique Device Identifiers for Implantable Medical Devices measure  
• Adopt two new eCQMs beginning with the FY 2030 payment determination in alignment with the Hospital Inpatient Quality Reporting Program 
• Remove three eCQMs beginning with the FY 2030 payment determination in alignment with the Hospital Inpatient Quality Reporting Program  

Build Business Knowledge to Anticipate Non-Compliance Risks 

Most compliance professionals are unlikely to be the assigned project lead on any of these announcements within their individual hospitals. But good compliance professionals need to understand their organization’s business lines and operations to anticipate where non-compliance could most likely occur. 

For those working with or for hospitals, the Hospital IPPS Final Rule is always a good place to review upcoming changes to hospital reimbursement, government policies and data reporting requirements.  

CJ Wolf, MD, M.Ed. is a healthcare compliance professional with over 22 years of experience in healthcare economics, revenue cycle, coding, billing, and healthcare compliance. He has worked for Intermountain Healthcare, the University of Texas MD Anderson Cancer Center, the University of Texas System, an international medical device company and a healthcare compliance software start up. Currently, Dr. Wolf teaches and provides private healthcare compliance and coding consulting services as well as training.   

Stay Informed on Medical Necessity and More 

Read other blogs by Dr. CJ Wolf on YouCompli to stay current on information compliance leaders need. He covers these and other topics:  

• Regulatory and Enforcement Updates: Breaks down OIG Work Plan priorities, CMS policy updates, and healthcare regulatory changes. 
• Compliance Auditing and Risk: Offers practical advice on risk assessments, internal auditing, and building effective compliance programs. 
• Billing and Documentation Integrity: Examines compliance strategy related to coding integrity, medical necessity, and operational oversight. 

Here are a couple of articles to get you started. 

Don’t Let Pain Injections Cause Regulatory Compliance Pain 

The regulatory compliance landscape around SI joint injections is dynamic and significant. It’s worth paying attention to those devilish details.   

Four Areas of Noncompliance in SI Joint Injection Procedures  

Below are four categories of noncompliance and indications of unmet requirements: How SI Joint Injections Are Covered 

Medical Necessity: A Guide for Healthcare Compliance Leaders 

Ensuring medical necessity for services or supplies is a safeguard against unnecessary or duplicative services that increase the risk of patient harm or medical errors. That’s reason enough for this to be an important topic for compliance leaders.  

This piece explains the medical necessity compliance risk in general, while subsequent articles highlight specific examples of enforcement actions experienced by medical providers such as hospitals and health systems.

Download our Latest Whitepaper

Sign-up for our Weekly Newsletter

Schedule a quick overview

The post Four Things to Know About the FY 2027 IPPS Final Rule  first appeared on YouCompli.

The HHS OIG recently released an audit report in which they concluded that for a recent one-year period, Medicare improperly paid physicians approximately $15.2 million for sacroiliac joint (SI) injections (see: https://oig.hhs.gov/reports/all/2026/medicare-improperly-paid-physicians-an-estimated-152-million-for-sacroiliac-joint-injections/).  

SI injections can help some patients improve their spinal mobility as well as relieve pain. Medicare covers these injections under certain conditions but not others. That’s where confusion can create painful compliance risks. 

Most Recent Audit in Series Related to Spinal Pain Management Services 

This was the most recent audit in a series of audits related to spinal pain management services which the OIG has been performing over many recent years.  

In prior audits of similar spinal services, the OIG found, for example, that Medicare improperly paid physicians for facet-joint interventions for more than 50 percent of sampled services that didn’t comply with one or more of the Medicare requirements:  

• https://oig.hhs.gov/reports/all/2023/medicare-improperly-paid-physicians-an-estimated-30-million-for-spinal-facet-joint-interventions/ 
• https://oig.hhs.gov/documents/audit/9596/A-09-20-03003-Complete%20Report.pdf 
• https://oig.hhs.gov/documents/audit/9602/A-09-20-03010-Complete%20Report.pdf  

They also reported finding improper payments associated with epidural steroid injections: 

• https://oig.hhs.gov/reports/all/2023/medicare-improperly-paid-physicians-for-epidural-steroid-injection-sessions/ 

Audits Continue in Therapeutic Spinal Pain 

In addition, last year, they published audit findings that said Medicare could have saved an estimated $17.7 Million if CMS oversight had prevented at-risk payments for anesthesia administered during spinal pain management procedures: 

• https://oig.hhs.gov/reports/all/2025/medicare-could-have-saved-an-estimated-177-million-if-cmss-oversight-had-prevented-at-risk-payments-for-anesthesia-administered-during-spinal-pain-management-procedures/  

Consequently, it should come as no surprise to healthcare compliance professionals that the audits in the therapeutic spinal pain space continue with the recent report about SI joint injections. 

Background on Crucial SI Joints 

The SI joints connect the lower portion of the spine to the pelvis. 

They support upper-body weight and play an important role in walking and changes in posture or position, such as moving from standing to sitting. These joints become painful for various reasons, including sacroiliac joint dysfunction, which occurs when the joint moves too much or too little, often due to injury, pregnancy or osteoarthritis.  

To improve movement and relieve lower back pain, a physician may administer an SI joint injection. A diagnostic injection is first used to determine whether the SI joint is the source of the pain. Significant immediate pain relief following the injection strongly suggests that the SI joint is responsible.  

(Image from page 2 of the OIG report) 

Once the SI joint is confirmed as the pain source, a therapeutic injection may be administered, with pain relief potentially lasting up to six months. 

How SI Joint Injections Are Covered 

Medicare Part B covers SI joint injections when medically reasonable and necessary. Five of seven Medicare Administrative Contractors (MACs) have local coverage determinations (LCDs) outlining requirements for  

• Pain indications 
• Imaging and pain assessment 
• Coverage limits  
• Diagnostic and therapeutic injections 

These LCDs limit coverage to two diagnostic and four therapeutic injection sessions within a rolling 12-month period, whether performed unilaterally or bilaterally.  

Billing and Coding for SI Joint Injection Procedures 

Each MAC also issued billing and coding guidance stating that physicians must add the “KX” modifier to each claim line for diagnostic injections to distinguish them from therapeutic injections. (Appendix C of the OIG Audit report summarizes the MACs, the states they cover, and the specific LCD number and LCD Reference article pertinent to their audit.) 

CPT code 27096 is used for injections made directly into the sacroiliac joint, while CPT code 64451 is used for injections targeting the nerves that innervate the sacroiliac joint. 

OIG Selects 100 Random Samples out of 186,000+ Procedural Sessions 

For the audit report, the OIG selected a random sample of 100 SI joint procedural sessions from a population of 186,842 sessions paid for by five MACs in a one-year period. They requested physicians’ supporting documentation to determine if the claims met Medicare requirements including LCD and LCD Reference Articles.   

Of the 100 sampled sessions, 28 complied with Medicare requirements, and 75 complied with Medicare billing guidance. However, the remaining 72 sessions didn’t comply with Medicare requirements, and 25 didn’t comply with Medicare billing guidance.  

Seventy-two sampled sessions didn’t comply with one or more of the requirements. The OIG report summarizes the noncompliant sessions by the type of noncompliance observed: 

(The total exceeds 72 sessions because 41 sessions had more than one deficiency.) 

Estimated Improper Payments of $15.2 Million in Sample Universe 

OIG then extrapolated their findings across the entire population of 186,842 sessions and calculated overpayments to determine their estimated improper payment amount of $15.2 million for the universe of sessions sampled for the one-year period. 

OIG found that although CMS had systems to identify some billing errors, it didn’t provide enough additional oversight or education to help physicians understand and follow Medicare requirements. CMS relied on MACs to educate physicians, but this wasn’t sufficient.  

As a result, some physicians may not have fully understood the requirements and billing rules. Physicians with billing errors said that more frequent and consistent training would have helped them understand the rules and avoid future errors. 

Other Improper Payments Assumed, Potentially Pushing Total Higher 

As mentioned, the sample universe of SI joint procedural sessions was limited to the five of the seven MACs that had issued LCDs. The other two MACs that didn’t have LCDs paid physicians $12.3 million for sacroiliac joint injection sessions. That accounts for approximately 36 percent of total Medicare payments for sacroiliac joint injections nationwide.   

Since these sessions were excluded from the audit, OIG wrote that this set of payments to physicians may also include improper payments. If true, the estimated $15.2 million in improper payments could potentially be higher. 

Four Areas of Noncompliance in SI Joint Injection Procedures 

Below are four categories of noncompliance and indications of unmet requirements: 

1 – Indications of Pain Requirements Not Met 

• At least three positive findings with provocative maneuvers 
• Low back pain below the L5 vertebra without radiculopathy 
• Low back pain that persists despite a minimum of four weeks of conservative therapies 
• Clinical findings and imaging studies that do not suggest any other diagnosed or obvious cause of the lumbosacral pain such as tumor and fracture 
• Low back pain for at least three months 
• Moderate to severe low back pain primarily experienced over the anatomical location of the sacroiliac joints between the upper level of the iliac crests and the gluteal fold 

2 – Imaging and Pain Assessments Requirements Not Met 

• The sacroiliac joint primary pain level must be measured prior to the injection at the beginning of the session. 
• The post procedure pain level must be measured at the end of the session. 
• The injections must be performed under computed tomography (CT) or fluoroscopy image guidance with contrast unless the patient has a documented contrast allergy so that ultrasound guidance without contrast may be considered. 

3 – Diagnostic or Therapeutic Sacroiliac Joint Injections Requirements Not Met 

• A diagnostic injection must have provided a minimum of 75 percent relief of primary pain before a therapeutic injection is administered 
• A subsequent therapeutic injection is not reasonable and necessary when the prior therapeutic injection did not result in at least 50 percent consistent pain relief or functional improvement for at least three months 

4 – Limitation of Coverage Requirements Not Met 

• Administer other musculoskeletal injections in the lumbosacral spine during the same session as sacroiliac joint injections 
• Perform multiple injections (e.g., epidural steroid injections, facet-joint injections, and trigger point injections) during the same session as sacroiliac joint injections and during the period when the physician is evaluating whether the injection reduced pain (i.e., efficacy assessment period) 

The Audit Details Smart Compliance Professionals Look For 

Like most medical claims’ audits, the “devil is in the details”. To avoid problems, wise compliance professionals will: 

1. Monitor the most recent LCDs from their MAC 
2. Maintain a process to review the LCDs and implement processes to ensure compliance 
3. Perform records audits for both coding and medical necessity  

Some coders might have the requisite medical knowledge to audit for medical necessity. However, it usually requires a clinical background as well as an understanding of Medicare billing requirements such as LCDs. 

The regulatory compliance landscape around SI joint injections is dynamic and significant. It’s worth paying attention to those devilish details.  

CJ Wolf, MD, M.Ed. is a healthcare compliance professional with over 22 years of experience in healthcare economics, revenue cycle, coding, billing, and healthcare compliance. He has worked for Intermountain Healthcare, the University of Texas MD Anderson Cancer Center, the University of Texas System, an international medical device company and a healthcare compliance software start up. Currently, Dr. Wolf teaches and provides private healthcare compliance and coding consulting services as well as training.   

Here are other resources to check out next: 

How to Avoid False Claims Related to Medical Necessity 

This expert blog gives compliance readers actionable steps to avoid civil monetary penalties and False Claims Act scrutiny resulting from documented medical necessity failures. 

Physician Coding and Billing Errors Enforcement: Compliance 

Get more context on enforcement actions stemming from unbundling, modifier misuse, and improper billing during same-day procedures. 

Know the Compliance Risk for Certain Anesthesia Services 

Learn about another recent OIG audit targeting spinal injection procedures and associated anesthesia/sedation coverage limitations. 

Medical Necessity: A Guide for Healthcare Compliance Leaders 

The linked article specifically discusses how MAC LCDs define medical necessity (such as requiring four weeks of conservative therapy prior to approving spinal injections)

The post Don’t Let Pain Injections Cause Regulatory Compliance Pain  first appeared on YouCompli.

A compliance control can exist, be documented and even be automated, yet still fail to prevent or detect a problem. That distinction matters as healthcare organizations add more policies, system edits, review procedures and reporting tools. The purpose of regulatory compliance control is to mitigate risk across the different operations and workflows in healthcare delivery.  

The presence of a control may give a false sense of security.  

The presence of a control may demonstrate that an organization recognized a risk. It doesn’t necessarily prove that the risk is being managed consistently. 

A recent audit from the U.S. Department of Health and Human Services Office of Inspector General offers a practical example of where controls can go wrong. 

What the OIG Audit Found 

The audit reviewed certain Medicare Part B payments made by Wisconsin Physicians Service (WPS) Insurance Corporation, a Medicare administrative contractor, for outpatient services during 2022 and 2023. 

Of 801 selected claim lines, OIG found that: 

• 138 claim lines were incorrect, resulting in at least $140,182 in overpayments. 
• 31 additional claim lines totaling $76,640 didn’t have supporting documentation. 
• Providers attributed identified overpayments to clerical errors and issues with their billing systems. 
• WPS had system edits in place but edits and review of flagged payments didn’t consistently identify claim lines that were in error. 

OIG recommended recovering identified overpayments and locating additional medical record documentation. Other recommendations included enhancing existing system edits and review processes and improving provider education. WPS agreed with all five recommendations. 

Read the official HHS-OIG audit summary and access the full report. 

Why Established Compliance Controls Still Fail 

Even though the audit focused on a specific contractor and set of Medicare payments, its findings illustrate a broader operational issue for healthcare compliance leaders: 

Having a control isn’t the same as knowing the control works. 

Most healthcare organizations don’t lack policies, procedures or controls. In fact, it may seem like there’s an abundance of those to some people.  

The more common challenge is that those controls operate across different people, departments and systems, and workflow can break down. A billing edit may identify a claim, but someone still needs to review it. A policy may require supporting documentation, but someone must still locate that documentation when it’s requested. An error may be corrected, but the organization still needs to verify the correction occurred. 

Each handoff creates an opportunity for the process to break down. 

Four Reasons for Control Failure 

As discussed in From Manual to Scalable: How to Manage Healthcare Compliance Risk, regulatory and compliance work becomes its own source of risk when it depends on individual effort, institutional memory and disconnected systems.  

In this environment, controls commonly fail for four reasons. 

1. The Process Depends on Manual Perfection 

Many compliance processes still rely on someone remembering to complete a step, notice an exception or follow up with another department. 

Manual work isn’t inherently ineffective. Human judgment is still essential to compliance. The problem arises when the process relies on individual memory without a reliable structure around it. 

Consider how often an organization depends on someone to: 

• Recognize that an issue requires review 
• Send an email to the appropriate person 
• Remember to follow up 
• Save supporting documentation 
• Confirm that the issue was corrected 
• Preserve evidence of the completed response 

A capable employee may perform those steps correctly most of the time. But a mature compliance program shouldn’t depend on perfect execution every time. The odds are against that long term. 

Instead, every regulatory change process should make the required next step clear, assign responsibility and show when work remains incomplete. 

2. A System Flag Is Mistaken for a Completed Control 

There are many reasons a system may successfully flag a potential error while the broader control still fails: 

• The alert goes to the wrong person. 
• No deadline is attached to the review. 
• The reviewer lacks sufficient context. 
• The alert is dismissed without documenting why. 
• The issue is corrected but not verified. 
• No one evaluates whether similar errors may exist elsewhere. 

This is the difference between detection and resolution. 

Automated edits and alerts can strengthen a compliance process, but an alert is only the beginning. 

A system edit can detect a possible problem. It can’t by itself ensure someone in the organization:  

• Evaluates the issue  
• Decides what action is required  
• Completes that action  
• Preserves evidence of the response 

Look at the full process surrounding an automated control, not just whether the technology generates an alert. 

3. Documentation Exists but Can’t Be Retrieved 

Supporting documentation is a recurring issue in audits, investigations and internal reviews. Sometimes the underlying work was completed, but the organization can’t produce any evidence.  

The organization may believe the record exists without actually knowing who owns it or where it can be found. Documentation could be stored in an individual inbox, a shared drive, a clinical system, a billing platform or a department-specific folder.  

For compliance purposes, documentation that can’t be retrieved may provide little practical protection. 

What Helpful Documentation Should Look Like 

A defensible process should make it possible to determine: 

• What happened 
• Who reviewed the issue 
• What information was considered 
• What decision was made 
• Why that decision was reasonable 
• What corrective action was assigned 
• Whether the action was completed 
• Where the supporting evidence is stored 

The goal isn’t about creating documentation for its own sake. The goal is to preserve a clear, trustworthy account of how the organization responded. 

For a deeper look at this issue, read How Healthcare Compliance Teams Can Turn Documentation Into Defensible Proof. 

4. Ownership Ends at the First Handoff 

Compliance teams rarely perform every operational task required to address a risk. They may identify the issue and send it to Revenue Cycle, Coding, Clinical Operations, Privacy, Legal, Quality or another department. Those handoffs are necessary, but they don’t complete the compliance process. 

Someone must remain responsible for determining whether the requested work was completed and whether the result adequately addressed the original risk. 

Without that accountability, a process becomes a series of disconnected activities: 

1. Compliance identifies a concern. 
2. The issue is sent to another department. 
3. The department begins reviewing it. 
4. A correction may or may not occur. 
5. The outcome is never reported back. 
6. Compliance can’t confirm completion or produce evidence later. 

Activity occurred, but the organization can’t demonstrate resolution. That’s why clear ownership means defining responsibility for both the operational action and the final verification. 

Three Questions to Test Whether a Control Works 

Healthcare compliance leaders can use three practical questions to evaluate a control. 

1. Does the Control Reliably Detect Exceptions? 

Don’t just ask whether a policy, edit or review procedure exists. 

Every time, the compliance leader should ask: 

• What specific risk is the control designed to identify? 
• What information does it evaluate? 
• Are there circumstances it may miss? 
• How often is its effectiveness tested? 
• What happens when the control identifies a potential exception? 

A control should have a clearly defined purpose and recognized limitations. It’s another job for compliance.  

2. Can We Retrieve the Supporting Evidence? 

Select a completed compliance action and attempt to reconstruct it. 

Can your organization quickly show: 

• Original issue or requirement 
• Analysis that occurred 
• People involved 
• Decision and rationale 
• Actions assigned 
• Completion records 
• Final verification 

This is a useful test because it evaluates the process from the perspective of an auditor, regulator or new compliance leader who wasn’t involved in the original work. 

3. Who Owns Correction and Verification? 

The person completing the corrective action may not be the person responsible for verifying it. Both roles should be clear. 

For example, an operational department may correct a billing process, while Compliance verifies that the correction addresses the identified concern and that evidence has been preserved. 

Without defined ownership, issues can remain open even after everyone believes someone else completed the work. 

From Individual Controls to Regulatory Operationalization 

The broader challenge isn’t simply building more controls but connecting them to repeatable operational processes. 

Then, when an issue or regulatory requirement is identified, the organization should be ready to: 

1. Assess its relevance and potential impact. 
2. Determine which departments and processes are affected. 
3. Define the required operational response. 
4. Assign clear owners and deadlines. 
5. Communicate expectations to the people completing the work. 
6. Track implementation and escalation. 
7. Verify that the required action occurred. 
8. Preserve documentation of the organization’s response. 

YouCompli refers to this discipline as Regulatory Operationalization: turning regulatory change into assigned, completed, verified and defensible action. This isn’t a one-off fix, but a scalable solution that adapts to health system needs. 

Technology can support this process but shouldn’t replace human judgment. The strongest approach combines structured workflows and automation with knowledgeable human review. 

Organizations evaluating whether their current technology supports that full process can use the six capabilities outlined in What to Look for in Regulatory Change Management Software for Healthcare Compliance. 

Metrics That Show Whether Controls Are Working 

Executive leadership and the Board of Directors may already receive compliance reports showing how many reviews, audits or corrective actions occurred. 

Those activity metrics are useful, but don’t necessarily demonstrate control effectiveness. 

Compliance leaders should also consider measures such as: 

• Percentage of flagged exceptions reviewed by the deadline 
• Average time from detection to resolution 
• Number of overdue corrective actions 
• Percentage of completed actions with supporting evidence 
• Recurrence rate of previously identified issues 
• Number of controls tested for effectiveness 
• Percentage of corrective actions independently verified 
• Time required to retrieve audit-ready documentation 

These measures help move the conversation from “Do we have a control?” to “Can we demonstrate that the control works?” 

For additional guidance on choosing useful measures and communicating them effectively, read Beyond the Penalty: What Metrics Should Healthcare Compliance Officers Track?. 

Compliance reporting should also help leaders identify overdue work, understand ownership and confirm what was completed and verified. Learn more about healthcare compliance reporting and verification. 

The Bottom Line 

The lesson from the OIG audit isn’t that automated edits, manual reviews or provider education are ineffective. The lesson is that no individual control should be evaluated in isolation. 

A system audit needs a reliable review process. A review needs an owner. An owner needs a deadline. A completed action needs verification. The entire response needs documentation that the organization can retrieve when challenged. 

Healthcare compliance programs have matured, and expectations have increased with them. It’s no longer enough to show that a policy was written, an alert was generated, or an email was sent. 

Organizations increasingly need to prove that risks were identified, evaluated, assigned, addressed and verified. 

That’s the difference between having compliance controls and operating a defensible compliance process. 

Can Your Documentation Prove the Work? 

Take the Compliance Documentation Readiness Check to evaluate whether your current process can demonstrate ownership, action, evidence and verification. 

The assessment takes approximately three to four minutes and provides a personalized result with access to the Prove-It Compliance Playbook. 

Download our Latest Whitepaper

Sign-up for our Weekly Newsletter

Schedule a quick overview

The post When Regulatory Compliance Controls Exist but Still Fail  first appeared on YouCompli.

About the Medical Necessity Series 

This is the third in our series of articles on medical necessity. In the first, we described the compliance risks associated with submission of claims for medically unnecessary services.   

In the second, we highlighted a case where an organization of long-term care hospitals were alleged to have violated the Federal False Claims Act (FCA) for holding patients in the hospital longer than medically necessary to increase reimbursement from Medicare. 

In this next article, we spotlight another recent example of a healthcare provider entity agreeing to pay a six-figure sum to resolve allegations of submission of claims for medically unnecessary services¹.  This time, the providers consisted of three affiliated skilled nursing facilities (SNF) that were alleged to have submitted claims for medically unnecessary rehabilitation services.   

False Claims Act Metrics Make Significance Clear 

The Department of Justice has reported that False Claims Act settlements and judgments reached $6.8 billion in Fiscal Year 2025. Over $5.7 billion of that total was derived entirely from the healthcare sector. Most of these healthcare recoveries stem from whistleblower lawsuits targeting corporate billing schemes, upcoding, and medically unnecessary services. 

Case Involves SNF Reimbursement Dispute Over Therapy Services 

For the period in question, skilled nursing facilities (SNFs) were reimbursed for therapy services based on a patient’s resource utilization group (RUG). The RUG was determined by the amount of services the patient received, such as: 

•  Physical therapy 
• Occupational therapy  
• Speech pathology services 

In short, the more services provided, the higher the reimbursement.  However, as discussed in our two prior articles, if the services don’t meet medical necessity requirements, they should not have been performed or billed in the first place. 

Whistleblower Lawsuit Triggers Investigation 

As is frequently the case, these allegations were first brought forth through a qui tam, or whistleblower, lawsuit. The whistleblower, or relator, claimed the defendants implemented a five-pronged scheme to fraudulently bill for unnecessary “Ultra High Rehab,” (the most intensive therapy provided by SNFs) and to keep patients in Ultra High Rehab for longer than necessary. 

The five prongs of the alleged scheme were: 

1. Pressure to perform excessive, unnecessary services: The organization’s leadership exerted pressure on therapy staff to administer excessive Ultra High Rehab and to do so for longer than necessary.   

This pressure was exerted not only by administrators who oversaw SNF operations, but also by regional directors of operations who managed the facility administrators. Such pressure was also exerted by directors of rehab (DOR) who managed therapists at each facility, and regional managers who directly managed the DORs.  

In other words, management, from top to bottom, spoke to therapists and staff in one voice: increase Ultra High Rehab, regardless of patient need. 

2. Financial vs. medical reasons to provide care:  Instead of letting therapists determine the appropriate level of therapy needed based on their professional evaluation, leadership insisted that each patient’s level of therapy be at least in part determined by whether the patient qualified for lucrative Medicare Part A benefits. 

3. Care for functional patients: The organizations pressured therapists to continue providing therapy to patients who were fully functional and in no way required intensive therapy. A scheme called “Bridge to Success” was employed which mandated an additional week of Ultra High Rehab be tacked on even after patients were ready for discharge. 

4. Too sick for care: The organizations pressured therapists to provide therapy to patients who were too sick to benefit from therapy and even to patients who were actually harmed by it.  

Since therapy minutes were dictated by management and not assigned based on the professional opinion of evaluating therapists, patients ended up receiving more therapy than they could tolerate, including instances where therapy was forced on patients about to pass away. 

5. Maximizing minutes: The focus on maximizing therapy minutes to hit therapy goals also resulted in leadership encouraging an array of fraudulent billing practices. 

This included: 

• Billing non-therapeutic minutes as therapy  
• Allowing therapists to bill for therapy without actually providing it 
• Encouraging therapists to bill evaluation sessions as therapy. 

Widespread Occurrences Involve $14.6+ Billion in Alleged Intended Losses 

Federal enforcement actions emphasize the commonality of these practices. The 2025 National Health Care Fraud Takedown alone resulted in criminal charges against 324 defendants nationwide, involving over $14.6 billion in alleged intended losses tied to fraudulent billing and medical necessity abuses. 

The most compelling argument for compliance leaders is that medical necessity fraud carries dual liability: 

• Financial Risk: Organizations face mandatory treble damages (three times the government’s actual loss) plus steep statutory penalties for every individual false claim submitted. 
• Human Risk: Unlike administrative billing errors, medical necessity fraud directly compromises patient care. Overutilization exposes vulnerable patients to unnecessary, exhausting or potentially harmful procedures simply to satisfy corporate revenue targets. 

Three Takeaways from Medical Necessity Cases 

Much can be learned from the themes of these allegations, even if your organization isn’t an SNF or doesn’t provide therapy services. Medical necessity requirements are common across most healthcare organizations. 

Key lessons from this case include: 

1. Decisions about billing for medical care provided need to be based on clinical and regulatory requirements, especially coverage requirements from Medicare and Medicaid, for example.   Such requirements often include statutes about: 

• Medicare coverage 
• Medicare manuals 
• National Coverage Determinations  
• Regional Medicare Administrative Contractors’ Local Coverage Determinations (LCD)  

2. Regular, focused compliance coding and billing audits may identify aberrant practices. This is especially true for services whose corresponding medical documentation doesn’t support compliance with coding or billing rules.   
    
   For example, Medicare reimbursement rules state that routine, non-skilled services aren’t separately reimbursable. In this case, it was alleged that one therapy assistant was coached to include in therapy minutes the time it took him to arrive at a patient’s room starting with the moment he left the therapy department. 
    

3. Use data analytics to identify outliers. Most whistleblower cases alleging medically unnecessary services are brought by an individual with knowledge from inside the organization. Many times, the individual is a physician, nurse or other clinician with medical expertise.   
    
   This case was different. It was filed by a private analytics firm using publicly available data. Though rare, these cases do exist. If a private firm using public data could find the alleged aberrations, one would hope the organization’s own compliance professionals would be able to find similar aberrations if given the resources to look.  Additionally, the government is using data analytics to identify cases they want to pursue as well. 

Apply These Takeaways to Your Own Regulatory Compliance Program 

False Claims Act allegations alleging a lack of medical necessity can take many forms. The kind of service or type of provider may also vary, but these key themes appear in many cases. The astute compliance professional will learn from them and apply the principles to the operations and services provided at their own healthcare organization. 

The claims resolved by the settlement are allegations only, and there has been no determination of liability. 

The post Lessons from the Frontlines: A Case Study in Medical Necessity Enforcement  first appeared on YouCompli.

Compliance risks associated with medical necessity happen when providers fail to show clinical evidence that a service is essential for a patient’s health. This often leads to legal, financial and operational consequences. 

This article uses a specific example to explore the implications of medical necessity for healthcare systems. 

Recent False Claims Act Complaint Hinges on Medical Necessity  

Recently we wrote an introductory article discussing in general terms the compliance risks associated with medical necessity. That was first in a series on medical necessity. Now this article introduces a specific example.   

In this case, the U.S Department of Justice (DOJ) filed a False Claims Act complaint against a hospital group and three long-term care hospitals. They allege the False Claims Act was violated because some of the care provided (for which the hospital was reimbursed) wasn’t medically necessary. 

Three Ways Medical Necessity Impacts Performance 

Medical necessity remains a serious compliance risk for providers, including hospitals and health systems. It impacts these organizations in several significant ways: 

• Performance and Efficiency 
• Financial and Compliance Risk 
• Patient Outcomes and Quality 

1. Performance and Efficiency 

Administrative Burden: Research shows that “medical necessity” serves as a primary tool for allocating resources, but varying definitions across payers create administrative churn. Studies indicate that managing these requirements increases the revenue cycle workload, leading to delayed payments and reduced efficiency. 

Operational Streamlining: Conversely, some evidence suggests that when medical necessity is effectively operationalized (e.g., integrated into EHRs), it can increase the speed of diagnosis by eliminating redundant or non-essential tests.  

2. Financial and Compliance Risk 

Denial Management: A major area of study involves “medical necessity” as a driver of claim denials. Research by organizations like AAPC indicates that failure to validate medical necessity can lead to revenue loss, recoupments, and payer audits. 

Regulatory Exposure: Inadequate documentation of medical necessity is a leading cause of False Claims Act allegations, representing a high-stakes legal and compliance risk for health systems.  

3. Patient Outcomes and Quality 

Care Appropriateness: Studies suggest that medical necessity standards help align clinical care with evidence-based guidelines, which can improve patient safety by reducing exposure to unnecessary, potentially harmful procedures. 

Equity and Access: Research into determinants of health system performance warns that restrictive criteria can limit access to essential care for vulnerable populations if based on cost-containment instead of individual patient needs.  

Allege Longer Stays to Increase Medicare Reimbursement 

The example covered here reflects some of these negative impacts. In this False Claims case, the DOJ alleges that the hospitals held patients in the hospital longer than medically necessary in order to increase Medicare reimbursement.  

Long-term care hospitals (LTCHs) provide inpatient services for patients whose medically complex conditions require long hospital stays and programs of care. Medicare reimburses LTCHs based, in part, on a patient’s length of stay.   

By allegedly delaying discharge of certain patients, even when their course of treatment had been completed or when they could have been transferred to a lower level of care, the hospital received higher payments than they should have. 

The DOJ did not discover this issue on their own. The lawsuit was originally filed by a former employee of one of the hospitals through the qui tam or whistleblower provisions of the False Claims Act.  

How Internal Concerns Become Full-Blown Investigations 

Though allegations of medically unnecessary care may be a common reason such lawsuits are filed, understanding the details of a specific case is important.  

It can help compliance professionals see how concerns, potentially first reported internally, can develop into full blown investigations or additional complaints being filed with the court by the DOJ, as in this example. 

Manipulating Qualifying Patient Stays for Higher Reimbursement 

In the complaint, the DOJ alleges that the defendants illegally inflated their Medicare payments by holding patients who were ready for discharge until they reached a certain threshold date that, once reached, would trigger increased reimbursement.  

Certain Medicare patients who meet an average length of stay over the twenty-five days that LTCHs must maintain are referred to as a Qualifying Patient. The Government claimed the defendants also inappropriately held Qualifying Patients long enough to meet the 25-day average length of stay requirement to maintain their LTCH status and be paid at the higher LTCH rate.  

In the court document filed by the DOJ, it’s alleged that one executive told her employees, “No one is leaving early. We lose money.” Unfortunately, this wasn’t the only example of their alleged poorly handled medical necessity determinations. 

Ignored Alternatives Could Have Been Fraction of the Cost 

According to the complaint, many of these patients could have been discharged earlier and received care at home or in a nursing facility for a fraction of the cost to Medicare.   

The complaint also states that when employees raised concerns about the practices to one of its executives, the executive dismissed them, noting they would make money even if Medicare denied some medically unnecessary claims.  

Compliance Responsible for Appropriate Processes 

Compliance programs should ensure that appropriate processes exist to confirm the appropriate clinical criteria are met when it comes to admission and discharge actions.  According to the government, LTCHs specifically must have a documented process that: 

“screens patients prior to admission for appropriateness of admission to a long-term care hospital, validates within 48 hours of admission that patients meet admission criteria for long-term care hospitals, regularly evaluates patients throughout their stay for continuation of care in a long-term care hospital, and assesses the available discharge options when patients no longer meet such continued stay criteria.” 

The government states that in 2017, CMS observed that LTCHs appeared to be improperly holding patients beyond the key time threshold to obtain the full payment, which resulted in potentially improper delays in patient discharges other than solely for medical reasons.  

As a result, in fiscal year 2018, CMS revised the payment methodology to reduce LTCHs’ financial incentive to delay patient discharges until after the threshold. 

Example of Inappropriate Intent to Maximize Revenue 

The DOJ’s complaint contains statements that appear to imply they have emails or other documentation that show the intent to delay discharge. For example, an executive allegedly emailed a broad group of staff to praise them for getting “patients discharged on their correct discharge day to maximize our revenue.”   

Reportedly, the same executive also developed a bonus plan for a case manager in 2018 that required her to discharge 90 percent of patients on the “ideal discharge date” to receive a bonus. The ideal discharge date was a date calculated in a way (and reported on a dashboard) to lengthen the stay to meet higher reimbursement goals. 

Of course, the claims asserted in the complaint filed by the DOJ are allegations only.  However, most of the time the DOJ is not going to file a complaint if they do not believe they have or will obtain the evidence they need to either pursue the case further in court or lead to a mutually agreed upon financial settlement. 

Requirements for Medical Necessity Determinations 

Medical necessity determinations tend to be circumstance-specific. Auditing and monitoring for medical necessity will also typically require the involvement of a professional with clinical training or background.   

At times, it may be appropriate (if there are no conflicts of interest) to have a medical director from the organization be involved in such determinations. At other times, it may be a better idea to seek independent expertise from someone outside your organization. 

Learn from Examples of Medical Necessity Problems 

Watch for the next article in this series when we take another deep dive into an example of medical necessity in healthcare. In the meantime, browse these curated selections. 

Find More Advice and Ideas in These Related Articles 

• Introductory Article: Understanding Medical Necessity Compliance Risks The first post in this series, covering the foundational definitions and general compliance risks healthcare providers face today. 
• The False Claims Act: A Guide for Healthcare Leaders A deeper look into how inadequate documentation can trigger False Claims Act allegations and the resulting legal stakes for health systems. 
• Strategies for Reducing Claim Denials and Revenue Loss Practical insights into how medical necessity acts as a driver for claim denials and how to improve your revenue cycle workload. 
• Aligning Clinical Care with Evidence-Based Guidelines Learn how to leverage medical necessity standards to improve patient safety and ensure care appropriateness across your organization. 

CJ Wolf, MD, M.Ed. is a healthcare compliance professional with over 22 years of experience in healthcare economics, revenue cycle, coding, billing, and healthcare compliance. He has worked for Intermountain Healthcare, the University of Texas MD Anderson Cancer Center, the University of Texas System, an international medical device company and a healthcare compliance software start up. Currently, Dr. Wolf teaches and provides private healthcare compliance and coding consulting services as well as training.   

Download our Latest Whitepaper

Sign-up for our Weekly Newsletter

Schedule a quick overview

The post When Compliance Risk Is Driven by Medical Necessity Problems  first appeared on YouCompli.

With the release of the CIA changes within the General Compliance Program Guidance (GCPG), the OIG has officially moved the goal posts. This isn’t just a new set of rules for organizations under investigation. 

The May 2026 update to the Corporate Integrity Agreement (CIA) framework signals a definitive shift from passive reporting to active governance. Compliance is no longer an administrative sub-function. It’s now a board-level strategic imperative. 

The OIG’s Modernized CIA: Your New Compliance North Star 

Whether you’re a leader in an acute care organization, or in a non-acute care market like home health, ASCs, labs, or behavioral health, these updates represent your new “North Star.”  

This blog offers a roadmap to navigating the four pillars of this modernized framework. 

• Pillar 1: The Board’s Mandatory Compliance Partner 
• Pillar 2: Catching Every Whisper in the “Any Modality” Net 
• Pillar 3: Technological Accountability and the IT Governance Mandate 
• Pillar 4: The Elevated (and Independent) Compliance Officer 

Pillar 1: The Board’s Mandatory Compliance Partner 

What does the OIG’s mandatory independent board compliance expert requirement mean for healthcare leadership? 

For years, boards could fulfill their oversight duties by simply reviewing a quarterly slide deck. Those days are over. The OIG now requires the appointment of an independent compliance expert with federal healthcare program experience to review program effectiveness and report findings directly to the board. 

An expert is only as effective as the data they have to work with. To be truly “audit-ready,” your organization needs a living, centralized record of every regulatory change and the specific actions taken in response. Without this “evidence engine,” an independent expert will spend hundreds of billable hours just trying to find the paper trail. That could create a massive financial liability for the board. 

Boards are also now mandated to formally respond to the expert’s findings in their annual reports. You can’t “file and forget” an audit anymore. The OIG is looking for a “culture of inquiry” where board members aren’t just receiving information but actively challenging it. 

Pillar 2: Catching Every Whisper in the “Any Modality” Net 

How has the OIG expanded the definition of a healthcare disclosure program beyond the traditional hotline? 

The OIG has finally caught up with how the modern healthcare workplace actually communicates. A “disclosure” is no longer defined by the phone number it was called into. Now it’s defined as any report made through any modality. 

The reality is, in a busy lab or ASC, a compliance concern rarely starts with a formal hotline call. It starts with an email to a supervisor, a quick Teams message between nurses, or an “off-the-cuff” comment in a hallway or breakroom. 

The Roadmap Action: If a billing concern is raised in a Microsoft Teams thread but never makes it into your formal compliance log, you are in violation of the new standards. 

• Modality Audit: You must ensure your intake log captures: 
• Digital Channels: Email, Slack, Microsoft Teams, Zoom chat, and other messaging platforms. 
• Interpersonal Channels: In-person “walk-ins” and verbal reports made to management or HR. 
• The Log Requirement: Every report, regardless of how it is received, must be tracked with its nature, status, and corrective action taken. 

Pillar 3: Technological Accountability and the IT Governance Mandate 

What are the specific OIG reporting requirements for Generative AI and Information Technology in the 2026 CIA framework? 

In perhaps the most significant update to the compliance landscape in decades, the OIG is mandating technological accountability. IT has gone from support service to a governance partner. 

Set a Place for the Mandatory IT Seat at the Table 

The modernized CIA framework requires that the Compliance Committee formally include IT expertise. The OIG recognizes that in a digital-first environment, governance is impossible without an understanding of the underlying infrastructure, data flows, and automated systems. 

The Roadmap Action: Organizations should update their Compliance Committee Charters to include a CTO, CISO, or equivalent technical lead. This individual is responsible for bridging the gap between regulatory mandates and digital execution.

Defining and Inventorying Generative AI as a Requirement 

The OIG has introduced a formal, rigorous definition of Generative AI for reporting purposes. The new definition focuses on foundation models and systems that “generate new content or inferred outputs” used in clinical, billing, or administrative decision-making. 

Your Generative AI Inventory must track: 

1. Life Cycle Use Cases: Identifying where AI is deployed, such as automated utilization reviews, draft patient communications, clinical note summarization, or coding/billing reconciliation. 
2. Deployment Status: Reporting whether a tool is in the “Pilot,” “Pre-deployment,” or “Production” phase. 
3. Data Provenance and Security: Documenting how Protected Health Information (PHI) is shielded from being used as training data for public or foundation models. 

The Risk of “Shadow AI” 

The OIG is particularly focused on “Shadow AI”, meaning automated tools implemented by individual departments without the Compliance Committee’s knowledge. Under the new reporting mandates, a marketing team using an AI bot to answer patient queries or a billing department using a third-party “coding assistant” without formal approval is now a reportable risk. 

By mandating these inventories, the OIG is forcing a shift from “trust” to “verification.” Compliance committees must document their review and approval of any AI tool before it impacts federal healthcare program billing or patient care. This creates a mandatory “accountability trail” that proves the organization is managing AI risks, such as algorithmic bias and “hallucinated” clinical data. 

Pillar 4: The Elevated (and Independent) Compliance Officer 

How is the OIG changing the independence and stature of the Compliance Officer role? 

The OIG is giving the Compliance Officer (CO) role real “teeth.” The new framework explicitly states that the CO must report directly to the CEO and cannot be subordinate to the General Counsel or the CFO. 

This change is about removing conflicts of interest. Legal and Finance have their own mandates, and Compliance must be free to evaluate them both. 

The Roadmap Action: 

• Direct Board Access: The CO must have direct, unfiltered access to the board. 
• Executive Sessions: Mandatory quarterly meetings with the board, including at least one portion in “executive session” without other senior management present. 
• Board Supervision: The board is now responsible for the supervision and performance evaluation of the CO, further decoupling the role from the CEO’s sole influence. 

Conclusion: Your Proactive CIA Readiness Checklist: Four Tactical Steps 

The OIG isn’t about making the job harder. They’re making it more technical and more transparent. To align with these modernized expectations before a regulatory knock at the door, prioritize these four tactical steps: 

1. Appoint an IT Lead to Compliance: Update your charter to include a technical expert who can oversee your AI and data governance. 
2. Conduct an AI Audit: Identify where automated tools are being used. Document what tools are being used, for what purpose, and how the data is being protected. 
3. Centralize Your “Any Modality” Intake: Move away from fragmented email folders. You need a single source of truth that can export a defensible log of every hallway conversation and digital message. 
4. Adopt the Gold Standard Early: Treat these new CIA mandates as a “Pre-Settlement Readiness Review.” Adopting these standards now proves to the OIG that your organization is committed to a culture of integrity, not just the appearance of one. 

Need some help putting together your “evidence engine” and a proactive CIA strategy? YouCompli takes acute and non-acute care organizations from chaos to compliance confidence. Reach out with your questions and challenges. 

Blog Glossary 

• General Compliance Program Guidance (GCPG): The OIG’s definitive framework for healthcare compliance.  
• Active Governance: A model where leadership and the board are directly involved in compliance effectiveness, moving beyond “check-the-box” reporting to formal responses and resource allocation. 
• Corporate Integrity Agreements (CIA): Binding five-year contract between healthcare entity and the HHS Office of Inspector General (OIG), imposed as part of a civil settlement to resolve allegations of fraud or abuse. 
• Shadow AI: The unauthorized or undocumented use of artificial intelligence tools within an organization without the review or approval of the Compliance Committee or IT leadership. 
• Generative AI: A category of technology utilizing foundation models to generate new content or inferred outputs used in clinical, administrative, or billing decision-making. 

Six More Resources 

Four Ways to Engage Leaders in a Culture of Compliance – Building positive, proactive relationships with leaders is crucial to a culture of compliance. Learn four approaches to engage leaders. 

10 Tips for Building a Compliance Culture in Healthcare – The tips explore how you can convince leaders that a strong compliance culture adds value to the organization. 

What to Look for in Regulatory Change Management Software for Healthcare Compliance – A modern regulatory change management (RCM) system does more than just notify you when regulatory changes occur. Learn what’s really possible today and why it matters. 

Your Board Committee Is Only as Effective as You Make It – Ten ways to engage your healthcare compliance board committee. 

How to Use AI for Systems Thinking in Compliance Processes – Artificial intelligence is beginning to reshape the compliance landscape, but the field is still in the early stages of adoption. 

Experts Weigh In: The Oversight Role of a Healthcare Board of Directors – Whether new to the field or a seasoned professional, get ideas on how support your board’s oversight responsibility for the compliance program. 

About the Author 

Jerry Shafran is the founder and CEO of YouCompli with years of experience in the healthcare compliance space.

He is a serial entrepreneur who builds on a solid foundation of information technology and network solutions. Jerry launches, manages and sells software and content solutions that simplify complex work. His innovations help compliance professionals focus on their core priorities.  

AI Handbook for Compliance Pro’s

Download our Latest Whitepaper

Sign-up for our Weekly Newsletter

Schedule a quick overview

The post OIG Compliance North Star: Roadmap to the 2026 Modernized CIA Framework  first appeared on YouCompli.

Ensuring medical necessity for services or supplies isn’t just about getting paid. It’s a safeguard against unnecessary or duplicative services that increase the risk of patient harm or medical errors. That’s reason enough for this to be an important topic for compliance leaders. 

This is the first article in a series on medical necessity — an area that many compliance programs struggle with. In this piece, we explain the medical necessity compliance risk in general, while subsequent articles highlight specific examples of enforcement actions experienced by medical providers such as hospitals and health systems. 

Impact of Denial Rates and Medical Necessity on Payer Costs  

Data suggests that medical necessity is becoming a primary way for payers to manage costs, making it even more worthy of leadership attention. The “State of Claims 2025” Report found that 54% of providers agree claim denials are increasing faster than they can appeal. 

A data accuracy gap also contributes to the problem. Roughly 41% of healthcare organizations report at least 1 in 10 claims is denied, often due to “bad data” at intake or lack of clinical justification. 

All of this creates further justification for the need to better understand medical necessity from a compliance standpoint. 

Role of Clinician Review in Determining Medical Necessity 

Medical necessity isn’t an easy compliance risk to tackle, especially when OIG recommendations bump up against front-line reality. Sometimes, clinicians view medical necessity as their bailiwick.   

Of course, their expertise is the basis for medical decision making. Generally speaking, clinicians are making their decisions based on what they believe is medically necessary. They are the clinically trained professionals and should know when something is medically necessary or not, right?  

However, from a compliance standpoint, medical necessity often really means “covered” by a third-party payor. If something is considered “not medically necessary,” it may actually mean it does not meet payor coverage requirements. 

OIG on Clinical Review of Medical Necessity in Claims Audits 

In their General Compliance Program Guidance document (GCPG), the Department of Health and Human Services (HHS) Office of Inspector General (OIG) emphasized the importance of ensuring claims submitted to government payors are medically necessary. 

Specifically, they note:  

“Medicare requires, as a condition of payment, that items and services be medically reasonable and necessary. Therefore, entities should ensure that any claims reviews and audits include a review of the medical necessity of the item or service by an appropriately credentialed clinician. Entities that do not include clinical review of medical necessity in their claims audits may fail to identify important compliance concerns relating to medical necessity.” 

Considerations for Compliance Risks in NCD and LCD 

Other entities have also emphasized medical necessity as coverage criteria. For example, Medicare publishes National Coverage Determinations (NCDs) and Local Coverage Determinations (LCDs). These are, in essence, coverage criteria for a specific service.  

Though generally accepted medical guidelines or medical practice may suggest a certain treatment plan is appropriate, the LCD might not cover the service for a particular condition or diagnosis or might not allow the service at a particular cadence or frequency. 

Example: Meeting LCDs for Pain Injection Procedures 

LCDs addressing pain injection procedures are a good example of this. A Medicare LCD might state that before Medicare considers a spinal injection “medically necessary” (think “covered”), the patient needs to have failed four months of conservative therapy (e.g., lifestyle changes, physical therapy, etc.)   

Or the LCD might state a total of four injections in a twelve-month period is the maximum number of injections they will allow. Additionally, an LCD might require that a patient has a certain condition (represented by an ICD-10 or diagnosis code i.e., diagnosis code) before considering a service covered.   

There is potential compliance risk in all these areas if coverage criteria are not met and documented in the medical record or if codes are reported to ensure coverage, but the medical record does not support the diagnosis code reported. 

Overlap with Patient Safety 

Medical necessity can also overlap with patient safety issues. If a physician exaggerates the severity of a condition to make it look like the services should be covered, a patient could undergo a procedure that was not appropriate or medically necessary to perform in the first place.  

This raises patient safety issues for subjecting a patient to certain risks when the service does not appropriately meet clinical standards or indications for performance. 

How Medical Necessity Compliance Is Enforced 

The government utilizes various tools for enforcing medical necessity compliance.  These include the False Claims Act (FCA), typically used by the U.S. Department of Justice (DOJ), and the Civil Monetary Penalties Law (CMPL) utilized by the OIG. 

The DOJ can investigate allegations of medically unnecessary services when credible information is brought to its attention by whistleblowers (qui tam relators). A qui tam relator is a private individual or entity who files a lawsuit on behalf of the government under the FCA against companies or individuals committing fraud. Or the DOJ can investigate on their own, typically because of data analytics they proactively perform. 

How OIG Pursues Financial Penalties and Program Exclusion 

The OIG is authorized to pursue monetary penalties and exclusion through a variety of civil authorities, most notably the CMPL. Under the CMPL, OIG can seek assessments in lieu of damages, Civil Monetary Penalties (CMP), and exclusion from participation in federal health care programs.   

According to the OIG, one example of conduct that could lead to CMP liability is presenting a claim for a pattern of medical or other items or services that a person knows or should know are not medically necessary. 

Medical Necessity Risk Tied to Clinical Services 

There isn’t a one-size-fits-all risk profile when it comes to medical necessity. Each organization’s risk is going to be tied to the clinical services it offers or orders. Organizations and their compliance programs should undertake risk assessments tailored to their particular situation.  

Via the GCPG document, the OIG recommends that when conducting risk assessments, organizations should “ensure that medical necessity, patient safety, and other quality compliance issues are included in the risk universe.” 

Download Tip Sheet

Coming Articles: Details of Recent Enforcement Actions 

In subsequent articles in this series, we’ll take a closer look at the details of recent enforcement actions involving allegations that submitted claims lacked medical necessity. This information will help compliance leaders stay on top of situations and reduce risks in their own organizations.  

Read Part Two Here

About the Author 

CJ Wolf, MD, M.Ed. is a healthcare compliance professional with over 27 years of experience in healthcare economics, revenue cycle, coding, billing, and healthcare compliance. He has worked for Intermountain Healthcare, the University of Texas MD Anderson Cancer Center, the University of Texas System, an international medical device company and a healthcare compliance software start up. Currently, Dr. Wolf teaches and provides private healthcare compliance and coding consulting services as well as training.   

Download our Latest Whitepaper

Sign-up for our Weekly Newsletter

Qualified compliance professionals do the heavy lifting for you, simplifying regulatory change management  

The post Medical Necessity: A Guide for Healthcare Compliance Leaders  first appeared on YouCompli.

In this blog, learn how to go on offense following a regulatory compliance audit or inspection, so you’re well-prepared for the next one. Using sports training analogies, the authors present a better way to handle ongoing inspections and audits in healthcare systems.  

If you play us in basketball, we’re going to run the fast-break transition offense at you, and we will tell you right now; you don’t want to play us two on two. We know our biggest strength – namely that conditioning kills. Savage speed plus unlimited endurance equals an unstoppable force.  

The fast-break transition offense we use is inspired by the 1990 UNLV Running Rebels basketball team. This high-tempo strategy aims to score before the defense can get set. It involves pushing the ball down the court immediately after gaining possession and creating scoring opportunities through numerical advantages and defensive mismatches.  

You can apply the same strategies when managing audits and inspections.  

What Drives Healthcare Audits and Inspections? 

Audits and inspections are regular occurrences in healthcare systems. A number of factors influence how often and what kind. 

• Internal vs. External: Healthcare organizations conduct their own internal audits monthly, quarterly or annually. 
• Regulatory Bodies: Government agencies conduct their own audits, with the number depending on things like budget and staff. 
• Risk and Regulation: Frequency may increase if issues are discovered or when major changes are made to regulations. 
• Organization Size: Larger organizations often have more complex auditing needs, potentially driving more frequent audits. 
• Staff Turnover: High turnover can trigger more frequent audits to ensure consistency. 

What’s Your Playbook for Regulatory Inspections and Audits? 

Most healthcare systems have good reason to believe that a regulatory inspection, sponsor audit or other scrutiny could appear at any time, announced or unannounced. It’s accepted that the standard technique for managing these visits is ongoing vigilance.  

At her presentation on “How to Be Your Own Internal Monitor: A Guide to Monitoring Your Own Studies” at the ACRP 2025 conference, Ann-Marie Jacobson, CCRP, Senior Research Affairs Specialist at Tufts University School of Dental Medicine, said “Because of the unknowns about inspections and audits of in-progress or completed clinical trials, it is important to make sure that all study materials are always kept accurate, current, and explanative of the study activities to date.”

“You always need to be asking yourself, if the Food and Drug Administration (FDA), sponsor, or IRB came in right now and selected a current or recently closed study for examination, would everything be ready?”  

She explained that at her institution, study coordinators “regularly conduct audits of regulatory binders, subject folders, case report forms (CRFs), payment logs, and enrollment/screening logs. These are coordinators who are separate from the clinical team, to ensure that fresh perspectives are always present.” 

We don’t disagree with her, but we wouldn’t call that a fresh approach. Rather, we think that ongoing vigilance should be the standard in healthcare compliance, like a basketball team needs the fundamentals of solid shooting, dribbling and passing.  

Changing Audit Landscape Requires a New Game Plan 

The current healthcare audit landscape is shifting and shifting quickly. Back in late 2024 and even earlier this year, federal and state auditors would arrive and investigate one complaint at a time. They’d come in specifically for one reason or to investigate a particular incident, talk with a couple of staff members, and then summarize their findings and leave.  

Now, we’re hearing differently. Just this week at one of our collegial facilities, an investigator came in to investigate about 10 complaints in various areas, from documentation, to patient care and the like.  

To diligently investigate complaints of this type and volume, the auditor or inspector is probably going to be there on-site for a week or more. They will gobble up valuable conference room space, staff time and basically throw your whole operation into a tizzy due to the heightened emotional state.  

What’s your game plan for audit readiness now? 

Fast Break Offense for Compliance Audit Readiness 

How do you combat this? Well, if you use the key principles of a fast break offense, you will be prepared and conditioned. We’ve adapted these three techniques to the compliance game, to make champions of your team. 

1 – Push the Pace 

In basketball, coaches encourage players to maintain a fast pace and recognize when to initiate the first trigger. In an audit, this means anticipating what the auditor is going to ask and getting ahead of it before they bring it up.  

Pre-audit prep meetings and ongoing reviews of your events make this work, but you can’t just do a pre-audit meeting when an inspection is scheduled. You need to regularly schedule pre-audit meetings, so you’re always prepared.  

I know most organizations don’t do this. But we do. Which is why we have covered things so thoroughly that we can go quickly and get the auditor what they need and then move on to the next question.  

2 – Strength in Numbers 

In sports, we recognize numerical advantages, such as 2-on-1’s, 3-on-2’s or 4-on-3’s and then capitalize on these circumstances through drive-and-kick sequences. Drive the ball to the basket and when the defense collapses on the person with the ball, you kick the ball out to an open teammate to hit a jump shot.  

Within audits, scoring means answering auditors’ questions with the best players you have. You create a numerical advantage by bringing in multiple people to meet with the auditor at the same time and kicking facts around like you would move the ball to score.  

3 – Continuously Practice Good Habits Across the Team 

Lastly, you need elite conditioning habits in sports and in compliance. To run the fast break effectively, you can’t get tired. Imagine unleashing an endless barrage of offense and staying so diligent to this effort that teams know it’s coming and still can’t stop it.  

The team with the most dialed-in offense is usually the most capable, but you need to have players who can react “lag-free” or win their first three steps to capitalize on numerical advantage. The only way to get good at this is to continually work on it.  

Quality and compliance preach continuous improvement, but how often do you do make the effort? How often do you stay late at work, just because? How often do you run more meetings or make everything tighter?  

Chances are zero times, but I will tell you right now that we do. So, if you get into an audit with me, by Day 4, I am still working with a full gas tank, but the auditor isn’t because they went home and “Netflixed“ while I slept. Get your whole team committed to elite habits, and you are unstoppable.  

Prepare Your Compliance Program for the Win 

By reinforcing these principles and working on conditioning and decision making, teams can create more scoring opportunities. And just as a prepared team can force the defense into difficult situations, a well-prepared compliance team can “force” the auditor into zero-findings and more quality inspections.  

Download a PDF Version of the Tip Sheet

Create Compliance Scoring Opportunities 

If you’re interested in more ideas for building a strong compliance program, read these resources next. A strong compliance culture is the foundation of a strong program. 

10 Tips for Building a Compliance Culture in Healthcare 

Earning recognition as a value creator and establishing a healthy culture can be challenging. Yet as these 10 tips show, you can successfully shape culture to help the larger organization better manage and control risk. 

Healthcare Compliance Culture Means Doing the Right Thing at All Levels 

A culture of compliance isn’t just a platitude. It really does exist. Those organizations with a strong culture of compliance and an effective compliance program are the ones with engaged clinical and operational leaders. 

A Culture of Compliance Through Proactive Decision-making 

A culture of compliance is critical to effective regulatory change management. Find three steps to help your leaders make decisions more proactively.   

Andrea has taught first grade in Willoughby, Ohio for 27 years in the same classroom that she attended school as a child. She earned a Bachelor of Science in elementary education with a minor in language arts from John Carroll University and a Master’s Degree in the Art of Teaching and Education from Marygrove College. 

John builds and fixes quality departments, while currently thriving as the Administrator & Director of Quality, Risk Management and Compliance at River Vista, a behavioral hospital in Columbus, Ohio.

---

The Q-Kids – John R Nocero and Andrea L Bordonaro – are experts at everything quality, regulatory, education training and compliance and love sharing their knowledge on YouCompli.

Follow them on LinkedIn – for more quality content or send them a message – they’d love to hear from you.

---

Download our Latest Whitepaper

Sign-up for our Weekly Newsletter

Schedule a quick overview

---

27 Ungated Resources for Compliance Leaders and Teams 

Compliance professionals sometimes feel undervalued in comparison to other functions in their organization. They think leaders and colleagues don’t really understand what they do.  

These resources will help. Packed with ideas, tips and recommendations, these pieces were written by professionals with many years of compliance experience. 

You can quickly skim for articles that relate to your needs and interests. Bookmark this page as a reference for future questions or projects.

Visit Now

---

The post With Compliance Audits, The Best Defense is a Good Offense  first appeared on YouCompli.

It’s the nature of our mission to stay on top of what’s happening in the world of healthcare compliance. And right now, that focus couldn’t be more important.  

These are unusual times, and Compliance is feeling the impact. The Medicare Fiscal Year 2026 Final Rules were expected to be late but came through on time. However, hospitals must still rush to analyze and respond with action plans in short order. CMS transmittals are also likely impacted by the government shutdown (more on that later). 

That leaves many hospital compliance teams unprepared and under-resourced to cope with fast-coming changes. The price of noncompliance, even under extenuating circumstances, is reimbursement risk. 

Two Areas Needing Compliance Attention: Final Rules and Transmittals 

• Final Rules – Legally binding federal regulations that establish new policies in particular areas of healthcare. 
• CMS Transmittals – Internal instructions for updating CMS operational manuals to reflect new or changed policies. 

Two Important CMS Timelines: Fiscal Year and Calendar Year 

The CMS guidance for healthcare comes with its own deadlines attached, and every year there are two important and separate timelines for fiscal year and calendar year Final Rules.  

In healthcare, fiscal year guidance typically has an October 1 effective date, and that Final Rule usually drops in August. This year, YouCompli analysts got through the fiscal year Final Rules incredibly quickly, because CMS cut a lot of the material in the preamble, and that allowed more efficient review and analysis. 

Effective Date of Calendar Year Final Rule Coming Up Fast 

As every seasoned compliance professional knows all too well, CMS puts out a handful of big, omnibus rules for different areas of health care on an annual basis. This time of the year brings us the final rules affecting outpatient costs and billing. These areas usually get addressed during the calendar year, and these calendar year communications started dropping this year on November 5. That gives an effective date of January 1 of the next year.  

It’s important to get these annual changes synthesized and implemented in a health care organization because they cover the entire year. Even when Rules drop at the usual time (and not during a government shutdown), the short time frame to the established effective date still puts pressure on providers to analyze and develop a compliance action plan. That’s where having a partner like YouCompli already breaking down these rules and translating them into actionable business requirements is essential.  

Transmittals Could Be Delayed and Affect Claims Processing 

On top of concerns about Final Rules delays, CMS transmittals ceased to come out on September 30. Transmittals are typically issued on a running basis as they come up. In a given month, you can have anywhere from 15 to 150 transmittals come out.  

A CMS transmittal is not the same as a Final Rule. They are two distinct types of guidance documents from the CMS. Transmittals are official documents to communicate new or changed policies, procedures, claims and other operational guidance to Medicare administrative contractors (MAC), regional offices, and healthcare providers. The communications update specific CMS program manuals, instructions, and other documentation to ensure consistent implementation of Medicare rules.  

MACs Also Risk Claims Backlog with Transmittal Delays 

Another job of a transmittal is to direct the MACs on what to do in processing claims. These third-party contractors are hired by CMS to administer claims, and they can get backlogged on their instructions and claims processing when transmittals run late.  

Any claims processing delays impact providers, so it’s important to keep an eye on when these transmittal communications come out, especially if it drags out for weeks. If MACs struggle with claims processing because they can’t keep up with the updates, providers lose money. 

Whether it be through time-related loss, because then they have to reissue claims with fixes and things of that nature, delays directly impact revenues. That’s not good at a time when health systems are already under the gun. 

Solution: Proactive Compliance to Know, Act and Verify 

If you’re a YouCompli customer, you wouldn’t have to scramble to prepare for last-minute changes, because we would handle it.  

If communications are ever delayed, creating a time crunch, let us act as your analysist team, grabbing communications as soon as they come out, and breaking it down for you. We capture the necessary data and deliver it, along with easily understandable business requirements.  

You’ll know what you need to do to comply, so when the next Final Rule or transmittal hits your inbox, you’re ready to run with updating procedures, training and other requirements.  

We suggest getting on board with us now, so when that time comes, you’re not struggling with these risks and delays.  

About the Author 

Nate Ward, J.D. is the Manager of Compliance and Content Development at YouCompli Software. He comes from a deep background in healthcare compliance and the legal field. Nate leads a team of experts who read regulations, analyze how they apply, and recommend action plans for healthcare compliance.   

Download our Latest Whitepaper

Sign-up for our Weekly Newsletter

Schedule a quick overview

---

27 Ungated Resources for Compliance Leaders and Teams 

Compliance professionals sometimes feel undervalued in comparison to other functions in their organization. They think leaders and colleagues don’t really understand what they do.  

These resources will help. Packed with ideas, tips and recommendations, these pieces were written by professionals with many years of compliance experience. 

You can quickly skim for articles that relate to your needs and interests. Bookmark this page as a reference for future questions or projects.

Visit Now

---

The post How to Prepare for New CMS Final Rules and Transmittals  first appeared on YouCompli.