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.   

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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.  

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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.” 

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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.   

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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.  

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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.

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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.

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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

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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.   

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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.

Many compliance professionals rely on HHS OIG focus areas as they perform risk assessments and plan subsequent auditing and monitoring activities. In November 2024, the OIG added an item to their Work Plan describing their intention to review Medicare Part B payments for skin substitutes.  

More recently, in September of 2025, the OIG published a data snapshot report that concluded Medicare Part B payment trends for skin substitutes raise major concerns about fraud, waste and abuse.  

This blog explores the implications for compliance and what health systems need to be aware of.  

How Skin Substitutes Are Covered Currently 

Skin substitutes aid in wound healing and redevelopment of skin. Medicare covers skin substitutes that are reasonable and necessary for the treatment of an enrollee’s condition. Local coverage determinations state that Medicare Part B generally covers skin substitutes for treatment of diabetic foot ulcers and venous leg ulcers that have failed to respond to at least four weeks of standard wound care.  

However, no national or local coverage requirements apply for other wound types (e.g., pressure ulcers or trauma wounds), and coverage of skin substitutes for these wounds is determined on a case-by-case basis.  

How Medicare Pays for Skin Substitutes 

Medicare Part B pays for skin substitutes based on the number of service units billed at prices ranging from approximately $100 to more than $1,000 per square centimeter.  

For payment purposes, CMS treats skin substitutes like approved prescription biologics, and skin substitutes are reimbursed in non-institutional Part B settings at 106% of the average sales price (ASP).  ASP Refers to the average price of a drug sold to providers, and it’s used for calculating reimbursement rates.  

From calendar years 2020 through 2023, Medicare Part B payments for skin substitutes increased substantially. In two years, Part B spending on skin substitutes increased 640%, going from $389 million (Q3 2022) to $2.88 billion (Q3 2024). 

What Drives Increases in Skin Substitute Pricing and Utilization? 

The rapid growth in expenditure is driven by both higher prices and increased utilization, and the OIG found concerning trends in both areas. 

Higher Prices Driven by ASP and Incentives 

Some of the factors potentially increasing prices include the ASP and incentives for providers. Manufacturers of skin substitutes can quickly bring new skin substitutes to market compared to typical products paid using ASP.  

By statute, ASP is defined as a manufacturer’s sales of a drug to all purchasers in the United States in a calendar quarter (net of most discounts) divided by the total number of units of the drug sold by the manufacturer in that same quarter. 

Calculating Payments for Billing Codes 

Manufacturers are required to report the ASPs and total sales volume for each of their Part B drugs to CMS within 30 days of the end of every quarter. CMS then uses this data to calculate a payment amount for the billing code representing the drug.  

Because different versions (i.e., dosage amounts, package sizes) of a drug may be included within the same billing code, CMS calculates an overall volume-weighted ASP for the code using the manufacturer-reported sales data. By statute, Part B payment is set at 106% of the volume-weighted ASP.  

In cases in which CMS is unable to calculate a volume-weighted ASP for a code (e.g., a new code for which ASPs have yet to be reported), Medicare Part B contractors typically use Wholesale Acquisition Costs, aka WACs (i.e., list prices) or payment invoices to determine a payment amount.  

Providers Seek More Favorable Payments Based on Spread 

Allowing for the time it takes for manufacturer price reporting and the subsequent CMS validation and calculations, there is a two-quarter lag in the ASP-payment process (e.g., first-quarter 2024 ASPs were used as the basis for third-quarter 2024 payment amounts). 

Part B providers can retain the “spread” between their acquisition cost for a drug and the Medicare payment amount. Previous OIG work found that higher spreads may correlate with increased utilization for certain drugs.  

Under the current payment system, Medicare often pays providers for skin substitutes at amounts much higher than providers’ purchase prices, and providers keep the “spread.” This creates incentives to bill for more and more units of skin substitutes and to choose products with the greatest spreads – the same types of billing trends highlighted in the OIG’s report. 

Increased Utilization Has Average Part B Payment Up 153% 

Utilization of skin substitutes has also increased steadily, with more enrollees having skin substitute claims and a higher number of units being billed per enrollee. OIG found that between the first quarter of 2023 and the third quarter of 2024: 

• Number of unique Part B enrollees with skin substitute claim increased by 53%. 
• Total number of units paid under Part B increased by 83%. 
• Average Part B payment amount for each unit of skin substitute increased by 153%. 

In less than two years, the amount paid per Part B enrollee has tripled from $40,051 to $121,501. 

28% Growth in Utilization and Payments in Home Care Settings 

The OIG also found the growth of skin substitute utilization and payments in the home care setting to be particularly notable. By the third quarter of 2024, 28% of enrollees with a paid skin substitute claim under Part B were reportedly being treated in their home. These home care enrollees accounted for more than half of Part B spending on skin substitutes that quarter. 

They also noted that utilization and expenditures for skin substitutes under Medicare Advantage (MA) are just a fraction of utilization and expenditures under original Medicare.   

For example, in the third quarter of 2024, OIG found that only 3,800 Medicare Advantage enrollees were associated with a skin substitute claim, compared to 24,000 enrollees in Part B.  

OIG concluded there were no obvious differences in the enrollee demographics of original Medicare and Medicare Advantage that would explain the massive variance in skin substitute utilization.  

Instead, they suggested variance is likely driven by MA plans’ ability to use numerous reimbursement and utilization management tools to set payment rates and coverage for products such as skin substitutes. 

Urgent Action Needed to Rein in Spending Increases and Fraud 

Based on their data snapshot report, the OIG concluded that action is urgently needed to rein in the massive increases in Medicare Part B spending for skin substitutes in non-institutional settings. They also cited numerous fraud schemes involving skin substitutes. 

Compliance professionals should make sure they are considering their organization’s use of skin substitutes and determine if there are existing risks. If so, they should monitor and audit their organization’s use of skin substitutes to ensure compliance. 

More Resources on Compliance Risk 

Know the Compliance Risk for Certain Anesthesia Services 

A good healthcare compliance program is all about reducing risk, both in patient care and in financial reimbursement. This detailed blog by compliance expert, CJ Wolf, will bring you up to date on the compliance risks associated with certain anesthesia services.   

How to Avoid Compliance Risk in Peripheral Vascular Reimbursement   

Peripheral vascular disease (PVD) reimbursement is fraught with potential compliance pitfalls. This expert-written blog addresses the pressing concern of compliance risks in PVD reimbursement. It provides insights into regulatory trends, recent investigations and best practices. 

Exclusion Screening Failure Causes Compliance Nightmare 

Even a seemingly small glitch can have major consequences for healthcare compliance. This blog shares the story of the consequences of an incident when exclusion screening software glitched. 

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

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 OIG Cites Fraud, Waste and Abuse Concerns with Skin Substitutes  first appeared on YouCompli.

A good healthcare compliance program is all about reducing risk, both in patient care and in financial reimbursement. This detailed blog by compliance expert, CJ Wolf, will bring you up to date on the compliance risks associated with certain anesthesia services.   

The OIG just published audit results and report (July 31, 2025) outlining the issues in this area. This article is a summary of that report, along with what it might mean for compliance professionals.  

The implications can be huge. For example, OIG concluded that Medicare paid $45.7 million for anesthesia services provided during the SPM procedure sessions that were at risk for noncompliance with Medicare requirements.  

What to Know About Anesthesia, Compliance and the Latest OIG Audit 

The U.S. Department of Health and Human Services Office of Inspector General (OIG) recently released a nationwide audit report highlighting potential improper payments for anesthesia services provided during select spinal injection procedures  

It is only under rare circumstances that Medicare Part B covers the cost of anesthesia during certain spinal pain management (SPM) procedures. In fact, a prior OIG audit found that 27% of billed anesthesia services during SPM procedures did not have supporting medical documentation that would justify the use of anesthesia.  Given these circumstances, the OIG decided to perform the more recent nationwide audit and publish its findings. 

Goal of OIG Audit Regarding Medicare Part B Payments 

The OIG’s goal in the audit was to identify Medicare Part B payments to physicians for anesthesia administered during selected SPM procedures that were at risk for noncompliance with Medicare requirements. 

The specific SPM procedures included in the audit were: 

• Facet-joint injections 
• Facet-joint denervation (aka radiofrequency ablation) 
• Epidural steroid injections 
• Sacroiliac joint injections 

Medicare Coverage Only in Rare Circumstances 

As mentioned, it is only in rare circumstances that Medicare covers the cost of certain anesthesia services provided during SPM procedures. The types of anesthesia services that could potentially be covered under these rare circumstances include: 

• Moderate sedation: Administration of a drug-induced depression of consciousness during which a patient responds purposefully to verbal commands, either alone or accompanied by light tactile stimulation. No interventions are required to maintain the enrollee’s airway, and spontaneous ventilation is adequate. 

• General anesthesia: Administration of a drug-induced loss of consciousness during which a patient is not arousable, even by painful stimulation. The ability to independently maintain breathing is often impaired. The patient often requires assistance in maintaining an open airway that allows for adequate airflow and proper oxygenation of the lungs. Positive pressure ventilation may be required because of depressed spontaneous ventilation or drug-induced depression of neuromuscular function. 

• Monitored anesthesia care: This is a specific anesthesia service for a diagnostic or therapeutic procedure. Indications for monitored anesthesia care include the need for deeper levels of analgesia (i.e., the inability to feel pain) and sedation than can be provided by moderate sedation. Monitored anesthesia care falls between moderate sedation and general anesthesia. 

MAC LCDs Published for Select SPM Procedures 

Medicare Part B claims are adjudicated and paid by Medicare Administrative Contractors (MAC).  MACs are charged with ensuring proper payment of claims.  They are to safeguard Medicare funds against improper medical coding and billing, fraud and abuse. One way they do this is by publishing local coverage determinations (LCDs) which outline when certain services are, or are not, covered. 

The MAC LCDs for the selected SPM procedures explain that the use of moderate sedation, general anesthesia, and monitored anesthesia care is usually unnecessary or rarely indicated for these procedures. However, individual consideration may be given in rare cases when documentation clearly established the need for such anesthesia. 

Audit to Confirm Compliance with Limited Coverage Rules 

The OIG wanted to confirm compliance with these limited coverage rules for anesthesia services billed along with the SPM procedures. To do so, they identified an audit period consisting of claims for SPM procedure dates of service between May 2, 2021, and August 31, 2023, during which Medicare paid for 3.9 million sessions of SPM procedures.   

For this audit period, physicians billed for anesthesia services nearly 18% of the time. The MACs paid $46.2 million for the anesthesia services or 99.5% of the time that anesthesia was billed during the same SPM procedure session. 

Then, the OIG identified and selected a nonstatistical sample of 28 sessions where both anesthesia and the selected SPM procedures were billed. To verify compliance, the OIG obtained the supporting medical documentation for these sessions and had an independent medical reviewer determine whether the anesthesia was medically necessary and met the rare circumstances when Medicare would cover the anesthesia service.  

Medical Records Fail to Document Necessity 

For 20 of the 28 sampled sessions, the medical reviewer determined the supporting medical records did not document a rare circumstance in which administering anesthesia was reasonable or necessary for the specific SPM procedure.   

One such example included a session where a physician administered moderate sedation to a patient during an epidural steroid injection session. The medical records provided by the physician stated that this type of anesthesia was administered because of the patient’s anxiety, which is not a medically necessary indication meeting coverage criteria according to the LCD. The medical records also did not have evidence of failed oral sedation, which could have necessitated moderate sedation. 

The OIG stated they could not provide an overall estimate of improper payments for the entire audit period because the sample they used was a nonstatistical sample. However, they concluded that Medicare paid $45.7 million for anesthesia services provided during the SPM procedure sessions that were at risk for noncompliance with Medicare requirements. 

OIG Recommendations Include Provider Education 

One of the more significant recommendations the OIG made for CMS and the MACs is to  

• Educate providers on the coverage criteria 
• Review claims for improper billing of anesthesia services 

For providers, this means your MAC may begin auditing such claims. 

Compliance Tip for Anesthesia Billing 

Compliance professionals should assess how often their organizations bill anesthesia services at the same time as the SPM procedures and review the medical records to determine if the sessions meet the rare circumstances found in the LCD requirements for coverage of both services. 

More Resources about Compliance Risks 

Continue learning about the complexities of Medicare reimbursement and compliance in these other piece by CJ Wolf. 

Compliance Risks Associated with Outlier Payments 

In some circumstances, payers like Medicare, for example, will reimburse additional amounts beyond the prospective payment rate. These additional payments are called “outlier payments.” Outlier payments provide additional reimbursement for cases of exceptionally costly treatments.   

How to Avoid Compliance Risk in Peripheral Vascular Reimbursement   

Peripheral vascular disease (PVD) reimbursement is fraught with potential compliance pitfalls. This expert-written blog addresses the pressing concern of compliance risks in PVD reimbursement. It provides insights into regulatory trends, recent investigations and best practices. It provides insights into regulatory trends, recent investigations and best practices. 

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

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

The post Know the Compliance Risk for Certain Anesthesia Services  first appeared on YouCompli.

In this blog, experts offer the real scoop on audit readiness in healthcare. Learn the unfiltered truth about compliance audits and what audit etiquette means. Get essential tips on preparing for audits, the role of healthcare compliance auditors, and what to do (and what not do) during an audit.  

What Does Audit Readiness Mean? 

Let’s say a regulator shows up at your door tomorrow. What’s the first thing your team scrambles to find? Is it evidence of task completion? Maybe a list of applicable regs? Updated policies? How about proof of communication to stakeholders? We saw a post this week asking for a current audit preparedness playbook because so many organizations think they’re ready, until they aren’t. 

Raw Truth about Compliance Audits 

Here’s the raw, unfiltered truth; no organization is ever ready for an external auditor or inspector. Ever. If you were, no one would panic when the FDA shows up at the door unannounced, or the state shows up in your lobby. “The state showed up the other day, and I knew why they were coming so I wasn’t unprepared.”  

The truth is you do your best, and you also expect the worst because they’re an auditor or inspector. Duh. It’s what they do.  

It’s like when you hear a funny rattle in your car. You take it to the mechanic. You know he’s gonna find SOMETHING. That’s his job. If you didn’t hear the rattle, you wouldn’t have taken it to him. You’re just hoping it is a minor repair rather than a total overhaul. Same with your audit, your auditor, and the rattle in your compliance practices. 

What to Know About the Healthcare Compliance Auditor 

Auditing is a formal, independent way to investigate regulatory compliance of a system or process within an organization. In accordance with regulations or industry best practices, an auditor assesses the adherence, adequacy and absence of certain processes.  

What a Healthcare Compliance Auditor Does 

• Identifies errors, omissions and irregularities.  
• Investigates the intent of possible wrongdoings. 
• Provides information regarding auditing procedures.  
• Submits reports to investigating authorities. 

Okay, A Compliance Audit Is Scheduled – What to Do? 

Once you know an audit is coming, use these five steps to prepare your organization. 

1. Make sure you can have as many of your team members available for the audit as possible, in case the auditor wants to schedule interviews with them.  
2. Provide a few date options for the auditor to choose from. A regulatory body like CAP, CLIA or FDA does not have to give warning of an audit and can arrive unannounced, but most audits are not unannounced. You have time to prep. Use it.  
3. Ask for an audit agenda as soon as you can. Review it.  
4. Alert the team that an audit will occur. This allows time to prepare any project-specific documents that may not be complete.  
5. About a week out from the audit, do a facility walkthrough to make sure there is nothing out of place. Do it two days out and then the day before. Yes, this much. You have people in your office. They move things.  

Once you have these steps under control, preparation becomes a case of do’s and don’ts. In other words, audit etiquette. 

What Is Audit Etiquette? Best Practices for Compliance Behavior 

Audit etiquette covers all the best practices required to facilitate smooth external audits. These vary slightly based on the health system’s existing compliance processes and experience facilitating them.  

In most cases though, following these techniques for what to do and what to avoid will drive positive, less stressful outcomes.  

What to Do in a Compliance Audit 

• Do listen to an auditor’s question and think before responding.  
• Do answer only the question that is asked. Stop talking.  
• Do ask for clarification if you don’t understand the question.  
• Do answer only those questions relative to your job.  
• Do be honest and pleasant. 
• Do treat the auditor with respect and courtesy at all times.  
• Do dress in business casual attire. 
• Do prepare to talk to the auditor and anticipate questions. 
• Do have quality obtain copies of taped conversations. 
• Do provide well-ordered, clear documents. 
• Do understand your policies and procedures. 
• Do keep computers locked when away. 
• Do close security-controlled doors. 
• Do keep paperwork organized and out of sight when possible. 
• Do escort the auditor at all times while on the premises. 

What Not to Do in a Compliance Audit 

Don’t guess. Say you don’t know or that you need to consult an SOP or defer to someone who is more suitable to answer the question. If you want to consult an SOP, describe the procedure in general terms with the auditor and then walk them through the details. Just saying “I have to consult my SOP” gives the impression that you aren’t trained. 

Here are other things NOT to do in an audit:  

• Don’t try to answer for someone else. 
• Don’t answer for another department or specialty. 
• Don’t offer additional information. Again, stop talking.  
• Don’t elaborate – answer only what is asked. 
• Don’t use hedge words (examples: I think, usually, normally). 
• Don’t guess when asked a question. 
• Don’t sign anything without legal approval.  
• Don’t argue with the auditor or inspection. Clarify anything the auditor misunderstood.  
• Don’t be rude or disrespectful to the auditor. 
• Don’t huddle. 
• Don’t panic. 
• Don’t lie. 

Practice Compliance Audit Etiquette with Confidence 

Regulatory bodies will give a report prior to leaving the audit. Ensure you engage with the necessary teams to give sufficient responses and have a plan for any noted observations. The observations and responses in a report will generally be the first items looked at in the next audit. Make sure you stay on top of these action plans and complete the items you have committed to. 

Also remember that auditors may be experts or novices based on the type and scope of the audit being performed. Do not assume you are the smartest person in the room when communicating with an auditor. Understand that the inherent authority of the auditor is dictated by the interested party they are advising. Their ability to influence a decision (that may have a significant impact on your organization) is the foundation of a desired outcome for you. That’s one reason why we recommend practicing good audit etiquette. 

More Resources about Compliance and Audit Readiness 

• Three Strategies to Align Compliance with Revenue Cycle 
• Audit Expectations and Challenges 
• Healthcare Audit? Stay Ready. Don’t Get Ready. 
• How to Use TPE Plans for Compliance Auditing and Monitoring 

John R. Nocero, Ph.D., and Andrea L. Bordonaro, MAT, blog on LinkedIn as “The Q-Kids,” discussing everything related to clinical research education, inspiration, and professional connection. 

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.

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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.

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The post Audit Readiness? How about Audit Etiquette?  first appeared on YouCompli.