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.  

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.

For healthcare compliance leaders, financial literacy is not optional. Compliance risk often hides in the fine print of financial data, making literacy a prerequisite for effective oversight.  

To identify anomalies or potential regulatory “red flags,” compliance officers must move beyond a high-level view of healthcare finance and understand how clinical operations translate into financial entries. 

What does a compliance leader need to understand? Things like: 

• Budgeting and capital planning 
• Internal controls and risk 
• Grant and research compliance  
• Key performance indicators (KPIs) 
• Communication between CFO and compliance officer 

Familiarity with the 14 steps of the revenue cycle is also valuable for mitigating risks associated with reimbursements and 340B compliance. (This topic is covered later in the blog.) 

Where Do Healthcare Compliance and Finance Intersect? 

Regulatory compliance and healthcare finance overlap in multiple ways. Compliance-related areas with a financial angle include: 

• Medicare, Medicaid reimbursement 
• 340B drug pricing 
• Stark Law and anti-kickback statutes 
• Charity care 
• Financial assistance requirements  

What Should Compliance Leaders Understand About Financial Statements? 

To build fiscal literacy, let’s start with some foundational concepts – financial statements. Compliance officers should have a basic understanding of these types of statements: 

1. Balance Sheet 
2. Income Statement 
3. Cash Flow Statement 

1. The Balance Sheet: Assessing Financial Integrity Through a “Snapshot” 

The balance sheet provides a snapshot of an organization’s financial health at a specific point in time, detailing its assets, liabilities and equity. 

Why Compliance Should Care: Monitoring the balance sheet helps ensure that assets are properly recorded, and that liabilities like these are appropriately disclosed: 

• Potential legal settlements 
• Debt obligations 
• Medicare overpayments 

2. The Income Statement: Monitoring Operational Risk Over Time 

Unlike the balance sheet snapshot, the income statement tracks revenue and expenses over a specific period, such as a month or a fiscal year. The income statement puts a focus on total revenue and expenses, and the difference between them, while distinguishing between operating and non-operating items. Those two concepts are compared in the chart below. 

In an income statement, it’s important to distinguish between accrual-basis accounting (matching revenue to period it was earned) and cash-basis accounting (recording transactions only when money changes hands). 

Why Compliance Should Care: By comparing current monthly performance against previous years, compliance officers can spot outliers in revenue or sudden spikes in expenses that could indicate billing errors, “upcoding,” or improper financial arrangements under the Stark Law. 

3. The Cash Flow Statement: Ensuring Operational Sustainability 

The cash flow statement tracks the actual movement of cash into and out of the organization, categorized by: 

• Operating activities 
• Investing activities 
• Financing activities 

Why Compliance Should Care: Understanding cash flow is vital for making sure the organization has liquidity to maintain compliance standards even during times of financial strain. A significant discrepancy between reported net income and actual cash flow can signal deep-seated issues with revenue cycle integrity.  

Revenue Cycle as Regulatory Roadmap 

For a prepared healthcare compliance leader, the revenue cycle isn’t just a financial process; it’s a regulatory roadmap. From initial patient interaction to final collection, each step presents a unique set of compliance risks that can lead to audits, fines or loss of reimbursement if not managed with understanding. 

What Compliance “Trapdoors” to Watch for in the Revenue Cycle 

The revenue cycle is full of complexity, largely fueled by the impact of different hospital types (PPS, critical access, disproportionate share, and tribal hospitals) on Medicare and Medicaid rates. 

While the full revenue cycle has 14 distinct stages, compliance officers should pay particular attention to these “trapdoors” where financial operations must meet strict federal regulations: 

• Front-End Integrity (Scheduling and Registration): Accuracy is paramount to ensure Medicare and Medicaid reimbursements aren’t jeopardized by incorrect patient data or lack of prior authorization. 
• Clinical Documentation and Coding: This is a high-density risk area. Compliance must make sure that coding reflects the actual services provided to avoid allegations of “upcoding” or “unbundling,” which can trigger False Claims Act investigations. 
• 340B Drug Pricing Program: If an organization participates in 340B, the revenue cycle needs rigorous internal audits to establish compliance with drug diversion and duplicate discount prohibitions. The stakes will be even higher if the program undergoes potential changes regarding payment models. 
• Billing and Claims Submission: Errors in this stage directly impact the Clean Claim Rate. More importantly, consistent billing errors for federal healthcare programs can lead to significant liability under Anti-Kickback Statutes or the Stark Law if improper financial relationships are found. 

Monitoring Denial Management at Back End of Revenue Cycle 

A robust compliance program monitors the back end of the revenue cycle as closely as the front. Analyzing denials can reveal systemic issues in documentation or billing practices that, if left unaddressed, represent both financial loss and compliance vulnerability. 

What KPIs Should Compliance Watch as Part of Financial Oversight? 

For a healthcare compliance officer, financial data is more than just a reporting requirement. It’s a proactive tool for risk assessment. By monitoring specific KPIs, compliance teams can move from reactive auditing to strategic oversight and identify operational stressors before they escalate into violations. 

The “Big Four” Financial KPIs for Compliance Officers 

Comprehensive financial oversight should track these four metrics: 

• Operating Margin: This measures whether the organization’s core clinical mission is profitable after all operating and overhead costs are paid. A shrinking margin often leads to “cutting corners” in staffing or documentation, which directly increases compliance risk. 
• Days Cash on Hand: This indicates liquidity. How many days can an organization operate using its current cash reserves if all revenue stopped? Higher liquidity provides the financial “breathing room” to maintain compliance and quality standards even during economic downturns. 
• Clean Claim Rate (CCR): A high CCR (ideally 95% or higher) indicates that claims are being submitted without errors the first time. A low rate is a red flag for systemic billing or documentation errors that could trigger federal audits under the False Claims Act. 
• Payer Mix: It’s critical to understand the percentage of revenue coming from Medicare, Medicaid and private insurance. In many healthcare models, Medicare functions as a “break-even” payer, while Medicaid reimbursements often fall below the actual cost of care, placing additional pressure on revenue integrity. 

What to Know about Budgeting and Internal Controls 

Compliance officers should also distinguish between the Operating Budget (daily/annual clinical operations) and the Capital Budget (typically reserved for long-term investments or items over $10,000). 

To prevent fraud and ensure financial integrity, a compliance program must enforce strict segregation of duties. This assures that no single individual has control over all aspects of a financial transaction, serving as a primary defense against embezzlement and improper financial reporting. 

Using the SBAR Tool to Structure CFO and Compliance Communication 

The most effective healthcare compliance programs are those where the Chief Compliance Officer (CCO) and Chief Financial Officer (CFO) operate as strategic partners.  

However, communicating complex compliance risks in a way that aligns with financial priorities requires a structured approach. This is where the SBAR tool (Situation, Background, Assessment, Recommendation) becomes invaluable for justifying financial decisions and resource allocation. (Download a helpful SBAR template at the end of this article)

Four-Step Method for Financial Advocacy 

Use this four-step method to present compliance needs to your finance team: 

• Situation: Clearly state the immediate financial or regulatory issue.  
  Example: “We have identified a 15% discrepancy in our 340B drug pricing audits.” 

• Background: Provide the necessary context and data.  
  Example: Current Medicare reimbursement rates for these drugs are subject to strict transparency requirements. 
   
• Assessment: Offer your professional analysis of the risk.  
  Example: Failure to rectify this documentation gap poses a significant risk to operating margin and regulatory standing and could trigger a federal audit. 
   
• Recommendation: Propose a specific, data-backed solution.  
  Example: “I recommend an immediate investment in automated tracking software as part of the next capital budget cycle.” 

How Compliance Can Secure a “Seat at the Table” 

By confidently speaking the language of finance with terms like liquidity, capital planning and debt financing, compliance officers move beyond being seen as a “cost center” and the “Department of No.”  

Instead, compliance can become a guardian of the organization’s financial sustainability, ensuring that compliance is integrated into every high-level discussion, from annual budgeting to long-term strategic growth.  

Ready to drive more compliance value? Reach out to see how YouCompli can help.  

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The post Financial Literacy: The “Superpower” Every Modern Compliance Leader Needs  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.   

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Sign-up for our Weekly Newsletter

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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.

Peripheral vascular disease (PVD) reimbursement is fraught with potential compliance pitfalls. With increased scrutiny and worrisome statistics about improper payments, healthcare providers must identify and mitigate any PVD compliance risks that could jeopardize their operations.  

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.  

Equip yourself with the knowledge to navigate this complex environment and safeguard your organization’s reputation and financial sustainability. Learn effective strategies to mitigate compliance risks in peripheral vascular reimbursement by focusing on medical necessity and adherence to guidelines. 

What’s your compliance risk when it comes to reimbursement for specific medical procedures like peripheral vascular interventions (PVD)? 

Hospitals, health systems and medical practices providing peripheral vascular procedures should be aware of recent scrutiny of these services by government enforcement agencies. 

What Therapies Target Peripheral Vascular Disease? 

Peripheral vascular disease can result in the narrowing or blockage of arteries in the periphery, such as the lower extremities. There are many different therapies to address PVD, including the typical first-line treatment of lifestyle changes and medications.  Lifestyle changes include quitting smoking, eating a healthy diet low in saturated fats, regular exercise and weight management. Some PVD medications include the statin class of drugs, antiplatelet agents, ACE inhibitors and others.   

If lifestyle changes and medications don’t work, and certain clinical criteria are met, patients can undergo peripheral vascular procedures. These are minimally invasive procedures intended to improve blood flow through the arteries. Angioplasties, atherectomies and placement of stents are types of peripheral vascular procedures. 

OIG Looks at Compliance Risk in PVD Reimbursement  

Enforcement agencies are concerned with the increasing volume of these procedures. The problem relates to suspicions that some clinicians perform these procedures when they’re not medically necessary. 

The HHS OIG has added two different projects to their work plan related to peripheral vascular procedures. The first is “Utilization of Peripheral Vascular Procedures and CMS’s Related Program Integrity Efforts.” They report that in one calendar year, Medicare paid more than $600 million for atherectomies and angioplasties in peripheral arteries with and without a stent.   

Editor’s Note: The Work Plan is a guide to OIG priorities around oversight and compliance. By reviewing the Work Plan, health systems can identify potential compliance risks and proactively take action to mitigate them. 

Fraud Concerns Over Vascular Reimbursement Volume 

The OIG also states that both CMS and whistleblower fraud investigations have identified these surgeries as vulnerable to improper payments. This particular project is designed to determine trends in Medicare fee-for-service for surgeries in peripheral arteries over several years and identify paid claims that exhibit questionable characteristics.  

The OIG will also describe program integrity activities that CMS and its contractors have taken to combat fraud, waste and abuse specific to procedures in peripheral arteries. The report is expected to be issued in 2026. 

Understanding Medicare Compliance for Vascular Interventions 

The second work plan project is named “Medicare Payments for Lower Extremity Peripheral Vascular Procedures.” The OIG reports that peripheral vascular procedures in an office setting have increased among the Medicare population over the past decade.  

In fact, OIG says for calendar years 2022 and 2023, Medicare paid approximately $1.16 billion for lower extremity peripheral vascular procedures in office settings. Their concern is that these procedures are generally recommended only after patients have exhausted medical and exercise therapy and have lifestyle-limiting symptoms.  

The OIG plans to analyze Medicare fee-for-service for peripheral vascular procedures for questionable characteristics. They would also like to assess whether these procedures complied with CMS requirements and met applicable treatment guidelines. This report is expected to be released in 2025 under report number W-00-24-35914. 

Whistleblower Fraud Investigations Find Compliance Issues 

The OIG reported that there have been some whistleblower fraud investigations concerning these procedures. One case recently occurred in Florida where the whistleblower was a physician who claimed a vascular center and its providers were performing and billing for medically unnecessary peripheral vascular procedures.   

The government intervened in the case and alleged the providers submitted false claims to Medicare for percutaneous transluminal angioplasties that were not reasonably or medically necessary because they were performed without appropriate diagnostic imaging or clinical justification.   

The case was resolved when the medical providers agreed to pay $810,301, of which $337,625 was restitution. The defendants also agreed to pay $85,000 for the whistleblower’s reasonable expenses, including attorneys’ fees and costs. 

Report: Faster Treatment, Higher Costs with Office Procedures 

The Journal of Vascular Surgery published a report in June 2024 that concluded Medicare patients with peripheral artery disease are treated more quickly but undergo higher cost interventions in office-based laboratories compared to outpatient hospital settings. 

The authors used publicly available Medicare fee-for-service claims data spanning a five-year period that identified all patients undergoing certain peripheral procedures for certain conditions. They then evaluated the associations of patient and procedure characteristics with the site of service. 

Steps for Compliance in Peripheral Vascular Reimbursement 

So, what’s a compliance officer to do?  The first step is to determine the level of involvement the organization has in these particular procedures.  

If found to be significant, it’s probably wise to evaluate the clinical guidelines and policies in place for use of peripheral vascular procedures. Most organizations have a medical director or department chair who could guide a review to determine if procedures are medically necessary.  

Seek Out External Resources about PVD Compliance 

Alternatively, seeking external expertise is also an option. Though professional societies’ clinical practice guidelines are not the “end-all,” it might be useful to reference such guidelines as a starting point.  

These might include: 

• Society of Vascular Surgery

• American College of Cardiology/American Heart Association Joint Committe

• Society of Interventional Radiology

Best Practices for Peripheral Vascular Procedure Compliance  

Most compliance programs only perform medical coding reviews of the procedure documentation, but the OIG suggests including medical necessity audits as well. In their General Compliance Program Guidance (GCPG) document, they state, “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.” 

Given this, compliance professionals shouldn’t ignore the question of medical necessity for peripheral artery procedures. Scrutiny of these services continues to be a priority for the OIG and their work plan as well as the Department of Justice, as evidenced by cases that result either from data analytics or whistleblowers. 

Confident Compliance Starts Now 

YouCompli customers are confident in their approach to compliance challenges like managing PVD reimbursement. Learn more about the unique combination of expert human analysis and digital compliance management tools. 

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 How to Avoid Compliance Risk in Peripheral Vascular Reimbursement   first appeared on YouCompli.

Aligning healthcare regulatory compliance with revenue cycle management is critical to mitigating risks and preserving business integrity. This blog explores three effective strategies to foster collaboration between compliance teams and revenue cycle management.  

Some of the most significant compliance risks faced by healthcare organizations today are found in the revenue cycle. The HHS OIG has stated, “One of the best ways to identify fraud and abuse risks is to follow the money.” 

For many healthcare organizations, this means having a good working relationship with the entity’s revenue cycle team.  

The revenue cycle is the process that starts with a patient’s initial appointment and ends with full payment for services. It encompasses all the administrative and clinical functions that contribute to collecting patient service revenue.  For healthcare organizations that provide services to patients, the revenue cycle is the organization’s financial lifeblood. 

3 Ways Compliance Can Stay Connected with RCM 

If compliance has a good working relationship with revenue cycle management, the two functions can enjoy a fruitful outcome.  

Compliance professionals should consider the following three ways to interact with the revenue cycle team. 

1. Regular Collaboration 

We know from OIG guidance documents that, to be effective, the compliance officer should maintain a degree of separation from the entity’s delivery of healthcare items, services, and related operations.  

Even though this means the compliance officer should not be responsible, either directly or indirectly, for the delivery of healthcare items and services or billing, coding, or claim submission, it does not mean the compliance officer should not be well-versed in these functions through regular communication and collaboration. 

Take Advantage of Compliance Committee Connections 

Regularly collaborating with the revenue cycle team will inform compliance professionals of the specific risks and potential compliance red flags the revenue cycle may be facing.  Many organizations ensure this collaboration by having revenue cycle leadership serve on the organization’s compliance committee.  

In fact, the OIG states the compliance committee “…should be comprised of the relevant leaders of both operational and supporting departments, which could include Billing and Coding, Clinical and Medical, Finance, Internal Audit, IT, HIM, Human Resources, Legal, Quality, Risk Management, Sales and Marketing, and other operational managers.”  Most of the departments suggested by the OIG play a role in the revenue cycle. 

In addition to revenue cycle personnel participating in the compliance committee, collaboration between compliance and revenue cycle can occur on a weekly basis through meetings and sharing of revenue cycle data such as denial rates, reports from electronic claims editors, communications from third party payors and any internal coding and billing monitoring the revenue cycle is performing. 

2. Proactive Claims Auditing  

The OIG tells healthcare providers that they “…should take proactive measures to ensure compliance with program rules, including regular reviews to keep billing and coding practices up to date as well as regular internal billing and coding audits.” 

In organizations that submit claims for services, a sizable number of resources should be dedicated to ensuring the claims they are submitting for reimbursement meet all program requirements.  

The revenue cycle team should have monitoring efforts in place for correct coding and billing.  Also, compliance departments should ensure that independent claims audits are also occurring regularly. 

Assisting Revenue with 60-Day Repayment Rule Requirements  

Even if an entity makes innocent billing mistakes, they have an obligation to repay the money to government third-party payers such as Medicare and Medicaid. The Affordable Care Act included a requirement that entities must report and repay overpayments by the later of: “(A) the date which is 60 days after the date on which the overpayment was identified; or (B) the date any corresponding cost report is due, if applicable.”  Sometimes this is referred to as the 60-day repayment rule. 

If a revenue cycle team’s internal monitoring identifies overpayments, it is critical for compliance departments to know the date of discovery, so the organization does not run afoul of the 60-day repayment rule. If the entity does not monitor the repayment requirements, they could be subject to liability under the Federal False Claims Act. 

3. Training and Education Geared to Job Roles 

Coding and billing rules are regularly updated and can change frequently, and it’s often difficult for busy clinicians to stay on top of the changing regulations. Compliance and revenue cycle teams should work together to ensure those involved in revenue cycle functions are educated on the most current rules. 

The OIG recommends targeting training depending on an individual’s role. Thus, those involved in revenue cycle operations need to provide training and education specific to the nuances of the revenue cycle. The training sessions should cover any compliance risks specific to the learners’ roles and responsibilities.  

Depending on the learners’ roles, these may include: 

• Billing 
• Coding 
• Documentation 
• Medical necessity 
• Beneficiary inducements 
• Gifts 
• Interactions with physicians  
• Other sources or recipients of referrals of federal healthcare program business 

Three Ways to Show You Follow the Money

If healthcare organizations are going to address their biggest compliance risks, they must include the revenue cycle. Compliance professionals can lead in addressing revenue cycle risks by: 

• Driving effective collaboration between compliance and revenue cycle teams 
• Verifying that proper auditing and monitoring of claims are occurring  
• Ensuring those involved in revenue cycle receive targeted training based on their specific role.  

Doing these three things helps show your compliance program is indeed “following the money” as suggested by enforcement agencies such as the OIG. 

About Solutions for Compliance Management and Operations 

Need help keeping track of everything going on in regulatory management? When multiple people and departments are involved, the last thing stretched compliance teams need is more manual work.  

YouCompli compliance solutions keep cross-functional engagement organized, verified and on schedule.  

• Identify and assign specific individuals responsible for completing regulatory requirements. 
• Track progress and on-time completion of all regulatory requirements. 
• Verify that regulatory requirements have been acted upon within the organization. 
• Gauge and quantify potential areas of risk related to incomplete regulatory requirement assignments. 

Detailed reports equip compliance teams with oversight information they need to effectively communicate, act on, monitor, and focus organizational compliance efforts. 

Combine YouCompli solutions with the three best practices in this blog to build productive connections with Revenue and other departments.  

More Resources About Revenue Cycle Management and Compliance 

If you’re interested in learning more about the Revenue angle of healthcare compliance, here are a few additional resources: 

White Paper: Exploring the Four Hot Spots Of the Healthcare Revenue Cycle 

Case Study: Getting It Right: Minimizing Self-identified Overpayments & Maximizing Accurate Billing 

Tips and Tactics: Revenue Cycle Management Compliance: Ensuring Financial Health in Healthcare 

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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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.

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The post Three Strategies to Align Compliance with Revenue Cycle  first appeared on YouCompli.

The HHS OIG recently issued its first Industry Segment-Specific Compliance Program Guidance, or ICPG, with many more expected.  This first ICPG covers Skilled Nursing Facilities and Nursing Facilities.  

Let’s review some of the highlights. 

1. Quality of Care and Quality of Life 

For decades, the OIG and other government enforcement agencies have emphasized the importance of the quality of care and quality of life for nursing facility residents.   

When a nursing facility submits a claim to Medicare or Medicaid for reimbursement, it certifies the services were provided in compliance with all applicable statutes, regulations, and rules. If a nursing facility does not provide care consistent with professional standards of quality, or in an environment that promotes quality of life, claims for reimbursement may be considered false.   

The ICPG provides the following examples of quality and related safety concerns that can lead to submission of false claims:  

• providing medically unnecessary or grossly substandard services 
• housing residents in unacceptable or dangerous living conditions 
• failing to provide residents with activities 
• failing to provide residents with needed psychiatric care 

2. Billing Requirements 

The ICPG states, “Ensuring compliance with Medicare and Medicaid billing requirements should be a core function of nursing facility compliance program operations.” 

The OIG expects nursing facilities to be proactive in their oversight of billing compliance. This includes conducting regular reviews to ensure billing and coding practices are current and accurate, as well as performing regular internal billing and coding audits. Even if an entity makes an isolated billing error, that entity still has an obligation to repay the overpayment to avoid False Claims Act liability. 

The ICPG specifically addresses the following risk areas associated with billing requirements: 

• SNF Prospective Payment System (PPS)  
• Value-Based Payment Models and Programs 
•  Medicare Advantage and Medicaid Managed Care  
• Medicare Part D  
• Medicare Health Plan Enrollment for Nursing Facility Residents 

Interestingly, the ICPG for nursing facilities also refers readers to a supplement on understanding reimbursement for nursing facilities, which can be viewed at https://oig.hhs.gov/documents/compliance/10039/nf-icpg-supplement.pdf. 

3. Anti-Kickback Risks 

The OIG’s General Compliance Program Guidance (GCPG) highlighted some of the risks associated with the Federal Anti-Kickback Statute (AKS) in the healthcare industry. The nursing facility ICPG provides many helpful and specific AKS risks to unique to nursing facilities. Among the specific risks highlighted by the OIG are: 

• Free (or Below Fair Market Value) Goods and Services  
• Discounts 
• Arrangements for Services and Supplies  
• Long-Term Care Pharmacy and Consultant Pharmacist Arrangements  
• Hospital Arrangements  
• Hospice Arrangements  
• Care Coordination and Value-Based Care Arrangements  
• Joint Ventures 

The ICPG emphasizes that all referral relationships call for vigilance under the Federal AKS. The discussions in the ICPG not only highlight several risk areas for nursing facilities under this law, but it also provides excellent recommendations for mitigating those risks. OIG also stresses that nursing facilities should scrutinize the listed risk areas as part of their risk assessment, internal review, and monitoring processes. 

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 Breaking Down the OIG’s First Industry-Specific Guidance  first appeared on YouCompli.