3. 5. 6. 7. Hospitals Are Implementing Compliance Programs

According to the results of two hospital surveys, our interviews with observers in the health care field, and our study of 25 hospitals, it is apparent that many hospitals are implementing formal compliance programs. However, the actual prevalence of such programs is difficult to determine precisely. Also, a recent survey of 4,300 hospitals by AHA found that 96 percent of the 1,902 respondents indicated that they have a formal compliance program in place or plan to implement one within the coming year. When asked why they felt the need to develop more rigorous compliance programs, these hospital officials mentioned the heightened enforcement environment, HHS-OIG guides and workplans showing a continued enforcement focus on hospital billing, and expectations that HCFA and accrediting bodies would soon require compliance programs. Hospitals Report Compliance Program Costs Are Considerable

According to the hospitals in our study, the implementation and operation of compliance programs entail a considerable commitment of time and money. However, among hospitals that could provide us with direct compliance program cost data, only one appears to spend more than 1 percent of total patient care revenues. All of the hospitals in our study identified direct cost components, such as salaries and fringe benefits for compliance officers and staff, consulting and legal fees, and outside audit services; but determining the costs of these and other components of compliance programs was difficult for our hospital providers. The lack of a compliance budget was the main reason for this difficulty; the hospitals could not always distinguish the costs attributable to their compliance programs from those of their normal operations. Hospital officials pointed out that their compliance programs also generate indirect costs, which are more difficult to measure and may be greater than the direct costs. Foremost among these was employee and physician time spent away from regular duties while attending compliance-related training. Early Evidence of Compliance Program Effectiveness Is Inconclusive

The principal objective of compliance programs, and hence the most direct measure of their effectiveness, is their performance in preventing improper Medicare payments. Self-disclosures of potential misconduct by providers have been reported by HHS-OIG, Justice, and hospital officials, although the number of self-disclosures reported is small. Others we spoke with cautioned that a variety of factors could contribute to an increase in refunds of provider-identified overpayments—not just the effectiveness of compliance programs. One of the other two contractors we spoke with also reported that it had received refunds of overpayments, reportedly due to compliance programs. The voluntary compliance of hospitals and other Medicare providers is crucial to reducing the improper payments that continue to plague the program. The evidence available to date does not show that compliance programs have reduced improper Medicare payments. Comments From the Department of Health and Human Services’ Office of Inspector General

Organizations at Which GAO Conducted Interviews

Alton Ochsner Medical Foundation, New Orleans, La.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the compliance programs established by health care providers to reduce improper payments by Medicare, focusing on the: (1) prevalence of compliance programs among hospitals and other Medicare providers; (2) costs involved with compliance programs; and (3) effectiveness of the programs, to the extent that could be measured.

What GAO Found

GAO noted that: (1) although there is no comprehensive data on the number of providers with compliance programs, many hospitals are implementing them; (2) two recent hospital surveys, one focusing on academic health centers and the other including a broad range of hospital types, found that most hospitals responding either had or planned to soon implement a compliance program; (3) the hospitals in GAO's study said they felt compelled to implement a compliance program for a variety of reasons, including the heightened enforcement environment, suggestions from the Department of Health and Human Services' Office of the Inspector General, and expectations that the Health Care Financing Administration and accrediting bodies would soon require compliance programs; (4) although compliance programs are apparently becoming widely accepted, most of the hospitals in GAO's study have only recently begun implementation; (5) hospitals report that compliance programs require an investment of considerable time and money; (6) however, measuring the cost of compliance programs is difficult; (7) hospitals could not always distinguish costs attributable to their compliance programs from those of their normal operations, in part because the hospitals often had existing compliance-oriented activities that were subsumed by the compliance program; (8) hospitals reported a variety of significant direct costs, such as salaries for compliance staff and professional fees for consultants and attorneys; (9) according to the information GAO was able to obtain, direct compliance program costs appear to account for a very small percentage of total patient revenues--less than 1 percent in all but one of the hospitals studied; (10) the hospitals also reported indirect costs, such as time spent by employees in compliance-related training and away from their regular duties; (11) these indirect costs are more difficult to measure and may be larger than the direct costs reported; (12) the principal measure of a compliance program's effectiveness is its ability to prevent improper Medicare payments; (13) it is difficult to measure effectiveness in this way because of the lack of comprehensive baseline data and the existence of many other factors that could affect measurement results; (14) other measures have been suggested as a proxy for measuring compliance program effectiveness; (15) Medicare contractors reported that they have received refunds of provider overpayments with more frequency; (16) GAO has also noted an increase in formal provider self-disclosures during the last few years; and (17) however, this preliminary evidence does not demonstrate that compliance programs have reduced improper Medicare payments.