OIG compliance guidance for nursing facilities

The importance of the long-term care (LTC) mission and this hyperintensive regulatory environment requires constant vigilance and hard work. As Congress moves compliance from recommended to mandatory, key management, financial, and clinical personnel need to begin upgrading compliance plans and activities. Since 1998, the Office of Inspector General (OIG) of the Department of Health and Human Services has issued a series of guidance statements for various types of healthcare providers. In 2000 and 2008, the OIG issued compliance recommendations for long-term care (copies can be downloaded at


In 2009, the Patient Protection and Affordable Care Act moved compliance to a new realm by making a compliance and ethics plan mandatory, by a date to be determined. Effective compliance requires a team approach by administration, clinical staff, and legal advisers.

A compliance plan can be considered evidence of “good faith” during audits, investigations, and in federal sentencing considerations. The goal, of course, is to avoid ever getting close to a federal criminal proceeding.

During the move from recommended to mandatory, facilities will have to commit more staff and money; however, compliance can be good business. Just as many facilities use self-survey to monitor quality and regulatory compliance, the self-audit features of a compliance and ethics plan can improve billing, documentation, and quality of care.


LTC facilities face complex tasks with limited resources, often caught between regulators and families. Quality-of-care problems quickly become front-page news. OIG guidance statements for other providers focus on billing integrity. For LTC, however, this emphasis has evolved into something broader. Quality of care is a big emphasis. As stated in the OIG guidance: “A successful compliance program addresses the public and private sectors’ common goals of reducing fraud and abuse, enhancing healthcare providers’ operations, improving the quality of healthcare services, and reducing their overall cost.”

The OIG guidance details the potential benefits including demonstrating the facility’s commitment to honest corporate conduct, increasing the odds of detecting dishonest and unethical conduct, encouraging all stakeholders to report potential problems to enable investigations and reduce the risk of sanctions, minimizing risk of financial loss and financial penalties, enhancing resident care, and enhancing the facility’s reputation.


The OIG lists several operational categories that present liability risks to the LTC provider. Quality of Care is the first category listed and the OIG lists and expands on five areas of concern. Providers should be familiar with relevant state and federal law on quality of care and neglect and abuse issues.

Sufficient staffing. Quality is often measured in terms of quantity of employees. While there is not always an exact correlation, staffing ratios are an important measure for regulators. The OIG also lists “appropriate clinic expertise” as a factor.

Comprehensive resident care plans. The OIG considers the resident care plan an essential element of reducing risk and it mentions the inadequacy of care plans reviewed during enforcement audits and proceedings. The OIG cites relevant Medicare and Medicaid statutory authority and lists “basic steps” in meeting those requirements, specifically:

  • Have appropriate scheduling to allow full team attendance

  • Complete clinical assessment before the meeting

  • Open the lines of communication among all team members

  • Involve the resident and family and any legal guardian or POA

  • Document the length and content of each meeting

The OIG emphasizes physician participation as a component and stresses the need to facilitate planning participation, including careful scheduling and use of technology.

Medication management. The OIG guidance minces no words: “A failure to manage pharmaceutical service properly can seriously jeopardize resident safety and even result in resident deaths.” It also emphasizes that management processes be put in place to advance resident safety, minimize drug interactions, and ensure discovery and correction of irregularities.

Appropriate use of psychotropic medications. These medications create risks of violating two standards of care: the inappropriate use of chemical restraints and a requirement to avoid unnecessary drug usage. These issues were brought to the forefront long ago and all facilities should have proper safeguards in place. Risks may accelerate with staff turnover, pharmacy changes, new physicians, physicians not sensitive to LTC regulations, or sloppy coordination among departments.

Resident safety: Mistreatment, neglect, abuse. The OIG wants an “effective compliance program” to prevent, investigate, and respond to incidences of staff-on-resident abuse and neglect, resident-on-resident abuse and neglect, and abuse from unknown causes or sources. Here the OIG defines an effective compliance program as: “[P]olicies, procedures, and practices to prevent, investigate, and respond to instances of potential resident abuse, neglect or mistreatment….”

A confidential internal reporting mechanism is a key to a resident safety program. The mechanism could include a telephone hotline or lockbox for written comments cards. Appropriate follow-up is critical, as a program without genuine follow-up activity might be taken as a sign of bad faith.


Billing integrity is a major focus of the OIG. Every election cycle, politicians pledge to eliminate fraud and abuse by healthcare providers, and they all expect the OIG to perform this duty. While the OIG has performed admirably, eliminating all fraud and abuse has proven to be elusive. The OIG specifically mentions concerns well understood in the LTC industry: duplicate billing, insufficient documentation, and false or fraudulent costs reports.

Anti-kickback regulations are another area of concern. The federal government wants to receive fair value for its Medicare and Medicaid payments. The federal anti-kickback statute restrains providers from certain forms of business arrangements relating to items or services reimbursable by the Medicare and Medicaid programs.

Providers cannot buy or reward referrals of Medicaid or Medicare patients. Relevant laws define conduct with regard to purchases of goods, services, and leases as well as prohibiting direct or indirect payment or remuneration for referrals. Penalties, in addition to criminal prosecution, include Civil Monetary Penalties and program exclusion and additional liability under the False Claims Act. LTC facilities receive referrals from physicians, hospitals, and therapists; they also make referrals to physicians, hospitals, pharmacies, therapists, etc. The government wants all referrals to be made on the basis of good clinical care, and not improper remuneration.

Medicare and Medicaid payments are designed to be, subject to available coinsurance or copayments, payment in full for covered items and services. Neither the beneficiary nor any person in lieu of the beneficiary (e.g., family member, guardian) may be required to supplement the payments. However, a not-for-profit may solicit and accept donations unrelated to the care of a specific resident.


The LTC facility guidance allows a great deal of latitude in design and operations, and a compliance program can and should be customized to fit the size, resources, and risks of the organization. Neither guidance statements are intended to represent complete “compliance plans;” both are a starting point.

The seven standard OIG recommendations for compliance plans form a starting outline:

  • Designation of a compliance officer and compliance committee

  • Development of compliance policies and procedures, including standards of conduct

  • Developing open lines of communications

  • Appropriate training and teaching

  • Internal monitoring and auditing

  • Response to detected deficiencies

  • Enforcement of disciplinary standards

Effective plans are not derived from “cookbook” sources or written and left on a shelf. There is plenty of work ahead for many facilities. LTL

Disclaimer: Legal advice should always be obtained from licensed and experienced legal counsel.


This case was a perfect storm of whistleblower litigation alleging poor quality care and fraudulent billing. The whistleblower sued under seal alleging care deficiencies and false billings. After an investigation the federal government joined the case.

Ciena Healthcare Management, Inc. (hereinafter “Ciena”) owned and operated 24 nursing facilities in Michigan. The owner also owned Sunshine Therapy, providing physical and speech therapy.

Relator Hubbard (the original plaintiff) alleged severe deficiencies in care with details by resident and also alleged cost report falsification. Billing fraud included therapy billings, fraudulent RUG reporting, Minimum Data Set (MDS) falsification, false certification, document destruction, back dating, kickback violations, and potential self-referral on a vendor account. Apparently Ms. Hubbard had a brief and tumultuous employment with Ciena as an acting Director of Nursing at a Detroit area nursing facility, after which she retained counsel and took legal action.

The case was settled in 2007 with financial penalties and a Corporate Integrity Agreement (CIA). The CIA not only applied to all of the defendants but nearly anyone working, supplying, or contracting for Ciena for a period of five years. It requires a thick blanket of obligations to be strictly monitored and enforced.

In brief the CIA outlines extensive requirements, duties, and obligations in these categories:

III Corporate Integrity Obligations

  • Compliance Officer, Committees, and Internal Audit or Review Functions

  • Written Standards

  • Training and Education

  • Independent Monitor

  • Disclosure Program

  • Ineligible Persons (screening)

  • Notification of Government Investigations or Legal Proceedings

  • Reporting

A CIA is a tough, no-nonsense agreement placing stringent performance and reporting requirements on the provider. There are significant costs and the possibility of future penalties. Avoiding a CIA is one major reason to maintain a robust compliance program.


United State of America, ex relator Denise Hubbard, Plaintiffs vs. Ciena Healthcare Management, Inc., Mohammad Qazi, Anis Khan, Denise Manhke-Pugh, United States District Court, Eastern District of Michigan, CV:03-60175.

Tom Ealey, MA, an associate professor of business administration at Alma College, has three decades of experience with long-term care as a CPA, consultant, seminar leader, and writer. For more information, visit


Marcy Gilstad, a candidate for a Bachelor of Arts at Alma College, is a member of the Phi Beta Kappa scholars honorary and will attend graduate school studying healthcare administration.


  1. Original (2000) OIG Compliance Guidance for Long-term Care.https://oig.hhs.gov/authorities/docs/cpgnf.pdf
  2. Revised (2008) OIG Compliance Guidance for Long-term Care.https://oig.hhs.gov/fraud/docs/complianceguidance/nhg_fr.pdf
  3. Patient Protection Accountability and Affordability Act. See Title VI, Subtitle B, Sec. 6102 and https://thomas.loc.gov/cgi-bin/query/z?c111:H.R.3590

Long-Term Living 2011 April;60(4):30-32

Topics: Articles , Facility management , Regulatory Compliance , Risk Management