United States: Deadline Looming (March 23, 2013) For Nursing Facilities To Have "In Operation" An "Effective Compliance And Ethics Program"

On March 23, 2013, it will have been three years since President Obama signed the Patient Protection and Affordable Care Act (ACA) into law. This date is a significant one for the nursing home industry, not because it marks the third anniversary of the ACA, but because it marks a key deadline. As the owners, operators and administrators of nursing facilities are, or should be, aware, Section 6102 of the ACA requires nursing facilities on March 23, 2013, to "have in operation a compliance and ethics program that is effective in preventing and detecting criminal, civil, and administrative violations under this Act." This deadline should not be ignored or taken lightly.

Section 6102 of the ACA also required the U.S. Department of Health and Human Services (HHS) and Office of Inspector General (OIG) to "promulgate regulations for an effective compliance and ethics program" by March 23 of last year. To date, no such regulations have been promulgated—or even proposed. However, any nursing facility believing that this gives them the right to ignore the upcoming March 23 deadline does so at its peril. To anyone who has been involved in the healthcare industry, it should come as no surprise that the government is not subject to the same rules to which providers are subject. The fact that HHS has granted itself an indefinite extension of its deadline in no way means that nursing facilities will also receive an extension of their deadline. Nursing facilities will still be required to have an effective compliance and ethics program in operation by March 23.

Until the required regulations are promulgated, the operators of nursing facilities may want to look to two sources of guidance for the elements of an effective compliance program.

1. The ACA

Section 6102 defines a "compliance and ethics program" as a program "reasonably designed, implemented, and enforced so that it generally will be effective in preventing and detecting criminal, civil, and administrative violations . . . and in promoting quality of care." To achieve this, such a program must include the following elements:

  • The establishment of compliance standards and procedures reasonably capable of reducing the likelihood of violations and promoting quality of care;
  • The assignment of specific high-level individuals with overall responsibility to oversee compliance, and with sufficient resources and authority to enforce the compliance standards;
  • The use of due care to avoid delegating substantial discretionary authority to individuals known to have a propensity to engage in violations;
  • The effective communication of compliance standards and procedures to all employees;
  • The establishment of monitoring and auditing systems designed to detect violations and, in addition to this, a mechanism through which employees can report violations without fear of retribution;
  • The consistent enforcement of compliance standards through appropriate disciplinary actions;
  • The establishment of a procedure for responding appropriately to any violation that has been detected and for preventing further similar violations; and
  • The periodic reassessment of the compliance program to identify changes necessary to reflect changes within the organization.

If these elements sound familiar, it is because they largely reiterate the common elements of the Compliance Guidance OIG has issued for individual sectors of the healthcare industry.

2. OIG Compliance Guidelines

One common theme runs through each of these common elements: Effective compliance programs are proactive and responsive to problems that may arise. A compliance program cannot be effective if it is contained in a loose-leaf binder that resides on a book shelf never to see the light of day.

The OIG issued Compliance Program Guidance for Nursing Facilities in 2000, and Supplemental Compliance Program Guidance for Nursing Facilities in 2008. Both contain the common elements of an effective compliance program. In addition, the Nursing Facilities Guidance1 identifies six broad areas of risk for nursing facilities:

  • quality of care;
  • residents' rights;
  • billing and cost reporting;
  • employee screening;
  • kickbacks, inducements and self-referrals; and
  • recordkeeping and documentation.

The Supplemental Nursing Facilities Guidance2 reiterates the six areas of risk identified in the initial Nursing Facilities Guidance and highlights risk areas of fraud and abuse that are "currently of concern to the enforcement community." They include:

  • Medicare Part D,
  • additional examples of the risk areas identified in the initial Nursing Facilities Guidance and
  • the necessity of the adoption and implementation of an ethical culture.

The OIG Nursing Facilities Guidance and the Supplemental Nursing Facilities Guidance, together with the definition of a "compliance and ethics program" in Section 6102 of the ACA, appear to present the necessary elements of an effective compliance program. It is not at all apparent what substantive elements the ACA-mandated regulations can add to existing compliance guidance. Moreover, it is far from apparent why nursing facilities were singled out for a separate compliance program requirement.

Section 6401 of the ACA requires all providers and suppliers of medical goods and services, presumably including nursing facilities, to have an effective compliance program as a condition of enrollment in Medicare and Medicaid. Such compliance programs are required to contain the "core elements," as determined by OIG and the HHS Secretary. It may not come as a surprise that HHS/OIG have yet to identify the required "core elements."

It cannot be underscored enough that ignoring the requirement to implement an effective compliance program is simply not an option for nursing facilities, or for any provider. The failure by HHS/OIG to promulgate the required regulations, to provide ethics guidance or to identify the "core elements" does not excuse a nursing facility from the requirement to adopt and implement an effective compliance program. Ample existing guidance is available on the required elements of an effective compliance program.


1 65 Fed. Reg. 14,289 (March 16, 2000).

2 73 Fed. Reg. 56,832 (Sept. 30, 2008).

If you have any questions about this Alert, please contact please contact Harry R. Silver, any member of the Health Law Practice Group, any member of the Long Term Care and Senior Services Practice Group or the attorney in the firm with whom you are regularly in contact.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. The Duane Morris Institute provides training workshops for HR professionals, in-house counsel, benefits administrators and senior managers.

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