Corporate Compliance

1. Internal auditors: How S-O will affect you
2. Assess your compliance program
3. Gov't audit insider

Healthcare Auditing Weekly, May 1, 2003

Health Care Auditing Strategies
NEW Newsletter
Guide to Compliance Auditing: Applying OIG Techniques and Tools
Strategies for Health Care Compliance
May 13, 2003
Vol. 1, No. 2

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Auditing news and tips

Sample audit programs (For subscribers to Health Care Auditing Strategies only)

Sample compliance policies and procedures. (For subscribers to Strategies for Health Care Compliance only)

The OIG Work Plan for Fiscal Year 2003

Ask the Expert

Tip of the Week

Compliance Hot Topics: Billing and Coding, EMTALA, Stark, HIPAA

Question of the Week

In This Week's Issue

  1. Internal auditors: How S-O will affect you
  2. Assess your compliance program
  3. Gov't audit insider

This Week's Headlines

1. Internal auditors: How S-O will affect you

A new law may change the way health care organizations perform their compliance and audit functions. The Sarbanes-Oxley Act (S-O), which Congress enacted July 30, 2002, applies only to publicly traded entities, but its provisions may become the new standard for how you develop compliance programs, use external auditors, and build audit committees.

Auditors must now have a greater sensitivity to some of the problems S-O highlights. Many aspects of the S-O law are relevant for nonprofit and other health care organizations. Auditors should do the following:

  • Clarify the reporting relationships and functions of independent and internal auditors relative to the board and management
  • Identify management responsibility for internal controls and financial reporting
  • Identify auditing, quality control, ethics, independence, and other standards relating to audit report preparation

    This article was excerpted from the special report "Sarbanes-Oxley Act: Impact on health care organizations." Subscribers to Health Care Auditing Strategies will receive this special report with their May issues. Go to &source=EHCAW to order.

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    To learn more about the Sarbanes-Oxley Act and how it affects internal auditors and compliance officers, sign up for the HCPro audioconference "The Sarbanes-Oxley Act: What Healthcare Organizations Need to Know."

    2. Assess your compliance program

    Use the following guidelines to find out whether your organization is meeting the Office of Inspector General's (OIG) compliance standards in two key billing areas:

    Standard FS 2.3: A review of a representative sample of medical records, compared to charge slips and billing forms is periodically conducted to safeguard against this process. Notes: Gather the following documentation:

  • Copies of audit or monitoring reports indicating that a representative sample of coded medical services was reviewed and found to be correctly coded
  • Examples of training materials and other information given to coding staff to ensure they are able to properly code services rendered


    Standard FS 2.8: Unbundling is the practice of submitting bills piecemeal or in fragmented fashion to maximize the reimbursement for various tests or procedures that must be billed together. A review of a representative sample of medical records, compared to charge slips and billing forms is periodically conducted to safeguard against this process. Notes: Gather the following supporting documentation:

  • Reports on the analysis of bundled tests or services to ensure unbundling does not occur
  • Reports will involve a review of a sample of charges to determine whether the billing process is appropriate

    Editor's note: This is an excerpt from Hospital Compliance Program Assessment: Your Tool for Measuring Effectiveness, published by HCPro. This 194-page book provides standards based on the OIG Compliance Program Guidance for Hospitals and a rating system for determining your level of compliance with each standard. It also includes an explanation of how to meet the standard, and a list of documents to help you prove compliance. Go to &source=EHCAWfor more information or to order.

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    Do your auditing and monitoring practices meet OIG standards?

    "Health Care Auditing Strategies," the new 12-page monthly newsletter, can help you get the most out of your audits. It offers practical how-to articles, sample policies and procedures, best practices, and auditing techniques for specific areas, including coding systems, billing systems, cost reports, credentialing processes, employee background checks, education and training programs, and quality of care. For more information, including how you can save 10%, go to EN1231A Or, call 800/650-6787 and mention Source Code EN1231A.


    OIG review of outlier payments

    The OIG's audit objective was to determine whether outpatient claims with outlier payments were billed in accordance with Medicare laws and regulations. The review included $628,520 in outlier payments to Mercy Hospital for services rendered from August 1, 2000 to June 20, 2001.

    For your next outlier payment audit, see the steps here that the OIG used in its Mercy Hospital audit:

    1. Use CMS' National Claims History file to identify 1,114 paid outpatient claims with $628,520 in outlier payments to Mercy Hospital for services rendered during the period August 1, 2000 through June 30, 2001.

    2. Analyze each of the hospital's outlier claims for the audit period. Do this to identify high-risk claims, such as those where the outlier payment represented a significant percentage of the total payment of the claim. The OIG selected a judgmental sample of 35 claims with $133,798 in outlier payments out of a total paid amount of $150,892 for review.

    3. Hold discussions with the hospital's billing and compliance personnel to help you understand procedures for accumulating charges, creating outpatient bills, and submitting Medicare claims.

    4. Use medical review staff to review medical records in order to determine whether services were medically necessary and appropriate.

    The OIG limited consideration of internal control structure to those controls concerning the accumulation of charges, creation of outpatient bills, and the submission of Medicare claims. The OIG did not assess Mercy's complete internal control structure.

    For more information, read the OIG audit report "Review of Outlier Payments Made to Mercy Hospital Under the Outpatient Prospective Payment System for the Period August 1, 2000 Through June 30, 2001."

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    In addition to each 12-page monthly newsletter, Health Care Auditing Strategies (HCAS) subscribers receive the following benefits:

  • Audit talk-a free forum to network, share ideas, and solve problems for HCAS subscribers.

  • Audit advantage-readers log on each month to the HCAS subscriber-only Web page that lists sample audit plans and government documents. Go to and enter the password that is printed in each issue of HCAS.

  • Fax and email alerts-When there's late breaking news that just can't wait until the next issue of HCAS, we'll fax or email the pertinent information to you immediately.

  • Editorial special reports-When there's a new regulation or news on laws related to health care auditors, our expert writers gather the necessary information and compile a special report. Subscribers will receive a free special report on the Sarbanes-Oxley Act with their May issues.

    Take advantage of these subscriber benefits, as well as auditing best practices and how-to articles by subscribing to Health Care Auditing Strategies. Save 10% by ordering online.

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    Send your comments and questions about Health Care Auditing Weekly to:

    Melissa Chapdelaine
    Managing Editor

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    DISCLAIMER Advice given is general, and readers should consult professional counsel for specific legal, ethical, or clinical questions. Users of this service should consult attorneys who are familiar with federal and state health laws.

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