Compliance Risk Areas for Health Centers: A Financial Perspective. Marcie H. Zakheim Partner

Transcription

1 Compliance Risk Areas for Health Centers: A Financial Perspective Marcie H. Zakheim Partner

2 DISCLAIMER This training has been prepared by the attorneys of Feldesman Tucker Leifer Fidell LLP. The opinions expressed in these materials are solely their views and not the views of any other organization. The materials are being issued with the understanding that the authors are not engaged in rendering legal, financial or other professional services. If legal or financial advice or other expert assistance is required, the services of a competent professional should be sought. 2

3 PRESENTER: MARCIE ZAKHEIM Partner at Feldesman Tucker Leifer Fidell, specializing in, among other things, federal grants and grant-related requirements (in particular the requirements of and related to Section 330 of the Public Health Service Act) and nonprofit corporation law; Counsel to National Association of Community Health Centers, and numerous Primary Care Associations and health centers nationwide for 18 years; and Provides advice and technical assistance services on compliance with federal rules and requirements related to the operation, administration and governance of health centers and health center consortia; assists with development of federal grant applications; and analyzes and provides comments/advice on legislation, regulations and policies impacting health centers and the health care industry in general. Contact Information: or

4 AGENDA I. Recent Developments in Health Center Audits 1. HRSA Operational Site Visits (OSVs) 2. HRSA Office of Federal Assistance Management Division of Financial Integrity B Discount Drug Pricing Program Audits 4. Office of Inspector General (OIG) Audits II. Changes in Grants Management: The Super- Circular is Here! III. False Claims Updates 4

5 Recent Developments in Health Center Audits 5

6 WHAT IS THE HRSA OPERATIONAL SITE VISIT? On-site audit of a health center s compliance with the Nineteen Health Center Program Requirements Process is designed to ensure review is based on objective program requirements and not subjective performance improvement recommendations Every health center will have a 3-day Operational Site Visit (OSV) at least once per project period, conducted by review team comprised of HRSA consultants Project Officer and/or other BPHC staff may be at the review to observe 6

7 WHAT IS THE OSV OUTCOME? After the OSV, HRSA will issue a standardized site visit report Drafted by review team Transmitted by project officer Report is final and findings of non-compliance will result in grant conditions HOWEVER, may be able to resolve issues prior to issuance of the report (either while team is still on-site or before the report is finalized by HRSA) by using the Rapid Response Process 7

8 HEALTH CENTER SITE VISIT GUIDE Main review instrument used by HRSA review team new version published November 2014 Includes Standardized, objective questions to assess compliance with the 19 Requirements List of documents that review team will assess either pre-visit or onsite Description of uniform OSV format and outcomes Site Visit Guide DOES NOT include performance improvement assessments for each requirement But reviewers will look at clinical and financial performance measures and may provide suggestions 8

9 WHAT ARE THE FINANCE & MANAGEMENT REQUIREMENTS? Program Requirements #9 - #16 Requirement #9: Key Management Staff: does the health center maintain a fully staffed management team appropriate for size and needs of the center? Requirement #10: Contractual / Affiliation Agreements: does the health center exercise appropriate oversight and authority over contracted services? Requirement #11: Collaborative Relationships: does the health center make efforts to establish and maintain collaborative relationships with other providers? 9

10 WHAT ARE THE FINANCE & MANAGEMENT REQUIREMENTS? Program Requirements #9 - #16 (cont.) Requirement #12: Financial Management & Control Policies: does the health center maintain accounting and internal control systems appropriate for size and complexity of the organization reflecting GAAP and separate functions to safeguard assets / maintain financial stability? Specifically, does the health center s accounting system provide for: (1) separate identification of federal and nonfederal transactions; and (2) a chart of accounts that reflects the general ledger accounts? 10

11 WHAT ARE THE FINANCE & MANAGEMENT REQUIREMENTS? Program Requirements #9 - #16 (cont.) Requirement #13: Billing & Collections: does the health center have systems in place to maximize collections and reimbursement, including billing, credit and collection policies & procedures? Requirement #14: Budget: does the health center have an appropriate budget, consistent with PIN ? Are there budgetary controls in effect (e.g., comparison of budget with actual expenditures on a monthly basis) to preclude drawing down Federal funds in excess of: (1) total funds authorized on the Notice of Award; and (2) total funds available for any cost category, if restricted, on the Notice of Award? 11

12 WHAT ARE THE FINANCE & MANAGEMENT REQUIREMENTS? Program Requirements #9 - #16 (cont.) Requirement #15: Program Data Reporting Systems: does the health center have systems in place to collect and organize data necessary for reporting and decision-making? Requirement #16: Scope of Project: does the health center maintain its scope of project? 12

13 WHAT S AT STAKE? Special award conditions Ineligibility to apply for certain expansion grants One year project period for Service Area Competition (competitive project renewal) High-risk designation Cost disallowances Draw-down restrictions Suspension/termination of funding Re-Competition of your grant Any other remedies legally available and appropriate 13

14 COMMON FINANCIAL FINDINGS FROM OSV REVIEWS PR#10: Contractual Affiliations / Agreements Lack of adequate oversight over contracted services (clinical and administrative/financial) Particularly important if outsourcing billing functions Insufficient documentation to justify amounts paid to contractor Lack of, or insufficient, procurement policies & procedures Not conducting appropriate procurement process (despite have policies & procedures in place) 14

15 COMMON FINANCIAL FINDINGS FROM OSV REVIEWS PR #12: Financial Management & Control Polices Lack of fund-based accounting system to separately identify, monitor, track and analyze federal and non-federal transactions Not budgeting and monitoring expenses that must be paid with program income, and general tracking of program income Patient accounts receivable subsidiary ledger not reconciled to general ledger periodically (monthly) Lack of patient declaration of income on file and/or documentation that sliding fee adjustments were calculated correctly / supported 15

16 COMMON FINANCIAL FINDINGS FROM OSV REVIEWS PR #12: Financial Management & Control Polices (cont.) Insufficient separation of functions, including lack of, or insufficient check writing policy (policy with thresholds above generally accepted practices) Lack of policies for Drawdowns of federal funds Expenditure of program income Use of corporate credit card Follow-up process for audit findings Bank statement reconciliation Time and effort reporting Expense reimbursement 16

17 COMMON FINANCIAL FINDINGS FROM OSV REVIEWS PR #12: Financial Management & Control Polices (cont.) Incomplete (or inaccurate) documentation ensuring grant expenditures comply with federal cost principles Incomplete (or inaccurate) recording of assets purchased with federal funds Accounting policies & procedures not updated to reflect new PINs (Accounting and Budgeting Requirements) and (SFDP) Generally not following existing policies and procedures 17

18 COMMON FINANCIAL FINDINGS FROM OSV REVIEWS PR #13: Billing & Collections Inadequate documentation / inability to generate reports to substantiate adequacy of reasonable efforts to collect payments and maximize reimbursement (such as lack of AR aging report by payor source and similar system reports) Lack of policy on write-offs (or inconsistent application of policy) Lack of policy on reserving for bad debt (or inconsistent application of policy) Untimely billing / rebilling, or wraparound billing Patient charts not signed off or locked down on a timely basis 18

19 COMMON FINANCIAL FINDINGS FROM OSV REVIEWS PR #14: Budget No separate budget breakdown for the seven object class categories between 330 and nonfederal funds, consistent with PIN Flexibility but must show some allocation!! Budgeting salaries above salary cap using only 330 funds Financial statements should have budget versus actual comparisons Not a finding yet but a lot of chatter about documenting the use of excess program income 19

20 DIVISION OF FINANCIAL INTEGRITY AUDITS Purpose: to determine if HRSA funds are being used in accordance with program requirements and federal regulations Relationship to OSV: Similar to OSV (document reviews, interviews with staff and board), but focuses on financial management requirements set forth in HHS Administrative Regulations (45 CFR Part 75) May be (but not required to be) an extension of or followup to an OSV, in which compliance issues and operational concerns related to financial requirements are identified May include assessment of other non-financial unmet program requirements (if follow-up to OSV) 20

21 DIVISION OF FINANCIAL INTEGRITY AUDITS Ranges in length from a couple of days to one week What s at stake and common findings similar to OSV 21

22 340B AUDITS All OSVs after October 1, 2014 (for health centers that participate in the 340B program) include an assessment of compliance with 340B requirements Reviewers will ask five standard Yes/No questions: Does the health center participate in 340B? If yes, does it have written 340B policies and procedures? If yes, do the policies and procedures account for how the health center will prevent duplicate discounts and diversion? If the health center uses contract pharmacies, does it have appropriate contracts in place with clauses to prohibit duplicate discounts and diversion? Does the health center attest that it provides oversight of the 340B drugs dispensed by the contract pharmacy? 22

23 340B AUDITS 340B questions are not part of the 19 requirements Reviewers will not actually test compliance, but will flag health centers that may be out of compliance with 340B by sharing any no responses with the Office of Pharmacy Affairs (OPA), which may trigger a follow-up review Responses to questions should not result in noncompliance or grant conditions 340B questions are not included in the updated site visit guide OSV reviewers will be given separate assessment information for guidance 23

24 340B AUDITS In addition, OPA anticipates Audits of covered entities (CEs) in FY 2015 targeted and random Areas of focus include covered entity eligibility; internal controls to prevent duplicate discounts and diversion; Medicaid exclusion file listing; contract pharmacy compliance; and group purchasing organizations Note: Significant uptick in 340B purchases and/or large contract pharmacy networks attracts audits 24

25 340B AUDITS Manufacturer Audits Only one audit of a covered entity will be permitted at any one time When HRSA has received a request from a manufacturer to conduct an audit, HRSA will determine whether the audit should be performed by the Government or the manufacturer. Audit must be conducted by independent auditor Oral briefing at end of audit and written report (shared with OIG) Covered entity has 30 days to respond and can challenge findings 25

26 HRSA Sanctions WHAT S AT STAKE? Corrective action - prospective After notice and hearing: Repay amount of discount to manufacturer Pay interest on discount for knowing and intentional diversion Removal from 340B Program and disqualification for a reasonable period of time if violation was systematic and egregious Collateral Sanctions False Claims OIG and related penalties 26

27 COMMON FINDINGS FROM 340B AUDITS Diversion Contract pharmacy dispenses 340B drugs to non-patients Prescription written by ineligible provider No patient record documenting prescription Delivery site not registered on OPA database Contract Pharmacies No written contract Actual delivery sites do not match OPA database 27

28 COMMON FINDINGS FROM 340B AUDITS Duplicate Discounts Inaccurate record on OPA Medicaid Exclusion File Billing Medicaid contrary to data on file No NPI or Medicaid billing number registered Using contract pharmacy to dispense to Medicaid fee-for service beneficiaries without method to prevent duplicate discounts Administrative Registration of new health center sites with OPA Wrong authorizing official or contact person Lack, or inadequacy of, written policies and procedures for 340B program 28

29 OIG ENFORCEMENT: RETURN ON Individuals and entities excluded from Federal health care programs Total health care fraud judgments and settlements Return on investment from various HCFAC activities INVESTMENT FY 2011 FY 2012 FY ,662 3,131 3,214 $2.4 billion $1.5 to $1 $6.9 billion $7.9 to $1 $5.8 billion $8 to $1 Source: OIG Budget Requests to Congress (FY 2013, FY 2014, FY 2015) 29

30 OIG AUDITS Office of Inspector General FY 2015 Work-Plan health center reviews include: Community Health Centers Compliance with Grant Requirements of the ACA: review will include determining the allowability of expenditures and the adequacy of accounting systems that assess and account for program income Oversight of Vulnerable Health Center Grantees: determine the extent to which HRSA awards grant funds to health center grantees that have documented compliance / performance issues 30

31 WHAT S AT STAKE? Corrective action plans Grant conditions Debarment / suspension from participation in federal health care programs Other legal remedies 31

32 COMMON FINDINGS FROM OIG AUDITS In random audits, OIG found that some health centers lacked written policies and procedures, and appropriate documentation, primarily related to grants management: Procurement Accounting for property leased or acquired utilizing Federal grant funds Federal grant reporting Accounting system Segregation of duties Well-publicized whistleblower policy and procedures 32

33 Changes in Grants Management: the Super- Circular is Here! 33

34 THE OMB SUPERCIRCULAR A-102 A-110 A-89 A-21 A-87 A-122 A-133 A-50 Uniform Grants Guidance 34

35 SUPER-CIRCULAR: EFFECTIVE DATES Dec. 19, 2014, HHS issued implementing rules set forth in 45 CFR Part 75, superseding 45 CFR Part 74 and 92 New administrative requirements were effective for grant awards made after December 26, 2014 Current awards unchanged Grace period for procurement rules for one full fiscal year, provided that the health center documents in internal procurement policies that it is following the old procurement rules and continues to meet the documented standard Revised audit requirements were effective as of December 26, 2013 apply to audits of FY beginning on or after December 26, 2014 (single audit threshold of $750,000) 35

36 SUPER-CIRCULAR: GOAL IS UNIFORMITY New 2 CFR part 200, other circulars will be removed from CFR Same set of rules apply to all Non-Federal Entities (mostly) Consistent terminology Standard grant award documents Some standardization of grant award competition requirements Flow-down of requirements to subrecipient relationships 36

37 PROCUREMENT REQUIREMENTS Changes to procurement rules Grantees must maintain written standards of conduct covering conflicts of interest and governing the performance of employees engaged in the selection, award and administration of contracts (2 CFR (c)(2)) Organizational conflicts of interest If health center has a parent, affiliate or subsidiary, in addition to standard COI provisions regarding the selection, administration and award of contracts, health center must maintain written standards of conduct covering organizational COI 37

38 PROCUREMENT REQUIREMENTS Changes to procurement rules (cont.) Sole Source can only be used in certain situations (2 CFR ) Available only from one source Public exigency or emergency Federal awarding agency expressly authorizes noncompetitive proposals in response to written request from grantees After solicitation from multiple sources, competition is inadequate 38

39 PROCUREMENT REQUIREMENTS Changes to procurement rules (cont.) Criteria updated for the Simplified Acquisition Threshold (2 CFR (b)) Increased to $150,000 Micro-Purchase Threshold, defined as the acquisition of supplies/services, the aggregate of which does not exceed $3,000 (or $2,000 in case of some acquisitions for construction) (2 CFR ) Should, to the extent possible, be distributed equitably among qualified suppliers and can be awarded without competitive bids if price is reasonable 39

40 PROCUREMENT REQUIREMENTS Not new stuff (but still there and still important) Competition requirements Graduated system of complexity Documentation of cost/price analysis 40

41 TIME & EFFORT REPORTING Overview More flexibility; less variation between rules applicable to nonprofits and other grantees New rules emphasize overall internal controls, rather than specific required procedures: records must Be supported by internal controls that assure accuracy, allowability and allocability Be incorporated into center s official records Reasonably reflect total activity (not to exceed 100%) Budget estimates are useable on an interim basis as long as there is a review process Overall principle is documentation needs to accurately reflect the work performed 41

42 TIME & EFFORT REPORTING Documentation Standards (2 C.F.R (i)(1)) Personal Activity Reports are no longer the default rule (but government could choose to require them if a grantee does not meet the standards laid out in the Super-Circular) No rigid rules as to type of records required Charges for salaries and wages of nonexempt employees must be supported by records indicating hours worked (no change) May reflect categories of activities expressed as a percentage distribution of total activities 42

43 SUB-RECIPIENT REQUIREMENTS Sub-recipient vs. Contractor Distinguishes between Sub-recipient (2 CFR ) and Contractor (2 CFR , previously known as vendors ) based on the nature and purpose of the funds Impacts procurement requirements, reporting obligations, and collateral rights for subrecipients 43

44 INDIRECT COST RATES Strong encouragement to use Indirect Cost Rate Agreements (ICRA) Indirect cost rate: specific % applied to a base (e.g., Direct Salaries, Modified Total Direct Costs or Useable Sq. Ft.) If a grantee has a negotiated indirect cost rate, all Federal agencies must accept it unless there is a statutory, regulatory, or otherwise approved reason for deviation Pass through entities also have to recognize their subrecipients negotiated ICRA between the sub and the feds (if one exists) Minimum flat rate for entities (10% of modified direct costs) that have not previously had a negotiated rate before, may be used indefinitely 44

45 MANDATORY DISCLOSURES Mandatory disclosures health centers are required to timely disclose in writing to their federal awarding agencies all violations of federal criminal law involving fraud, bribery, or gratuity violations potentially affecting federal awards 45

46 False Claims Updates 46

47 FALSE CLAIMS UPDATES Two common types of financial litigation Cases affecting FQHC reimbursement, including state and federal compliance with the requirements of the Social Security Act (i.e., PPS litigation) Cases concerning enforcement of FQHC regulatory and billing requirements, including False Claims Act cases 47

48 FALSE CLAIMS UPDATES Enforcement cases As the health center program and financial commitments to health centers has grown, so has federal and state oversight of FQHCs More funds and resources have been invested in audits, Medicaid fraud control units, and Office of Inspector General investigations Examples of enforcement and false claims act issues include Compliance with Medicaid billing requirements Compliance with representations made in the Section 330 grant application Billing consistent with the FQHC s scope of project as indicated in its grant application 48

49 FALSE CLAIMS UPDATES Imposes civil liability for submitting false or fraudulent claims to the federal government OR causing another entity to submit false or fraudulent claims to the government False Claims Act violations may result from knowingly and improperly avoiding or decreasing a payment obligation Knowing retention of an overpayment (funds that a person or entity receives or retains under Medicare or Medicaid to which the person or entity, after applicable reconciliation, is not entitled) beyond due date (i.e., 60 days from identification or when applicable cost report is due) is an obligation under the False Claims Act 49

50 Marcie H. Zakheim, Esq. Feldesman Tucker Leifer Fidell LLP th Street N.W. Suite 400 Washington, D.C (202)