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DEPARTMENT OF HEALTH & HUAN SERVICES Office of Inspector General
Washington, D.C. 20201
An Open Letter to Health Care Providers
April 24, 2006
This Open Letter discusses certain of my perspectives on compliance, the resolution of health
care fraud cases, corporate integrty agreements (CIAs), and the OIG's Provider Self-Disclosure
Protocol (SDP). I am also announcing an initiative that promotes the use of the SDP to resolve
civil monetar penalty (CMP) liability under the physician self-referral and anti-kickback
statutes for financial arrangements between hospitals and physicians.
In addition to working with our law enforcement parners to sanction companies and individuals
who violate the law, OIG also commits substantial resources to promote voluntar compliance
by the health care industr. Our guidance to the industr, in the form of Advisory Opinions,
Special Fraud Alerts, Special Advisory Bulletins, and Compliance Program Guidance, offers
substantive assistance to program participants committed to promoting ethical and lawful
conduct in their organizations. Examples of recent guidance include a Special Advisory Bulletin
concernng patient assistance programs for Medicare Part D enrollees, and a supplemental
compliance program guidance for hospitals. All of our compliance materials may be found at
OIG's Web site, htt://Ww.oig.hhs.gov.
When a health care provider is alleged to have violated the law, OIG's first priority is to protect
the Deparent's programs and their beneficiares. OIG has several tools available for pursuing
this goal, including program exclusion, CMPs, and integrty agreements. We will continue to
seek the exclusion of providers that demonstrate a lack of integrty, or that provide substandard
care to beneficiares. For those providers that demonstrate the requisite level oftristworthiness
and that also have in place, or are willng to develop, an effective compliance program, OIG wil
waive its exclusion authority concurent with resolution of monetar liability under the False
Claims Act and the CMP Law. Typically, these settlements include an integrty agreement
between OIG and the provider.
Effective compliance systems are key to strengthening the integrty of the health care system.
OIG integrty agreements have been a catalyst for change in corporate culture, and can result in
the development of comprehensive internal control systems. Our communications with
providers during the course of our compliance monitoring efforts have also enhanced compliance
within their organizations.
While we are committed to working collaboratively with providers operating under integrty
agreements, some providers fail to demonstrate a commitment to compliance even while
operating under such agreements. Integrty agreements typically include contractual remedies
for breach of the agreement, including stipulated penalties and exclusion from Federal health
care programs. Since 1999, OIG has imposed stipulated penalties totaling about $300,000 in
21 cases where providers have failed to meet explicit requirements of their integrty agreements.
In a recent case involving repeated and flagrant violations of a CIA, we excluded a hospitaL.
The OIG's November 2001 "Open Letter to Health Care Providers" continues to guide decisions
about whether to require an integrty agreement and the specific terms of these agreements.
. Many providers have independently developed robust and effective compliance programs, which
include internal auditing mechanisms. In appropriate cases, we have agreed to reduce the
obligation on providers settling health care fraud matters by entering into Certification of
Compliance Agreements (CCAs), rather than more extensive CIAs. CCAs require providers to
certify that they will continue to operate their existing compliance programs for a fixed term,
typically 3 years, rather than enter into a more extensive CIA with a 5-year term. CCAs do not
require independent review organizations to conduct or verify audits or claims reviews.
A provider's self-disclosure of conduct continues to be an important factor in determining
whether a CCA is appropriate, because detection and prompt disclosure of potential fraud are
evidence of an effective compliance program. The OIG's 1998 SDP (available on our W eb site)
sets forth a mechanism for providers to investigate, quantify, and resolve potential fraud matters.
Consistent with the 2001 Open Letter, we have required CIAs in only 27 of the 136 self-
disclosures resolved with a monetar payment.
OIG has heard from hospitals that, through their compliance programs, they are discovering
improper arangements under the physician self-referral law (42 U.S.c. � 1395nn) and are
seeking a way to resolve violations. The SDP is one vehicle to resolve this type of
administrative liability. OIG has the authority to impose CMPs of up to $15,000 for each service
billed in knowing violation of the physician self-referral law, and assessments of up to 3 times
the amount claimed for such services (see 42 U.S.c. � 1395nn(g)(3)). Hospitals and physicians
also have potential liability for these arrangements under OIG's anti-kickback CMP (see 42
D.S.C. � 1320a-7a(a)(7)), which authorizes a penalty of $50,000 for each kickback, plus an
assessment of not more than 3 times th� total amount of remuneration offered, paid, solicited, or
received. In addition to CMPs, OIG may also seek exclusion under these authorities.
We are now seeking to increase awareness in the hospital and physician communities of a way to
resolve conduct that may result in liability under the OIG's CMP authorities for physician self-
referral and anti-kickback violations. This new initiative supplements the SDP by providing
guidance on how these types of disclosures will be resolved. The initiative incorporates the SDP
process, whereby OIG confers with the Department of Justice (DOJ) to ensure that it is aware of
each disclosure and has an opportnity to opine before OIG accepts a provider into the Protocol
and is presented with the results ofOIG's review of the SDP matter before it is resolved under
OIG's CMP authorities. It is important to stress that OIG's agreement to resolve an SDP matter
is not binding upon DOJ.
The initiative is limited to matters that, in the provider's reasonable assessment, involve conduct
that subjects the provider to CMP liability under the DIG's physician self-referral and anti-
kickback authorities-in paricular, situations involving a financial benefit knowingly conferred
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by a hospital upon one or more physicians. The financial benefit conferred upon a physician
may take varous forms, for example, an arrangement under which the physician pays the
hospital below fair market value for a good or service (e.g., lease of offce space).
Because multiple OIG authorities are implicated, a provider's liability in these cases typically
falls along a continuum--he CMP damages calculation for physician self-referral violations is
based on the number and dollar value of improper claims, while the CMP damages calculation
for kickbacks is based on the number and dollar value of improper payments or remuneration.
Subject to the facts and circumstances ofthe case, OIG wil generally settle SDP matters for an
amount near the lower end of this continuum, i.e., a multiplier of the value of the financial
benefit conferred by the hospital upon the physician(s).
A provider's paricipation in the SDP is contingent upon full cooperation and complete
disclosure ofthe facts and circumstances surounding the violation. Providers will be removed
from paricipation in the initiative unless they disclose in good faith and timely perform the
required self-assessment, including quantifying the financial benefits conferred upon the
physician(s) and quantifyg the full amount ofthe overpayment. The degreeofthe provider's
cooper�tion is considered when determining the appropriate terms of an administrative
settlement. OIG will also consider the provider's existing compliance program when evaluating
whether a CIA, CCA, orno additional compliance measures will be required.
This new self-disclosure initiative wil serve as an additional opportty for providers to work
collaboratively with OIG and to tae responsibility for fuher strengthening the integrty of our
health care system. I look forward to continuing our joint efforts to promote compliance in the
Federal health care programs.
Sincerely,~�~
Daniel R. Levinson
Inspector General
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