New York State Regulations Mandate Effective Compliance Programs for Providers

Posted by Jason Greis on November 29, 2009 under Articles | Be the First to Comment |  Print

Effective October 1, 2009, the State of New York implemented regulations (18 N.Y.C.R.R §521.1) requiring all health care providers (including LTACHs) that receive more $500,000 from the Medicaid program in a year to adopt and maintain an effective compliance program.  The effectiveness of a provider’s compliance program is to be judged by the N.Y. state commissioner of health and the Medicaid inspector general. 

This “first-of-its-kind” state statute is intended to promote responsibility for providing quality care.  It is important to note, however, that the Federal government does not mandate providers to have a compliance program, although the Department of Health and Human Services Office of Inspector General has published a series of compliance guidelines for various industry sectors and, particularly through its enforcement policies, strongly encourages such programs.

Failure to establish an effective compliance program under the new state law will subject both health care providers and their “affiliates,” including board members “in a position of responsibility or authority” to sanctions, including exclusion from participation, limited participation, and censure.  Unlike some states, like New Jersey, that ensure compliance through mandatory education for board members, New York has elected to ensure compliance by making board members responsible through penalties.

This appears to be consistent with the national trend to look to health care providers’ boards of directors—and to directors individually—to take on increased oversight of compliance area in addition to their more traditional roles as stewards of a hospital’s finances.  The Medicare Conditions of Participation for Hospitals, 42 C.F.R. § 482.21(e), make governing bodies responsibile for the quality of care provided.  The OIG’s March 2009 paper, Corporate Responsibility and Health Care Quality, highlights this when it says “quality, and particularly, the board’s responsibility to ensure high quality care” is a critical issue for federal enforcers.

Responsibility for care also is a common law duty, as courts since Darling v. Charleston Community Memorial Hospital, 211 N.E.2d 253 (1965), have found that boards and hospital administrators can be held liable for failure to exercise their fiduciary and corporate obligations to ensure that the medical staff is providing acceptable patient care—a duty, the courts have determined, that boards cannot delegate.

But what enforcement tools do governments have? Assuming that a board has not opened itself to a False Claims Act allegation, the main sanction available to both New York and the federal government for exercising inadequate oversight over quality of care is exclusion from participation in government health programs.  The federal government’s permissive exclusion authority is set forth in 42 U.S.C. §1320a-7(b)(6)(B) and applies to: “Any individual or entity that the [HHS] Secretary determines … has furnished or caused to be furnished items or services to patients … of a quality which fails to meet professionally recognized standards of health care.”

This potentially punitive statute also raises a number of important policy and practical questions since:

• It may dissuade people from serving on community hospital boards thereby making recruitment of qualified board members more difficult;
• Compensation to board members may need to be paid or increase to account for increased personal risk;
• It would be difficult for prosecutors to prove the nexus between a board member’s lack of due diligence in exercising quality oversight and the submission of claims for substandard care; and
• It would be difficult to single out individual directors for exclusion without trying to exclude the whole board.

Jason S. Greis
McGuireWoods LLP
312.849.8217
jgreis@mcguirewoods.com