Healthcare Law Blog

Compliance Programs for Nursing Facility Providers

Nursing facilities are now required to develop and implement effective compliance and ethics programs under newly-created Section 483.85 of the Affordable Care Act (“ACA”) §6102. These programs must be in effect by November 28, 2017. These regulatory requirements are highly complex, especially the requirement of annual review and revision of the programs.  

Since the inception of Affordable Care Act (“ACA”) §6102, adding Subsection 1128(b) to the Social Security Act, we have known that nursing facility providers would be required to design and implement a compliance and ethics program by March 23, 2013. However, the Centers for Medicare and Medicaid Services (“CMS”) did not finalize 42 CFR Part 483 until October 4, 2016. The revised Medicare and Medicaid requirements for participation for nursing facilities (42 CFR part 483, subpart B) became effective as of November 28, 2016, but with a three-part phased implementation process that spans a three-year period[i].

The Final Regulations include newly-created Section 483.85, which sets forth the requirements for nursing facilities’ compliance and ethics programs. Under this regulation, compliance and ethics programs must have written standards, policies, and procedures that are capable of reducing the prospect of criminal, civil, and administrative violations and promote quality of care consistent with federal regulations. Although the implementation breakdown provided in the Final Regulations states the implementation time frame for Section 483.85 would be under Phase III with an effective date of November 28, 2019, Section 483.85(b) sets forth an implementation date of November 28, 2017, which means this section of the regulation will be implemented under Phase II.

Under this regulation, the operating organization for each nursing facility must have in operation a compliance plan and ethics program that meets all of the regulatory requirements beginning on November 28, 2017. However, due to the complexity of either implementing or revising an effective program, it makes sense to begin the process of designing and implementing these programs now. With the new regulations, CMS has set forth penalties for all nursing facilities that are not in compliance. In addition, although nursing facilities are required to be in compliance by November 28, 2017, this regulation will not be enforced until November 28, 2019.

Instead of the “best practices” recommendation with the traditional seven elements of compliance, 42 CFR 483.85 now formally requires nursing facilities to develop, implement and maintain programs that consist of eight elements (for organizations with less than five facilities) and eleven elements (for organizations with five or more facilities), as described below:

“(1) Established written compliance and ethics standards, policies, and procedures to follow that are reasonably capable of reducing the prospect of criminal, civil, and administrative violations under the Act and promote quality of care, which include, but are not limited to, the designation of an appropriate compliance and ethics program contact to which individuals may report suspected violations, as well as an alternate method of reporting suspected violations anonymously without fear of retribution; and disciplinary standards that set out the consequences for committing violations for the operating organization's entire staff; individuals providing services under a contractual arrangement; and volunteers, consistent with the volunteers' expected roles.

(2) Assignment of specific individuals within the high-level personnel of the operating organization with the overall responsibility to oversee compliance with the operating organization's compliance and ethics program's standards, policies, and procedures, such as, but not limited to, the chief executive officer (CEO), members of the board of directors, or directors of major divisions in the operating organization.

(3) Sufficient resources and authority to the specific individuals designated in paragraph (c)(2) of this section to reasonably assure compliance with such standards, policies, and procedures.

(4) Due care not to delegate substantial discretionary authority to individuals who the operating organization knew, or should have known through the exercise of due diligence, had a propensity to engage in criminal, civil, and administrative violations under the Social Security Act.

(5) The facility takes steps to effectively communicate the standards, policies, and procedures in the operating organization's compliance and ethics program to the operating organization's entire staff; individuals providing services under a contractual arrangement; and volunteers, consistent with the volunteers' expected roles. Requirements include, but are not limited to, mandatory participation in training as set forth at § 483.95(f) or orientation programs, or disseminating information that explains in a practical manner what is required under the program.

(6) The facility takes reasonable steps to achieve compliance with the program's standards, policies, and procedures. Such steps include, but are not limited to, utilizing monitoring and auditing systems reasonably designed to detect criminal, civil, and administrative violations under the Act by any of the operating organization's staff, individuals providing services under a contractual arrangement, or volunteers, having in place and publicizing a reporting system whereby any of these individuals could report violations by others anonymously within the operating organization without fear of retribution, and having a process for ensuring the integrity of any reported data.

(7) Consistent enforcement of the operating organization's standards, policies, and procedures through appropriate disciplinary mechanisms, including, as appropriate, discipline of individuals responsible for the failure to detect and report a violation to the compliance and ethics program contact identified in the operating organization's compliance and ethics program.

(8) After a violation is detected, the operating organization must ensure that all reasonable steps identified in its program are taken to respond appropriately to the violation and to prevent further similar violations, including any necessary modification to the operating organization's program to prevent and detect criminal, civil, and administrative violations under the Act.

(9) Conduct annual and mandatory program training as explained in 42 CFR 483.95(f).

(10) Designate a compliance officer whose “major responsibility” is to oversee the program, and who reports to the “governing body.” Note: The compliance officer cannot be “subordinate to the general counsel, chief financial officer [CFO] or chief operating officer [COO].”

(11) Designate a compliance liaison at each of the organization’s centers.”

42 CFR 483.85(c)-(d).

Further, Section 483.85(e) mandates annual review of the operating organization’s compliance and ethics program, with necessary revisions for any changes in laws or regulations or changes within the operating organization.

In conclusion, under newly-created Section 483.85, nursing facilities are now required to develop and implement effective compliance and ethics programs. These programs must be in effect by November 28, 2017. Due to the complexity of these regulatory requirements, especially the requirement of annual review and revision of the programs, it is recommended that nursing facility organizations not only develop, implement and revise a compliance and ethics program internally, but seek outside legal review and analysis to confirm compliance with all federal requirements. 

[i] https://www.federalregister.gov/documents/2016/10/04/2016-23503/medicare-and-medicaid-programs-reform-of-requirements-for-long-term-care-facilities

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