Four Highlights from the August 2022 OIG Work Plan Updates

Skilled Nursing Facilities' (SNF) Medicare Payments to Related Parties

In the context of skilled nursing facilities, related parties are organizations that are owned or otherwise connected to the parent nursing home company and the related party might supply services necessary to run nursing facilities. Sometimes concerns with these types of relationships exist. For example, in June, an employee union picketed a nursing home chain because of concerns about related-party transactions that were allegedly inappropriate.

The OIG has added a work plan item to look at these types of arrangements. From the OIG’s perspective, the costs of nursing home services, facilities, and supplies that come from related parties may be included in the allowable costs of the nursing home, as long as those costs are equal to the related party’s costs. But these costs must not exceed the price of comparable services, facilities, and supplies that could be purchased elsewhere according to the OIG. “Medicare requires that a reported amount be the lower of either the actual cost to the related organization or the market price for comparable services, facilities, or supplies, thereby removing any incentive to realize profits through these transactions.”

The OIG plans to determine whether SNFs are reporting related-party costs in accordance with Federal regulations. They will also determine whether a SNF's allocation of Medicare funds could impact beneficiary care, such as whether overhead costs might have increased while allocations for patient care decreased, potentially reducing care.

These are similar concerns reported by the picketing union employees. Perhaps this OIG Work Plan item was added, in part, because of the types of concerns shared by these union employees.


Personnel Shortages at Nursing Homes

The Pandemic Response Accountability Committee (PRAC) was created by The Coronavirus Aid, Relief, and Economic Security Act. PRAC’s mission includes preventing and detecting fraud, waste and abuse as well as mismanagement in order to mitigate risks that cross agency boundaries. Membership of PRAC demonstrates this as Offices of Inspector General (OIGs) from many different federal agencies participate. PRAC’s Health Subgroup has raised the issue and importance of health care personnel as it relates to the federal government’s ability to respond to COVID-19 issues.

For this work plan item, HHS OIG will participate in the creation of a report that outlines healthcare personnel shortages. The report will also summarize best practices for hiring and retaining healthcare personnel for possible implementation. HHS-OIG will focus on personnel shortages at nursing homes.

Recently, the American Health Care Association (AHCA), which represents more than 14,000 nursing homes and long-term care facilities in the U.S. released a survey describing the serious staffing issues they face.

U.S. News and World Report also recently reported on the staffing shortages in U.S. nursing homes.


Emergency Preparedness and Clinical Laboratories

Emergency preparedness is an important topic for individuals and organizations alike, and the HHS OIG is interested in knowing how well CMS is prepared for emergencies as it relates to clinical laboratories. This is especially true given the important role clinical laboratories play in pandemics like COVID-19. Laboratory tests are a part of early detection, diagnosis, monitoring, and treatment of disease.

In 2016, CMS adopted a final rule referred to as the Emergency Preparedness rule. The rule required providers and suppliers to plan for natural and manmade disasters to coordinate with entities at all levels through emergency preparedness systems and be prepared to meet the needs of patients during disasters and emergency systems. According to the OIG, this rule covers 17 facility types such as hospitals, long-term care facilities, etc., but the rule does not cover clinical laboratories.

As most of the world has learned from the COVID-19 pandemic, clinical laboratories are essential in the management of such public health emergencies. To that end, OIG plans to conduct an audit to determine whether CMS's emergency preparedness for clinical laboratories could be improved. Specifically, they will look at CMS's emergency preparedness to ensure that:

    1. beneficiaries maintain access to all types of laboratory tests, including laboratory tests for novel infectious diseases during a public health emergency
    2. laboratories have the ability to develop and deliver timely and accurate testing for novel infectious diseases during a public health emergency


Medicare Payments for Laboratory Tests in 2021

In 2014, the federal government passed The Protecting Access to Medicare Act of 2014 (PAMA). This law requires CMS to set payment rates for lab tests based on current charges in the private sector of the healthcare market. CMS began paying for laboratory tests under this system in 2018. The law also requires OIG to conduct and release to the public an annual analysis of the top 25 (by expenditures) laboratory tests.

The OIG has done so in previous years. For example, see the 2020 report here.

This work is important as Medicare is the largest payer of clinical laboratory services in the United States. Medicare Part B covers most lab tests and pays 100% of allowable charges.

With this OIG Work Plan item, they will conduct and publicly release their report of the top 25 laboratory tests for 2021.


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