Compliance and Quality: What Patient Safety Officers Need to Know


November / December 2005

Compliance and Quality

Compliance and Quality: What Patient Safety Officers Need to Know

Following the publication of the Institute of Medicine Report, To Err Is Human, Building a Safer Health System (IOM), public awareness of the problem of medical errors resulted in several new patient safety initiatives by the federal government. Some initiatives were prescriptive and other initiatives punitive. This article discusses both initiatives and their implications for patient safety officers.

Prescriptive Measures
The prescriptive measures came in the form of refined Conditions of Participation for Hospitals (COPs) issued by The Centers for Medicare and Medicaid Services (CMS) and Supplemental Compliance Program Guidance for Hospitals issued by the Office of Inspector General (OIG).

Medicare Conditions of Participation for Hospitals
The Medicare Conditions of Participation for Hospitals were revised to include additional requirements that each Medicare participating hospital must implement a quality assessment and performance improvement program. The program must include activities for measuring quality of care and maintaining it at acceptable levels through 1) designing and implementing corrective action activities to address deficiencies and 2) following up to determine the degree of success of an intervention and to detect new problems and opportunities. CMS, in its commentary to the final COP rule, specifically acknowledged the importance of the IOM Report in focusing attention to systemic and procedural failures in preventing medical error; CMS specifically adopted a definition of error that “can include problems in practice, products, procedures, and systems.” The COP enforcement mechanism established through CMS relies upon state health agencies to assess, through a survey process, compliance with the COPs. Hospitals that are found to be out of compliance with the COPs must submit a plan of correction, which if not accepted, may result in civil monetary penalties or the more draconian measure of termination from the Medicare program.

OIG Supplemental Guidance for Hospitals
The OIG Supplemental Compliance Guidance for Hospitals, issued by the OIG in January 2005, provides insight into the OIG’s most recent approaches to fraud and abuse issues and provides specific risk areas that hospitals should currently consider.1In this Guidance, the OIG specifically reminded hospitals of the OIG’s ability to exclude them from participation in federal healthcare programs if a facility provides unnecessary or substandard care and asserts that hospitals should adopt quality of care protocols and implement procedures for assessing compliance with them. The OIG’s exclusion authority is broad, and it does not require proof of knowledge or intent on the part of the hospital, and the substandard care need not even involve a Medicare or Medicaid beneficiary. In the Guidance, the OIG also stated that hospital quality assurance must reach beyond hospital employees to physicians on the medical staff.

Punitive Measures
In recent years, federal prosecutors have targeted nursing homes for quality failures. Although there are no federal laws with explicit punitive provisions to punish poor quality care, federal prosecutors have successfully used the federal False Claims Act (“Act”) to do so.2The False Claims Act is a Civil War era statute aimed at preventing and prosecuting fraud by government contractors. It is a civil statute, which permits the government to seek triple the amount of the alleged false claims and up to $10,000 per alleged fraudulent claim. The Act was revised in 1986 by Congress to encourage private citizens with first-hand knowledge of fraudulent activity to act as whistleblowers and bring suit against a provider. If the federal government intervenes in the action and assumes the prosecution against the provider, the whistleblower can be rewarded up to 25% of the monies either reached in settlement or awarded by the court.

In addition to penalties imposed under the Act, if convicted, the provider is also subject to the exclusionary powers of the OIG and could be precluded from participation in Medicare and Medicaid. To avoid this dire result, most providers choose to enter into settlement agreements whereby fines are paid, but no wrongdoing is admitted — therefore, liability under the Act is avoided and so is the possibility of exclusion.

The fraud theory used by prosecutors in connection with the Act and quality of care failures is as follows. In return for payment from Medicare or Medicaid, providers agree to adhere to all the requirements imposed by those programs; when the quality of care becomes sufficiently substandard that it amounts to no care at all, the claim submitted to Medicare or Medicaid becomes a claim for services not rendered and therefore a false claim under the Act. Examples of substandard nursing home care centered on inadequate nutrition and hydration, wound and decubitus care, staffing patterns, and inadequate facilities.

Notably, prosecutors have repeatedly stated that a single isolated instance of poor quality care will not give rise to prosecution under the Act; instead, prosecutors look for patterns or practices that substantiate failure of care.

Bolstered by the findings in the IOM Report, federal prosecutors then also publicly stated that hospitals would be the next provider targeted for prosecution under the Act. In addition to substandard care, prosecutors stated that in hospital settings the withholding of care or the provision of unnecessary care would also be subject to enforcement. Prosecutors look for situations where there are continuing incidents in which JCAHO and state law requires a hospital to report, but for which the hospital does not institute needed system changes. Unfortunately for hospitals, recent prosecutions and settlements indicate that prosecutors are already moving forward. Listed below are several notable cases.

Tenet Healthcare Corporation agreed to pay $54 million dollars to settle allegations that at least two cardiac surgeons on staff at Redding Medical Center performed unnecessary cardiac catheterizations and cardiac bypass surgeries. Federal investigators alleged that the surgeons preformed “excessive numbers of costly and invasive diagnostic procedures and heart surgeries compared with their peer group,” which resulted in Medicare billing in amounts for each surgeon of more than $3 million in one year. Tenet Healthcare Corporation sold Redding Medical Center in lieu of having the hospital excluded from federal healthcare programs.3It was the first time the OIG initiated the exclusion of a hospital based on unnecessary or substandard care.

United Memorial Health Center in Greenville, Michigan, pleaded guilty to healthcare fraud and entered into a plea agreement whereby the hospital agreed to pay a $1.05 million fine and reimburse insurers for falsely billing insurers for pain management procedures performed by an anesthesiologist, which the hospital knew were unnecessary and placed patients at risk. Instances of unnecessary care that prosecutors alleged included the anesthesiologist billing for complex invasive nerve procedures on a nerve that had previously been extracted and performing delicate surgeries on the lumbar spine when diagnostic tests indicated that the problem was in the cervical spine. At least one patient was rendered paraplegic and another died before hospital administrators acted.

In July 2005, a Pennsylvania hospital, Central Montgomery Medical Center, and its management company, UHS of Delaware, Inc., entered into a settlement agreement for failure-of-care claims based upon alleged violations of regulatory requirements pertaining to physical and chemical restraints that resulted in the death of a restrained elderly patient.4The government alleged that the hospital knowingly billed the government for numerous patients who were improperly physically or chemically restrained in violation of the COPs, which protect patient rights. The hospital denied wrongdoing in the settlement but agreed to pay the government $200,000 and to hire a consultant to review restraint usage at the hospital.

Implications for Patient Safety Officers
Federal prosecutors and governmental agencies have clearly raised the profile of patient safety as an integral component of compliance. By necessity, patient safety and quality of care must be treated as processes that are integral to a hospital’s formal compliance plan and methods. At a minimum, patient safety officers must be cognizant of the fraud and abuse implications inherent in patient safety and quality. The patient safety officer and committee should work closely with leadership to develop a strategic plan to link compliance, risk management, patient safety, and quality. Each hospital organization should put in place a systemic mechanism to link patient safety and quality activities to compliance activities. The patient safety officer should have an identified role in sharing information regularly with the compliance officer regarding identified patient safety and quality of care issues discovered either through audit or in response to an incident or event and should participate in relevant compliance plan policy and procedure development. Only when patient safety and compliance are closely linked can a hospital hope to withstand the increased scrutiny of federal enforcement authorities.

Renee H. Martin is a member of the health law firm of Tsoules, Sweeney & Martin, LLC, located in Exton, Pennsylvania and is a registered nurse with over 15 years of clinical practice. She advises healthcare providers on patient safety and quality of care issues, HIPAA compliance, informational privacy, and medical record documentation. Martin holds a degree from the Villanova University School of Law, where she is an adjunct faculty member, and a master’s of science degree in nursing from Villanova University. She writes and speaks nationally to healthcare professionals on a variety of health law topics and serves on the Advisory Board of Advance for Nurses.


Institute of Medicine. (2000). To err is human: Building a safer health care system.L. T. Kohn, J. M. Corrigan, & M. S. Donaldson (Eds.). Washington, D.C.: National Academies Press.

170 Fed. Reg. 4858 (Jan. 31, 2005). The Office of Inspector General’s mission is to protect the integrity of Department of Health and Human Services (HHS) programs, as well as the health and welfare of the beneficiaries of those programs. The OIG has a responsibility to report both to the Secretary and to the Congress program and management problems and recommendations to correct them. The OIG’s duties are carried out through a nationwide network of audits, investigations, inspections and other mission-related functions performed by OIG components.

231 U.S.C. ßß 3729-3733