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Managed care organizations that provide care to Medicare and Medicaid beneficiaries must develop a "compliance culture" to avoid allegations of fraud by the federal government, a managed care liability expert asserts.

Such steps are necessary to respond to stepped-up enforcement of federal regulations aimed at protecting beneficiaries enrolled in managed care organizations, said Paula J. McCann, an attorney with the Denver law firm of Kutak, Rock.

The government has allocated billions of dollars to strictly enforce the Health Insurance Portability and Accountability Act, the Balanced Budget Act of 1997 and the False Claims Act, according to Ms. McCann.

"The uncertainty isn't whether or not there are enforcement activities taking place. The uncertainty is what direction are they going to come at you from," Ms. McCann told a group of risk managers for managed care organizations attending a recent seminar hosted by J&H Marsh & McLennan Inc. in Marina Del Rey, Calif.

Managed care companies should keep up on enforcement trends because "just about any mistake can now be deemed fraud. You need to be prepared," she said.

For example, "on June 26, when we all woke up, compliance plans were no longer optional. They are now required," Ms. McCann said, referring to Interim Final Rule 42 C.F.R. 422.501(b)(3)(vi), which was added to the Code of Federal Regulations.

Under this regulation, everyone involved in a managed care organization must participate in the compliance plan: doctors, staff, vendors and the management team.

"Choose your business partners wisely. Due diligence is not just a term to be thrown about," she said.

"Under HIPAA, you can't do business as a Medicare managed care contractor with someone who has any degree of ownership or who has an equity position in your plan who has been deemed unacceptable in any federal health program," she pointed out.

"If they've been thrown out of any federal health program, they cannot participate in an ownership manner or a management manner in your new venture. So you've got to do background checks," Ms. McCann said.

In adopting a "compliance culture," managed care companies also should educate their entire staffs about "why the law is what it is," she advised.

"People picking up the phones on your membership services line should know more than what the rule says. They have to understand where the rule came from. They have to understand that in order to apply facts, in order to adjudicate issues without causing problems," she said.

To ensure fair treatment of Medicare and Medicaid beneficiaries, employees of managed care organizations should be reminded daily "that they stand in the shoes of the federal government, that they're dealing with beneficiaries who have rights," Ms. McCann said.

In particular, managed care companies need to be careful how they handle "dual eligibles," or those patients eligible for both Medicare and Medicaid, she said. Medicare pays primary, she explained.

"For those of you who do both Medicare managed care and Medicaid managed care contracts. . .I feel for you," she said. "You are dealing with the most complex payer mix in the country, if not in the world."

"There are very limited amounts of skilled human talent in this area of Medicare-Medicaid managed care. It's hard to find people who truly understand the nuts and bolts," Ms. McCann said.

Among Ms. McCann's other admonishments to the risk managers:

* "Make sure your providers are licensed and that they have active -- active -- Medicare provider numbers."

Furthermore, "triple check, especially in an urban area, that providers have hospital privileges, because it is deemed lying to HCFA to list anyone who is not a bona fide provider on your Excel spreadsheets."

HCFA, the Health Care Financing Administration, administers the federal Medicare program.

* "Don't illegally enroll beneficiaries. Don't lie to them; don't tell them their doctor is in the network if he isn't. That means your marketing staff has to be trained very, very well, and there has to be tremendous oversight."

* "Don't refuse to provide Medicare-covered services unless you deem it -- and really document it -- as not medically necessary."

* "Train doctors not to counsel or advise patients on which plan to enroll in."

While there are no specific provisions in any of the new laws prohibiting doctors from serving as counselors, "there are in the Medicare marketing guidelines, where HCFA explains that they don't want the line between physician as healer and treater being confused by the beneficiary with physician as insurance counselor," Ms. McCann explained.

* "Prohibit staff of providers or providers themselves from health screening."

Health screening is the practice in which healthy beneficiaries are encouraged to enroll in managed care plans, while unhealthy beneficiaries are discouraged from enrolling or advised to disenroll because they've become sick.

Managed care companies found to have practiced health screening can be fined $100,000 for every beneficiary involved, according to Ms. McCann.

"This is a very high-stakes game" with very little margin for error, she warned.