What Healthcare Providers Are Doing to Promote Regulatory Compliance The Medical Device Regulatory, Reimbursement and Compliance Congress March 29, 2007 Jeffrey G. Micklos, Esq. Senior Vice President, Business Operations & General Counsel

Session Overview Current compliance landscape for hospitals Importance of a culture of compliance Involvement of corporate governance Federal enforcement priorities Hospital compliance initiatives that affect medical device companies

Current Compliance Landscape for Hospitals Hospitals have been under scrutiny by federal law enforcement for many years. DOJ/OIG has pursued hospitals through several national initiatives. e.g., lab unbundling, pneumonia upcoding. Despite increased focus on other health care sectors, cases against hospitals continue e.g., Medicare outlier payments; payments for medically unnecessary services; cost reporting issues.

Culture of Compliance Compliance risk management is a must for everyone in health care. A compliance culture is critical; government’s focus is now on effective compliance programs. Regulatory compliance is not the only goal; focus on ethical decision making is now important too. Federal government is looking for more personal accountability when things go wrong.

Corporate Governance and Risk Minimization Recent accounting scandals show a need for a better connection between governance and compliance risk management. SOX protections are seen as important for all corporate entities. Law enforcement is increasingly interested in the knowledge/actions of a corporate board on matters. Directors and/or officers are being targeted; sanctioning the corporate entity is no longer the only remedy.

Federal Enforcement Priorities DOJ/OIG’s enforcement has been widened significantly to other types of providers, suppliers, and individuals. Focus is now on downstream suppliers too. Pharma has been a focus in recent years. Medical device companies are next. New Jersey investigation is a precursor. Scrutiny of hospital supply chain will continue.

Hospital Compliance Initiatives Related to Medical Devices Physician/medical device company arrangements Credentialing of Health Care Industry Representatives (HCIRs) Gainsharing programs

Medical Device Company/Physician Arrangements Hospitals are increasingly interested in arrangements between their medical staff physicians and medical device companies. Illegal arrangements could subject hospitals to fraud liability for billing for services related to those arrangements. Surgeon-owned device companies present a real concern. Fair market value is a difficult issue for hospitals to understand or even to get at.

Credentialing of HCIRs For various reasons, hospitals should maintain oversight of HCIRs inside hospitals. Goal is for an effective credentialing process that does not unduly burden all parties. Policies should differentiate rules based on the roles of specific HCIRs. Ongoing monitoring of compliance – both HCIRs and medical staff physicians – is important to an effective process.

Gainsharing Arrangements Physician satisfaction is critical for hospitals. Aligning incentives should lead to more efficient care and higher quality services. Legal impediments remain, although the OIG has given recently more reason for hope. The DRA demonstration projects will be watched with interest by all parties.

E-mail: jmicklos@fah.org Questions/Comments? Now . . . Later . . . Jeff Micklos Phone: 202.624.1521 E-mail: jmicklos@fah.org