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Searching for Articles published in March 2017.
Found 20 Results.

Setting Up Your Compliance Internal Reporting Mechanism

Posted on March 3, 2017, Authored by John H. Fisher, II, Filed under Health Care

One of the primary elements in a Compliance Program is the creation of a system that permits employees and others to provide information regarding potential compliance issues without fear of retaliation.  In larger organizations, multiple pathways permitting employees to make anonymous complaints should be maintained.  Oftentimes providers use 24 hour compliance “hotlines,” compliance “lockboxes,” and other methods to facilitate compliance tips. Whatever system is used as part of your compliance reporting system, it is crucial employees understand they are encouraged to provide information and there is a clear prohibition against others in the organization retaliating against them for providing information.  It should also be made clear to employees that the desire of the employee to remain anonymous will be honored. Establish Compliance Reporting Process Absent a system to encourage reporting, it is hard to imagine a compliance program being found to be effective.  Effectiveness is the standard all compliance programs must meet in order to provide any risk mitigation.  All government standards for compliance require the program be “effective.”  A well designed and properly operated reporting system will help the business obtain valuable information, hopefully early on, before the issue becomes a big problem.  Additionally, the openness of the program will send a strong signal to the outside world, such as government regulators, that the organization takes compliance seriously. If information is obtained through the compliance reporting system it must be taken seriously.  Certainly not every piece of information will be reflective of a serious compliance problem and an employee could potentially have other motives for making a compliant.  Regardless, it is crucial the information be acted upon and the action be documented.  If the compliance officer concludes there were alternative motivations for the complaint, that fact should be substantiated and documented.  If an objective investigation indicates there could be a compliance issue, the matter needs to be pursued through an appropriate outcome. Depending on the circumstances and the result of a thorough investigation, the outcome could range anywhere from additional training through a self disclosure to the government.  

Hey Dentists: No Business Associate Agreement, No Problem

Posted on March 23, 2017, Authored by Ruder Ware Attorneys, Filed under Health Care

According to the U.S. Health and Human Services Office for Civil Rights (OCR), dental practices are not required to have a business associate agreement with their dental laboratory before sharing protected health information. The HIPAA Privacy Rule applies to covered entities (including dental practices) and their business associates.  As you know, for the past few years, dental practices have been the target of increased HIPAA audits by the OCR.  On March 22, 2017, the American Dental Association (ADA) announced[1] that OCR had clarified to the ADA that a dental laboratory is not a dentist’s business associate when the communication is for treatment purposes.  Specifically, in its correspondence to the ADA, the OCR said, “a covered entity such as a dentist is not required to have a business associate agreement with another health care provider such as a dental laboratory when disclosing [protected health information] for treatment of an individual.”  It’s important to note, this clarification is not a blanket exemption from the requirement to have business associate agreements between dental practices and dental laboratories.  In certain instances, business associate agreements are still required, for example the OCR pointed out that if the laboratory provides “other (nontreatment) services or functions on behalf of the provider that fall within the definition of business associate and require access to protected health information.” If you have questions regarding your dental practice’s HIPAA compliance or need assistance in training for your staff, feel free to contact any one of our Health Care Focus Team attorneys. [1] http://www.ada.org/en/publications/ada-news/2017-archive/march/ocr-responds-to-question-about-dental-labs-business-associate-agreements

Faster Pace of Interest Rate Hikes

Posted on March 3, 2017, Authored by Jeremy M. Welch, Filed under Banking and Financial Matters

As we indicated on February 16, 2017 the Federal Reserve is looking at interest rate hikes for 2017.  At a speech in Chicago today Chairwoman Janet Yellen said it is likely the Federal Reserve will increase the federal funds rate in March, which was most recently increased in December from 0.50% to 0.75%.  The stock market remained relatively flat after the announcement, indicating the recent surge had already taken into account that a rate hike is likely.   Yellen went on further to state that as long as the economy continues to pick up more momentum as expected the Federal Reserve will likely raise rates at a faster pace.  In addition, if President Trump invests significant funds into infrastructure repairs and replacement, as he has indicated, that would spur greater inflation which would likely further cause the Federal Reserve to increase interest rates. Given the fact that the federal funds rate has been below 0.25% between 2009 and 2015, the indication that the Federal Reserve is consistently, and potentially more aggressively, increasing interest rates is an indication they believe the economic recovery is near its end. 

Protect Your Assets - Medical Assistance & Long-term Care Planning Spring 2017 - Wausau, WI

Posted on March 5, 2017, Authored by ,

Holiday Inn & Suites 1000 Imperial Ave Rothschild, WI  54474 The Need for Planning Who Is Eligible for Medical Assistance Planning?  Protection of the House and Vacation Home  Permitted Transfers of Assets  Using Trusts to Protect Your Assets This seminar is presented at no charge - refreshments are included. It is offered at both 9:00 a.m. and 5:30 p.m. Please specify a time when registering. To register contact Shannon Jacobson (sjacobson@ruderware.com) or by calling 715.845.4336 or 800.477.8050. Or, to register online, choose one of the following: Wausau - Morning Session (9:00 a.m.) Wausau - Evening Session (5:30 p.m.)

Local Government Seminar - Spring 2017

Posted on March 22, 2017, Authored by ,

Holiday Inn & Suites 1000 Imperial Ave, Rothschild, WI To register, use our Online registration form, or contact Shannon Jacobson at: sjacobson@ruderware.com or (715) 845-4336.   We look forward to seeing you. Ruder Ware's Spring Local Government Seminar is set for April 25, 2017 at the Holiday Inn Hotel & Suites in Rothschild, Wisconsin (click here for information and directions). Ruder Ware is providing this Local Government Seminar to all of its current and prospective clients.  The seminar is designed to give detailed information to experienced administrators and officials as well as general information for the newer administrator/elected official.  We hope you will take the time to attend this event. Impact of the Administrations of President Trump and Governor Walker on Local Governments 4:00 - 5:15 p.m. While new developments are happening daily, we plan to discuss: Status of the Affordable Care Act and employer compliance with any existing requirements of the Act. Enforcement of employment laws at the state and federal level. Proposed changes in the 2017-2019 State Budget. Dinner and Networking  5:15 - 6:00 p.m. Legal Updates 6:00 - 7:30 p.m. Changes to the Unemployment Compensation Law. Recent decisions regarding Wisconsin Open Meetings Law and Wisconsin Public Records Law. Recent decisions regarding reasonable accommodations of employees under the Americans with Disabilities Act and the Wisconsin Fair Employment Act. Recent decisions regarding due process protections for public employees. This seminar is offered at no charge.

When is a Physician Liable for Stark Law Violations?

Posted on March 30, 2017, Authored by John H. Fisher, II, Filed under Health Care

I frequently hear attorneys claim the Stark law applies equally to hospitals and physicians.  This position is sometimes taken in the process of negotiating a transaction between a hospital and a physician or physician group.  In this context it is limited to simple posturing to attempt to get a better financial deal in the negotiated arrangement.  This position takes on different and much more serious repercussions when taken in the context of addressing a potential compliance violation. Let me make it clear, Stark law applies to physicians.  It applies when physicians are the provider of designated health services.  It also potentially applies to physicians when they make referrals to hospitals or other providers of designated health services.  The potential liability to the physician is much different and more remote than the liability of the designated health service provider. The primary sanction for violating the Stark law is denial of payment of designated health services that flow from referrals made by a physician who has a prohibited financial arrangement with the DHS provider.  The Stark law is primarily a payment ban effective regardless of intent.  If there is a financial relationship with the physician and no exception exists to permit the referral, there is a violation and the provider of the designated health service is denied the right to seek payment for the prohibited services.  Prohibited billings result in an overpayment. The Affordable Care Act attaches additional penalties under the Federal False Claims Act if repayment is not made within 60 days after the designated health service provider discovers an over-payment occurred as a result of the Stark law infraction.  Penalties for failing to make timely repayment include triple the amount of the improper payment plus an additional $22,000 per claim.  In many cases the potential exposure to the designated health service provider can be astronomical and large enough to threaten the potential viability of their business.  However, none of this exposure falls on the referring physician if the referring physician does not bill for the designated health service. In the typical case involving a hospital/physician relationship, the liability exposure for improperly billed designated health services only falls on the hospital, not the referring physician. This is the source of a common misconception among physicians and even some hospital attorneys.  A physician is not subject to the primary sanction for violating the Stark law which is repayment of amounts received for improperly billed designated health services.  This has been confirmed multiple times by the Center for Medicare and Medicaid Services.  Physicians who make referrals to DHS entities are only liable if found to have participated in a circumvention scheme the physician knows or should know has a principal purpose of assuring improper referrals.  Participation in a circumvention scheme is a serious offense and can result in exclusion and the imposition of penalties.  A circumvention scheme requires proof and is not a strict liability offense resulting in the obligation to repay billings. A circumvention scheme is likely not present if a contracting physician is being compensated in excess of an appraisal obtained by the contracting hospital.  A circumvention scheme is a scheme (such as a cross-referral arrangement) the physician knows or should know has a principal purpose of assuring referrals that could not be made directly.  It does not occur just because a physician is paid a little bit over fair market value.

Defining the Duty of the Board of Directors over Compliance Functions

Posted on March 22, 2017, Authored by John H. Fisher, II, Filed under Health Care

I recently posted a blog article about a document released by the Department of Justice entitled “Evaluation of Compliance Programs.”  As the title of the document might suggest, the DOJ release covers a variety of issues it looks at when evaluating the effectiveness of compliance programs.  The document includes some guidance on how a corporate board should view its responsibilities for corporate compliance.  The direction applies to health care boards, but extends to boards that oversee other types of businesses as well. A few practical points can be gleaned from the DOJ guidance regarding the practical application of board responsibilities over compliance. Direct reporting from the compliance officer to the board of directors is an essential element of an effective compliance program.  The direct reporting relationship should be set forth in policy, but the board should assure that reporting is actually occurring on an ongoing basis.  Regular means more than just once or twice per year.  Compliance should appear as a regular board agenda item.  Even if there are no compliance events to report, the compliance officer should be available to answer questions and/or make presentations to further the board’s awareness of the compliance function. The direct reporting relationship should not be contaminated by intervention of management, general counsel, or any other party.  The direct reporting relationship must be directly to the board and the compliance officer should not feel impeded in any way from exercising the direct reporting relationship. Be careful not to leave loose ends.  If a compliance issue is present, the board should assure the compliance process is followed through resolution.  Just learning about an issue is not enough.  The compliance function should be accountable to the board for follow-through on all significant compliance issues. Compliance environment is critical and the board should insist on measurement or other methods to ensure an open compliance environment exists throughout the organization. Availability of compliance expertise or support for the board enhances effectiveness.  Corporate boards might consider placing a compliance professional on their board of directors.  At a minimum, the board should be supported in the exercise of its compliance oversight functions.  Expertise independent of the compliance officer should be available to guide the board. A vital element of a compliance program involves training.  The Board should not be immune from the need to obtain compliance training.  The type of training that a board member receives should support the oversight function of the board.  This might be different than training received by a member of management or staff that focuses in a specific division. Compliance function independence is critical, particularly in cases where management might be involved in an issue or if the issue occurs in an area of operational oversight.  Board members should assure that compliance independence is present. Compliance should be active and ongoing.  If a board is not regularly hearing about compliance program operations or developments, it should be concerned.  If reports are not coming, ask for them. Board members should be provided with the DOJ document and should review it as part of the education needed to define their responsibilities and enable effective oversight.  The above only contains a few points included in the DOJ guidance. 

Excluded Party Cases Dominate OIG Published Self Disclosure Settlements

Posted on March 21, 2017, Authored by John H. Fisher, II, Filed under Health Care

In 2013, the HHS Office of Inspector General issued revised protocols outlining the process through which health care providers are able to self-disclose and resolve potential liability under the OIG’s civil monetary penalty (CMP) authorities.  The 2013 Self Disclosure Protocols (SDP) clarified the process of self-disclosure and provided answers to some of the questions previously impeding provider use of the self-disclosure process.  One area the SDP clarified involved the calculation of damages where a provider discovers an employee has been excluded from the Medicare and Medicaid programs.  When a provider is a “direct billing” provider, such as a physician, it is relatively easy to identify the billings attached to that provider.  Prior to 2013, the process for estimating damages was unknown for employees who do not directly bill federal programs for their services.  The 2013 SDP contained a suggested process for estimating damages when non-billed employees are excluded from the program.  The process is based on the cost of employing the excluded individual.  This made it much easier for providers to use the SDP in these circumstances.  Review of the recently settled self-disclosure cases confirms the process is working to encourage providers to use the SDP in cases involving exclusions.  The SDP uses a multiple of 1.5 times estimated program damages as a minimum baseline for settling SDP cases.  Calculation of damages resulting from exclusion involve identification of billing for services of a physician or other provider who receives reimbursement for their services.  Other employees such as nurses, medical assistants, administrative staff, and others use the estimated cost of employment method. By my count there appears to have been a total of forty-nine excluded party SDP settlements from the beginning of 2016 through the publication date of this article.  This is reflective of the clarified procedure in the 2013 SDP.  Settlement amounts range from around $10,000 to a high of around $800,000.  The higher dollar amount settlements likely relate to multiple excluded parties, long-term employees, or large dollar “direct-bill” employees. Listed settlements in cases where the disclosing party was alleged to have employed an individual it knew or should have known was excluded from participation in Federal health care programs include: Precision Toxicology, LLC (Precision), California, agreed to pay $30,137.69 Claxton-Hepburn Medical Center (CHMC), New York, agreed to pay $23,483.39 Delaware Valley Community Health, Inc. (DVCH) and Fairmount Primary Care Center (FPCC), Pennsylvania, agreed to pay $27,061.58 Scott & White Memorial Hospital (S&W), Texas, agreed to pay $19,146.08 Consulate Health Care (Consulate), Florida, agreed to pay $359,388.10 Consulate Health Care and Perry Village Facility Operations, LLC d/b/a The Manor at Perry Village (collectively, Perry Village), Florida, agreed to pay $29,324.36 Good Samaritan Society HCBS-Choice, LLC d/b/a Choice Home Health Care (CHHC), Texas, agreed to pay $10,000 Diversicare Healthcare Services, Inc. (Diversicare), headquartered in Delaware, agreed to pay $514,424 Marias Care Center (Marias), Montana, agreed to pay $85,952.72 125 Alma Boulevard Operations LLC d/b/a Island Health and Rehabilitation Center (IHRC), Florida, agreed to pay $30,924.11 AHS Oklahoma Physician Group, LLC d/b/a Utica Park Clinic (UPC), Oklahoma, agreed to pay $13,467.01 Where The Heart Is (WTHI), Tennessee, agreed to pay $100,000 Health Recovery Services, Inc. (HRS), Ohio, agreed to pay $213,564.54 UHS of Westwood Pembroke, Inc. d/b/a Pembroke Hospital (Pembroke Hospital), Massachusetts, agreed to pay $807,856.65 Fort Duncan Medical Center, L.P. d/b/a Fort Duncan Regional Medical Center (FDRMC), Texas, agreed to pay $545,995.62 BHC Streamwood Hospital, Inc. d/b/a Streamwood Behavioral Health System (SBHS), Illinois, agreed to pay $285,683 UHS of Dover, LLC d/b/a Dover Behavioral Health System (DBHS), Delaware, agreed to pay $197,320.85 UHS of Texoma, Inc. d/b/a Texoma Medical Center (TMC), Texas, agreed to pay $127,001.69 TBD Acquisition, LLC d/b/a Brook Hospital-Dupont (BHD), Kentucky, agreed to pay $119,033.54 La Amistad Residential Treatment Center, LLC d/b/a Central Florida Behavioral Hospital (CFBH), Florida, agreed to pay $26,744.55 UHS of Parkwood, Inc. d/b/a Parkwood Behavioral Health System (PBHS), Mississippi, agreed to pay $13,092.48 UHS of Fairmount, Inc. d/b/a Fairmount Behavioral Health System (Fairmount), Pennsylvania, agreed to pay $58,339.74 Community Care Physicians, P.C. (CCP), New York, agreed to pay $60,972.04 Moses H. Cone Memorial Hospital Operating Corporation d/b/a Cone Health System (CHS), North Carolina, agreed to pay $475,220.66 Natera, Inc. (Natera), California, agreed to pay $10,000 Palisades Health Care Partners, Inc. d/b/a ASAP Services Corporation (ASAP Services), District of Columbia, agreed to pay $66,647.28 Gateway Healthcare, Inc. (Gateway), Rhode Island, agreed to pay $400,000 Carolina Kidney Associates, P.A. (CKA), North Carolina, agreed to pay $11,805.48 Buckner Elam Medical (BEM) and Setal Rana, M.D. (Dr. Rana), Texas, agreed to pay $435,481.50 O'Connor Hospital, California, agreed to pay $207,698 Fort Worth Manor Nursing Center (Fort Worth Manor), Texas, agreed to pay $113,820.91 UMass Memorial Health Care, Inc.; UMass Memorial Medical Center, Inc.; and the Clinton Hospital Association (collectively, "UMass"), Massachusetts, agreed to pay $30,299.27 Beth Israel Deaconess Hospital-Needham and Medical Care of Boston Management, Inc. d/b/a Affiliated Physicians Group, Massachusetts, agreed to pay $154,506.84 Compliance Advantage, LLC (CAL), Kentucky, agreed to pay $32,249.15 Richland Memorial Hospital, Inc. (Richland), Illinois, agreed to pay $29,932.86 Buffalo Heart Group (BHG), New York, agreed to pay $13,084.73 Consulate Health Care and Vero Beach Facility Operations, LLC d/b/a Consulate Health Care of Vero Beach (collectively, "Consulate Vero Beach"), Florida, agreed to pay $30,978.42 Drug Abuse Comprehensive Coordinating Office, Inc. (DACCO), Florida, agreed to pay $32,189.76 Antelope Valley Hospital (AVH), California, agreed to pay $190,087.90 Alternative Consulting Enterprises, Inc. (ACE), Pennsylvania, agreed to pay $126,102.38 New LifeCare Hospitals of Northern Nevada, LLC d/b/a Tahoe Pacific Hospitals (New Life Care), Nevada, agreed to pay $57,425 KaleidAScope, Inc. (KaleidAScope), Pennsylvania, agreed to pay $18,468.30 Wexner Heritage Village (Wexner), Ohio, agreed to pay $10,000 Athena Orchard View LLC d/b/a Orchard View Manor (Orchard View), Rhode Island, agreed to pay $61,576.22 Metro Health Corporation and its subsidiary, Metropolitan Hospital d/b/a Metro Health Hospital (Metro Health), Michigan, agreed to pay $2,305,743.39 OhioHealth Corporation (OhioHealth), Ohio, agreed to pay $231,277.60 Health Sciences, Inc. (Health Sciences), Alabama, agreed to pay $10,000 Ridgeview Institute, Inc. (Ridgeview), Georgia, agreed to pay $29,113.82 Ocean Dental of Arkansas, PC (ODA), Arkansas, agreed to pay $17,346

Physician Practice Compliance Programs

Posted on March 15, 2017, Authored by John H. Fisher, II, Filed under Health Care

In today’s environment of complex regulations, aggressive prosecution, exorbitant penalties, and hungry whistleblower attorneys, it is necessary for medical practices to maintain effective compliance programs.  Failure to do so puts the practice at a great deal of unnecessary risk.  Many or most practices will eventually make errors in their billing and collections or other regulatory areas.  Self-discovery of these issues is unpleasant but manageable.  Discovery by a government enforcement agency or a whistleblower can be personally and financially devastating. A compliance program creates a systematic process that proactively operates to discover potential regulatory risks, to audit and monitor identified risk areas, and to take action to correct discovered deficiencies.  A compliance program contains seven core elements, without which a program will not be effective.  The seven core elements establish the operational foundation and are required in all programs.  A compliance program will also include policies and procedures that set forth the requirements for compliance in identified risk areas.  For example, a health care provider is exposed to potential risk in billing and coding and will need to have policies and procedures covering general billing practices supplemented with specific billing requirements pertaining to their specific practice area. Risk area policies and procedures establish requirements and communicate them to staff.  They also establish a baseline against which auditing and monitoring activities can be measured. Having an active compliance process in place will help identify and correct issues before they are the subject of enforcement or legal action.  Additionally, an effective compliance program will help mitigate damages of third party claims.  Federal Sentencing Guidelines provide reduction in sentencing if an effective compliance program is in place.  Additionally, civil penalties can be assessed absent actual knowledge if the government feels a provider should have known about a deficiency through the operation of an effective compliance program. Every medical practice should operate a compliance program tailored to the risks present in their practice.  It is crucial the program be tailored to the risk involved in the specific practice.  Some of the core requirements are relatively standard but should still be adjusted to leverage the resources of the practice and accommodate the specific operational structure.  Risk area factors will always be unique to the practice. Some risk area policies will be based on the nature of the service provided.  Others will be based on the individuals involved and the operational structure of the practice. Adoption of policies is only the first step.  Compliance program effectiveness requires continual operation of the program as a “living and breathing” process to identify, assess, and address risk.  Without ongoing and systematic operations, a compliance program will not be effective and will provide little, if any, risk mitigation to the practice. An effective compliance program must address, at a minimum, seven core elements in addition to practice-specific risk areas. Appointment of a high ranking member of management to act as compliance officer or compliance responsible individual. Compliance policies that describe the process to conduct ongoing compliance activities. Training of employees, contractors and others on basic compliance program elements and risk areas that are applicable to their job functions. A visible compliance reporting system and protection of those who make complaints from retaliation or retribution. Consistently enforced disciplinary standards that hold employees responsible for following compliance requirements. Continual operation of the program to identify areas of potential compliance risk within the practice. Maintaining a system of appropriately responding to identified compliance problems through creation of appropriate corrective action, self-disclosure or other appropriate action. Putting these elements in place through adoption and operation of appropriate policies and standards establishes the central elements of the compliance process.  It is critical the activity does not stop at the establishment of policies.  A compliance program must be continually operated as a living and breathing process to identify and address risk.  The compliance officer or responsible individual is responsible for assuring the continued operation of the program.  

Are You a Joint Employer? Watch Out for Potential Liability

Posted on March 13, 2017, Authored by Dean R. Dietrich, Filed under Employment

Many businesses today use other entities to provide employees for their business operations.  This type of structure is often viewed as a good way for a company to avoid many of the pitfalls of being an employer under state and federal laws.  A recent court ruling has redefined what it means to be a joint employer and may cause companies to change their model or simply decide to be the employer of record. In a recent ruling by the United States Court of Appeals for the Fourth Circuit, the Court of Appeals established a new six-factor test to determine whether or not two entities should be considered joint employers under the Fair Labor Standards Act.  This new test is different than other jurisdictions and may be a signal the court view of joint employer status is changing and not in a good way.  In the decision in Salinas v. Commercial Interiors, Inc. (2017 WL 360542), the Fourth Circuit Court of Appeals established a new test for joint employer status where “(1) two or more persons or entities share, agree to allocate responsibility for, or otherwise codetermine – formally or informally, directly or indirectly – the essential terms and conditions of a worker’s employment and (2) the two entities’ combined influence over the essential terms and conditions of the worker’s employment render the worker an employee as opposed to an independent contractor.”  The Court went on to set forth six factors that should be considered when applying the test of whether two or more entities are joint employers.  The factors are the following: “(1)      Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to direct, control, or supervise the worker, whether by direct or indirect means;    (2)     Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to – directly or indirectly – hire or fire the worker or modify the terms or conditions of the worker’s employment;    (3)     The degree of permanency and duration of the relationship between the putative joint employers;    (4)     Whether, through shared management or a direct or indirect ownership interest, one putative joint employer controls, is controlled by, or is under common control with the other putative joint employer;   (5)     Whether the work is performed on a premises owned or controlled by one or more of the putative joint employers, independently or in connection with one another; and   (6)     Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate responsibility over functions ordinarily carried out by an employer, such as handling payroll; providing workers’ compensation insurance; paying payroll taxes; or providing the facilities, equipment, tools, or materials necessary to complete the work.” This test is not that different from other court rulings, but it recognizes a more broad interpretation of joint employment.  My fear is that this is a huge signal from the courts that joint employer status is going to be liberally construed going forward.  Employers must be careful when thinking about their potential claim that they are not in a joint employer relationship with another organization.

Ambulatory Surgery Center Physician Exclusions - Reducing Risk of Forced Redemption of ASC Investment Interests

Posted on March 3, 2017, Authored by John H. Fisher, II,

Many surgery centers are eventually faced with decisions about how to treat investing physicians who do not perform as many procedures in the surgery center as others. Under performing physicians can create political issues in ASCs because investors who perform more surgeries or higher value procedures at the center feel the other investors are taking a ride on their efforts.  Over time, higher producers may start to view those with lower surgery levels as “dead wood”.  This dynamic is a perfect set up for violating the Anti-kickback Statute which specifically prohibits basing investment offering on the actual or expected volume or value of referrals. ​The Anti-kickback Statute standards that apply to surgery centers are somewhat counterintuitive.  The safe harbors that protect ASC investment interests actually require an investor to make certain levels of referral in order to receive the benefits of the safe harbor.  Usually, the Anti-kickback Statute considers referral requirements to be suspect.  So the one-third requirements under the single and multi-specialty safe harbor provision are somewhat counterintuitive. ​The conditions included in the ambulatory surgery center safe harbors act as a proxy for determining when an investing physician actually uses the ASC as a natural extension of his or her office practice.  An investing physician might still use the ASC as an extension of practice when the one-third requirements are not met.  The failure to meet the one-third safe harbor does not automatically disqualify a physician from maintaining an investment and many investments that do not meet the safe harbors present very little compliance risk. The safe harbors are just that; safe harbors.  An investing physician who does not meet the one-third requirements of the safe harbor might still be perfectly in compliance.  The investing physician might still be using the ASC as a natural extension of his or her medical practice, but the natural flow of the practice may not permit full compliance with the one-third requirements.  The fact is that many ASC’s do not strictly meet the safe harbor provisions yet do not create any real compliance risk. This might not be what the higher referring physician investors in the ASC want to hear.  In reality, they may feel that lower volume providers are taking a ride on the higher profitability created by their more lucrative practice. Depending on the specific situation, the attitude of the more profitable physician might be very dangerous and could potentially create more compliance risk than the investor who does not strictly meet the one-third tests.  Strict adherence to the one-third tests for multi-specialty ambulatory surgery centers can support the positions of the high-volume surgeons to the detriment of the lower volume surgeons who still realistically create very little risk under the Anti-kickback Statute because they use the ACS as a natural extension of their practice. I have seen several ASCs use exclusion clauses in their operating agreements to force out lower producing physicians.  Generally, the “in crowd” argues the lower producing physician does not meet one or both of the one-third safe harbor tests.  I have also seen ASC’s send letters or otherwise take action to pressure “underperforming” investors to increase their volume of referrals to the ASC under threat of having their investment interest involuntarily redeemed.  In most cases, this type of approach is a big mistake.  Pressuring a physician to make more referrals, even with the goal of meeting a safe harbor requirement, creates risk under the Anti-kickback Statute.  The letter demanding (or even suggesting) that referrals be increased creates what we call in the law business, a “bad fact.” These types of cases run significant risk of being challenged under the Anti-kickback Statute by excluded investors or governmental enforcement agencies.  Great care must be taken in surgery centers with this dynamic to assure that frustrations of higher volume producers do not lead to actions that create regulatory risk for the surgery center. Many operating agreements that govern the rules relating to ambulatory surgery center ownership actually create legal compliance risk.  It is critical the procedures for excluding providers be established in advance, are uniformly followed, and do not raise any inference that additional referrals are being required in order to maintain an investment interest.  Efforts to bring investors closer to compliance with safe harbor standards can easily be “turned inside out” and be re-characterized as requiring additional referrals. Once investors own interests in an ambulatory surgery center, it is very difficult to force redemption without creating significant legal risk.  The ASC Safe Harbor provisions exist to protect arrangements from further scrutiny where they contain elements that the federal government has indicated are reflective of there being a lower level of risk of abuse.  The safe harbors were never intended to be used as a tool to exclude existing investors or replace a complete risk analysis presented by the referral flow from the physician’s practice. Not everyone who practices in this area agrees with my analysis.  Some believe that a normal safe harbor analysis should be followed.  In other types of arrangements, coming closer to compliance with a safe harbor requirement is generally believed to mitigate potential risk.  I do not believe the same analysis always applies when analyzing an ASC investment structure for compliance with the Anti-kickback Statute.  In the ASC case, requiring an investor to come closer to meeting the one-third safe harbor requirements inherently includes an inference that referrals should be increased.  No other safe harbor includes a volume of referral requirement.  This makes the ASC safe harbor unique.  Although I understand the arguments made by those who apply the “normal” safe harbor (closer to compliance) analysis to ASC compliance issues, I believe the approach is inherently risky. Keep in mind the usual investor exclusion case never reaches the point of producing a published legal opinion.  Most of these cases settle without reaching the ultimate issue of whether coming closer to complying with the ASC safe harbor reduces risk.  Viewed from this perspective, facts that imply an investor should increase referrals to meet safe harbor requirements are not helpful to the ASC when going through mediation or settlement discussions.  Who wants to come out on the wrong side of that argument if the case ever goes to court, is subject to a whistleblower claim, or catches the eye of a government enforcement agency? What ends up happening with more of these cases is they settle short of litigation or very early in the mediation or litigation process.  The ASC ends up paying the wrongfully excluded investor; sometimes a very large amount of money. This situation can be prevented if an ASC establishes appropriate criteria and procedures for analyzing the risk of an investment interest.  The usual provisions in an operating agreement that “parrot” the safe harbor requirements are not adequate to mitigate risk presented by improper exclusions.  In fact, many operating agreements contain provisions that actually create first source evidence supporting the claim of an excluded investor.  There are certainly ways to reduce the risk associated with excluding under-performing investors, but using the safe harbor requirements to force redemption is not included.  If your ASC contains exclusion provisions based on the one-third safe harbor provisions, you should seriously consider rethinking your exclusion process.  What you have is not going to work without creating quite a bit of risk. Links to Additional Articles Regarding Ambulatory Surgery Center Compliance Issues Ambulatory Surgery Center – Anti-kickback Issues and Safe Harbor Regulation Compliance Ambulatory Surgery Center Compliance Federal Settlement Raises Issues for Physician Owned Surgery Centers Ambulatory Surgery Center Compliance Legal Practice Ambulatory Surgery Center Advisory Opinions Ambulatory Surgery Center Radiologist Rules – Proposed Simplified By CMS Anesthesia Company Model Advisory Opinion 12-06

Enforcing ASC Exclusion Provisions While Minimizing Legal Risk – Rethinking Strict Application of the Safe Harbors to Exclusion Decisions

Posted on March 3, 2017, Authored by John H. Fisher, II, Filed under Health Care

Many surgery centers are eventually faced with decisions about how to treat investing physicians who do not perform as many procedures in the surgery center as others.  Under performing physicians can create political issues in ASCs because investors who perform more surgeries or higher value procedures at the center feel the other investors are taking a ride on their efforts. Attempting to exclude investors can expose and ASC to legal risk and must be done with great care and proper planning. Ruder Ware has just released a Legal Update covering some of the risks of excluding non-performing physician investors from an ambulatory surgery center.  The Legal Update Ambulatory Surgery Center Physician Exclusions - Reducing Risk of Forced Redemption of ASC Investment Interests also touches on some of the steps that can be taken to mitigate risk through proper advance planning and analysis. Links to Additional Articles Regarding Ambulatory Surgery Center Compliance Issues Ambulatory Surgery Center – Anti-kickback Issues and Safe Harbor Regulation Compliance Ambulatory Surgery Center Compliance Federal Settlement Raises Issues for Physician Owned Surgery Centers Ambulatory Surgery Center Compliance Legal Practice Ambulatory Surgery Center Advisory Opinions Ambulatory Surgery Center Radiologist Rules – Proposed Simplified By CMS Anesthesia Company Model Advisory Opinion 12-06

Recent Changes to Medicare “Incident To” Billing Rules

Posted on March 2, 2017, Authored by John H. Fisher, II, Filed under Health Care

Medicare permits a physician to bill for certain services furnished by a nurse practitioner or other auxiliary personnel under what is referred to as the "incident to" billing rules.  The "incident to" rules permit services or supplies furnished as an integral, although incidental, part of the physician's personal professional services in the course of diagnosis or treatment of an injury or illness to be reimbursed at 100% of the physician fee schedule, even if the service is not directly furnished by the billing physician. A significant requirement to permit the services of physician extenders to be billed as "incident to" services requires direct personal supervision by the physician. The supervising physician does not necessarily need to be present in the room where the procedure is being performed.  The “direct supervision” standard requires the supervising physician be “physically present in the office suite and immediately available to furnish assistance and direction” during the time the auxiliary personnel is providing the service.  The 2016 Medicare physician payment rule provided some clarification on how the direct supervision requirement under the “incident to” billing rules operates.  The new rule clarifies that the physician who directly supervises the applicable auxiliary personnel is the only party that can bill the service of the auxiliary personnel as “incident to” his or her service.  CMS considers this a clarification of its longstanding policy, but many providers will see this as a new restriction on the application of the “incident to” rules. To understand the significance of this “clarification,” it is useful to note that more than one physician is often involved in the care of a patient.  It is not uncommon for one physician to visit the patient and order a test or procedure that is then supervised by another physician.  Prior to this “clarification,” the physician who originally ordered the service might have billed the service as “incident to” even though another physician actually supervised the performance of the service.  The revised regulatory language clarified this is not permitted and that only the physician actually present in the office suite who supervises the service can bill for the service as “incident to” their service.  When making a claim for services billed “incident to” a physician’s services, the billing number of the physician that actually supervises the performance of the service must be used rather than that of the ordering physician. CMS clarifies the reasoning behind this rule as follows: “[B]illing practitioners should have a personal role in, and responsibility for, furnishing services for which they are billing and receiving payment as an incident to their own professional service.” In view of this regulatory clarification, providers may wish to reexamine their billing process and procedures to clarify the correct billing for “incident to” services.  Staff should also be trained on the proper supervision of services billed under the “incident to” rules.

Justice Scalia’s Definition of “Waters of the United States” to Become the Law of the Land?

Posted on March 9, 2017, Authored by Russell W. Wilson,

On February 28, 2017, Donald Trump signed the “Presidential Executive Order on Restoring the Rule of Law, Federalism, and Economic Growth by Reviewing the ‘Waters of the United States’ Rule.”  This executive order requires the Administrator of the EPA, the Assistant Secretary of the Army for Civil Works, and other executive department and agency heads to “...rescind or revise, or publish for notice and comment proposed rules rescinding or revising, [the Clean Water Rule] as appropriate and consistent with law.” The stated policy in the executive order is “...to ensure that the Nation’s navigable waters are kept free from pollution, while at the same time promoting economic growth, minimizing regulatory uncertainty, and showing due regard for the roles of the Congress and the States under the Constitution.” In carrying out the task, “...the Administrator and the Assistant Secretary shall consider interpreting the term ‘navigable waters,’ as defined in 33 U.S.C. 1362(7) as consistent with the opinion of Justice Antonin Scalia in Rapanos v. United States, 547. U.S. 715 (2006). This executive order applies to what has come to be known as the “Clean Water Rule,” which defines the jurisdiction of the Clean Water Act.  The EPA and the U.S. Army Corps of Engineers developed the Clean Water Rule in accordance with Justice Kennedy’s “significant nexus test” in the Rapanos case.  The “nexus” or connection to Clean Water Act jurisdiction is to the biological, chemical, or physical integrity of nation’s waters.  Rapanos was a fractured case; there were three separate opinions on how the “waters of the United States” should be defined, none of which was held by a majority.  Justice Scalia crafted his opinion by resort to his dictionary.  According to Justice Scalia, the definition of the “waters of the United States” – and hence the jurisdiction of the Clean Water Act – can only be defined as: ...only those relatively permanent, standing or continuously flowing bodies of water ‘forming geographic features’ that are described in ordinary parlance as ‘streams[,] ...oceans, rivers, [and] lakes. See Webster’s Second 2882. The phrase does not include channels through which water flows intermittently or ephemerally, or channels that periodically provide drainage for rainfall... Wetlands that are adjacent to “waters of the United States” are also under the jurisdiction of the Clean Water Act under United States v. Riverside Bayview Homes, Inc., 474 U.S. 171 (1985).  The definition of “wetlands” has not changed; rather, it is what wetlands are adjacent to (that is, the waters of the United States) that is the subject of the executive order. And those waters would be considerably diminished if the EPA and the Corps of Engineers adopt Justice Scalia’s formulation.

Employee Absenteeism Due to Disability: What are Reasonable Accommodations?

Posted on March 2, 2017, Authored by Dean R. Dietrich, Filed under Employment

One of the most troubling issues faced by human resource professionals is how to address an employee with a disability that impacts their ability to report for work.  A good example is an employee who suffers from episodes of depression that affect the employee’s ability to come to work.  It is almost impossible to challenge that type of condition as not being a disability so the employer needs to figure out how to accommodate the employee without creating a workplace morale problem.  The issue normally focuses around the balance between the duty to accommodate an employee with a disability and the requirement of regular attendance as an essential function of the employee’s job.  Many cases have held that regular attendance is a proper and reasonable essential function for almost all positions.  The debate really focuses on what type of an accommodation does the employer have to make in order to allow the employee to continue to work when the employee needs additional time off.  This most often arises when an employee has exhausted all family medical leave and even short-term disability leave provided as a benefit to employees. In a recent decision by the Sixth Circuit Court of Appeals, the Court of Appeals offered some guidance to employers.  The Court held that a request for a flexible start time and ten minute breaks every two hours was not a reasonable accommodation for the employee who suffered from depression and anxiety and needed time off to calm down after anxiety attacks.  The Court of Appeals recognized that regular attendance at work was an essential function for the employee working in a customer service position which involved answering phone calls from telephone service customers.  The Court of Appeals also found the request for a flexible start time and multiple breaks was not reasonable because the anxiety attacks were unpredictable and could not be attached to a fixed work schedule.  The employee also asked for more time away from work after the employee exhausted all available leave time.  The Court found this was not a reasonable accommodation because the employee and her physician could not give a specific time when the employee would be able to return to work. Every case of reasonable accommodation requires an interactive process with the employee and a review on an individual basis.  In this case, the Court held that the accommodations being requested by the employee were not reasonable which provides some support for limitations on the type of accommodations that need to be given to an employee with a disabling condition that affects attendance.  Employers must always be careful to do a separate analysis in each case depending upon the condition of the employee.

Ambulatory Surgery Centers

Posted on March 30, 2017, Authored by ,

Ruder Ware has developed an active practice counseling ambulatory surgery center (ASC) providers and has served as special counsel in several cases involving ambulatory surgery center exclusions.  The firm's health care and compliance attorneys are knowledgeable on the numerous legal and regulatory requirements that are applicable to ASCs.  The regulations applicable to these entities are complex and nuanced.  The consequences of failing to comply or with taking improper steps to exclude providers can be very costly. Some of the issues that our health care practice has recently addressed include the following: Counseling ASCs on the application of the Stark law, Anti-Kickback Statute, and ASC safe harbor issues. Advising and representing providers on issues relating to conditions of participation and governmental surveys. Representing organizations in preparing and submitting self-disclosure to the government. Development of ASC investment entities. Establishment of ASC compliance programs. Decisions regarding exclusion of "under-performing" providers. Structuring exclusion provisions to minimize risk of violating regulations or enhancing the risk of litigation. Sale and purchase of surgery centers. ASC licensure and governmental approval. Compliance with patient confidentiality and privacy laws. Risk assessment, audits, compliance work plans, staff compliance training. Contractual relationships with outside parties.

2016 Bankruptcy Statistics for the Western District of Wisconsin: Overall Filings Decreased 5.5%, but Chapter 12 Farm Bankruptcies Increased 31%

Posted on March 15, 2017, Authored by Christopher M. Seelen, Filed under Banking and Financial Matters

The 2016 bankruptcy statistics tell an interesting story.  While the total number of bankruptcy cases filed in 2016 in the Western District of Wisconsin (“WDW”) fell 5.5% to its lowest level in ten years, Chapter 12 farm bankruptcy cases actually increased 31% from 2015.    Total Filings.  There were 4,362 total bankruptcy cases filed in the WDW in 2016 compared to 4,619 total cases filed in 2015.   Total bankruptcy cases are now down 54% from 2010 when 9,494 total cases were filed and they are at the lowest level since 2006 when 3,560 total cases were filed.  Total bankruptcy cases have now decreased every year in the WDW since 2010. Chapter 7.  In 2016, there were 3,566 Chapter 7 cases filed in the WDW.  That is a decrease of 7% from 2015, when 3,832 Chapter 7 cases were filed, and a drop of 57% from 2010 when 8,322 Chapter 7 cases were filed. Chapter 11.  In 2016, there were 17 Chapter 11 cases filed in the WDW, which equaled the number of Chapter 11 cases filed in 2015, but that number is down 65% from 2012 when 49 Chapter 11 cases were filed. Chapter 12.  In 2016, there were 21 Chapter 12 farm bankruptcies filed in the WDW.  That is an increase of 31% over 2015 and is the highest since 2010 when 31 Chapter 12 cases were filed.  In 2016, the WDW continued to rank 3rd in the nation in the number of Chapter 12 cases filed.  The WDW was tied with Kansas (21) and behind only Middle District of Georgia (28) and  Puerto Rico (25).  Chapter 13.  In 2016, there were 758 Chapter 13 cases filed in the WDW, compared to 754 Chapter 13 cases filed in 2015, but still down 31% from 2010 when 1,099 Chapter 13 cases were filed. Link to WDW Bankruptcy Statistics.  Here is the link for statistics by month. http://www.wiwb.uscourts.gov/statistics-month Here is the link for statistics by Chapter. http://www.wiwb.uscourts.gov/statistics-chapter Keep in mind that things move rather quickly in Chapter 12 and Chapter 13 cases.  If you receive a bankruptcy notice, you should promptly review your file and contact your counsel, as necessary, so you don’t miss any important deadlines.

Wisconsin Unemployment Insurance Benefits Upon Discharge for Absenteeism – the Employer’s Policy May Be More Generous, But Not More Restrictive, Than the Statutory Default

Posted on March 21, 2017, Authored by Russell W. Wilson, Filed under Employment

The Wisconsin Court of Appeals issued a decision in an unemployment insurance benefits case on March 8 that provides clarity where an employee is discharged for absenteeism.  The case is Wisconsin Department of Workforce Development v. Wisconsin Labor and Industry Review Commission, et al (2017 WL 946724).  In doing so the court of appeals described recent legislative history as it relates to discharge for absenteeism. Prior to 2013, unemployment insurance (UI) benefits could be denied where an employee was discharged for “5 or more” absences without notice in a 12-month period.  In 2013 the legislature changed the standard to “more than 2 absences” without notice in a 120-day period “unless otherwise specified by his or her employer in an employment manual.”  What does that last phrase mean?  The Wisconsin Department of Workforce Development (DWD) asserted that UI benefits could be denied where the employer’s handbook provided that its attendance policy was more restrictive than the “2 in 120 days” floor set in Wisconsin Statute section 108.04(5)(e). The facts that gave rise to the case involved an employer’s written policy that just one “no call no show” during the probationary period would result in termination.  The flu bug visited the employee shortly before her shift was to begin, and she did not call in. The employer fired her.  The Labor and Industry Review Commission (LIRC) did not accept the DWD’s argument that the employer had free rein to impose a stricter standard than provided by the legislature.  Rather, LIRC ruled that eligibility for UI benefits cannot be eliminated upon an employer’s written attendance policy that is more restrictive than the “2 in 120 days” standard.  The court of appeals affirmed LIRC’s determination. The court of appeals accorded “due weight” deference to LIRC’s decision.  The due weight standard applies where the agency has “some experience” in administering the statute in question.  Indeed, LIRC has issued over 50 decisions interpreting section 108.04(5)(e).  The due weight standard calls for deferring to LIRC’s judgment “as long as it is reasonable and another interpretation is not more reasonable.”  LIRC employed a 3-step analysis, which the court of appeals found to be reasonable.  First, was the employee discharged for “misconduct” by engaging in any of the seven activities listed in section 108.04(5)(a)-(g)?: use of drugs or alcohol; theft from an employer; conviction of a crime that affects the employee’s ability to perform his or her job; threats or harassment at work; absenteeism or excessive tardiness; falsifying business records, and, willful or deliberate violation of a written and uniformly applied government standard or regulation. The terminated employee did not meet any of those seven activities. Second, did the employee’s action amount to “misconduct” as defined from prior case law (Boynton Cab Co. v. Neubeck, 237 Wis. 249, 259-60, 296 N.W.2d 636 (1941)) and codified in the 2013 statute?  LIRC found that failing to call in on just one occasion was “an isolated incident of ordinary negligence resulting from her ill health” that did not amount to “misconduct.”  Finally, did the employee’s conduct constitute “substantial fault”?  The employee did not have control over becoming ill, and her failure was viewed as health-related inadvertence.  LIRC acknowledged that the statute allows employers to “substitute a different standard to suit its needs, in this case a different quantity of absences.” But LIRC noted the distinction between the discharge decision of an exacting employer, on the one hand, and eligibility for UI benefits, on the other.  The UI statute is remedial in purpose such that provisions for denial of benefits should be narrowly construed in order to soften the law’s severity and to liberally effect coverage for those who are economically dependent on others.  The court of appeals found LIRC’s 3-step analysis to be reasonable.  As an example, the court reasoned, would there have been any difference if the employee, instead of coming down with the flu, had been involved in a car crash within two hours of the start of her shift so as to require hospitalization?  Almost no one would deny coverage under that circumstance.  Alternatively, the employee could fail to call in due to drunkenness, in which case almost everyone would deny coverage   LIRC’s 3-step analysis, according to the court of appeals, allows the agency to balance the legitimate concerns of the employer with the remedial purpose of UI benefits.  The court viewed the DWD’s analysis as not more reasonable than that of the LIRC.  And it’s the LIRC, not the DWD, whose decisions are judicially reviewed because the LIRC hears UI appeals and has final review authority of DWD’s decisions. The minority dissented, noting that review of LIRC’s decision should be “de novo,” in which no deference is given to its analysis.  According to the dissent, the plain language of section 108.04(5)(e) allows the employer to substitute a more generous or a more severe “no call no show” standard.  Moreover, the dissent argued that what is really more or less generous may be a matter of subjective interpretation.  Will we see this case petitioned for review to the Wisconsin Supreme Court for a final determination? Or will LIRC be abolished after the next budget is enacted?

Harassment Discrimination Covers the Waterfront

Posted on March 6, 2017, Authored by Dean R. Dietrich, Filed under Employment

We have always been concerned about the extent to which employees or the Equal Employment Opportunity Commission (EEOC) could claim they were suffering from harassment in the workplace.  Recent guidance from the EEOC clarifies its position regarding the extent of the types of harassment that could occur and for which employers will be held responsible.  In guidance issued by the EEOC on January 10, the EEOC states that employers are required to implement programs to combat any “known or obvious risks of harassment” and suggests a failure to do so could result in the loss of normal affirmative defenses to a claim of harassment such as proper action taken by the employer to address a harassment discrimination when brought to its attention. What’s most disturbing about this new guidance is the broad interpretation of the types of harassment that would be considered covered under various federal laws.  These include: Race Color National origin Religion Sex Age Disability EEOC went on to indicate that harassment claims could be based upon actions like: Sex stereotyping Sexual orientation Gender identity Genetic information Pregnancy EEOC also indicated it would pursue claims based upon actions that do not directly show harassment such as: Perceived membership in a protected class (even if the perception is not accurate); Associational harassment where an employee is a member of a protected class and claims inappropriate action based upon their association with another who does not share their protected characteristics; Where the alleged action was not directed at the complainant; Instances where the alleged harassment occurred outside of the workplace. While this is proposed guidance subject to additional comments and review, it signals the extensive nature of harassment complaints and potential liability for employers.  EEOC suggests there must be a committed and engaged leadership within an organization to ensure harassment claims are avoided at all costs and regular training is provided by the organization to address the potential for harassment complaints.  While some suggest the new administration will lessen the types of enforcement proceedings that will be taken against businesses, it is important to recognize the potential for harassment complaints against employees under a myriad of situations and make sure they are addressed appropriately through training and immediate effective action.

Compliance Budgeting – Put Your Money Where Your Mouth is

Posted on March 31, 2017, Authored by John H. Fisher, II, Filed under Health Care

You have adopted your basic compliance policies and procedures, established a reporting system and visibly rolled out your new compliance program.  Your board of directors has passed a resolution decisively stating its commitment to compliance.  The CEO issued a letter stating her commitment to compliance and mandating every person in the organization follow the Code of Conduct and perform their activities in a compliant manner.  You may have even integrated compliance training into your initial hire and periodic training programs. On effectiveness review, the reviewer sits down with your management team.  At some point during the meeting the reviewer goes through a list of critical compliance items; policies and procedures (check); training program (check); reporting system (check); compliance budget … compliance budget? It turns out you put a great deal of effort into establishing and operating a compliance program but have never established a separate budget line for compliance.  An adequate compliance budget is a significant indicator of an effective compliance program.  Without a separate budget line item, you would need to reverse engineer to determine how much you have spent on compliance.  You talked the talk, but did not walk the walk.  In compliance, it is important to put your money where your mouth is.  But enough of the clichés. All external compliance standards require your program to be “effective.”  It is difficult to imagine a program meeting effectiveness standards if no financial resources are put behind it.  Having evidence of compliance expenditures at your fingertips can save a lot of effort when it’s time to defend the effectiveness of your compliance program.  Establishing a compliance budget requires focus on what is required to operate your compliance program.  An adequate budget indicates organizational commitment and reinforces support from the top of the organization.  It also reinforces independence of the compliance officer who otherwise is required to beg for resources from other budget areas. Compliance budgeting is difficult.  The return on investment on revenues allocated to compliance is not always evident to corporate decision makers.  After all, how do you prove or quantify costs that might be avoided through the operation of a compliance program?  Those of us who deal with compliance difficulties fully understand the value of investment in compliance structure and operation.  Companies that go through a compliance issue, particularly one that could have been avoided by a properly funded compliance program also tend to gain an understanding of the value of compliance. This does not mean compliance should be immune from expectations of efficiency.  It also does not mean an organization needs to allocate an unrealistic level of funds to compliance.  Compliance efforts and resulting expenditures can be scaled to the size, nature, and complexity of the business.  Issues related to scaling of compliance are perhaps the most difficult aspect of the compliance practice.  In smaller organizations, resources should be focused on areas of greatest vulnerability.  It is also critical to establish a system to identify and rank identified risk areas.  This information can be used to establish a work plan that sets compliance priorities based on a reasonable assessment of potential risk.  Compliance activities objectively determined not to create higher degrees of risk can be scheduled into the future.  If an issue that arises is judged as a lower risk area, the work planning process demonstrates the issue was part of the process but not the highest priority or the area of greatest vulnerability. Don’t ignore the need to plan compliance activities and budget based on prioritized risk.  A logical and adequate budget established using a well thought out process is the key.  A budget based on specifically identified and prioritized risk areas will be easier to communicate to business minded individuals on your board.  It is much easier to see the potential return on investment when the compliance officer presents a well-supported work plan based on specific identified risk areas.