Benefits of a Compliance Program in Healthcare Organizations

Healthcare compliance programs are often misunderstood as administrative overhead rather than strategic organizational safeguards. At The Fox Group, we have worked with healthcare organizations navigating regulatory expectations, operational risk, and governance challenges. We have also helped organizations adapt to evolving compliance standards across a wide range of care environments. Understanding the benefits of a compliance program in healthcare starts with understanding why these programs became so important in the first place.

Why Healthcare Organizations Feel Pressure to Implement Compliance Programs

Here’s a question we often encounter when we talk to people in healthcare organizations about compliance programs: What are the benefits of compliance programs in healthcare organizations? Of course, the subtext is: Why do I have to devote resources to a compliance program?

It doesn’t generate any revenue. It does not necessarily make it easier to deal with employees or medical staff. And, most tellingly, with two exceptions, compliance programs for healthcare organizations are voluntary.

Unless an organization owns or manages skilled nursing facilities (SNFs) or accountable care organizations, healthcare providers are generally not required to have a compliance program. No broader provision of regulatory compliance currently imposes that requirement.

So, where does all this pressure come from to implement a healthcare compliance program?

A Short History of Healthcare Industry Compliance Programs

In the early 1990’s, the Department of Health and Human Services (HHS) was grappling with increasing trends of fraud and abuse, especially involving clinical laboratory services. At the time, there was no statutory authority requiring healthcare organizations to implement compliance plans. In response, the Office of Inspector General (OIG) developed and issued the first Compliance Program Guidance for Clinical Laboratories in 1997.

Compliance Program Guidance for hospitals followed in 1998. More guidance followed in the late 1990’s and early 2000’s. Eventually, there was compliance program guidance for nine different types of healthcare providers and for entities such as research organizations, pharmacy manufacturers, and Medicare Advantage Plans. 

Ultimately, the OIG issued its General Compliance Guidance for most healthcare providers in a single document. The guidance also emphasized the seven elements of an effective healthcare compliance program.

Two healthcare organizations also have actual regulations requiring compliance programs. Accountable Care Organizations (ACO’s) are required to have a compliance program. In addition, the HITECH Act of 2010 required HHS to develop compliance program regulations for healthcare providers. The requirement applied to organizations submitting claims to Medicare and other government healthcare programs.

Thus far, the only regulation issued pursuant to that requirement has been for skilled nursing facilities to implement a Compliance and Ethics program. The requirements of this regulation are very limited.

In November of 2024, the OIG reissued its voluntary Nursing Facility Compliance Program Guidance. The update reinforced the continued emphasis on compliance programs even in areas where formal regulatory requirements remain limited.

Sentencing Guidelines and Compliance Program Benefits

There is at least one very tangible benefit of having an effective healthcare compliance program.

In 2007, the United States Sentencing Commission introduced guidelines for determining whether an offending organization has an effective healthcare compliance and ethics program. If an entity is determined to have such a program, it could potentially have its sentence, including fines, reduced by up to 90%.

These guidelines are extensive. Among several requirements, an organization must:

• establish standards and procedures to prevent and detect criminal conduct;
• have a governing authority that is knowledgeable about the content and operation of the compliance and ethics program. The governing authority must also exercise reasonable oversight with respect to the implementation and effectiveness of the program.
• not retain a high-level individual who has engaged in illegal activities or other conduct inconsistent with an effective compliance and ethics program.
• conduct effective training programs and otherwise disseminate information appropriate to individuals’ respective roles and responsibilities for compliance and ethical practices.
• promote and enforce the program using incentives and disciplinary actions to prevent or deter illegal behavior.
• when criminal conduct has been detected, they take reasonable steps to respond appropriately and prevent further similar conduct. This includes making any necessary modifications to the organization’s compliance and ethics program.

Although not identical to the seven elements of general compliance program guidance, there is considerable overlap with those elements. 

Other Benefits of Compliance Programs

Other benefits of strong compliance programs can be viewed through the prism of the seven core elements of compliance programs outlined by the OIG.

1. Written policies and procedures
   • Some healthcare facilities are larger organizations like hospitals; some are individual physicians or other healthcare professionals working in a small office. No matter what the size, written policies can enhance operations. They help staff repeat processes that affect patient safety, standardize patient care, and avoid adverse events.
   • And general policies, such as a Code of Conduct, establish ethical standards and encourage staff members to “do the right thing, always”.
2. Leadership and Management
   • Members of the governing body (or Board of Directors) must take their role in governance seriously. Board members not only have duties under their own Bylaws, they also typically have responsibilities under state law. These responsibilities include duties of care and staying informed about important corporate issues.
   • Board members and senior managers also have a responsibility for fostering a culture of compliance within an organization’s culture.
3. Training and Education
   • For most healthcare organizations, staff training and education are a never-ending activity. Periodic reminders of staff roles in regulatory compliance, like HIPAA privacy, go a long way to protect patients and the organization. Organized compliance training can include things like the Code of Conduct and HIPAA Privacy regulations.
4. Effective Lines of Communication
   • In every healthcare organization, you will hear complaints about communication from management. Communication should include topics such as regulatory expectations, how to contact the designated Compliance Officer, or the Compliance Committee.
   • Communication about compliance expectations may not be as glamorous as the upcoming holiday party. But people will at least remember they received information even if it does not stay top of mind for long.
5. Enforcing Standards
   • Many healthcare organizations operate incentive programs to encourage staff members’ performance along various lines. Safety huddles and other similar small group activities can also include attaboys for reporting compliance issues that may reduce legal risks or encourage ethical operations.
6. Risk assessment, Auditing, and Monitoring
   • At their core, effective compliance programs are a type of risk management activity. And every risk management program starts with a risk assessment. In the healthcare industry, this has usually meant risk of mistakes or even misconduct that endangers or injures patients.
   • This element of every healthcare compliance plan addresses the risks inherent in the business activity of the organization: submitting claims to federal and state healthcare programs. Just like auditing patient care activities, internal audits and monitoring of business and human resources processes can address significant compliance risks. These risks include exposure under the federal government’s False Claims Act and the Anti-Kickback Statute.
   • Such audits can also lead to improved internal controls and increase operational excellence.
7. Responding to Detected Offenses
   • As the Sentencing Guidelines note, it is important to take action when criminal or even non-criminal activities take place. Successful healthcare organizations typically have a reputation for treating staff members equitably, but still enforcing disciplinary actions when necessary. Investigating possible violations of policy or outside regulations is an important part of institutional culture as well as a significant compliance program activity.

Effective Compliance Programs Protect Healthcare Organizations

Healthcare leaders are faced with innumerable issues, from avoiding financial penalties to compliance with numerous applicable laws to serving communities and their patients. Effective compliance programs protect patients, reputations and financial resources.

Compliance programs do not have to be simply another overhead activity to fund and manage. Compliance teams can and do make a difference every day to healthcare organizations all over the country. We have been proud to lend our skills and knowledge to numerous facilities. Our work has helped organizations not only meet regulatory standards, but also better serve their constituents!