Where do conduct, culture, and compliance intersect?

Culture has always been fundamental to determining how an organization operates.  Recently, however, the topic of culture has moved to the top of the agenda for regulators, investors, and consumers. Regulators have come to realize that that without a culture of integrity, organizations are likely to view their ethics and compliance programs as a set of check-the-box activities.

Organizations understand that culture is one of the biggest determinants of how employees behave. Strong cultures have two common elements: there is a high level of agreement about what is valued, and a high level of intensity with regard to those values. Organizations with strong positive cultures create trusting relationships with stakeholders and investors and—in turn—stakeholders and investors trust the organization and the brand.

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Budget agreement includes technical changes to MACRA, notable policy changes to other health care programs

The President on February 9, 2018, signed H.R. 1892, the Bipartisan Budget Act of 2018, which sets discretionary spending caps for the federal government for fiscal years (FY) 2018 and 2019 while also reauthorizing federal funding and making important policy changes to a number of health care programs. The Medicare Part B physician fee schedule, including implementation of the Medicare Access and CHIP Reauthorization Act (MACRA); the Children’s Health Insurance Program (CHIP); and state allotments to Medicaid Disproportionate Share Hospital (DSH) payments are among the health care issues addressed in the law.

Health care providers, plans, and other industry stakeholders may consider revisiting strategic, operational and compliance plans in light of a number of provisions of the law.

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Deloitte hosts its Cross-Industry Compliance Leadership Summit

Deloitte recently held its 4th annual Cross-Industry Compliance Leadership Summit at the Deloitte University campus in Westlake, TX. The Summit convened over two dozen chief compliance officers (CCOs) and senior compliance leaders representing a range of industries, including health care, financial services, manufacturing, and retail.

The first night of the summit showcased emerging technologies during an interactive networking reception, and allowed CCOs to see firsthand how to leverage them to enhance their corporate compliance programs. Participants spent the second day of the program with industry specialists and their peers, discussing their own experiences in operating compliance programs.

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ONC seeks comment on Trusted Exchange Framework aimed at facilitating greater interoperability of health information

On January 5, 2018, the Department of Health and Human Services’ Office of the National Coordinator for Health Information Technology (ONC) released a draft Trusted Exchange Framework and Common Agreement (TEFCA), outlining a common set of principles for trusted exchange of health data and interoperability between health information networks (HINs) and proposing a Common Agreement aimed at operationalizing the principles for data exchange in an effort to drive interoperability. ONC released the draft framework in compliance with provisions of the 21st Century Cures Act, which was enacted in December 2016.

The draft framework is part of an effort “to scale interoperability nationwide by providing a single ‘on-ramp’ to allow all types of healthcare stakeholders to join any health information network they choose and be able to participate in nationwide exchange, regardless of what health IT developer they use, health information exchange or network they contract with, or where the patients’ records are located.”

Comments on the draft framework are due to ONC by February 20, 2018. ONC will post comments on its website. ONC will consider comments on the draft framework as it develops a final TEFCA product, which will be posted on the ONC website and published in the Federal Register.

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HHS Office of Inspector General flags MACRA vulnerabilities related to clinician awareness, program integrity

The Health & Human Services (HHS) Office of the Inspector General (OIG) in December 2017 released a report indicating that with regard to the implementation of the Medicare Access and CHIP Reauthorization Act (MACRA), the Centers for Medicare and Medicaid Services (CMS) continues to face vulnerabilities related to clinician awareness of MACRA’s Quality Payment Program (QPP) and program integrity to avoid fraud and improper Medicare Part B payment adjustments.

In a similar report from 2016, HHS OIG highlighted vulnerabilities related to providing guidance and technical assistance to clinicians and to developing information technology (IT) systems to support data reporting, scoring and Part B payment adjustments. HHS OIG found that CMS has made “significant efforts” to address these vulnerabilities.

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CMS releases part II of the 2019 Medicare Advantage and Part D Advance Notice and Draft Call Letter

The Centers for Medicare and Medicaid Services (CMS) on February 1, 2018, released the second part of the 2019 Medicare Advantage (MA) and Part D Advance Notice, and the Part D draft Call Letter, proposing average increases to MA payment rates for 2019 of 1.84% plus a potential further increase of 3.1% as a result of expected changes to risk scores for MA Plans.

The first part of the Call Letter was released on December 27, 2017, in compliance with provisions of the 21st Century Cures Act that require CMS to fully implement changes to the Medicare risk adjustment model by 2022.

Comments for both parts of the proposed Advance Notice and the Part D Call Letter are due to CMS by March 5, 2018. CMS expects to publish the final 2019 Rate Announcement and final Call Letter by April 2, 2018.

Highlights of key provisions of the advance notice and draft call letter are provided below.

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FRB, FDIC provide resolution plan feedback to 19 FBOs, tailor supervisory expectations

On August 8, 2017, the Federal Reserve Board (FRB) and Federal Deposit Insurance Corporation (FDIC) (collectively, the agencies) extended, from December 31, 2017 to December 31, 2018, the resolution plan deadline for 21 firms, including 19 foreign banking organizations (FBOs).

On January 29, 2018, the agencies issued firm-specific feedback to these 19 FBOs based on their last resolution plans filed in 2015.1 Although the feedback letters do not identify any deficiencies or shortcomings with respect to the 2015 plans,2 they outline key supervisory expectations that must be met as the FBOs prepare to file their next plans.

FBOs with US IHCs

Eight of the 19 FBOs were required to establish US intermediate holding companies (IHCs) as of July 1, 2016.3 Accordingly, these FBOs are required to describe any changes they have made to their resolution plan resulting from the implementation of the IHC requirement.

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FRB finalizes US risk committee, home country stress testing certifications for FBOs

More than two years after issuing its proposal, the Federal Reserve Board (FRB) finalized1 changes to the FR Y-7 (Annual Report of Foreign Banking Organizations) with respect to the US risk committee and home country stress testing certification requirements for foreign banking organizations (FBOs).

The changes are effective beginning with the reports submitted on or after March 1, 2018.

For more information on the reporting requirements, please click here.

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Latest continuing resolution reauthorizes funding for CHIP, delays ACA tax provisions

On January 22, 2018, the President signed a continuing resolution (CR) to maintain funding for the federal government at current levels through February 8, 2018, while reauthorizing federal funding for the Children’s Health Insurance Program (CHIP) for six years through fiscal year 2023 and delaying the effective date of some taxes and fees enacted as part of the Affordable Care Act (ACA).

With an eye on the new February 8 deadline, Congress will be working on negotiations related to spending caps, appropriations for the remainder of fiscal year 2018 and a number of outstanding health care issues.

Highlights of the health care provisions of the most recent CR are provided below.

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Is your resolution plan enough?

Enhancing the second line of defense framework

Over the past several years, the Federal Reserve Board (FRB) and the Federal Deposit Insurance Corporation (FDIC) (collectively, “the Agencies”) have shifted their focus on resolution planning, now emphasizing the capabilities that banks must demonstrate in order to have a credible plan. Through their feedback letters to institutions, guidance, and FAQs, it is evident that the Agencies are emphasizing plan execution rather than conceptual strategy.

Banks’ first lines of defense (FLOD) should demonstrate that they can execute the plan to the Agencies. By using the second lines of defense (SLOD) to review controls, manage internal testing, and provide credible challenge, banks may be able to reduce the chances of the Agencies finding a firm’s plan “non-credible.” Ultimately, banks should demonstrate that required actions are replicable in order to reduce exposure to agency criticism.

One key to success? Accurate and precise data. Banks have the opportunity to leverage data to improve resolution planning processes continuously, which captures data that demonstrates they can execute their preferred resolution strategy. That same data can be used to improve efficiencies and avoid potential identified shortfalls or deficiencies.

By embracing resolution planning’s complexity, banks can accelerate their performance to lead the industry and better navigate resolution planning challenges, especially as changes occur.

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