April 16, 2014

Corporate Compliance: A Nursing Facility's Responsibilities Under the Medicare Part D Program

In prior issues of Shorts, we highlighted corporate compliance issues based on our work with the American Health Care Association to revise and update the Association’s 2002 Corporate Compliance Guidance to nursing homes across the country. This month, we’re focusing on nursing facilities’ roles and responsibilities under the federal Medicare Part D program. This article is based on a national webinar held in March 2009 and related materials published at as part of that national project.

In our March 2009 webinar, we explained how to approach the auditing and monitoring aspects of an "effective" compliance program, using the Medicare Part D program as an example. The Part D program is one of the new risk areas identified by the OIG as an area of concern in its 2008 Supplemental Compliance Guidance for Nursing Facilities.

We’ve based this "primer" on Medicare Part D and nursing facilities on the OIG’s 2008 Supplemental Compliance Guidance (73 Federal Register 56832 at pages 56846-56847). This document and the OIG’s advisory opinions, fraud alerts and similar publications published at are a great source for identifying the risk areas that the OIG is especially concerned about with nursing facilities (along with each company’s specific risk areas, as identified by internal auditing and monitoring systems).

With respect to Medicare Part D in nursing facilities, the OIG has pointed out that:

  • Medicare Part D extends voluntary prescription drug coverage to all Medicare beneficiaries, including nursing facility residents.
  • Nursing facility residents who elect Medicare Part D have the right to select their own Part D Plans.
  • Different Part D plans offer a variety of drug formularies and have arrangements with a variety of pharmacies to dispense drugs on the plan’s specific formulary. Nursing facilities also contract with pharmacies to dispense medications to their residents. These arrangements are often exclusive or semi-exclusive arrangements between the nursing facility and one or more pharmacies, designed to ease the administrative burden on facilities and help coordinate the accurate dispensing of medications to residents.  
  • In some cases, the Part D plan that best meets a resident’s needs may not have a contract with the nursing facility’s pharmacies.
  • CMS has said that it expects nursing facilities to work with their current pharmacies to ensure that they recognize the Part D plans chosen by their Medicare residents or to add additional pharmacies to ensure residents’ rights to select the Part D plan that’s best for them. In the alternative, according to CMS, the facility could enter an exclusive contract with another single pharmacy (other than its current pharmacies) that contracts more broadly with an array of Part D plans and thus offers more choices.
  • CMS has also said that nursing facilities "may, and are encouraged to, provide information and education on all available Part D plans to their residents." If facilities choose to do this, they should ensure that the information they provide is "complete and objective." This could include walking residents through the important details of all Part D plans available to them, including premium and cost-sharing obligations, and discussing which plans do and do not cover a resident’s medications.
  • The OIG warns that in carrying out these educational efforts or even at other times, nursing facilities must not act in ways that frustrate a resident’s right to choose a Part D plan; must not require, request, coach or steer any resident to select or change a plan for any reason; and must not "knowingly and/or willingly allow the pharmacy servicing the nursing home" to do the same.
  • In addition, nursing facilities, their employees and contractors should not accept any payments (or other items of value) from any plan or pharmacy to influence a resident to select a particular Part D plan or pharmacy (a potential kickback and violation of a resident’s right to choose a Part D plan). 

Monitoring compliance with a facility’s Part D obligations isn’t necessarily difficult, but it does involve an array of facility staff, management, contractors, consultants (such as consulting pharmacists), pharmacies and Part D plans. For more information on how to set up an auditing and monitoring plan for Part D, and to see a sample audit program, visit, roll over "Facility Operations" in the orange tool bar and then select "Compliance Program" from the bottom of the drop-down box.

© 2009 Poyner Spruill LLP. All rights reserved

About the Author


Ken is a long term care attorney advising clients on a wide variety of legal planning issues arising in the skilled nursing facility setting, assisted living setting, and other spheres of long term care. He is a frequent national lecturer and author of industry manuals, national trade journal magazine articles and similar training tools. He serves Poyner Spruill clients by focusing on legal issues impacting the long term care and health services sector. Ken also serves as head of Poyner Spruill's Health Law Section.

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