Interim and Designated Compliance Officers

An ICO is a contractor expert temporarily engaged to assume the duties of the Compliance Officer for a limited period to avoid the risk of permitting gaps in the operation of the compliance program for months on end. The use of ICO has become common, particularly as a result of labor disruption arising from the COVID Pandemic. An ICO can keep the operation of the compliance program running smoothly while the organization searches for a permanent candidate.

Compliance programs with gaps in staffing may rapidly degenerate. Engaging contractors to temporarily assume duties is preferable to taking the risk of turning to internal, unqualified staff. Properly experienced and knowledgeable professionals can quickly assume duties and provide high-value services for day-to-day compliance program management, often on a part-time basis, while seeking permanent replacements.

There are many potential benefits in engaging an ICO. It permits quickly filling gaps in staffing while seeking permanent replacement. It can also be cost-effective in that you pay only for the hours worked and avoid FICA taxes, overhead costs for leave, and benefits. Outside experts provide an independent and objective perspective, free of corporate decisions and actions.

Interim means a temporary engagement, until a permanent replacement is found, usually for about three to five months.

The key factor in making this decision is that the expert is a contractor engaged for a limited time as a risk management action and that they are not an employee. They are paid only for the hours they work under the terms of the contract. As such, certain expenditures are avoided, such as paying (a) FICA payroll taxes, (b) time off (vacation, sick leave, holidays), (c) health, insurance, or retirement expenditures, (d) any other benefits.

The cost of using an expert part-time as an Interim Compliance Officer (DCO) versus hiring a full-time Compliance Officer depends on a variety of factors. Thompson Reuters, a leading professional assessment organization, reported that the range of Compliance Officer base salaries starts at around $106,000 per year for small organizations. The Health Care Compliance Association (HCCA) reported, in its “Healthcare Compliance Staff Survey,” the average salary at around $125,000 with benefits and overhead costs bringing the total to roughly $135,000 per year, or $10,000-$12,000 per month. These estimates are for candidates who are not likely to possess top credentials, expertise, or in-depth industry knowledge.

A DCO an individual to whom an organization outsources the responsibilities of Compliance Officer to develop and manage the day-to-day operation of an organization’s Compliance Program. The HHS OIG sees this as a suitable solution for smaller health care organizations where hiring a full-time Compliance Officer is not financially justifiable. As such, DCOs normally are part-time contractors. Strategic Management provides experienced consultants for this role.

The DHHS OIG recognized that smaller healthcare organizations may not be able to afford having a full-time Compliance Officer. To designate compliance responsibilities to an internal individual as a secondary duty is not an option for many reasons, including conflicts of interest, lack of knowledge, and expertise that could result in liabilities. Under these circumstances, engaging an expert on a part-time basis may be the right solution.

Under certain conditions, it is considered by regulatory authorities that outsourcing the compliance program to a Designated Compliance Officer (DCO) is a reasonable option for organizations to consider. However, this is only for smaller organizations where it would not be reasonable for the engagement of a W-2 employee to perform the duties of Compliance Officer on a part-time basis. Most such engagements are for half or quarter time. Using DCO is NOT an option for larger organizations or those under a Corporate Integrity Agreement (CIA).

Advantages for engaging qualified Designated or Interim Compliance include being able to provide the benefits of wide experience that include awareness of the regulatory environment and what it takes to have an effective program. They can move quickly to efficiently address any issues that could result in a liability.

Smaller organizations face the daunting challenge of meeting the standards of an effective compliance program while also trying to maintain focus on core business activities. Having a full-time compliance officer may be cost-prohibitive, but placing compliance as a secondary duty for an employee can invite exposure to liability. It is virtually impossible for an effective compliance program to be managed as a secondary duty. Anyone who has tried this approach can confirm the proposition. Given the challenge of managing the priorities of both compliance and core business, not to mention finding adequate resources to manage an effective program, it is not surprising to know organizations are commonly passing the burden to outside experts to serve as Designated Compliance Officers DCOs. The DHHS OIG has long recognized that: “For those companies that have limited resources, the compliance function could be outsourced to an expert in compliance.” The expert engaged as the DCO would NOT be full-time time with most engagements being about 40-100 hours per month

One way that many compliance offices are meeting the challenge of short-term needs is by having a Master Service Agreement with an expert compliance advisory consultant to provide services on an hourly basis as needed. This offers the advantage of letting the entity’s compliance officer maintain control and direction of the program.

“Insourcing” is merely hiring staff internally to carry out duties and responsibilities, and while this is generally preferred over other options, such as “outsourcing” functions on a temporary or permanent basis. “Co-Sourcing” is a middle ground option and involves using limited vendor services and tools to address key elements in the entity’s compliance program. The most common co-sourcing tools and services include sanction screening tools and services, hotline operations, compliance training programs, code and policy development,and compliance surveys. Other services include compliance risk assessments, compliance program evaluations, HIPAA Privacy/Security audits, physician arrangement reviews, conducting Internal Investigations, conducting “mock audits” and claims reviews, etc. Noteworthy is that the OIG recognizes co-sourcing as a useful solution for organizations with limited compliance expertise and resources.