Creating a ‘compliance culture’ minimizes risk of fraud claims

Listening and caring go a long way toward resolving internal compliance questions ― and keeping them from escalating into full-blown lawsuits and investigations. An effective compliance program provides a way to report concerns to a designated person who hears and acts upon each concern; a health care organization that establishes a “compliance culture” is in a better position to avoid external scrutiny.

The panel discussion was moderated by Erik Lioy, Grant Thornton Forensic and Valuation Services partner. Three professionals whose work is steeped in compliance, fraud and abuse claims spoke about their experiences in a session of the fall 2015 Healthcare Provider Conference in Charlotte, N.C. The conference was a gathering of health care and business professionals co-sponsored by Grant Thornton LLP, AON and McGuireWoods LLP. Among the topics was fraud and abuse enforcement and litigation. A panel discussion was led by Erik Lioy, Grant Thornton Forensic and Valuation Services partner; the other two panel members were Mark Anderson, McGuireWoods LLP partner, and Matthew Molbert, Novant Health vice president of Internal Audit and Compliance.

Concentrate efforts on internal concerns The three panelists agreed on the necessity for health care providers to earn a reputation for taking concerns seriously and personally. Novant's Matthew Molbert stressed an organization needs “a compliance program with policies and procedures that help establish behaviors of a good corporate citizen and employer. The program should include a repeatable and consistent process so that you can demonstrate that every complaint is reviewed and if a problem is identified, an investigation is launched.” Finally, after the internal investigation, Molbert advises, you work until the issue is resolved.

These resolutions allow the organization to focus on its purpose ― providing health care. They also reduce the risk of complaints going outside the organization. Those risks carry high costs; according to McGuireWoods' Mark Anderson, “under the False Claims Act, for the first half of this year the government has recovered $5.7 billion, the majority of that in health care.” Such cases, Anderson said, yield valuable clues. “Generally in this space, particularly to health care,” he said, “you’ll see that the government has identified what are hot topics and why you should be concerned.”  

Know the hot topics for investigatorsWhile false billings continue to be a focus for governmental investigations, the panelists referred to two areas from which many related fraud claims are initiated:
  • Physician referrals
  • Labor relations and management
Physician referrals
“The number one thing they are looking for is relationships with what they call ‘acquired physicians,’” said Anderson. “With the changes in health care, hospital systems are acquiring practices. The U.S. attorney’s office has said we’re looking to see whether physicians in those transactions are getting paid ‘above market rate.’ The government’s position is if you’re making more money it’s because the hospital is buying your patient referrals, and that is unlawful. That’s simplistic, but that is a focus. And as you can see from the hospital side that is a huge liability.” He cited recent media coverage of a Florida hospital system ordered to pay $69.5 million as a result of a lawsuit accusing it of improper financial relationships with physicians referring patients.    

In another case, a $10 million settlement was ordered. Management agreements with two physician groups were intended to create efficiencies and reduce costs, Anderson said. “The allegation was that these management agreements were for the purpose of inducing the groups to refer to the health system.” The government looked upon the agreements as kickbacks to the physicians.  

Labor relations and management
Issues between the hospital or system and the physician employee are another hot topic. “A lot of the cases we see deal with supervision and proper staffing,” Anderson said.   

Anderson pointed to the need to promptly investigate such issues and noted another case which ended with a large settlement ― $5.4 million.  “The allegations were that the radiation oncology services were provided without the required supervision of a qualified medical professional,” he said. The claim was made by a radiation oncologist, and it was supported by the government.  
The best defense against becoming embroiled in a claims case, the panelists all advised, is taking the positive route of instituting and maintaining an effective compliance program.

A meaningful compliance program requires a cultural viewpointThe compliance program must have two basic components:
  • Steps for reporting concerns
  • Assurance of listening and acting

To make it work, more than a phone number is needed, said Grant Thornton's Erik Lioy. “I can’t tell you how many times we run into the contention of ‘Well, there was just a bad culture. No one wanted to hear.’ It’s not enough to say, ‘Here’s a hotline.’ Because then what you get is ‘We never could have done that [file a complaint] ― we would have been retaliated against because nothing’s anonymous here.’

“You have to create the culture of compliance to encourage people to come forward. As part of your program, you have to develop some mechanisms where people in the rank-and-file organization get that you mean it.”

This means that both components must be communicated to employees with the message that the organization wants to know what employees have to say. Fear of retaliation must be allayed, and it must be clear that concerns will be addressed. To make the program accessible and practical to employees, the panelists named three essential mechanisms:
  • Oversight responsibility
  • Training and communication
  • Documentation and program review

Oversight responsibility must be personal, Anderson said. “You need to have an individual who is specifically designated, and that individual needs to report directly to the board or a board committee.” Molbert concurred, advising that “the compliance function has direct access to the board.”

Training on the steps to reporting and communication about the organization’s interest in concerns must be carried out and documented. The means to reporting can be tailored, with a hotline part of the mix if it’s operated by an independent third party and communicated as such, said Molbert.

Documentation and review begin, Molbert said, with “a charter that’s approved by a committee. And it’s probably a good idea to have a compliance plan that’s reviewed annually and approved by the committee. And do some form of periodic reporting that demonstrates how you’re complying with the elements of the effective program.” Further documentation can share results of the compliance program with employees, the board and others.

Relying on external resources will support compliance efforts. Federal sentencing guidelines1 provide the starting point for designing an effective compliance program, Lioy said. Anderson pointed out that according to the penalty section, if during an investigation an organization shows that it has an effective compliance and ethics program, there will be allowances for penalty reductions.

Utilizing an external compliance audit to gauge how the program is working is wise, said Anderson, and Molbert advised engaging third-party evaluation experts to assist with transactions and management agreements.

Addressing concerns can keep them from escalating to whistleblowing The best way to resolve issues is to encourage employees to trust the organization to set things right. As Molbert pointed out: “Reassure folks that you’re listening to them and that you’re investigating their claim.” This is the opportunity, he said, to receive information the organization will use to mitigate a problem.

1 United States Sentencing Commission. “2014 Guidelines Manual: Chapter 8 — Sentencing of Organizations,” Nov. 1, 2014.