Practical Considerations In Managing The Cost And Effectiveness Of Corporate Compliance Programs

Co-written By Christopher Myers

Unless their heads have been buried deeply beneath the sand during the past

few years, most providers of health care in the United States are well aware

that a compliance program is desirable. They have at least a general

understanding that a compliance program might benefit them, although they cannot

always articulate why. Health care executives and counsel read the papers and

trade journals just like the rest of us. They understand that the Departments of

Justice (DOJ) and Health and Human Services (HHS) have made stamping out health

care fraud and abuse one of their top priorities. They understand that

government enforcement agencies have targeted virtually every aspect of the

health care industry for investigations and criminal and civil fraud

prosecutions. They understand that civil fines in excess of one hundred million

dollars have become common and that many health care executives have received

significant prison terms.

Why is it then, that at a recent seminar for a health

care trade association, nearly one-half of the providers in the audience

admitted that they did not have a compliance program in place? This article will

attempt to answer that question and provide some practical solutions to

providers' legitimate concerns that compliance programs can be too cumbersome,

expensive and ineffective.

Before we outline our solutions to the problems listed above, a quick review

of recent events will help put this discussion into context.

For fiscal year 1999 alone, the federal government claims to have

recovered $524 million in judgments, settlements and administrative fines.

This amount does not include the recently announced tentative settlement

with Columbia HCA, which, alone, will pay the government approximately

$750 million. Fiscal year 1999 netted 396 criminal convictions and 2,978

individuals and entities excluded from participation in the federal health

care programs, including Medicare and Medicaid. In addition, the year

ended with 2,278 civil fraud matters pending.

The Department of Health and Human Services fraud and abuse related

budget for the year 2001 will increase twenty-nine percent over fiscal

year 2000 levels. There will be an additional $48 million for 100 fraud

fighters at carriers and intermediaries. There will be $70.8 million to

implement the July 1998 nursing home quality initiative.

At least one health care fraud specialist has been established in every

local United States Attorney's Office in the country.. In 1997 alone,

167 new federal jobs were added to the health care fraud fighting force,

along with an additional 77 FBI agents dedicated to health care issues.

The HHS Office of the Inspector General (OIG) is implementing a plan to

hire 243 new investigators and to staff Medicare fraud field offices in

every state.

Whistleblower suits alleging health care fraud under the qui tam

provisions of the False Claims Act have increased from 17 in 1992 to

almost 300 in 1998. Some experts estimate that currently there may be as

many as 4,000 additional whistleblower suits in the pipeline. The huge,

multi-million dollar False Claims Act settlements with many of the largest

corporate providers of health care in the United States have created a

cottage industry of qui tam plaintiff's lawyers, who are beating

the bushes for new cases.

What can health care providers do in the face of this onslaught? Here, DOJ,

HHS OIG and the defense bar are on the same page. A corporate compliance program

is the most effective way to avoid the troubles outlined above in the first

place, as well as the best way to minimize the blow if problems are discovered.

Compliance programs originally came to the attention of the public through

the Federal Sentencing Guidelines for Organizations, published in 1991.

Conceived as a means of providing credit at sentencing for organizations that

made a legitimate effort to obey the law, but nevertheless committed a crime,

compliance programs were originally thought to provide benefit only upon

conviction of a crime. There are, however, a number of other significant

benefits of compliance programs, which we will briefly describe here.

Under the Sentencing Guidelines, organizations with an

"effective" compliance program receive a significant reduction

in the calculation which determines the seriousness of their offense.

This, in turn, can result in substantial reduction of the fines imposed.

Other benefits under the Sentencing Guidelines include the possibility

of avoiding probation and modifications of the timing of restitution

payments.

Compliance programs can help organizations discover problems on their

own and to "self-report," thus making the organization eligible

for additional significant reductions in fines and penalties. Further

reductions in penalties related to the lack of complicity of...

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