Practicals Solutions To High Cost, Complexity Of Corporate Compliance Programs

Compliance

Most providers of health care in the United States are well aware that a

compliance program is desirable, if not mandatory. 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 understand that the Department of Justice

and Department of Health and Human Services have made stamping out health care

fraud and abuse one of their top priorities.

They understand that government enforcement agencies have targeted virtually

every segment of the health care industry for investigations and criminal and

civil fraud prosecutions.

They understand that civil fines in excess of $100 million have become common

and that many health care executives have received significant prison terms.

Why is it, then, that many health care providers do not have a compliance

program in place, and many others have programs that do not meet

well-established minimum requirements for effectiveness?

This article will attempt to answer these questions 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.

Government Focus on Fraud and Abuse

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 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.

Benefits of Compliance Programs

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

Here, DOJ, the IG, 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.

Avoiding Probation

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 senior officers can be obtained through

compliance programs.

Perhaps more important than benefits in the event of a criminal conviction

are benefits that help to avoid a conviction in the first place. These...