iProtean—Compliance in a Health Reform Environment

What is a hospital/health system board’s accountability standard for compliance in the current health reform environment?  The board’s oversight responsibility remains the same, said Monte Dube, Esq., at the recent iProtean Symposium.  Directors still have two principal obligations with respect to oversight:  a duty to attempt in good faith to assure that 1) a corporate information and reporting system exists, and 2) the reporting system ensures that the board receives timely and appropriate information as to compliance.


But the Affordable Care Act (ACA) has added specific twists on current regulations that should be noted at the board level:

  • The law makes it easier for whistleblowers to initiate lawsuits;
  • The False Claims Act and Anti Kickback Statute have been changed:  it is no longer necessary to prove that the offender knew his/her action was illegal;
  • When a provider is overpaid by CMS, the provider must pay back the overpayment within 60 days from the time the provider recognizes the overpayment;
  • HHS can withhold future payments based on credible allegations of fraud; and
  • An additional $350 million has been allocated to Office of the Inspector General (OIG) for fraud investigations/enforcement.


The new compliance regulations added by ACA as well as the existing regulations may cause concern for board members.  Mr. Dube suggested using the following format for assessing your organization’s actions:

  • Is it legal?
  • Is it right?
  • What do your stakeholders expect?
  • What do the regulators expect?
  • What does the market expect?
  • How it will read in the paper?
  • What’s coming down the pike?


Boards also are on the receiving end of an alert mechanism from the OIG—it publishes its work plan annually and gives hospital/health system leaders a detailed view of the enforcement activities planned by the OIG for the coming year.  (See iProtean blog OIG Issues FY 2013 Work Plan, October 9, 2012)


Case Study

Mr. Dube provided an example of a compliance problem from several years ago. A hospital management company fired a CFO at one of its hospitals, and the then-former CFO filed a wrongful termination suite.  During the deposition, he discovered that the hospital management company had “reserve Medicare cost reports” that its hospitals would use when the government challenged the cost report that a particular hospital had submitted.  The rationale was that because cost reporting is complicated, hospitals would file in good faith, but would also have these reserve cost reports in case the government disagreed with them.  That discovery resulted in the former CFO bringing a whistleblower lawsuit against the management company, which the Justice Department joined.  The lawsuit was settled against the hospital management company for $85 million, and ultimately led to its sale.


Mr. Dube noted that there will always be whistleblowers and ultimately wrongdoing will be discovered.  What might have alerted the board to this hospital management company’s practice?  The audit committee of the board, the compliance department, the internal auditor or even general counsel may have picked this up.  Certainly the external auditor should have raised a red flag.  The board was not reprimanded for “not knowing” about this practice because ultimately board members can’t control how well their auditors are doing their job.  However, they should make it a practice to check their compliance process oversight and from time to time make it a point to ask the right questions.


Resource for Healthcare Board Members  on Corporate Responsibility and Corporate Compliance

Board members should consider a serious of questions to guide them in their oversight responsibilities.  These questions appear in Corporate Responsibility and Corporate Compliance, a joint publication by the Office of the Inspector General (Department of Health & Human Services) and the American Health Lawyers Association in 2003.  The questions remain relevant to hospital/health system boards today (for the full publication, click here):


  1. How is the compliance program structured and who are the key employees responsible for its implementation and operation?  How is the board structured to oversee compliance issues?
  2. How does the organization’s compliance reporting system work?  How frequently does the board receive reports about compliance issues?
  3. What are the goals of the organization’s compliance program?  What are the inherent limitations in the compliance program?  How does the organization address these limitations?
  4. Does the compliance program address the significant risks of the organization?  How were those risks determined and how are new compliance risks identified and incorporated into the program?
  5. What will be the level of resources necessary to implement the compliance program as envisioned by the board?  How has management determined the adequacy of the resources dedicated to implementing and sustaining the compliance program?
  6. How has the Code of Conduct or its equivalent been incorporated into corporate policies across the organization?  How do we know that the Code is understood and accepted across the organization?  Has management taken affirmative steps to publicize the importance of the Code to all of its employees?
  7. Has the organization implemented policies and procedures that address compliance risk areas and established internal controls to counter those vulnerabilities?
  8. Does the compliance officer have sufficient authority to implement the compliance program?  Has management provided the compliance officer with the autonomy and sufficient resources necessary to perform assessments and respond appropriately to misconduct?
  9. Have compliance-related responsibilities been assigned across the appropriate levels of the organization?  Are employees held accountable for meeting these compliance-related objectives during performance reviews?
  10. What is the scope of compliance-related education and training across the organization  Has the effectiveness of such training been assessed?  What policies/measures have been developed to enforce training requirements and to provide remedial training as warranted?
  11. How is the board kept apprised of significant regulatory and industry developments affecting the organization’s risk?  How is the compliance program structured to address such risks?
  12. How are “at risk” operations assessed from a compliance perspective?  Is conformance with the organization’s compliance  program periodically evaluated?  Does the organization periodically evaluate the effectiveness of the compliance program?
  13. What processes are in place to ensure that appropriate remedial measures are taken in response to identified weaknesses?
  14. What is the process by which the organization evaluates and responds to suspected compliance violations?  How are reporting systems, such as the compliance hotline, monitored to verify appropriate resolution of reported matters?
  15. Does the organization have policies that address the appropriate protection of “whistleblowers” and those accused of misconduct?
  16. What is the process by which the organization evaluates and responds to suspected compliance violations?  What policies address the protection of employees and the preservation of relevant documents and information?
  17. What guidelines have been established for reporting compliance violations to the board?
  18. What policies govern the reporting to government authorities of probable violations of law?



Monte Dube appears in three new iProtean courses:  Affiliations & Partnerships, Physicians and Governance and Competency-based Succession Panning.  Look for these courses in the upcoming months.  iProtean subscribers will earn advanced certification upon successful completion of these courses.




For a complete list of iProtean courses, click here.


For more information about iProtean, click here.


iProtean—Imperatives for the New Payment System

Even if the Supreme Court overturned the Affordable Care Act, hospitals would still experience huge cuts in Medicare payment, and there would still be a movement away from traditional fee-for-service, said Marian Jennings at the recent iProtean Symposium in La Jolla, California.


“We have put a lot of things into the bucket called “healthcare reform” that already were in the works before health reform was passed,” Ms. Jennings said.  Significant restructuring of the healthcare’s payment systems have been underway for several years, including value-based purchasing and bundled payments.


This is not a transition from “here” to “there,” but rather an evolution so, in that respect, hoping for the dust to settle is only that—a hope, and not one based on facts, she noted.


Ms. Jennings’ presentation focused on the following points:

  • There is not enough money to sustain the current health system.
  • Maintaining balance between mission and margin is critical in an environment of uncertainty.
  • Payment models will shift more risk to providers—both for the cost of care and for population health management.  This may take a decade.
  • In the near future, hospitals will have to work with multiple payment models, often with conflicting incentives.  It is not clear when the system will move entirely to one payment model—again, it may take a decade.
  • Private insurers are leading the re-crafting of the payment structure.
  • Delivering high value care is always a good strategy.



Key Imperatives

The board’s strategic discussions today should focus on several key imperatives:


Shifting Risk to Providers

In addition to the relentless downward pressure on costs, the scene has been set for shifting risk from payers (CMS, private insurance) to providers—hospitals and physicians.  Provider risk and cost accountability will move from low risk, traditional fee-for-service prospective payment to increasingly higher risk models:  value-based purchasing, hospital-physician bundling, episodic bundling, the ACA Shared Savings Model and ACOs, to, finally, capitation.  Essentially, this means moving to population health management—spreading risk over a larger base.


If a hospital considers what would be the tipping point from the old business model to the new business model, one of the questions it should consider is how proactive it should be; how much risk it wants to take now as opposed to waiting.  Ms. Jennings posed these questions, “Do you push initiatives with insurers in your state to partner with you on a demonstration project—to make it happen sooner?  Are you waiting for it, or are you trying to make it happen?”


New Patient Approaches Reducing Utilization

Another imperative for hospital decision makers focuses on the outcomes inherent in the new payment systems; that is, reduced utilization.  Emergency room use and inpatient admissions will fall significantly because of the way patients will be managed through accountable care organizations, medical homes and value-based purchasing initiatives such as readmission rate penalties.


New Role for Primary Care

The new emphasis on primary care (and primary care physicians) will also have a significant impact on hospital admissions.  Insurers are working with primary care physicians to reduce health costs, including fewer hospital admissions, tests and procedures, and some private insurers currently are offering primary care physicians payment bonuses for significant cost reductions.


Scale Matters

Another imperative noted by Ms. Jennings involves consolidation and the rationale for consolidation.  Smaller hospitals may lack access to sufficient capital, and may not have the economies of scale that, by itself, creates demand.  Hospitals need a large enough population base for risk contracting and negotiating leverage with payers. So scale matters, and many new players are entering the hospital consolidation sphere.  Smaller hospitals need to assess their positions, and larger systems need to assess the feasibility and attractiveness of non-traditional partners.


The Emerging Initiatives of Private Insurers


The Affordable Care Act has constrained the way private insurance companies do business, so it should be no surprise that they are moving aggressively to use the ACA provisions to their advantage.


Private insurers are leading the re-crafting of the payment structure. They are very nimble, and can launch initiatives quickly.  Two examples of recent private insurer initiatives include:

  • A Blue Cross Blue Shield of Arizona and Banner Health joint venture to expand services to Medicare beneficiaries, plus the launch of “Blue Alliance”—offering lower premiums by using Banner’s local network of providers.
  • The purchase of a Catholic health system, Caritas Christi, in Boston by a private equity firm and subsequently named Steward Health Care.  Steward and an insurer established a “select network” with a plan premium at 20% to 30% below market.  In that product, they negotiated a deal with Massachusetts General and Dana-Farber Cancer Institute.  If Steward couldn’t provide the needed service to a subscriber, that subscriber could get that service at Massachusetts General or Dana-Farber.


Marian Jennings will be featured in three upcoming iProtean advanced courses:  Transforming Your Organization into an Integrated Delivery System, Affiliations & Partnerships and Making Difficult Decisions about Services and Programs:  A Portfolio Approach.  iProtean subscribers, please look for these courses in your course list over the next  few months.



For a complete list of iProtean courses, click here.



For more information about iProtean, click here.


iProtean—The Importance of Governance

Governance matters to credit rating agencies, according to Lisa Goldstein of Moody’s Investors Service.  At the iProtean Symposium last week, Ms. Goldstein presented the scorecard used by Moody’s to assess governance and management.  The five core elements of governance used by Moody’s include:


Whether the board and management exhibit leadership capability in stable and stressful times.  This element is assessed by confirming that the board has a mix of tenured and new members (i.e., term limits are preferred); the organization has experienced senior leadership; and the governance structure reflects the organization’s strategy.


Whether the board has sufficient oversight and disclosure processes that reduce risk and enhance operational effectiveness.  This element is assessed by examining the board’s disclosure practices.


Whether the board effectively integrates short- and long-term plans to optimize resource utilization.  Here, the determining factors are:  Integrated strategic, capital and financial planning with an emphasis on scenario planning; conservative budgeting and consistent results; fundraising activities; and consideration to consolidation.


Whether the board has a commitment to self-assessment and benchmarking to promote ongoing improvement.  This includes reviewing and assessing the performance of senior management, and conducting the board’s work according to “best practices.”


Whether the board effectively manages government relations in its efforts to influence local, state and federal healthcare policy.  This means understanding the regulatory environment and establishing/maintaining ties to local and national industry affiliations.


Ms. Goldstein emphasized that health reform will “test  hospital boards like never before—the recession was nothing compared to what’s coming.”  She outlined what Moody’s calls the characteristics of a “progressive health care system”—regardless of size:


Data, Data, Data

Integral use of data to develop evidenced-based medicine; build data-warehouses to predict health care outcomes to manage population health


Forward-Thinking Leadership

Use data for competitive advantage; execute strategies; add board expertise in manufacturing, engineering, consolidation; continued focus on quality and safety


Strong Financial Management

Scenario planning; execute next level of cost reductions; critical approach to spending when ROI is uncertain or hard to measure; realization that inpatient utilization will likely not return to historical levels


Consideration of Consolidation

Strategies that examine avenues to drive efficiencies and leverage from scale and size


Preparing for Payment Models that Embrace Value

Heavy integration with physicians to build a clinical playbook, prepare for readmission penalties, bundled payments to lower costs


And boards of progressive health systems must demonstrate their own specific “progressive governance” characteristics, according to Ms. Goldstein:


  • New expertise to the board
  • Consideration of non-traditional partners
  • Evaluation of all services/facilities for re-purposing, including scenario planning
  • New mission or re-evaluation of healthcare delivery model
  • Managing to Medicare


Ms. Goldstein will be featured in iProtean’s upcoming courses Transforming Your Organization into an Integrated Delivery System, Affiliations & Partnerships, Making Difficult Decisions about Services and Programs:  A Portfolio Approach,  Physicians and Governance and Competency-based Succession Planning.  iProtean subscribers please note that the new iProtean courses are considered advanced and will enable those who are interested to earn advanced certification.



For a complete list of iProtean courses, click here.


For more information about iProtean, click here.



OIG Issues FY 2013 Work Plan

The Department of Health and Human Services Office of Inspector General (OIG) conducts audits, investigations and evaluations to ensure compliance with laws and regulations for Medicare, Medicaid and more than 300 other HHS programs.


The OIG issues its work plan each year, and the work plan provides significant signs about OIG activity and investigations over the coming year.  Its fiscal year 2013 work plan was issued on October 2.


The work plan details several new areas of focus related to hospitals including inpatient billing for Medicare beneficiaries, same day readmissions, and Medicare payments made to hospitals for beneficiary discharges that should have been coded as transfers, along with other initiatives.


Although many of OIG’s focus areas continue previous years’ initiatives, the fiscal year 2013 work plan “includes many new and notable reviews and activities that could affect accreditation and payment matters under Medicare and Medicaid,” noted Stephen Bentfield and Karen Lovitch in an October 3 article from American Health Lawyers Association. Two areas of particular focus in the upcoming year relate to billing and payment issues and also the ongoing implementation of the Affordable Care Act (ACA) requirements. (S. Bentfield, Esq., K. S. Lovitch, Esq., “HHS OIG Issues FY 2013 Work Plan,” Regulation, Accreditation and Payment Practice Group Leadership, AHLA, October 3, 2012)


Areas for review and investigation include:

  • When hospitals acquire ambulatory surgery centers and convert them to hospital outpatient departments, OIG will determine the effect of such acquisitions on Medicare payments and beneficiary cost sharing.


  • Medicare issues in other care setting such as nursing homes, hospices and home health agencies.


  • Reviewing the impact on Medicare costs associated with inpatient hospital claims for canceled surgical procedures.


  • Identifying potential cost savings resulting from new payment methodologies for swing-bed services at critical access hospitals (as compared to the same level of care obtained at a skilled nursing facility).


  • Medicaid reviews of manufacturer rebates, Medicaid waivers, state management of Medicaid, dual-eligible issues and Medicaid managed care.


OIG Releases FY 2013 Work Plan,” Health Lawyers Weekly, October 05, 2012)


OIG’s review of the ongoing implementation of the ACA covers several new focus areas.  Notably, it will analyze possible savings associated with bundling outpatient services delivered up to fourteen days prior to inpatient hospital admissions into the DRG payment for the inpatient stay (compared to the three-day window that currently applies). Under the so-called DRG window policy, Medicare does not pay separately for preadmission services when they are delivered in a setting owned or operated by the admitting hospital.
 (S. Bentfield, Esq., K. S. Lovitch, Esq., “HHS OIG Issues FY 2013 Work Plan”)


The OIG has posted its work plan here.


For more information on healthcare compliance in today’s environment, go to the iProtean course Compliance where experts Monte Dube, Esq., Robin Nagele, Esq., Anjana Patel, Esq. and Anne McGeorge provide an in-depth review of compliance issues for board members.


Monte Dube, Esq., will be delivering a special presentation, The Compliance Environment—Fallout from Health Reform, at the iProtean Symposium October 10-12 in San Diego.  Limited space is available so contact Sue Gordon at segordon@iprotean.com for last-minute registration.


For a complete list of iProtean courses, click here.


iProtean Symposium & Workshop

Mark the Date!! October 10 – 12, 2012 at The Lodge at Torrey Pines, La Jolla, CA. Faculty: Barry Bader, Monte Dube, Esq., Lisa Goldstein, Dan Grauman, Marian Jennings and Brian Wong, M.D. For more information, click here.


For more information about iProtean, click here.


iProtean—Two Pay-for-Performance Programs Now in Effect

Two pay-for-performance programs in the Affordable Care Act became effective on Monday—one relating to value-based purchasing and another targeting readmission rates.  Both programs enable Medicare to reward hospitals for providing more efficient and higher quality care and penalize those hospitals that don’t measure up.


Under the value-based purchasing program, Medicare will pay hospitals based on performance on a set of standard clinical quality measures and also on surveys of patients’ experience.  CMS will withhold one percent of Medicare payments to about 3,000 acute care hospitals over the next year and redistribute that money to the best performing hospitals.  The percentage will rise to two percent by 2016.


Under the readmission rate program, CMS will take up to one percent from Medicare payments to hospitals with high readmission rates.  For now, hospitals are only being measured on three medical conditions:  heart attacks, heart failure and pneumonia.  Penalties will gradually rise until three percent of Medicare payments to hospitals are at risk—and four additional treatments/conditions may be added:  joint replacements, stenting, heart bypass and treatment of stroke.


Some experts question whether the penalties and rewards are sufficient to encourage hospitals to make the necessary changes to delivery of care.  Others have questioned whether the readmissions program should be separate from the value-based purchasing program.  An executive at Premier Healthcare Alliance recently noted that the readmissions program “should be part of the value-based purchasing program, with fixed targets that hospitals can try to meet, rather than past performance.”


(Sources:  American Health Lawyers Association Health & Life Sciences Law Daily, October 1, 2012; Associated Press, “Medicare fines over hospitals’ readmitted patients,” September 30, 2012; Politico, “ACA tries carrots, sticks on hospitals,” October 1, 2012.)


Marian Jennings and Daniel Grauman will be discussing value-based purchasing and other delivery/payment components of the Affordable Care Act at the iProtean Symposium, October 10-12 in San Diego, CA.


Upcoming iProtean courses will feature these issues as well as issues related to quality, governance and mission & strategy.  Look for these new courses in the next few months.

For a complete list of iProtean courses, click here.


iProtean Symposium & Workshop

Mark the Date!! October 10 – 12, 2012 at The Lodge at Torrey Pines, La Jolla, CA. Faculty: Barry Bader, Monte Dube, Esq., Lisa Goldstein, Dan Grauman, Marian Jennings and Brian Wong, M.D. For more information, click here.


For more information about iProtean, click here. www.iprotean.com/index.php/iprotean/demo