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Corporate Compliance: A High Yield Investment Opportunity

The prevailing sentiment is that developing and maintaining a corporate compliance program in a health care organization is a costly burden.  Many health care organizations have compliance policies only because they are required and may lessen the penalties associated with regulatory enforcement.  In fact, the financial strain of maintaining regulatory compliance is a common issue raised by providers and those in health care administration.  In countless discussions, articles, and presentations, the cost of maintaining compliance with the current mountain and the seemingly always forthcoming tsunami of regulations is often listed as a key driver of the current physician employment boom.  However, these views are wrong, a corporate compliance program is an investment opportunity that when properly developed and executed provides opportunity for a significant return on investment.

For many years, corporate compliance programs were voluntary.  The Affordable Care Act (ACA) made compliance mandatory.  The ACA requires all providers or suppliers participating in Medicare, Medicaid, or CHIP to establish a compliance program as a condition of participation.   This requirement applies regardless of size.  Further, the ACA requires the Health and Human Services Secretary to establish the “core elements” of a compliance program and implementation timelines specific to particular industries and categories.  The compliance regulations specific to nursing homes became effective on March 23, 2013.  While the final rules and implementation deadlines for other providers and suppliers have not been published, CMS proposed a rule in September of 2010 that included a listing of what may become the core elements: 

  1. Development and distribution of written policies, procedures and standards of conduct to prevent and detect inappropriate behavior;
  2. Designation of a chief compliance officer and other appropriate bodies (e.g., a corporate compliance committee) charged with the responsibility of operating and monitoring the compliance program and who report directly to high-level personnel and the governing body;
  3. Use of reasonable efforts to exclude any individual in the substantial authority personnel whom the organization knew, or should have known, has engaged in illegal activities or other conduct inconsistent with an effective compliance and ethics program;
  4. Development and implementation of regular, effective education and training programs for the governing body, all employees, including high-level personnel, and, as appropriate, the organization’s agents;
  5. Maintenance of a process, such as a hotline, to receive complaints, and the adoption of procedures to protect the anonymity of complainants and to protect whistleblowers from retaliation;
  6. Development of a system to respond to allegations of improper conduct and the enforcement of appropriate disciplinary action against employees who have violated internal compliance policies, applicable statutes, regulations or Federal health care program requirements;
  7. Use of audits and/or other evaluation techniques to monitor compliance and assist in the reduction of identified problem areas; and
  8. Investigation and remediation of identified systemic problems including making any necessary modifications to the organization’s compliance and ethics program.

Many health care organizations  will satisfy the first element and adopt a set a policies that require that the organization satisfy the remaining elements.  Many of these organizations may even name a compliance officer. But this is where most will stop.  They believe they have satisfied the legal requirement and that they policies may mitigate government compliance oversight or the risk of large fines and penalties.  These organizations will not realize a return on their limited investment in compliance.  To them compliance is just is an expense. 

In contrast, organizations that focus on compliance and integrate compliance into the culture of the organization realize a significant return on investment.  These organizations do not simply see compliance as a burden and an argument used to reduce penalties, they use compliance to reduce cost, reduce risk, and increase revenues.  Specifically, these organizations:  

  • Use compliance to provide guidelines for internal auditing of billing and coding to detect mistakes early resulting in:
    • Increased revenue from a shortened revenue cycle (a result of not having to correct and resubmit claims) and identified under billing;
    • Reduced audit costs as a result of fewer and shorter audits; and
    • Decreased prosecution risk. Billing issues can be fixed before they are reportable or, if they reportable, allowing the organization to take advantage of self-disclosure protocols.
  • Are less likely to have an employee become a whistleblower as the organization’s focus on compliance is clear and the employees are aware of internal reporting  mechanisms.
  • Are more likely to identify and prevent acts that expose the organization to liability.
  • Are more likely to identify and prevent theft from the organization.   

Additionally, organizations focused on compliance are perceived internally and externally as ethical and trustworthy.  People are naturally drawn to ethical and trustworthy organizations.  Physicians prefer to refer patients to them, patients prefer to receive care from them, and the best employees will want to work for them. As a result, these organizations have a competitive advantage, and as a result, realize additional revenues and decreased costs.

The obligation to develop and implement a compliance program presents an opportunity to health care providers and suppliers.  Many organizations will see it as only an opportunity to incur an expense.  Successful organizations will seize the opportunity to improve their organizations and expand their competitive advantage.