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Legal Speak

Proof that Corporate Compliance is Still Needed in Health Care

Published August 15, 2013 2:10 PM by Tony DeWitt
One of the great things about capitalism is that every person has the right to make as much money as they can make, so long as they do not break any laws in the process. Motivational expert Zig Ziglar was fond of saying, "you can have everything in life you want, as long as you help enough other people get what they want." When skilled nursing facilities are operated properly and lawfully, they can and do generate good profits. But sometimes in health care the desire to generate bigger profits leads to bad decision-making.

A perfect example of this is the recent reporting about Sacred Heart Hospital in Chicago. Although sounding like a charitable or non-profit organization, Sacred Heart was actually a for-profit medical center that was operated by its owner. Its owner and several physicians stand accused of performing unnecessary tracheotomies because it generated $160,000 more in profit for Medicare patients. A report on the case can be found here. It is worth noting that an effective corporate compliance program could have prevented this debacle.

A few hundred miles east of Chicago, in Detroit, a physician stands accused of giving patients $35,000,000 in chemotherapy they did not need. Yes, as ridiculous as it seems, the doctor is alleged to have given chemotherapy - poisons designed to kill cells - to patients without cancer. The story can be found here.

The cases are, of course, aberrations. That's why they make the news. But the profit motive, particularly in health care, has been at the root of so many egregious cases in health care that it is worth acknowledging that whether an organization is structured as "for profit" or "not for profit" the margins in health care are smaller than the margins in manufacturing, new car sales, and day trading on the stock exchange. While the margins can be improved with effective cost-reduction measures, the desire to improve the bottom line through means that exceed ethical and legal bounds are to be avoided.

There are severe legal penalties for violating federal health care laws, particularly for overbilling Medicare. Not only are the penalties financial (double and sometimes triple damages) but they can also involve wearing stripes and eating bad food behind gray prison walls for long periods of time. This is exactly what happened to Robert Courtney, the Kansas City pharmacist who diluted chemotherapy for hundreds of patients and generated millions in profits. Courtney never got to enjoy the profits. He is now 12 years into a 30 year federal sentence (and federal sentences are meant to be served in their entirety - there is no parole or early release).

The role of the Corporate Compliance officer is to guard against what appear to be good business decisions that are perfectly fine in other businesses (e.g., paying people when they refer buyers) but that will run afoul of federal health care laws if applied in the health care context. And it is worth noting that just because someone can manage a small manufacturing operation doesn't mean that those management skills will translate into the health care field.

No company providing skilled nursing services should be without a corporate compliance program and a trained corporate compliance officer. Otherwise, it's like flying blind into a snowstorm - you won't see the obstacles until you crash into them.

posted by Tony DeWitt

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About this Blog


    A.L. "Tony" DeWitt, RRT, CRT, JD, FAARC
    Occupation: Attorney
    Setting: Jefferson City, Mo.
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