Compliance failure means financial disaster
To manage regulatory risk and protect an enterprise, all health care providers as well as suppliers of goods and services to the health industry that in any way rely on direct or indirect payments from governmental reimbursement programs for business success should implement a Corporate Compliance and Ethics Plan that conforms to Federal Sentencing Guidelines.
Compliance failure also means exposure of individual directors and officers to a personal liability.
Under In re: Caremark International, Inc., Derivative Litigation, the standard of conduct applicable to corporate Director under Delaware law requires implementation of a Corporate Compliance and Ethics Plan that complies with Federal Sentencing Guidelines. In the Caremark decision, the Delaware Chancery expressly recognizes that the Federal Sentencing Guidelines offer powerful incentives for organizations to implement Compliance Programs to detect violations of law, to report promptly violations to appropriate public officials when discovered, and to take prompt, voluntary remedial efforts.
Accordingly, under Delaware law, Directors have a duty to assure that a corporate information gathering and reporting system exists which represents a good faith attempt to provide senior management and the Board with information regarding material acts, events, or conditions within the organization, including compliance with applicable statues and regulations.
In the case of In re: World Health Alternatives, Inc. , a federal bankruptcy judge applying Delaware law ruled that a corporate Officer is subject to the same minimum standards of supervision and monitoring applied to corporate Directors under the Caremark Delaware Chancery Court decision. Therefore, at least under Delaware law, corporate Officers are now also subject to the Caremark standard of conduct.
CompLiance Is an essential function for all health Industry Organizations
Effective implementation of a Corporate Compliance and Ethics Plan mitigates regulatory risk. While obviously important to organizations such as non-profit health care delivery systems, implementation of an effective Corporate Compliance and Ethics Plan is equally important, if not more so, for private equity funded enterprises that are expected to create a substantial return on investment while not compromising either patient care or regulatory compliance.
Compliance Education for Governing Boards and officers of Health care providers and suppliers of goods and services to the health industry is required for implementation of an effective corporate compliance and ethics plans in accordance with the federal sentencing guidelines and other compliance guidance.
Under federal guidelines, one critical component for an effective Corporate Compliance and Ethics Plan is periodic compliance education and training for Governing Boards and high level management. The United States Department of Health and Human Services, Office of the Inspector General (“OIG”) has published Practical Guidance for Health Care Governing Boards on Compliance Oversight that clarifies the OIG’s expectations regarding Board oversight of compliance program functions.
The OIG GUidance is simply stated: every board is responsible for ensuring that its organization complies with relevant federal, state, and local laws and regulations, and governing boards are expected to take an active role in overseeing the compliance function.
This responsibility cannot be delegated or ignored by the Board. The Board should make efforts to increase knowledge of relevant and emerging regulatory risks, the role and function of the organization’s compliance program in light of those risks, and the flow and evaluation of reporting potential issues and problems to senior management. In short, developing a structured culture of compliance is critical.
The OIG guidance is complemented by guidance from the Fraud Section of the United States Department of Justice (“DOJ”), which requires effective communication of the enterprise’s Compliance Program standards and procedures to all employees and other agents, including the Governing Board and high level management.
Coronat’s “White Papers” on OIG/AHLA/AHIA/HCCA Practical Guidance for Health Care Governing Boards on Compliance Oversight and Using the DOJ Fraud Section Guidance on “Evaluation of Corporate Compliance Programs” to Enhance Compliance Plans are available under the Educational Books and Resources tab on the Menu.