New York State Medicaid Inspector General Calls for Board Involvement in Compliance
Sheehan Scheduled to Address Conference for Health Care Board Audit & Compliance Committee Members
MINNEAPOLIS, April 1 /PRNewswire-USNewswire/ -- In an interview released today by the Health Care Compliance Association (HCCA), New York State Medicaid Inspector General James G. Sheehan underscores the importance of health care board members' knowledge of and involvement in the oversight of compliance and ethics programs.
Inspector General Sheehan warns that, "The members of the board in a non-profit organization have a fiduciary and legal duty to determine that systems and procedures are in place to provide reasonable assurance of compliance with governing law. The exposure for the organization without such systems and procedures can be substantial, including both economic recoveries and exclusion from Medicare and Medicaid - even where the problem was an imprudent acquisition or a failure of oversight rather than intentional conduct."
"It is vital for board members of health care organizations to understand their role when it comes to the compliance and ethics program. In his interview, Jim offers his thoughts and insights on board members' compliance oversight role," said HCCA CEO Roy Snell. "I suggest that compliance officers share this interview with their boards."
James G. Sheehan and other experts will be covering this topic in the upcoming Audit & Compliance Committee conference being held May 20-21, 2010 in New York, NY. http://www.hcca-info.org/StaticContent/2010MayNY_AuditComp_brochure.pdf. This event is of critical importance for board compliance and audit committee members.
Interview with James G. Sheehan, New York State Medicaid Inspector General
Introduction by Health Care Compliance Association CEO Roy Snell:
The Board's role in regulatory and compliance oversight is coming under scrutiny more than any other time in our history. This role is important and can't be taken lightly. It weighs heavily on the minds of countless board members. Many board members are looking for guidance on how to fulfill this obligation and to do so efficiently. James G. Sheehan is one of the most knowledgeable leaders in this field. In the following interview, Jim shares his thoughts and ideas regarding the board's role in the oversight of compliance programs.
RS: Why should board members be concerned with the activities of a compliance program?
JS: In my view, there are five reasons:
1. It is the right thing to do to protect the interests of the non-profit and its beneficiaries, and to assure the implementation of its mission.
2. The members of the board in a non-profit organization have a fiduciary and legal duty to determine that systems and procedures are in place to provide reasonable assurance of compliance with governing law. The exposure for the organization without such systems and procedures can be substantial, including both economic recoveries and exclusion from Medicare and Medicaid-even where the problem was an imprudent acquisition or a failure of oversight rather than intentional conduct.
3. For non-profits, the IRS 990 informational return (particularly for hospitals) makes specific representations about compliance activities, and factual representations about non-profits' operations and activities which are unlikely to be reliable in the absence of an effective compliance program. The 990 contains specific representations about board members' reviews of that document.
4. State statutes and regulations in New York require that every Medicaid provider which receives more than $500,000 per year have an effective compliance program, including board oversight. The Patient Protection and Affordable Care Act will impose similar obligations on certain health care providers.
5. Non-profit board members can face personal financial and professional exposure and embarrassment from membership on a board which fails in its oversight responsibilities.
RS: What is the board's role in the oversight of compliance programs?
JS: The most significant role is becoming sufficiently educated about the topic to ask appropriate questions and determine whether management has the expertise, the will, and the metrics to provide a reasonable assurance of compliance, and for the Board members to review intelligently the responses and submissions of management.
RS: Are boards being held responsible for organizations' non-compliance?
JS: Generally they are not held responsible for the organizations' non-compliance unless they have personal involvement. However, they can be held responsible for neglecting their duty of oversight where non-compliance occurs and there were either significant warning signs that the compliance program was not effective, or a failure to undertake oversight.
RS: Can the board delegate oversight of a compliance program to a subcommittee of the board?
JS: Yes, a significant portion of oversight responsibilities may be delegated to a subcommittee. In fact, a Compliance and Audit Committee is often better equipped by background and by time to undertake this responsibility. The scope of the charge to the subcommittee should be clear from the minutes and from the subcommittee's charter and reporting. Care should be taken to assure that independent directors are a majority of the Compliance subcommittee. Delegation must be accompanied by periodic reporting of significant compliance issues to the whole board.
Even where responsibility has been delegated, education of new board members should include a compliance component.
RS: How many times a year do you recommend reporting to the full board?
JS: In the absence of a specific, major compliance issue, I would recommend a quarterly report, in writing with an opportunity for questions, to the full board by the subcommittee, and at least an annual in-person presentation by the compliance officer to the full board.
RS: Some object to having the board held accountable for fraud committed by employees.
JS: Board members are not accountable when they have no knowledge of fraud that is committed by employees, although the corporation is accountable, since the corporation is the employer. Board members are accountable for failing to undertake their duty of oversight where fraud or abuse occurs and there were either significant warning signs that the compliance program was not effective, or a failure to undertake oversight at all. These duties are defined by law, and board members must carry out these duties.
RS: How much training should the whole board receive, if any, on an annual basis?
JS: Every new member of a board should receive adequate training in compliance issues and their compliance oversight responsibilities as part of their initial introduction to the board. In my view, boards should consider brainstorming sessions annually similar to SAS 99 (See
RS: Do you feel boards are vulnerable to having important information filtered by management or the General Counsel? And is there anything that can be done to stop this?
JS: There is a risk in any organization that senior managers will provide filter and emphasize positive information to the board. This is true whether the senior manager is the CEO or the General Counsel, or in some other position. The best response to this concern is a culture of transparency that is embraced by the CEO and emphasized by the board, and inviting other managers to present at board meetings.
However, if the Board feels that the CEO or the General Counsel are not providing accurate information, it is time to consider either replacing these individuals, or leaving the board.
RS: What is the biggest problem you see with regard to the Board's involvement in the oversight of compliance programs?
JS: In my opinion, it is board members who fail to ask the tough questions of management, do not require and review compliance metrics, and do not require compliance education for the board itself and for senior managers.
RS: Do you think the board should ask one board member to focus their time on compliance, as they do with finance or audit?
JS: No.
About the HCCA
The Health Care Compliance Association (HCCA), established in 1996 and headquartered in Minneapolis, MN, is a non-profit membership organization made up of compliance and ethics professionals working in the health care industry. HCCA is dedicated to improving the quality of compliance. Its mission is to champion ethical practice and compliance standards and to provide the necessary resources for ethics and compliance professionals and others who share these principles.
Visit HCCA's Web site at www.hcca-info.org. Tel: 888/580-8373.
SOURCE Health Care Compliance Association
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