Facts

You have recently been hired as the new Chief Compliance Officer for, Memorial Health System (MHS), a large academic medical center in California.

MHS is a nonprofit corporation. It participates in the Medicare and Medicaid (Medi-Cal in California) programs and various commercial health plans that follow Medicare billing guidelines for claims processing.

After a couple months on the job, you have had time to settle in and conduct an initial risk assessment of their operations. You have developed a work plan for your team to address various items that surfaced from your risk assessment. There are two topics on the work plan that you have identified as your highest priority areas of concern. For that reason, you have elected to oversee these projects personally.

First Work Plan Item

The first item relates to the health system's medical director contracts. After talking with the Jennifer Klockman, MHS's CFO, you have identified a concern with respect to how MHS manages and compensates physicians serving as medical directors for the hospital. More specifically, Ms. Klockman has told you that MHS does not have any internal controls in place to ensure that medical director contracts are valid, and related payments to the physicians under those contracts are appropriate. For example, Ms. Klockman points out that Dr. John Anderson, the medical director over the cardiac cath lab (CCL), has a contract that expired last year, yet MHS has not signed a new agreement with him. In another example, Ms. Klockman explains that Dr. Mary Johnson, the medical director over radiology, does not submit any timesheets documenting the work she performed, yet accounts payable continues to pay her. Finally, Ms. Klockman mentions Dr. Jennifer Smith, an OBGYN physician. Here, Ms. Klockman points out there is no documentation in her contract file showing the compensation under her contract of ($250.00 per hour) is within fair market value (FMV). It is unknown at this time, which employees in the department or within finance are involved in processing payments to physicians. Additionally, it is unknown who in the organization oversees the drafting, execution, and warehousing of physician contracts. The concern from Ms. Klockman's perspective is not fully knowing whether the physician is actually performing the work and whether the organization has inadvertently overpaid a physician. To that end, she has concerns MHS is not in compliance with its physician contracts.

Second Work Plan Item

The second issue you have found comes out of your review of the department that submits bills to Medicare, Medi-Cal and commercial health plans for hospital services (Billing Department). The Billing Department had a long-standing program where it had a single employee monitor changes in the Medicare rules to ensure that Medicare claims were submitted accurately. Three years ago, the employee who had this function, Joan Miller, gave notice of her retirement. She agreed to train her successor, Scott Evans. Scott overlapped with Joan for 3 weeks and all reports are that Scott received appropriate training. Scott has many other tasks in his position with the Billing Department, as did Joan. Joan had estimated that about 10% of her time was spent following Medicare developments. You have a hunch that Scott has not been as thorough in his efforts as is required for someone solely responsible for following Medicare billing changes.

Upon further investigation, it turns out Medicare recently changed one of its requirements for knee replacement surgeries. Prior to this change, Medicare would not pay for knee replacement surgery for patients whose body mass index (BMI) was 30% or greater. BMI measures body mass and indicates whether an individual is obese. Two years ago, on January 1st, Medicare made a change that currently provides that it will not pay for knee replacement surgery for patients whose BMI is 25% or greater.

A patient's BMI is not indicated on the bills submitted to Medicare. Rather, providers are expected to document the patient's BMI in the medical record.

You have found that since the timing of this change, MHS has been, and is still billing Medicare for knee replacement surgeries so long as their BMI was less than 30%. The Billing Department policies and training on this issue have not changed in 5 years.

As of this point, you see that the Medicare program has not audited any of MHS's knee replacement surgeries for the last 3 years or otherwise asked for the medical records for any of the knee replacement surgical patients.

(Students: please note the above-referenced Medicare rules and descriptions of BMI and the percentages uses are fictional for examination purposes.)

Instructions

please draft an internal memo to the CEO and Board of MHS. In your memo, first provide a brief summary of the two issues you have identified as highest priority. Then, for each of the two issues you identified, address the following questions/topics:

1. Describe for the reader how you would further investigate the issue.

2. Provide your recommendations for how MHS will resolve the issue.

3. Provide your corrective action plan recommendations for how MHS can prevent a future occurrence of the issue.

As you are addressing the above, be sure you identify any potential laws/regulations that may be applicable to each issue and apply any relevant facts to those laws to support any of your conclusions.