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Board Sins of Omission: Failure to Oversee Quality Creates Fraud and Fiduciary Liabilities. Elisabeth Belmont, MaineHealth Lewis Morris, Office of the Inspector General Brian M. Peters, Post & Schell PC Robert G. Homchick, Davis Wright Tremaine LLP. Sins of Omission in the Board Room.

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board sins of omission failure to oversee quality creates fraud and fiduciary liabilities

Board Sins of Omission: Failure to Oversee Quality Creates Fraud and Fiduciary Liabilities

Elisabeth Belmont, MaineHealth

Lewis Morris, Office of the Inspector General

Brian M. Peters, Post & Schell PC

Robert G. Homchick, Davis Wright Tremaine LLP

summary of hypothetical
Summary of Hypothetical
  • Hospital recruited Dr. Bones a couple years ago
    • $ubstantial investment
    • He is the face of the Ortho Center of Excellence
    • Generates a lot of $ for Hospital
  • Dr. Bones controls credentialing and peer review processes for his department
  • Some indications that Dr. Bones’ clinical performance and perhaps that of his partners is sub standard
summary
Summary
  • Dr. Bones has lucrative contracts with hospital as Director of Institute and Medical Director of SNF
    • Total director fees $450,000
    • SNF MD compensation 4x that of his predecessor
  • Admissions from SNF increasing since Dr. Bones became Medical Director
summary1
Summary
  • Dr. Bones is the Principal Investigator for the Excellogen Clinical Trial
  • Excellogen treats deep joint infections
  • Dr. Bones steering patients to skew results
    • Inaccurate data are being reported to FDA and Drug Company
  • Deep joint infections causing spike in readmissions to hospital
summary2
Summary
  • Dr. Bones sits on the Hospital Board and is reassuring the Board that all is well
  • Hospital CEO doesn’t want to rock the boat
  • You are in-house General Counsel and aware of all of the above
the key players
The Key Players

Hospital System Board

  • Informed leaders or dead cosmonauts?

Hospital CEO

  • Sergeant Shultz

General Counsel

  • You (in the hot seat)

Dr. Bones

  • Charismatic, Entitled, Competent?
the ubiquitous dr bones
The Ubiquitous Dr. Bones
  • Member of Board
  • Chair of Department of Surgery
  • Member of MEC
  • Director of Bone & Joint Institute
  • Medical Director for Hospital’s SNF
  • In charge of Peer Review for Department
  • Principal Investigator for Excellogen trial
guideposts for prosecution
Guideposts for Prosecution
  • When evaluating substandard but medically necessary care at least some in the government will look for:
    • Knowing conduct by institution or gross and systemic leadership failures
    • Intentional acts by individuals
    • False reporting or failure to report
    • Appalling clinical outcomes
outside peer review of dr bones charts
Outside Peer Review of Dr. Bones’ Charts?

Data on Dr. Bones’ clinical performance:

  • High rate of infection following surgery
  • Rate of injury to patients outside norm
  • Readmission rates high
  • SNF admissions spike

How Can Board Effectively Monitor?

  • What tools are available? What reports?
  • Informational gatekeepers?
  • In this case, tension between GC and CEO
  • Need for systemic change in Peer Review?
review of dr bones charts
Review of Dr. Bones’ Charts
  • What if Board does not address Dr. Bones’ clinical performance?
  • Risks include:
    • Malpractice exposure increases
      • Negligent credentialing
    • False Claims Act claim – Whistleblower?
    • Administrative Sanctions
    • Quality statistics decline – loss of P4P funding?
    • Claims against Board members for breach of fiduciary duties?
beyond dr bones potential exposure for other quality failures
Beyond Dr. Bones: Potential Exposure for other quality failures
  • Scope of False Claims Act exposure based on quality of care is in flux
  • Existing claims/settlements for unnecessary care or care that puts patients’ lives at risk
  • In the future possible FCA claims based on:
    • Never Events
    • Hospital Acquired Conditions
    • Failure to meet either quality or P4P standards?
review of dr bones credentialing processes
Review of Dr. Bones’ Credentialing processes

Dr. Bones controls the credentialing process for everyone in his group

  • Self credentialing -- bias or at least appearance of bias
  • Are there procedural safeguards in the credentialing process?
  • Will Board step up if there are problems?
  • What is obligation of counsel when the CEO “knows nothing”
self credentialing
Self Credentialing
  • If Board does not address issues:
    • Malpractice risks (hospital liability for negligent credentialing)
    • False Claims Act claims
    • Breach of Fiduciary Duties
    • Administrative Sanctions
dr bones presence at meetings discussing his performance
Dr. Bones’ Presence at Meetings Discussing His Performance
  • Dr. Bones’ presence inhibits candor and discourages Board from asking hard questions
  • But, Dr. Bones is respected physician, VIP and substantial economic contributor
  • Who has the courage to raise the issue?
    • Would that person be marginalized?
    • Would an independent review be a better approach?
  • What are the risks to the Hospital or the Board if nothing is done?
dr bones contracts with hospital
Dr. Bones’ Contracts with Hospital
  • Medical Director Contract:
    • Dr. Bones’ threatens to establish competing ASC
    • Hospital offers SNF medical directorship to Bones at four times current compensation
    • Hospital admissions from Dr. Bones’ group spike after Dr. Bones becomes Medical Director
dr bones contracts
Dr. Bones’ Contracts
  • Director of Bone & Joint Insitute
    • $250K Salary
    • Duties, other that promotion of the Institute, are unclear
  • Dr. Bones’ total compensation from Hospital for director services is $450K
dr bones contracts1
Dr. Bones’ Contracts

Director Agreements suspect

  • Need to review the FMV of compensation
  • Are services commercially reasonable
  • Payments for Promotion? Referrals?
  • Investigate the facts to determine kickback and Stark risks
dr bones contracts2
Dr. Bones’ Contracts
  • Who is overseeing Dr. Bones’ contracts?
  • Has Hospital Compliance Officer been informed of facts?
  • What processes are in place to inform the Board of these arrangements?
  • Need for Corrective Action?
    • Ingnore?
    • Disclose and repay?
    • Who makes that decision?
the excellogen clinic trial
The Excellogen Clinic Trial
  • Background Facts:
    • Centurion’s new drug for treatment of deep joint infections
    • Dr. Bones hired as principal investigator
    • Dr. Bones steering patients
    • Dr. Bones and assistant submitting false data to FDA and Company
    • Some indications patients are being injured
the clinical trial
The Clinical Trial
  • Who is overseeing the Clinical Trial?
    • Dr. Bones is steering patients and tampering with data
    • These fraudulent activities may well be harming patients
  • Where is the Hospital’s IRB?
  • What data does the Board receive?
  • What safeguards are in place?
the clinical trial1
The Clinical Trial
  • The Board should understand how clinical trials are regulated and the activiites of its IRB
    • Informational Gatekeepers?
    • Lack of Expertise on Board?
  • What steps should the Board take?
  • Risks if the Board does not act?