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Board Sins of Omission: Failure to Oversee Quality Creates Fraud and Fiduciary Liabilities
Elisabeth Belmont, MaineHealthLewis Morris, Office of the Inspector GeneralBrian M. Peters, Post & Schell PCRobert G. Homchick, Davis Wright Tremaine LLP
Sins of Omission in the Board Room
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
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
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
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
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
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
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?
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
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
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
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
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 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
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
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’ 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’ 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
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
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 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?