On the front page of the Saturday New York Times (NYT) was an obituary for Edward Thomas, who joined the Houston Police Department (HPD) in 1948 and finally retired in 2011 at the age of 90. As reported in the article, entitled “Edward Thomas, Policing Pioneer Who Wore a Burden Stoically, Dies at 95”, when Thomas joined the HPD, “he could not report for work through the front door. He could not drive a squad car, eat in the department cafeteria or arrest a white suspect. Walking his beat, he was once disciplined for talking to a white meter maid.” The reason was that Thomas was the first African-America to don a uniform for the HPD. Yet through stoic service and professional leadership, Thomas became the longest serving Houston police officer and had the HPD Police headquarters renamed in his honor earlier this year.
I thought about how Thomas led the HPD to the modern era in the area of race relations in the context of a report, issued in April, by the Office of Inspector General (OIG), Department of Health and Human Resources, entitled “Practical Guidance for Health Care Governing Boards on Compliance Oversight” (the OIG Guidance). Through this paper, the OIG provided compliance practitioners and health care company Board of Directors its views on the proper role of a Board in overseeing a corporate compliance function.
As an introduction, the OIG Guidance states that a Board must act in good faith around its obligations regarding compliance. This means that there must be both a corporation information and reporting system and that such reporting mechanisms provide appropriate information to a Board. It stated, “The existence of a corporate reporting system is a key compliance program element, which not only keeps the Board informed of the activities of the organization, but also enables an organization to evaluate and respond to issues of potentially illegal or otherwise inappropriate activity.” The OIG Guidance sets out four areas of Board oversight and review of a compliance function; “(1) roles of, and relationships between, the organization’s audit, compliance, and legal departments; (2) mechanism and process for issue-reporting within an organization; (3) approach to identifying regulatory risk; and (4) methods of encouraging enterprise-wide accountability for achievement of compliance goals and objectives.”
While noting that a corporate compliance function should promote the prevention, detection and remediation of compliance violations, the OIG Guidance goes on to state that an organization’s Chief Compliance Officer (CCO) “should neither be counsel for the provider, nor be subordinate in function or position to counsel or the legal department, in any manner.” Rather the Board must ensure the CCO and compliance function have resources to fulfill their assigned role within an organization and access to the Board. The Board should “evaluate and discuss how management works together to address risk, including the role of each in:
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identifying compliance risks,
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investigating compliance risks and avoiding duplication of effort,
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identifying and implementing appropriate corrective actions and decision-making, and
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communicating between the various functions throughout the process.”
A key component of Board oversight is through the flow of information. The OIG Guidance says, “The Board should set and enforce expectations for receiving particular types of compliance-related information from various members of management. The Board should receive regular reports regarding the organization’s risk mitigation and compliance efforts—separately and independently”. These reports can come to the Board via a variety of reporting mechanisms; regular Board meetings, special Executive Sessions where the Board meets with the CCO or compliance leadership outside of the presence of senior management and ad hoc communications from the CCO. All of these help create a “continuous expectation of open dialogue” which is paramount for proper Board oversight. Of course, if a serious compliance issue arises, it needs to be communicated directly, and in a timely manner, to the Board.
But in addition to setting the expectations for the flows of information, a Board must also set expectations for holding senior management accountable for areas such as compliance. This can be through the assessment of “individual, department, or facility-level performance or consistency in executing the compliance program” and using this information to payout or withhold discretionary based bonuses “based upon compliance and quality outcomes.” The OIG Guidance also notes, “Some companies have made participation in annual incentive programs contingent on satisfactorily meeting annual compliance goals. Others have instituted employee and executive compensation claw-back/recoupment provisions if compliance metrics are not met.” However the key component is that “Through a system of defined compliance goals and objectives against which performance may be measured and incentivized, organizations can effectively communicate the message that everyone is ultimately responsible for compliance.”
A Board also needs to have regular reports on the risks that any organization may face. This means keeping abreast of “relevant and emerging regulatory risks, the role and functioning of an organization’s compliance program in the face of those risks and the flow and elevation of reporting of potential issues and problems to senior management.” The OIG Guidance speaks to technological solutions when it says, “Some Boards use tools such as dashboards—containing key financial, operational and compliance indicators to assess risk, performance against budgets, strategic plans, policies and procedures, or other goals and objectives—in order to strike a balance between too much and too little information. For instance, Board quality committees can work with management to create the content of the dashboards with a goal of identifying and responding to risks and improving quality of care.”
Moreover, a Board should also mandate that the company’s compliance function have the proper tools in place to facilitate compliance reporting internally. It states, “Boards should also consider establishing a risk-based reporting system, in which those responsible for the compliance function provide reports to the Board when certain risk-based criteria are met. The Board should be assured that there are mechanisms in place to ensure timely reporting of suspected violations and to evaluate and implement remedial measures. These tools may also be used to track and identify trends in organizational performance against corrective action plans developed in response to compliance concerns.”
Ultimately a Board should drive home of the message of compliance as “a way of life” so that it permeates into the DNA of a health care organization. For if a Board can help drive compliance into the fabric of an organization, it will have done more than simply fulfill its legal obligations starting in the Caremark decision and going forward. The Board will have helped to make the entire organization more compliance-centric and when a Board can help to facilitate such a change in attitudes, it will have moved the organization several steps down the road of doing business in compliance with relevant laws and issues.
The OIG Guidance is an excellent review for not only compliance professionals and others in the health care industry but a good primer for Boards around their own duties under a best practices compliance program. The US Federal Sentencing Guidelines, the Ten Hallmarks of an Effective Compliance Program, the “OIG voluntary compliance program guidance documents, and OIG Corporate Integrity Agreements (CIAs) can be used as baseline assessment tools for Boards and management in determining what specific functions may be necessary to meet the requirements of an effective compliance program. The Guidelines “offer incentives to organizations to reduce and ultimately eliminate criminal conduct by providing a structural foundation from which an organization may self-police its own conduct through an effective compliance and ethics program.” The compliance program guidance documents were developed by OIG to encourage the development and use of internal controls to monitor adherence to applicable statutes, regulations, and program requirements.”
It is a document well worth your consideration.
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