Vendor Compliance

Can you pick the real story?
A.     The head of a nursing agency, Home Helper, was indicted for illegally employing unlicensed nurses to work at New York State and City facilities.  The indictment alleges that several correctional facilities routinely obtained nursing services from Home Helper.  The defendant routinely sent individuals who were not licensed or registered in New York State to work at the State facilities and then submitted time sheets and invoices falsely identifying these individuals as RNs. The defendant was paid approximately $261,000 by the State for the services provided by these individuals.

B.    A company paid approximately $154,000 in kickbacks in order to ensure they would be allocated a portion of a hospital’s total contracts for purchasing telecommunications equipment and services and that no alternative vendors would be chosen for those contracts. The kickback money was paid to sham consulting companies.  A hospital employee and the telecommunications company plead guilty.

Unfortunately…. they are both true!

Every week the media publishes hundreds of new stories about healthcare fraud.  According to some estimates the impact can be as much as $100 or $200 Billion a year.  That’s right with a “B”. 

With an increased focus in preventing medicare/medicaid fraud,  government agencies, including the OIG and FDA, are investigating more incidients of potential fraud, and prosecuting these offenses when proven necessary.  As a hosptal it is best to “mind your store” and know as much about your vendors as possible.  When the feds come knocking, ignorance is not a legitimate defense.

 -Andy Monin

Corporate Nepotism in the real world 

Have you ever played the game 6 Degrees of Kevin Bacon? 
(http://en.wikipedia.org/wiki/Six_Degrees_of_Kevin_Bacon )

The premise of the game is based on the idea that “it’s a small world” and everyone is interconnected.  Everyone in Hollywood has worked directly with or with someone who has worked with Kevin Bacon.  
 
This game works well in the Entertainment industry because productions last a few months and the industry is highly visible, relatively small and incredibly incestuous. 

Finding the links back to Kevin Bacon can be a brain-teaser and a lot of fun at parties, however this concept, applied to business relationships, could provide the greatest insight for sourcing, compliance, risk management, and corporate governance professionals.

We heard from a director of Materials Management at a large regional hospital who claimed that the head of OR’s son was the sales representative of one of the medical device vendors.  Not only was the son guaranteed the hospital’s business because of his father’s position at the hospital, but it was later discovered that the hospital was paying more than double fair market value for the privilege of doing business with the surgeon’s son. 

Web companies such as LinkdIn, Jigsaw, and Plaxo have attempted to make contact databases relevant and relational.  These tools have been used mostly by sales professionals for networking purposes and maintaining contact databases.  I believe the value at this level is novel and helpful for prospecting, but more experience based, relationship information is needed for these tools to be game changers and appeal to a  more diverse/broader group of users.

You can just imagine how much unaccounted over spending, fraud and abuse of programs like the Hurricane Katrina cleanup, the United Nations Oil for Food Program, rebuilding of Iraq, etc… were a result of corporate nepotism and political favoritism. 

Lexis Nexis (http://www.corporateaffiliations.com/) has had a product that tracks corporate affiliations for some time.  This product provides visibility into the big, publicly held business affilitations with subsidiaries but has limited breadth and depth of information on the other 21 million US businesses and their owner/operators .  In addition, the mechanism is insufficient for delivering the information to the proper stake holders.  More reports are not the answer for delivering greater transparency into business relationships.  

-Andy Monin

I need to share this article featured in This Week in Corporate Compliance published by the Health Care Compliance Association (HCCA).   You can’t make this stuff up!

On November 7, USA Today reported that Medicare investigators in
Los Angeles, using sophisticated computer technology to sift through claims data, saw an unusual pattern: A single patient had apparently undergone a diagnostic rectal-probe procedure 118 times in a year — at 21 medical facilities.” For more:  http://www.usatoday.com/tech/news/computersecurity/2006-11-06-medicare-usat_x.htm?POE=TECISVA . 

Was it the fraudster’s sense of humor that led them to claim rectal-probes, a procedure that draws immediate smirks?  Or was it the historical lack of oversight in the audit process of  Medicare/Medicaid reimbursements that led them to believe that no matter how outrageous a claim, they would be successful at perpetrating this crime?  It’s good to know that our tax dollars will never be hijacked again by these folks…. or will they?

- Andy Monin

I love coffee but don’t you hate it when you walk into Starbucks and order a large skim latte and they look at you like you are speaking a different language?  After a long pause they say “oh you mean a venti non-fat latte”.  Tall is small, grande is medium, and venti is large – that’s obvious. 

Why can’t simple things just be simple?   When I hear that business is taking a step in the direction of making things universal and less complicated, I get excited. 

I would like to thank the Association for Healthcare Resource & Materials Management (AHRMM) Board of Directors for recently declaring their support of the use of supply chain standards in all transactions between trading partners. They specifically recommended use of the United Nations Standard Products and Services Code®(UNSPSC®) to provide an open, global multi-sector standard for efficient, accurate classification of products and services.

“AHRMM selected these standards because they provide for a global solution and touch every product in the world, not just in the med-surg field,” notes Robert Perry, president of AHRMM. “Inefficiencies in the supply chain cost the industry billions of dollars each year. We need to adopt the standards that govern our trades and bring even more value to our patients, hospitals and partners.”

AHRMM advocates for every manufacturer, distributor, provider, and materials management information system vendor to prepare their company and trading partners to adopt these standards.

One of the most important aspects of using a UNSPSC standard is that the product and services codes are not industry specific.  Hospitals purchase an enormous array of products and services which span medical, technology, construction, as well as standard everyday business needs like office supplies and facilities needs.

Adopting an international standard will allow highly regulated industries like healthcare to correctly procure, manage, and assess vendors.  Healthcare providers will be able to evaluate their purchases across their company regardless of the specialty of supplier.  UNSPSC will also allow for industries to develop social analysis of suppliers and company performance and regulatory compliance issues common to a set of products or services.

It is a step in the right direction.  Now if we could just curb the use of acronyms.

-Andy Monin

What constitutes a bribe? A quick, inexpensive lunch at the local diner with your insurance sales representative or an elaborate dinner at a five star restaurant with 7 fellow colleagues and a pharma rep? 4 tickets to an Atlanta Braves game for you and your family or an invitation to attend a Braves game in a corporate suite with a vendor and several colleagues and clients of the supplier for education purposes?

These examples seem innocuous to some and blatant violations of ethical standards to others. And while you may have a clearly defined ethical lines that guide your decisioning on a daily basis, without a clear, comprehensive policy, your employees and colleagues may never know where to draw the lines.

Going through the process of determining what is acceptable and what is not can uncover complex ethical and moral dilemmas for debate. Some organizations are taking a hard look at gift policies as the American Medical Association and The Journal of American Medicine ask the question “…is it time for physicians to draw a brighter ethical line and totally refuse any gifts from industry?”

Developing a clear gift policy is critical to manage the risk of tarnishing your reputation based on someone’s interpretation of your employee’s actions or worse suffering legal attacks.

For over 12 years my wife, Greer, worked for 2 of the world’s largest telecommunications providers. Entertaining clients and giving branded trinkets and gifts was part of the job. She even sent a client to a PGA golf tournament that her company sponsored in Hilton Head, SC and had her client play in the Pro-Am the Wednesday before the tournament. It goes without saying that she won all bids.

When she moved from corporate sales to state government sales in early 2000, there was a dramatic shift in the way state government employees viewed gifts and customer entertaining. One client in particular rolled out very strict gift policies due to a highly publicized incident of vendor fraud. The incident involved a sales representative, a lobbyist, and a mid-level state employee who was responsible for awarding one of the largest telecommunications contracts in state government history. These folks had colluded and committed fraud by providing exotic gifts and trips for favors and information that resulted in awarding the contract to these insiders. These folks were caught, indicted and convicted, but what other malfeasance was unaccounted for?

In addition to developing and circulating this policy within your company, you need to communicate it to your vendor community. The majority of your vendors are ethical, honest business people that want to maintain a positive relationship with you. With concise guidelines they understand exactly what is acceptable and what is not.

Even honest and ethical vendors fall into the trap of trying to keep up with the “Jones’”. They would prefer to be on an even playing field winning business based on merit not politics, gifts and favors. But without a consistently communicated, highly visible policy nobody is certain what their competitor is doing to get your attention.

As noted in the article “Steering Clear of Vendor Bribes” by Joan Indiana Rigdon ‘Ethics experts say companies are better off with such policies than without them. But in the end, policies don’t keep deals ethical, people do.” I would say in addition to working with your legal department and ethics consultant to draft these policies, having a means to systematically deliver to all employees, and existing and potential vendors; and track acceptance with an auditable database are just as important.

Developing a policy with protective legal language is only half the work. Ensuring receipt and acknowledgement of the policy by all is the other and sometimes more difficult half.

-Andy Monin