The New Corporate Integrity Agreements: What Did the Board Know and When Did They Know It?

Transcription

1 The New Corporate Integrity Agreements: What Did the Board Know and When Did They Know It? Malcolm J. Harkins Center for Health Law Studies St. Louis University School of Law 2015 by Malcolm J. Harkins

2 AMENDED AND RESTATED CORPORATE INTEGRITY AGREEMENT BETWEEN THE OFFICE OF INSPECTOR GENERAL OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES AND OMNlCARE, INC. (Nov. 2, 2009) C. Certifications. The Implementation Report and Annual Reports shall include a certification by the Compliance Officer that: 1. to the best of his or her knowledge, Omnicare is in compliance with all of the requirements of this CIA; 2. he or she has reviewed the Report and has made reasonable inquiry regarding its content and believes that the information in the Report is accurate and truthful. (pp.32-33).

3 CORPORATE INTEGRITY AGREEMENT BETWEEN THE OFFICE OF INSPECTOR GENERAL OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES, FOUNDATION HEALTH SERVICES, INC., RICHARDT. DASPIT, SR., et al. (June 5,2014). 2. Compliance Committee The Compliance Committee shall include the Compliance Officer, representatives from among senior personnel responsible for clinical operations and quality of care, human resources, operations, including Foundation's Director of Clinical Services, Richard T. Daspit, Sr., and any other appropriate officers or individuals necessary to thoroughly implement the requirements of this CIA.. For each scheduled [monthly] Compliance Committee meeting, senior management of Foundation shall report to the Compliance Committee, in writing, on the adequacy of care being provided by Foundation and senior representatives from facilities associated with Foundation shall be chosen, on a rotating and random basis, to report to the Compliance Committee on the adequacy of care being provided at their facilities. The minutes of the Compliance Committee meetings shall be made available to the OIG upon request. (pp. 4-5).

4 CORPORATE INTEGRITY AGREEMENT BETWEEN THE OFFICE OF INSPECTOR GENERAL OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES, FOUNDATION HEALTH SERVICES, INC., RICHARDT. DASPIT, SR., et al. (June 5,2014). b. Board Resolution. For each Reporting Period of the CIA, the Board of Directors shall adopt a resolution summarizing the Board of Directors Committee's review and oversight of Foundation's compliance with the requirements set forth in this CIA, Federal health care program requirements, and professionally recognized standards of care. Each individual member of the Board of Directors Committee shall sign a statement indicating that he or she agrees with the resolution. (p.8).

5 I. CORPORATE INTEGRITY AGREEMENT BETWEEN THE OFFICE OF INSPECTOR GENERAL OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES AND HALIFAX HOSPITAL MEDICAL CENTER AND HALIFAX STAFFING, INC. (March 10,2014). 2. Compliance Committee. The Compliance Committee shall, at a minimum, include the Compliance Officer and other members of senior management necessary to meet the requirements of this CIA (e.g., senior executives of relevant departments, such as billing, clinical, human resources, audit, and operations).... (pp.4-5).

6 I. CORPORATE INTEGRITY AGREEMENT BETWEEN THE OFFICE OF INSPECTOR GENERAL OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES AND HALIFAX HOSPITAL MEDICAL CENTER AND HALIFAX STAFFING, INC. (March 10,2014). 3. Board of Commissioners Compliance Obligations. The Board of Commissioners of Halifax (Board) shall be responsible for the review and oversight of matters related to compliance with Federal health care program requirements and the obligations of this CIA. The Board must include independent (i.e., non-executive) members. c. for each Reporting Period of the CIA, adopting a resolution, signed by each member of the Board summarizing its review and oversight of Halifax s compliance with Federal health care program requirements and the obligations of this CIA.

7 CORPORATE INTEGRITY AGREEMENT BETWEEN THE OFFICE OF INSPECTOR GENERAL OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES AND HALIFAX HOSPITAL MEDICAL CENTER AND HALIFAX STAFFING, INC. (March 10,2014). 5. Management Accountability and Certifications. [C]ertain Halifax officers or employees (Certifying Employees) are specifically expected to monitor and oversee activities within the hospital and shall certify annually that the areas under their authority are compliant with applicable Federal health care program requirements and with the obligations of this CIA. These Certifying Employees shall include, at a minimum, the following: the President & Chief Executive Officer, the Senior Vice President & Chief Revenue Officer, the Executive Vice President & Chief Operating Officer, the Senior Vice President & Chief Quality Officer, the Executive Vice President & Chief Financial Officer, the Senior Vice President & Chief Medical Officer, the Vice President & Chief Nursing Officer, the Vice President & Chief Surgical Services Officer, the Vice President of Operations, the Vice President & Service Line Administrator and any other employees of Halifax with the title of Vice President or higher. (p.8).

8 CORPORATE INTEGRITY AGREEMENT BETWEEN THE OFFICE OF INSPECTOR GENERAL OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES AND HALIFAX HOSPITAL MEDICAL CENTER AND HALIFAX STAFFING, INC. (March 10,2014). Each Certifying Employee shall sign a certification that states as follows: I have been trained on and understand the compliance requirements and responsibilities as they relate to [department or functional area], an area under my supervision. My job responsibilities include ensuring that the [department or functional area] remains compliant with all applicable Federal health care program requirements, obligations of the Corporate Integrity Agreement, and Halifax Policies and Procedures, and I have taken steps to promote such compliance. To the best of my knowledge, except as otherwise described herein, the [department or functional area] of Halifax is in compliance with all applicable Federal health care program requirements and the obligations of the CIA. I understand that this certification is being provided to and relied upon by the United States. (p. 8).

9 Corporate Integrity Agreement Between the Office of Inspector General of the Department of Health Services and Extendicare Health Services, Inc. (Oct. 3, 2014). 6. Additional Extendicare Obligations: Extendicare Shall: c. Provide the [Independent] Monitor [selected by OIG] a report monthly, or sooner if requested by the Monitor, regarding each of the following occurrences: i. Deaths or injuries related to use of restraints; ii. iv. Deaths or injuries related to use of psychotropic medications; Deaths or injuries related to abuse or neglect; viii. Any other incident that involves or causes actual harm to a resident. Each such report shall contain the full name, social security or medical record number, and date of birth of the resident involved, the date of death or incident, and a brief description of the events surrounding the death or incident.

10 Corporate Integrity Agreement Between the Office of Inspector General of the Department of Health Services and Extendicare Health Services, Inc. (Oct. 3, 2014). 7. Additional Monitor Obligations: The Monitor Shall: d. If the Monitor has concerns about action plans that are not being enforced or systemic problems that could affect Extendicare's ability to render quality care to its residents, then the Monitor shall: report such concerns in writing to OIG; and simultaneously provide notice and a copy of the report to Extendicare's Compliance Committee and Board of Directors Committee.

11 Corporate Integrity Agreement Between the Office of Inspector General of the Department of Health Services and Extendicare Health Services, Inc. (Oct. 3, 2014). 3. Board of Directors Committee. Extendicare shall create a committee as part of its Board of Directors (hereinafter "Board of Directors Committee"). a. General Responsibilities. The purpose of the Board of Directors Committee shall be to review and provide oversight of matters related to Extendicare's compliance with the requirements set forth in this CIA, Federal health care program requirements, and professionally recognized standards of care. The Board of Directors Committee shall, at a minimum: ii. review the adequacy of Extendicare's system of internal controls, quality assurance monitoring and resident care; [and] iii. confirm that Extendicare's response to state, federal, internal, and external reports of quality of care issues is complete, thorough, and resolves the issue(s) identified;

12 Corporate Integrity Agreement Between the Office of Inspector General of the Department of Health Services and Extendicare Health Services, Inc. (Oct. 3, 2014). Board of Directors Committee Resolution. For each Reporting Period of the CIA, the Board of Directors Committee shall adopt a resolution Each individual member of the Board of Directors Committee shall sign a statement indicating that he or she agrees with the resolution. At a minimum, the resolution shall include the following language:. "The Board of Directors Committee has made a reasonable inquiry into the operations of Extendicare's Compliance Program. The Board of Directors Committee has also provided oversight on quality of care issues. Based on its inquiry and review, the Board of Directors Committee has concluded that, to the best of its knowledge, Extendicare has implemented an effective Compliance Program and Extendicare is in compliance with the requirements of the CIA, the Federal health care programs, and professionally recognized standards of care.

13 ACA Compliance Program Requirements The required components of a compliance and ethics program of an operating organization are the following: (B) Specific individuals within high-level personnel of the organization must have been assigned overall responsibility to oversee compliance with such standards and procedures and have sufficient resources and authority to assure such compliance. 42 USC 1320a-7j(b)(4).

14 CMS s Proposed Compliance Program Regulations Required components for all facilities. (1) [T]he designation of an appropriate compliance and ethics program contact to which individuals may report suspected violations.

15 CMS s Proposed Compliance (continued) Program Regulations (2) Assignment of specific individuals within the high-level personnel of the operating organization with the overall responsibility to oversee compliance with the operating organization s compliance and ethics program s standards, policies, and procedures, such as, but not limited to, the chief executive officer (CEO), members of the board of directors, or directors of major divisions in the operating organization. (3) Sufficient resources and authority to the specific individuals designated in paragraph (c)(2) of this section to reasonably assure compliance with such standards, policies, and procedures. 80 Fed. Reg , (July 16, 2015), Medicare and Medicaid Programs; Reform of Requirements for Long-Term Care Facilities; Proposed Rule.

16 CMS s Proposed Compliance Program Regulations Compliance officer should report directly to the governing body. Compliance officer should not be subordinate to the general counsel, chief financial officer or the chief operating officer. 80 Fed. Reg , , (July 16, 2015), Medicare and Medicaid Programs; Reform of Requirements for Long-Term Care Facilities; Proposed Rule.

17 Omnicare, Inc. v. Laborers Dist. Council Const. Industry, 135 S.Ct. 1318, 83 USLW 4187 (March 24, 2015). This case arises out of a registration statement that petitioner Omnicare filed in connection with a public offering of common stock. Omnicare is the nation's largest provider of pharmacy services for residents of nursing homes. Of significance here, two sentences in the registration statement expressed Omnicare's view of its compliance with legal requirements: We believe our contract arrangements with other healthcare providers, our pharmaceutical suppliers and our pharmacy practices are in compliance with applicable federal and state laws. We believe that our contracts with pharmaceutical manufacturers are legally and economically valid arrangements that bring value to the healthcare system and the patients that we serve.

18 Omnicare, Inc. v. Laborers Dist. Council Const. Industry, 135 S.Ct. 1318, 83 USLW 4187 (March 24, 2015). Most important, a statement of fact ( the coffee is hot ) expresses certainty about a thing, whereas a statement of opinion ( I think the coffee is hot ) does not. That remains the case if the CEO's opinion, as here, concerned legal compliance. If, for example, she said, I believe our marketing practices are lawful, and actually did think that, she could not be liable for a false statement of fact even if she afterward discovered a longtime violation of law. That still leaves some room for 11's false-statement provision to apply to expressions of opinion. As even Omnicare acknowledges, every such statement explicitly affirms one fact: that the speaker actually holds the stated belief. And so too the statement about legal compliance ( I believe our marketing practices are lawful ) would falsely describe her own state of mind if she thought her company was breaking the law. In such cases, 11's first part would subject the issuer to liability (assuming the misrepresentation were material).

19 Omnicare, Inc. v. Laborers Dist. Council Const. Industry, 135 S.Ct. 1318, 83 USLW 4187 (March 24, 2015). [A] reasonable investor may, depending on the circumstances, understand an opinion statement to convey facts about how the speaker has formed the opinion or, otherwise put, about the speaker's basis for holding that view. And if the real facts are otherwise, but not provided, the opinion statement will mislead its audience. Consider an unadorned statement of opinion about legal compliance: We believe our conduct is lawful. If the issuer makes that statement without having consulted a lawyer, it could be misleadingly incomplete. In the context of the securities market, an investor, though recognizing that legal opinions can prove wrong in the end, still likely expects such an assertion to rest on some meaningful legal inquiry rather than, say, on mere intuition, however sincere. Similarly, if the issuer made the statement in the face of its lawyers' contrary advice, or with knowledge that the Federal Government was taking the opposite view, the investor again has cause to complain: He expects not just that the issuer believes the opinion (however irrationally), but that it fairly aligns with the information in the issuer's possession at the time

20 IN RE OMNICARE, INC. SECURITIES LITIGATION, 769 F.3d 455 (6th Cir. 2014) The Complaint claims that Omnicare was fully aware of the [ ] deficiencies and that their wholly owned, operated and controlled pharmacies were submitting false and fraudulent Medicare and Medicaid claims. In particular, KBC averred that [the Internal Auditor] shared with [the CEO] the results of the [internal compliance] Audit[s] The Complaint also states that [o]n information and belief these results were given to all of the Individual Defendants. Id. at (Page ID #849). 9pp ). At bottom, KBC claimed that Omnicare and the Individual Defendants knew of these allegations of fraud or noncompliance and that, rather than confessing to the company s failures to comply with the regulations, Omnicare and its officers routinely made material misrepresentations about (1) its compliance with applicable laws, rules, and regulations; (2) its financial results; (3) the accuracy of the statements contained in its Forms 10 K and 10 Q; and (4) the root causes of its financial performance. (pp ).

21 IN RE OMNICARE, INC. SECURITIES LITIGATION, 769 F.3d 455 (6th Cir. 2014) We agree with the district court that the Complaint does not sufficiently tie [the CEO] (or any of the Individual Defendants) to the [compliance] audits, and thus, KBC has failed to plead sufficient facts showing that [the CEO] or the other Individual Defendants had actual knowledge that the Form 10 K statements were false. The Complaint states that [the Internal Auditor] presented the results of the [compliance] [A]udit[s] to Omnicare s Internal Audit and Corporate Compliance Committees, but it never states with particularity who sat on those committees or what the committee members responsibilities were in the corporate structure. (pp ).

22 IN RE OMNICARE, INC. SECURITIES LITIGATION, 769 F.3d 455 (6th Cir. 2014) [KBC] has not alleged with particularity what the specific results of the [[compliance] [A]udit[s] demonstrated or what was communicated to [the CEO], i.e.[,] how many pharmacies were involved, what specific irregularities were found, how many actual claims were involved, or how, or what, information was actually communicated. KBC merely makes general statements and heaps inference upon inference; the Complaint never alleges that Person A did Act B at Time C, which is required by the PSLRA. (p.482).