WHAT IS EFFECTIVE COMPLIANCE?€¦ · •Compliance doesn’t stop at the company walls....
Transcript of WHAT IS EFFECTIVE COMPLIANCE?€¦ · •Compliance doesn’t stop at the company walls....
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WHAT IS EFFECTIVE COMPLIANCE?Darrell Armer & Chris Davis
Gray Reed
HFMA Lone Star Winter Conference January 2020
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Gray Reed
Education
Darrell Armer
• Dallas Managing Partner, Leader of the Healthcare Transactions Practice Group
• B.B.A., The University of Texas
• J.D., Texas Tech University
Primary Clientele
• Hospitals, ambulatory surgery centers, physical therapy companies, diagnostic imaging centers, medical and dental practices, and home health agencies, as well as various provider networks.
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Gray Reed
Education
Chris Davis
• Partner, Leader of the White-Collar Defense Practice Group
• B.B.A., Baylor University
• J.D., The University of Texas
Before joining Gray Reed …
• Senior Trial Counsel in the SEC's FortWorth Regional Office
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The Landscape
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Many agencies cover the waterfront, often with overlapping jurisdiction.
Federal-Criminal
• DOJ
• FBI
Federal-Civil
• DOJ
• HHS/HHS-OIG
• CMS
• FTC (Cyber)
State and Local
• Attorney General
• Texas Medical Board
• HHS
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Regulatory Focus on the Healthcare Industry
• 2019: $2.6 out of $3 billion in DOJ settlements and civil judgments (almost 90%) healthcare related
• 10th consecutive year to exceed $2 billion
• Hot areas: managed care providers, labs, pharmacies, physicians
• 633 whistleblower actions filed in FY 2019; $2.1 billion recovered in whistleblower-related actions
• HCF Strike Force (Dallas and Houston)
• 2018 HCF takedown: 601 individuals, including 76 doctors charged (most ever in a single operation)
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DOJ’s April 2019 Guidance on Corporate Compliance
• What is it?
• Standardized set of factors DOJ will consider when deciding:
• Whether to charge;
• How much to fine (if any);
• Whether a monitor is required;
• Disclosure requirements
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DOJ’s April 2019 Guidance on Corporate Compliance
Framework - three fundamental questions:
• “Is the corporation’s compliance program well designed?“
• “Is the program being applied earnestly and in good faith?“ In other words, is the program being implemented effectively?
• “Does the corporation’s compliance program work“ in practice?
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Is the program well designed?
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Is the program well designed?
• Key Factors
• Is it customized?
• Is it comprehensive?
• Is it aligned with employee incentives?
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Is the program well designed?
• Risk Assessment
• What are the particular types of misconduct most likely to occur at this particular company?
• “Prosecutors may credit the quality and effectiveness of a risk-based compliance program that devotes appropriate attention and resources to high-risk transactions, even if it fails to prevent an infraction in a low-risk area.”
• Deploy resources appropriately: “Does the company devote a disproportionate amount of time to policing low-risk areas instead of high-risk areas?”
• Regularly re-assess
• Prosecutors should consider “revisions to corporate compliance programs in light of lessons learned.”
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Is the program well designed?
• Policies and Procedures
• “As a threshold matter, prosecutors should examine whether the company has a code of conduct that sets forth, among other things, the company’s commitment to full compliance with relevant Federal laws that is accessible and applicable to all company employees.”
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Is the program well designed?
• Training and Communications
• Especially for employees in high-risk areas.
• Tailored and risk-based?
• Senior management involvement/emphasis?
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Is the program well designed?
• Confidential Reporting Structure and Investigation Process
• DOJ says “highly probative” of whether a company has established mechanisms that can effectively detect and prevent misconduct.
• Considerations
• Anonymity
• Internal publicity
• Independence
• Scope and resources
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Is the program well designed?
• Third Party Management
• Compliance doesn’t stop at the company walls.
• “[P]rosecutors should assess the extent to which the company has an understanding of the qualifications and associations of third-party partners, including the agents, consultants, and distributors.”
• “Prosecutors should further assess whether the company engaged in ongoing monitoring of the third-party relationships, be it through updated due diligence, training, audits, and/or annual compliance certifications by the third party.”
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Is the program well designed?
• Third Party Management
• Considerations
• Business rationale for the use of third parties? Due diligence on third parties?
• Mechanisms to ensure that the contract terms specifically describe the services to be performed, that payment terms are appropriate, and that compensation is commensurate with the services rendered?
• Ongoing monitoring? Right to analyze the books and accounts of third parties?
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Is the program implemented effectively?
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Is the program implemented effectively?
• Prosecutor will probe whether a compliance program is a “paper program” or one “implemented, reviewed, and revised, as appropriate, in an effective manner.”
• Commitment by senior management?
• Cannot just “set it and forget it”
• The company’s “governing authority shall be knowledgeable about the content and operation of the compliance and ethics program and shall exercise reasonable oversight” of it.
• Lead by example (tone at the top)
• Does management model proper behavior to subordinates? Do managers tolerated greater compliance risks in pursuit of new business or greater revenues?
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Is the program implemented effectively?
• Commitment by senior management?
• Have the proper skills and expertise
• Compliance expertise on the board of directors?
• Have the board of directors and/or external auditors held executive or private sessions with the compliance and control functions?
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Is the program implemented effectively?
• Autonomy and Resources
• Structural considerations
• Sufficient seniority within the organization;
• Sufficient resources, namely, staff to effectively undertake the requisite auditing, documentation, and analysis; and
• Sufficient autonomy from management, such as direct access to the board of directors or the board’s audit committee.
• Not one size fits all
• Each factor, will depend on the size, structure, and risk profile of the particular company. “A large organization generally shall devote more formal operations and greater resources . . . than shall a small organization.”
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Is the program implemented effectively?
• Autonomy and Resources
• Evaluation framework
• Structure: Where is compliance housed? Is there a designated CCO/other compliance person?
• Seniority and Stature: Rank/title? Compensation? Access to key decision makers?
• Experience and qualifications
• Funding and resources: Are there enough people/resources to do the job and do it right?
• Autonomy: Direct reporting line to board/audit committee? Meet independently of senior management?
• Outsourcing: If so, why? What level of access does external consultant have? Independent, qualified, etc?
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Is the program implemented effectively?
• Incentives and Disciplinary Measures
• “Another hallmark of effective implementation of a compliance program is the establishment of incentives for compliance and disincentives for non-compliance.”
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Is the program implemented effectively?
• Incentives and Disciplinary Measures
• Carrots and sticks
• E.g. promotions, bonuses, or other rewards for ethical leadership.
• E.g. swift disciplinary action; public disciplinary action.
• Other considerations
• Consistent process for each instance of potential misconduct?
• Similar consequences for similar misconduct?
• Compliance input on compensation, promotions, etc.?
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Does the compliance program work in practice?
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Does the compliance program work in practice?
• “[M]isconduct does not, by itself, mean that a compliance program did not work or was ineffective.”
• “[t]he Department recognizes that no compliance program can ever prevent all criminal activity by a corporation's employees.”
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Does the compliance program work in practice?
• Key Components
• Continuous improvement, periodic testing, and review
• Responses to misconduct
• Identify root causes, system vulnerabilities, and accountability lapses, including among supervisory manager and senior executives
• Analyze and remediate
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Other recent DOJ guidance
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Other recent DOJ guidance
• FCPA corporate enforcement policy (and possible impact on other areas)
• Presumption of declination when company:
1. Voluntarily self-discloses,
2. Fully cooperates, and
3. Timely and appropriately remediates.
• Think about these issues before you have misconduct.