Health Law Update – December 3, 2015

Alerts / December 3, 2015

Welcome to this week's edition of the Health Law Update. In this Issue:

  • The Deeper Dive: Guarding Against Unrealistic Goals and Organizational Pressures That Can Lead to Compliance Failure
  • It’s About Time (But Not Quite Yet)
  • Blog Exclusive: OCR Continues Waving Its HIPAA Enforcement Flag: Don’t Forget About Medical Devices
  • Blog Exclusive: OCR HIPAA Phase 2 Audits Coming Soon. Be Prepared.
  • Rosebush and Holmes Author Article on Contract Pharmacies and 340B Compliance in Journal of Health Care Compliance
  • Publication Notice
  • Events Calendar
The Deeper Dive: Guarding Against Unrealistic Goals and Organizational Pressures That Can Lead to Compliance Failure

By Robert M. Wolin

When misconduct occurs within an organization, it is often reported and interpreted as an anecdote involving a few rogue employees who are quickly identified and appropriately disciplined. Misconduct derives, at least in part, from the organizational environment, and studies suggest that pressure from management and the board of directors to meet unrealistic business objectives and deadlines is a leading factor in unethical corporate behavior. The same organizational pressures can lead to compliance failures in the healthcare industry.

For example, in 2010, the former Secretary of the U.S. Department of Veterans Affairs (VA), Eric Shinseki, ordered VA doctors to see new patients within 14 days. Skeptics considered Shinseki’s order to be incredibly unrealistic given the VA’s constrained resources and the outpouring of demands for care. However, Shinseki has said that he managed the VA by setting “bold goals” that looked impossible to achieve but he knew could inspire better performance and bigger budgets from Congress. Nevertheless, many involved in the gaming of appointments reportedly felt pressured to manipulate the data in order to reach the goal. Once the scandal broke, the VA acknowledged not only the intense pressure within the VA to meet the 14-day appointment goal but also that the goal was unattainable.

To help preclude compliance violations resulting from the establishment of unrealistic goals and inappropriate pressure on employees to meet corporate objectives, healthcare organizations should contemplate the implementation of a number of safeguards, including the following:

  • Consider who appoints or selects the organization’s board of directors to eliminate the potential for board members to be beholden to the leadership establishing the goals.
  • Consider the knowledge, experience and reputation of board members (e.g., can they and will they understand and address compliance issues?).
  • Provide members with access to various sources of information and outside advisors who can provide advice on organizational performance and whether organizational goals and pressures are appropriate.
  • Encourage board members to ask questions and ensure that their questions are answered; and that the board members also question the answers.
  • Ensure that board compliance committees actively engage the full board – boards should not delegate and forget.
  • Ensure that the board holds regularly scheduled executive sessions for compliance discussions outside of management’s presence with a specific director chairing the sessions.
  • Consider whether there are multiple sources of compliance data, and avoid circumstances where a source of compliance data predominates all others.
  • Be wary of a CEO/CFO excluding other members of the leadership from board meetings and compliance discussions, as it can narrow the board’s sources of information and allow the board to be manipulated.
  • Ensure the compliance officer has (1) independence from activities and personnel generating compliance risks, (2) influence, and (3) protection from non-cooperation/harassment. Avoid dual reporting relationships for the compliance officer to management and the board. Compliance officers reporting to management have the potential for diminished objectivity, especially if management controls resources, budgets, appraisals, and compensation.
  • Make sure the appointment and removal of a compliance officer requires prior board approval. Likewise, the board should be actively involved in setting the compliance officer’s compensation and in his or her annual evaluation.
It’s About Time (But Not Quite Yet)

By Gregory E. Fosheim and Robert M. Rozier

The comment period for the Notice of Proposed Rule Making (NPRM) regarding proposed changes to the Human Subjects Protection “Common Rule” issued by 16 federal departments and agencies in September has been extended an additional 30 days to January 6, 2016. Only the U.S. Department of Health and Human Services (HHS) has received any comments on the NPRM to date. Most of these comments are brief requests for more time to review the changes, given the sheer volume and impact of the proposals. More substantive comments were submitted by prominent research organizations, including the American Society for Investigative Pathology, Dana-Farber Cancer Institute, the Federation of American Societies for Experimental Biology, the American Society of Microbiology, and others, expressing concern that redefining “Human Subject” to include biospecimens may stifle research breakthroughs by requiring significant expenditures of time and resources, often creating a disproportional impact on small community and minority-serving institutions. Many comments were also submitted by individuals impacted by rare cancers, voicing similar concern that including biospecimens as “Human Subjects” would make accessing research materials and treatment breakthroughs that much more unlikely.

It is encouraging that industry leaders and community members have started evaluating the NPRM and its effect on clinical research. The deadline extension likely will result in additional meaningful discussion that will allow HHS and other federal departments to craft a final rule that meets the NPRM’s stated goal to “modernize, strengthen, and make more effective the Federal Policy for the Protection of Human Subjects.” We would be happy to assist you if you would like to prepare a comment on the NPRM during the extended comment period.

Blog Exclusive:

 OCR Continues Waving Its HIPAA Enforcement Flag: Don’t Forget About Medical Devices

Blog Exclusive:

 OCR HIPAA Phase 2 Audits Coming Soon. Be Prepared

Publication Notice

The Health Law Update newsletter is going on hiatus for the holidays. Our normal publication schedule will resume on January 14, 2016.

Subscribe to the Health Law Update blog for postings on the latest healthcare industry news and developments over the holidays (and every day!). Follow us on Twitter @HealthLawUpdate.

Happy Holidays!

Events Calendar

December 7-8

Washington, D.C., Partner Lee H. Rosebush will chair the second day of the Life Science Transparency Reporting Conference in Dallas, TX, where he will speak on “Ensuring Compliance Through Examination of Reportable and Non-Reportable Information” (December 7) and participate in the “Data Integrity Panel: Best Practices and Lessons Learned” (December 8).

Baker & Hostetler LLP publications are intended to inform our clients and other friends of the firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience.

Related Industries


Kathleen P. Rubinstein, MPA

Healthcare Industry
Key Contacts

B. Scott McBride

Charlene L. McGinty