The Little Dutch Boy

November 6, 2007 at 7:33 pm Leave a comment

There are so many great ways that I could title this entry: 

“Power tends to corrupt;   absolute power corrupts absolutely”   Lord Acton’s Dictum 

Blue Hawaii 

Hail to the Queen 

Whatever you label it, read AIS ON MEDICARE COMPLIANCE article about the allegations against the former compliance officer at The Queen’s Medical Center in Honolulu.   It seems the vendor compliance officer may have awarded herself several compliance-related consulting contracts with the hospital that totaled over half a million dollars.   The heart of the Federal allegation is that she did not disclose that she was the owner, as well as sole employee, of these consulting firms.    

The defendant counters that no information was withheld from the hospital and that the board and another senior hospital executive had approved these contracts.  She was a senior level employee of the hospital.   How much better can you “know your vendor”?

The alleged activities occurred in 2002 through 2004, and there has already been a civil lawsuit action between the hospital and the defendant.   But now, the Department of Justice has stepped in with criminal mail fraud charges related to the activities.    

Regardless of the outcome of these charges, the fact that it has gone this far is sufficient to give one pause.   The Queen’s Medical Center is not a small medical facility.   It’s a 600-bed hospital.   It is large enough to have a vendor compliance officer that maintains true independence, not one that manages other areas of operations and awards contracts.    

Our Take:  All hospitals feel understaffed — with more to do than their resources can manage.   But this story is an object lesson that the value checks and balances can’t be overlooked.    

Once the dam of trust is cracked, the rushing stream of temptation cannot be held back.    

I’m speculating that the dam analogy applies here.   But consider that the first contract was (only) $40,000 in January, 2002.   That was the first crack, and then came the stream.   In October, 2002 an annual contract valued at $270,000 was awarded.   October 2003 delivers another annual contract worth $150,000.   Finally, in summer 2004, the last contested contract of $138,640 came through.  In the end, the contracts totaled more than $500,000.

Simple steps, such as Stark law-related ownership disclosures or financial verification of the consulting firms, could have highlighted unusual circumstances here, if not demonstrated outright fraud.       

Of course, disclosure itself isn’t enough.   Someone would have to independently review the records.   Think about the unusual results.   Even question the data to catch something similar to these allegations before they happen.    

Now, It’s almost 8 years after the first questionable contract was awarded.   No matter how this case turns out, the hospital and the defendant will have spent years dealing with this when simple record keeping, audits, and checks and balances could have either caught it earlier or cleared the allegations at the very beginning. 

Sidebar:   For those of you wondering about The Little Dutch Boy title, read this. 

Entry filed under: Know Your Vendor, Stark, vendor management.

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