false claims act for labor and employment and health care practitioners
TRANSCRIPT
Co-presented by: Co-presented by:
False Claims Actfor Labor & Employment and
Health Care PractitionersPresented by: Polsinelli and Bennett Thrasher
Co-presented by: Co-presented by:
Panel 1FCA Overview & Recent Developments
and TrendsPatrick Braley, Emma Cecil, Jeff Fitzgerald, and
Jonathan Rosen
Co-presented by:
Fraud & Abuse Laws
False Claims Act– Civil liability for submitting false claims for payment to the
government– Also, liability for failure to refund identified overpayment
within 60 days– Noncompliance with regulations can make claims “false”
so AKS and Stark can be bootstrapped– Penalty: up to 3x damages plus $11,000 per claim– Offers a bounty for whistleblowers
• Up to 25% of recovery plus fees• 90%+ of cases are whistleblower driven
Co-presented by:
Implied False Certification Theory
Traditional FCA liability arises in cases involving claims that are factually false– EX: a health care provider bills for goods or services that
were never performed or submits a bill containing altered CPT or ICD-9 codes
False certification liability involves claims that are legally false– EX: the person or entity submitting the claim for payment
has failed to comply with applicable statutes, regulations, or contractual provisions underlying the claim for payment
Co-presented by:
Express v. Implied Certifications
The “legally false” certification can be express or implied– An express false certification occurs when the
person/entity submitting the claim expressly certifies compliance with ancillary legal requirements, either at the time the claim is submitted or at some other point in time
– “Implied false certification” cases rest on the theory that a person or entity receiving federal funds implicitly certifies, every time it makes a claim for payment, that it has complied with applicable legal requirements, even though no express certification of compliance has been made
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Implied False Certification Circuit Split
Second, Third, Sixth, Ninth, Tenth, and Eleventh Circuits recognize implied certification liability only where the statute, regulation, or contractual provision that has allegedly been violated expressly states that compliance with it is a precondition of payment
First, Fourth, and D.C. Circuits hold that liability attaches for any violation of statutory, regulatory, or contractual requirements, so long as compliance with those requirements was material to the government’s decision to pay
Materiality often determined in hindsight
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Implications of Circuit Split
Many FCA cases rely on the implied certification theory of falsity– Relators who lack firsthand knowledge of the actual claims
can often survive motions to dismiss– Relators can argue that all claims submitted by a
defendant while in violation of a regulation, statute, or contract were false
Encourages and rewards forum shopping Different outcomes under factually identical
circumstances based on where the case is filed
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What’s at Stake
Treble damages and civil penalties of up to $11,000 per claim Exclusion from participation in federal health care programs Payment suspension Potential criminal liability Follow-on suits under state false claims acts Reputational harm (DOJ announcements; SEC and other
mandatory public disclosures) Legal costs Increased scrutiny and monitoring (e.g., Corporate Integrity
Agreements)
Co-presented by:
Universal Health Services, Inc. v. United States ex rel. Escobar
– Supreme Court to resolve circuit split –United States ex rel. Escobar v. Universal
Health Services, Inc.,780 F.3d 504, 512-13 (1st Cir. 2015) • A claim is false or fraudulent whenever a defendant
fails to comply with a material—rather than express—regulatory precondition of payment
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Issues on Appeal
– Whether the “implied certification” theory of legal falsity under the FCA is viable
– Whether, if the “implied certification” theory is viable:• Failure to comply with a statute, regulation, or contractual
provision that does not state that it is a condition of payment can result in liability for a legally false claim (1st, 4th, and D.C. Circuits);
• Liability for a legally false claim requires that the statute, regulation, or contractual provision expressly state that it is a condition of payment (2nd and 6th Circuits)
– 27 Amici Briefs have been filed
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Oral ArgumentApril 19, 2016
UHS: – Supreme Court should reject the implied certification theory in its
entirety • FCA is a punitive statute that imposes treble damages and civil
penalties - should not be used to police compliance with every regulatory, statutory, or contractual requirement related to a claim for payment
• FCA’s treble damages and other penalties would eclipse the fines that the regulatory agencies deemed appropriate for the mental health clinic’s conduct
– Alternatively, should the Supreme Court recognize the theory, it should limit it to violations of requirements that are express preconditions to payment
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Oral ArgumentApril 19, 2016
Relators/Government– Limiting FCA liability to violations of legal
requirements that are express conditions to payment would create a loophole through which providers could escape liability for knowing violations of material requirements
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Oral ArgumentApril 19, 2016
Court appears likely to recognize implied certification liability in some form
Questions generally focused on where the line should be drawn—i.e., when does a statutory, regulatory, or contractual violation give rise to FCA liability? – Too narrow – FCA will not be able to reach the kinds of
fraud it was intended to combat– Too broad – application will result in mammoth damages
and civil penalties for every statutory, regulatory, contractual violation, no matter how de minimis
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Practical Considerations
If the Court is deadlocked 4-4, the First Circuit’s decision in Escobar will be upheld and the Supreme Court’s decision will not be precedent on the other circuits, which would leave the current circuit split unresolved
The Court’s decision is expected by June 2016
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Practical Considerations If served with an FCA complaint asserting implied certification claims, a defendant
should be thinking about: – A robust motion to dismiss strategy
• Regulation, statute or contract was not actually violated• Regulation is not a condition of payment
– Regulatory (or statutory, or contractual) scheme may designate other regulations as conditions of payment, but not the one at issue
– Regulatory infraction may be so minor that it could not conceivably be a condition of payment
– Government payor may have its own remedies for redressing violations, demonstrating payor did not condition payment on compliance
– Absence of a condition of payment requires dismissal for failure to plead both falsity and materiality
• Rule 9(b) remains a critical defense in implied certification cases - implied certification cases particularly ripe for Rule 9(b) dismissal
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Practical Considerations
Make aggressive use of discovery to negate falsity, materiality, and knowledge and set up summary judgment in an implied certification case:– The government payor did not condition payment on
compliance with the regulation at issue– The regulation does not mean what the relator says it
means or that the regulation was ambiguous– The government knew about the defendant’s practices– In healthcare cases in particular, that reasonable medical
minds may differ on a service or treatment
Co-presented by:
DOJ Yates Memo: The Call For Increased Individual Liability
Increased Focus on Individuals “Cooperation Credit” “Focus on individuals” “Routine communication” among
criminal/civil attorneys No corporate resolution absent “clear plan”
on individuals
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DOJ Yates Memo:Limited Individual Releases
Past practice: global individual release Present policy: no individual release absent
“extraordinary” circumstances Impacts: continued risk of criminal, civil,
administrative penalties
Co-presented by:
DOJ Yates Memo: Civil Enforcement and Ability to Pay
Not dispositive Must consider: seriousness of individual’s
misconduct, likelihood of judgment, existence of important “federal interest”
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DOJ Yates Memo: Rhetoric or Reality
Potential implications– DOJ fear of bad precedent based on individual
enforcement risks– Chilling effect on individual interviews in
corporate internal investigations – Constrained corporate disclosures
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Corporate Integrity Agreements(CIA)
Condition for continued funding from federal and state programs
Requires implementation of effective compliance program
OIG Monitor Annual reporting and IRO reviews Typically five-year proposition Additional costs above settlement amount
Co-presented by:
Columbus Regional Healthcare Systems, Inc.
CRHS – Columbus, GA– Settlement Date: September 3, 2015– Allegations:• Improper physician arrangement • Over-billing of office visits and other services
– Whistleblower – Administrator of cancer center – Settlement• Columbus Regional Healthcare Systems - $25,000,000+• Medical Director - $425,000
Co-presented by:
The Medical Center of Central Georgia, Inc.
MCCG – Macon, GA– Settlement Date: April 23, 2015– Allegations:• Improper billing of claims• Unnecessary inpatient admissions
– Health Care Fraud Prevention and Enforcement Action Team (HEAT)
– Settlement: $20,000,000
Co-presented by:
Memorial Health, Inc.
Memorial Health – Savannah, GA– Settlement Date: December 22, 2015– Allegation:• No business rationale for recruitment of PCPs• Overpayment of physicians for referrals
– Whistleblower – former CEO– Settlement: $10,000,000
Co-presented by:
Pediatric of Services of America, Inc.
PSA – Atlanta, GA– Settlement Date: July 27, 2015– Allegations:• Improper billing of unsupported and overstated claims
– Two Whistleblowers – billing specialist and director of clinical nursing
– Settlement: $6,900,000
Co-presented by:
Irwin County Hospital
ICH – Ocilla, GA– Settlement Date: April 21, 2015– Allegation:• Improper physician arrangements• Physician compensation in excess of FMV• Billing for services lacking appropriate supervision
– Whistleblowers – two x-ray technicians– Settlement: $520,000
Co-presented by:
Trends in Corporate Integrity Agreements
Independent directors
Board oversight of Compliance Program
Management Certifications
Executive compensation clawbacks
Training Plan
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Trends in Corporate Integrity Agreements (cont.)
Annual Risk Assessment
Compliance Expert
Overpayments review
Increased fines related to false Implementation Reports and Annual Reports
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Updated DOJ Statistics
Total recoveries down by almost $2.2B In FY15 85% of new matters based on qui tam actions, and recoveries from qui tam
actions exceeded DOJ initiated enforcement by ~$2.2B Huge jump in recoveries from non-intervened cases, largest $ in FCA history
Co-presented by: Co-presented by:
Panel 2L&E Issues: Addressing and
Investigating Employee ComplaintsSteve Fox, Tim Jefferson, Nancy Rafuse, and Justin
Snell
Co-presented by:
Who is a Whistleblower?
Any employee, contractor, or agent … – Any employee, contractor or agent shall be
entitled to all relief necessary to make that employee, contractor or agent whole if that employee, contractor or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employments because of lawful acts done by the employee, contractor or agent or associated with others in furtherance of other efforts to stop 1 or more violations of this subchapter. 31 USC Section 3730(h)
Co-presented by:
Establishing Claim
To establish FCA retaliation claim, plaintiff must establish– He engaged in protected activity– Employer knew of these acts and– Employer took adverse action against him because of those acts
FCA applies same general burden shifting analysis and framework applied in discrimination cases:– Once the plaintiff establishes a prima facie case – protected
activity, adverse action and causal connection –employer produces evidence of a legitimate, non-discriminatory reason for the adverse action
– Plaintiff must prove that the reason is not the true reason, but a pretext for retaliation
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Protected Activity
“The relevant inquiry when determining whether an employee’s actions are protected is whether (1) the employee in good faith believes and (2) a reasonable employee in the same or similar circumstances might believe that the employer is committing fraud against the government.”
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Protected Activity
“Confused pharmacist” (Clinkscales v. Walgreens)– “Paul,
• Jackie told me tonight that you told her for me to do a bin reconciliation to see if we could clear up the register problem I believed occurred Tuesday 06/15 where rx’s were sold but still say ready in work Q on intercom+. The report is done over 200 rx’s were in (ready not in bin status) – highlighted in blue or rx’s that were generated after 06/15? – (I hope this makes verification of register transactions easier). The report is in mgr. box in office. Wes”
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Protected Activity
“Confused pharmacist” (Clinkscales v. Walgreens)– “Paul,
• I just saw the note I jotted down of what Jackie was telling me that you were telling her for me to do. I wrote down that any item I could not find on bin recon – you wanted me to price modify to $0. Doe this mean I’ll need to print the 200 leaflets for the rx’s that showed up (ready not in the bins) then ring up at register. Also, if there are rx’s on bin recon that were not involved in the register problem how are they accounted for? I’m not sure how to correctly do this. Wes”
Co-presented by:
Protected Activity
“Confused pharmacist” (Clinkscales v. Walgreens)– Court held that pharmacist had not engaged in
protected activity• “[His] conduct amounts to merely asking how he could
correctly perform a job function, not reporting or attempting to stop misconduct under the FCA. [He] did not state that he thought the bin reconciliation was illegal or unlawful or express any concerns about it creating the potential for fraudulent billing. He also did not refuse to complete the bin reconciliation, he merely asked how to do it correctly. Such activity is not protected by the FCA whistleblower provision.”
Co-presented by:
Decision to InitiateInternal Investigation
Internal investigation warranted where allegations involve widespread misconduct, misconduct by sr. management, or violations of state/federal civil or criminal statutes (FCA, Stark, AKS)
Prompt internal investigation especially important where government scrutiny possible
Ignoring complaints could lead to disgruntled employee becoming FCA whistleblower
Internal investigation provides company with critical information early on
The faster facts are learned, the greater the chance company can minimize harmful consequences (reputational damage, loss of business, damages and penalties)
Co-presented by:
Releases
General release language releases party from all claims, causes of action and damages of whatsoever nature General exceptions
– “… except those claims that cannot lawfully be released” or “ … except those claims that cannot be released by law or statute.”
Specific exceptions– “Laundry-list” of carve outs: workers compensation claims, FLSA claims,
enforcement of the release agreement, certain state laws
Representations– Employee represents that he is not aware of any information and does not
have any documents which evidence any fraud by employer against the government and by signing this agreement is affirmatively representing that he is not aware of and has not been made aware of any such fraud
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Confidentiality
Restriction on confidentiality agreements that limit or restrict employees from reporting fraud and abuse to government Requires government contractor to represent that it does not
require employees to sign confidentiality agreements that prohibit or otherwise restrict lawful reporting of waste, fraud or abuse
Return of confidential documents– Courts willing to recognize a public policy exception for confidential
documents that form the basis of a qui tam action
Co-presented by:
Federal Trade Secrets Bill
(b) IMMUNITY FROM LIABILITY FOR CONFIDENTIAL DISCLOSURE OF A TRADE SECRET TO THE GOVERNMENT OR IN A COURT FILING.— – (1) IMMUNITY.—An individual shall not be held criminally or civilly
liable under any Federal or State trade secret law for the disclosure of a trade secret that— • (A) is made
– (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and
– (ii) solely for the purpose of reporting or investigating a suspected violation of law; or
• (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
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Federal Trade Secrets Bill (3) NOTICE.—
– (A) IN GENERAL.—An employer shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.
– (B) POLICY DOCUMENT.—An employer shall be considered to be in compliance with the notice requirement in subparagraph (A) if the employer provides a cross-reference to a policy document provided to the employee that sets forth the employer's reporting policy for a suspected violation of law.
– (C) NON-COMPLIANCE.—If an employer does not comply with the notice requirement in subparagraph (A), the employer may not be awarded exemplary damages or attorney fees under subparagraph (C) or (D) of section 1836(b)(3) in an action against an employee to whom notice was not provided.
– (D) APPLICABILITY.—This paragraph shall apply to contracts and agreements that are entered into or updated after the date of enactment of this subsection.
– (4) EMPLOYEE DEFINED.—For purposes of this subsection, the term ‘employee’ includes any individual performing work as a contractor or consultant for an employer.
– (5) RULE OF CONSTRUCTION.—Except as expressly provided for under this subsection, nothing in this subsection shall be construed to authorize, or limit liability for, an act that is otherwise prohibited by law, such as the unlawful access of material by unauthorized means.
Co-presented by:
Potential Counterclaims v. Whistleblower
Breach of contract/fraud Theft of documents/trade secrets Computer fraud and abuse act Libel/slander/defamation
Co-presented by:
Investigations
Be Prepared– Risk Assessments – Investigative Protocols
Professional skepticism & minimization– Whistleblower bias– Overstating controls
Scoping and planning– Too broad or too narrow scope– Starting too soon– Planning considerations
Co-presented by:
Dealing with WhistleblowerDuring Investigation
Keep whistleblower informed of status of investigation Inform whistleblower of outcome of investigation (without
disclosing privileged information) Keep whistleblower’s identity confidential Protect whistleblower from obvious retaliatory conduct
(discharge, demotion, suspension, threats/discrimination) – Protect whistleblower from actions that could be perceived as
retaliatory (denying a leave request, scheduling the employee for fewer hours, excluding the employee from certain meetings or projects, or applying a higher level of scrutiny to the employee or his/her work)
Co-presented by:
Reporting Mechanisms
Design– History & Evolution– More than a hotline– Anonymity– Anti-Retaliation– Metrics
Evaluation– Periodic audits– Document changes
Co-presented by: Co-presented by:
Panel 3Maintaining a Culture of Compliance: Prevention, Deterrence & Monitoring
Ross Burris, Billy Carr, Matt Grosvenor, and Jim Swartz
Co-presented by:
An Ounce of Prevention…
Healthcare in a fast moving reactionary environment Attorney’s and administrator’s fiduciary responsibility is to
the board and institution Deals often occur “behind closed doors”—but the earlier the
attorney becomes involved the better The best prevention is through a corporate compliance policy
and documentation Advise client to have an annual Corporate Compliance audit
by an outside source to review all contracts at risk in the past year and review current deals under discussion
Know your government representatives who participate in corporate investigations
Co-presented by:
Conducting Effective Internal Investigations
The (Not Always) Unique World of Health Care Investigations
Choosing Wisely – How and Who Should Conduct the Investigation
Following the Right Playbook - Protecting Your Client’s Interests and Maintaining Privilege
Where Do We Go From Here - Next Steps After Concluding the Investigation
Co-presented by:
They’re ALL Watching You …
RACs/ZPICs
StateLegislatures
State AGs
Congress Medicaid
HHS
FTC
FDA
DOJ/DOL/EEOCPlaintiff
Lawyers
Whistle-blowers
Commercial Payors
PersonalInjury
Litigants
CompetitorsOIG
PRESS
Medicare/CMS
YOU
The (Not Always) Unique World of Health Care Investigations
Co-presented by:
The (Not Always) Unique World of Health Care Investigations
It Usually Begins With…Search Warrant, Subpoena or Civil Investigative Demand (CID) from a government bodyResponse to problems uncovered through compliance program audit, hotline call, or HR issueResponse to allegations of wrongdoing reported through a whistleblowerState licensing boards or accreditation organizations Actual or threatened civil litigation (e.g., class actions)Response to allegations raised by customers, vendors or competitors
Co-presented by:
The (Not Always) Unique World of Health Care Investigations
Spotting the Hidden ComplaintNot all complaints triggering investigation are easy to identify.Exit interview comments“Rumors” or overheard comments about inappropriate/illegal conductInformal comments about relationships between or treatment of certain employees/vendors
Magic words are not required to trigger an investigation.
Co-presented by:
The (Not Always) Unique World of Health Care Investigations
The Benefits of an InvestigationDemonstrates a good-faith response by the Company Will allow the Company to take remedial action or make a self-disclosure Remedial actions or self-reporting may minimize the risk or potential penaltiesNegative consequences of not conducting an investigation could be increased penalties by government agencies and/or useful evidence may be lost or destroyed
Co-presented by:
The (Not Always) Unique World of Health Care Investigations
Different Circumstances, Similar Goals…Quickly obtain accurate information to facilitate the necessary legal advice, compliance assessment, and informed decision makingMaintain the confidentiality of the investigation and protect the information acquired from an undesired or non-strategic disclosurePrepare for and implement remedial action and limit riskCooperate with the investigative body while protecting organization’s rights
Co-presented by:
Choosing Wisely – How and Who Should Conduct an Internal Investigation
Develop an Investigation Plan:– Define the purpose and scope– Issue a litigation hold notice to ensure no
essential information is destroyed– Identify witnesses to be interviewed– Determine potential sources of information– Put together the investigation team
Co-presented by:
Choosing Wisely – How and Who Should Conduct an Internal Investigation
Business and Operational Considerations:– Some problems are best handled by in-house lawyers, HR,
or compliance personnel – Can’t always pick up the phone and call outside counsel
• Cost • Managing personalities • Institutional knowledge
– Impact on business operations and availability of resources
Co-presented by:
Choosing Wisely – How and Who Should Conduct an Internal Investigation
Legal Considerations:– Protecting privilege – Litigation hold notice– Need for objectivity and independence – Relationships with or knowledge of the regulators– Subject matter experience – Is the approach going to be defensible?– Investigator may be a witness
Co-presented by:
Choosing Wisely – How and Who Should Conduct an Internal Investigation
Red Flags, When To Consider Calling Outside Counsel– Any time there is potential for criminal culpability – Allegations against senior management or board – Systemic or wide ranging issues spanning an extended
period of time – Financial risk to the organization is high (bet the company) – Anticipation of collateral litigation – In-house interviews may be considered as “business” in
nature, and therefore not protected
Circumstances change quickly, who conducts an investigation not set in stone
Co-presented by:
Following the Right Playbook - Protecting Your Client’s Interests
Preparation of a work plan, making decisions about scope
Getting the word out, taking a balanced approach to explain to employees purpose of investigation
Consider working with PR groups if allegations are publicly known
Co-presented by:
Following the Right Playbook - Protecting Your Client’s Interests
Collecting and Retaining Documents– Identify potential sources of relevant documents– Implement a “Do Not Destroy” notice or similar litigation hold notice– Notice should be sent to anyone who may have relevant documents– IT and other departments should be notified to suspend document
destruction policies
Potentially Responsive Documents May Include– Emails– Financial records– Complaints– Policies and procedures
Co-presented by:
Following the Right Playbook - Protecting Your Client’s Interests
Interviewing current and former employees– In-person is always best– Never conduct interviews alone– Interviews should not be recorded or transcribed (second
person can take notes)
Protect the attorney-client privilege and attorney work product materials– Discuss key documents with interviewees– Documents should be marked as privileged or attorney
work product
Co-presented by:
Following the Right Playbook - Protecting Your Client’s Interests
Give Upjohn warnings in some circumstances– Upjohn v. U.S., 449 U.S. 383 (1981), held that
communications between the Company’s counsel and employees is privileged (but the privilege belongs to the Company)
– Employees should be aware that you represent the Company, not them as individuals
Co-presented by:
Following the Right Playbook - Protecting Your Client’s Interests
Considering Joint Defense Agreements– Continental Oil Co. v. U.S., 330 F.2d 347 (9th Cir.
1964) recognized a “joint defense privilege” where some communications can be disclosed to a third party without waiving privilege
– Useful when employees engage their own counsel– Check local law to confirm scope and applicability
of this privilege
Co-presented by:
Where Do We Go From Here - Next Steps After Concluding the Investigation
Assessing potential criminal, regulatory or civil liability Consider whether report will be oral or written Reporting requirements (need for self-disclosure):
– Government – Board of directors – Outside auditors
Notification requirements to insurance carriers, state licensing boards, NPDB
Need for employee disciplinary actions Modification of policies and procedures or corporate practices Extent and content of any communication with employees or the public
Co-presented by:
Where Do We Go From Here - Next Steps After Concluding the Investigation
Practical Guidance for Health Care Governing Boards on Compliance Oversight– Office of the Inspector General, Department of Health and Human
Services– Association of Healthcare Internal Auditors– American Health Lawyers Association– Health Care Compliance Association
Board of Director Oversight– Compliance, Legal, Internal Audit: Roles and Relationships– Issue reporting within an organization– Risk identification approach– Enterprise-wide accountability for compliance goals
Co-presented by:
Discussion
Should I keep all deal deliberations under attorney client privilege?
What can human resources professionals do to assist with investigations?
What are the OIG’s expectations of Companies with respect to monitoring compliance?
What are some ways that Board members should be engaged with compliance?
Co-presented by:
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