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Part two: Moving forward-the story behind CCMH

This is the second part of a two part series covering the community forum held by the Cavalier County Memorial Hospital.

Posted 1/25/18

by Lisa Nowatzki

The fines were directly related to the financial disclosures Nienhuis was required to do to apply for the Helmsley Charitable Trust Grant. At that time, she also arranged for a “very basic audit” of CCMH’s finances through the Helmsley Charitable Trust which would provide three years of financing for a much-needed telemedicine system in the Emergency Department. The Trust wanted to know how the hospital would pay for the tele-med program after the three-year grant ended.

During this inspection, the auditors noted that CCMH had the “highest paid providers that they had encountered at any facility.”  The findings were presented to the hospital’s board of directors, but the auditor’s report regarding the provider’s overpayment beyond fair market value was not discussed, according to Wyatt, because the prevailing belief was that paying this level of compensation was necessary to keep providers in the CCMH service area. Wyatt went on to say that this was not the sentiment of the entire board.

During the February 2016 time frame, Wyatt discovered documentation dated around the 2014/2015 timeframe that connected provider compensation to the level of referrals into the hospital. Wyatt felt that the documents added credence to management practices in place at the time.

From this point, Wyatt directly contacted the attorneys at Wolfe’s office to help with the legal ramification of the possible fair market value violations.

In April 2016, an independent analysis of the provider contracts was done, at the advice of Wolfe and his team, by the firm Clifton Larson Allen, LLP the results were tested again by a separate firm, EGC Management Consultants.

Wolfe explained, upon immediate inspection of the provider contracts, “These were immediately troubling. I had immediate concerns about these contracts, and I thought they needed to be validated.” For these reasons, the contracts needed to be verified and examined by two individual firms.

As a part of self-disclosure that is required by law, the hospital tried to resolve the contracts in question.

Click Here for Part 1 of This Story

“We took the highest amounts feasible that our consultants and appraisers could support and offered amendments to the provider contracts in question in order to go forward.” Wolfe said.

Only one provider elected to stay on at the corrected fair market value contract. Wolfe also said that the provider that flew into the area to perform his contractual duties declined the new contract because the compensations he was receiving could not be replicated in good faith.

When the provider shortages and the loss of medical care and coverage issues were examined, closure of Cavalier County Memorial Hospital was on the table for discussion more than once.

Going forward, Wolfe stated that it was crucial that the hospital take stock of the potential violations before self-reporting to the OIG. The longer they waited to self-report, the violations, fines, and fees mounted. As a part of these fines, the six years before the identification of the violation becomes part of the examination and potential fines. If there had been a whistle-blower down the road, the damages could have been significantly more.

Next, Wolfe discussed the ‘self disclosure’ phase and process. In August of 2016, the hospital began to self-disclose to the OIG. Wolf stated that the hospital was looking at a fine of about 3.3 million dollars.

During this phase, the hospital also noted and documented the hospital’s inability to pay the fine. Eventually, because of the efforts of Chief Financial Officer Pete Fromme and others, the fine was negotiated down to $750,000.

As a part of compliance, Wolfe noted that his firm came on-site to train the board members with board education. The hospital has made compliance a significant point of emphasis. The medical by-laws have been revised. As a result, the fine was imposed in December 2017 when the actual amount was set. The OIG gave the hospital three years to pay.

After Wolfe finished, he turned the meeting back over to Wyatt who read over the revised mission statement and vision of the hospital. Wyatt also discussed the ‘Three Pillars of Management’ as it related to the hospital associates, patients, and the stewardship of the hospital finances.

Wyatt then turned the meeting over to questions and answers from the audience. The first question from the audience related to exit interviews by former employees. Wyatt assured the audience that exit interviews were now a part of the process for employees that did not want to continue working at the hospital.

Another audience member wanted to know if the CEO’s and CFO’s salaries are tied to the ‘fair market value’ like the hospital providers. Wolfe responded that the CEO’s and CFO’s compensations are not subjected to the Stark and Anti-kickback laws because they don’t perform clinical and healthcare services.

Wyatt also noted that he did have a review done of all the salaries and compensation of all the employees because the hospital is a non-profit organization. Salaries needed to be in line with the non-profit compliance laws.

The next question regarded the three contracts of the providers that were so overpaid. The audience member wanted to know who signed those contracts. Wyatt responded, “I don’t want to give individual names, but what I will say is that the practice of the board for many, many years, had it set up to where the board president was signing contracts.”

Wyatt went on to say that the hospital has corrected this fault. He goes on to elaborate that the hospital board is a governing board. Their job is not to get involved in the day-to-day operations. Their job is to arrange the policies and guidelines in which the CEO works within. In the past, the governing board set up the bylaws in such a manner that the president of the hospital board had the CEO authority even though that was not the way the board was supposed to be run.

Now and going forward, the board has different sub-set committees that are being trained as experts in their area. For example, the finance committee now meets with the CFO on a regular basis to go over each line item.

In the past, only a few individuals acted on behalf of the entire board. Wyatt noted that he can prove this because he retained emails between the administration and the hospital board. Now the job of each board member is to go to the board and educated each board member. The practice of a few members acting on behalf of the entire board and signing all the contracts, Wyatt surmised, ended in 2014, a year before his appointment.

Next, someone wanted to know if those individuals would be held criminally accountable for their actions. Wolfe stepped in and said that the contracts were legal, but the financial compensation was the problem. Going forward, the entire board will be notified of the providers’ salaries, and the information that was used to determine those salaries will be made available for the board’s consideration.

Wolfe then explained that the self-disclosure phase is not designed to address the criminality of the process. Whether not charges will be filed against individuals is in the hands of the OIG. Criminality must show intent, that the individuals intended to violate the Stark and Anti-Kickback laws.

Wyatt then discussed the 2.2 million dollars of overpayment to the providers. He stated that not all the providers were out of compliance for the entire term: some were and some got out of compliance at a later date. Wyatt could not discuss the specifics of the compliance with regards to a specific individual because of the confidentially still imposed on the hospital.

Wyatt also revealed that approximately 8 million dollars over six years in revenue was generated for the hospital by the providers and the referrals. One concerned citizen wanted to know where did the millions of dollars of referral revenue go to. Wyatt explained that with such high salaries, most of the revenue went into the providers’ pockets.

Wolfe also reiterated that the services were performed for the 8 million dollars in referral revenue and that there is no indication that the referrals were unnecessary.

During this time, another concerned citizen asked about the board’s understanding of the Stark/Anti-Kickback laws. She wanted to know if the providers and board members were aware of the laws and if so, could they have misunderstood the laws or wrongly applied them.

Wyatt, again, stated that even though the laws are complicated in June or July of 2015, the OIG and Health and Human Services sent out a letter to all board members detailing other providers who had been in violation of the laws and the penalties for their violation. The letter was specifically designed to answer any questions and as a resource for board members that did not understand the fair market value concept. Wolfe also stated that at no time during the process did anyone indicate that any of the persons involved, including board members and providers, committed an intentional act to defraud someone or do something illegal.

Next, a question about the hospital solvency was asked. Nienhuis explained that because the hospital was considered a critical access hospital, the emergency department had to remain open. The hospital could not remain open without the emergency department services. Along those lines, someone wanted to know if the hospital was in danger of closing in the near future. Was the hospital safe from closure? Wyatt said the hospital is safe, and he thanked Ashton Fischer-Hedger for her help in keeping the hospital solvent.

Wyatt elaborated on the financial solvency of the hospital. Emphasizing the positive steps taken, through equipment contract re-negotiations and laboratory and restructuring, the hospital has been able to save a total of $750,000 a year for the next three years.

The CFO then explained that because of the fine amount, through the month of December 2017, the hospital is showing a loss of $250,000. However, without the fine, the hospital would have shown a net profit of $136,000 profit for the month of December. Fromme explained that looking forward, the hospital is not in any danger of closing. He also assured the audience that they (hospital staff) would do everything appropriately in their power to keep the hospital viable and up and running.

Next, someone asked about the financial statements and just who signed off on all of the financial reports. Fromme stated that the CFO should have known and kept the financial situation in hand and in compliance. Fromme stated that in his 30 years of dealing with hospital turnarounds, CCMH’s financial books were the worst hospital’s books that he had encountered in 35 years.”

Finally, the question of accountability was revisited. A large amount of money passed through the hospital, and there seems to be no one willing to say this person/those people are accountable or neglected their duties. Wyatt explained that the previous board and board members were there to provide oversight as a governing board. It should have been the board’s job to put in place policies and guidelines in which the CEO has to act within. This did not occur at CCMH in the past. If those policies had been in place, then the CEO and the governing board could not do anything illegal or improper.

Wyatt stressed that his office is always open, and he is willing to talk to anyone. He will gladly discuss any questions dealing with the hospital from the hospital bill breakdown to services and provider questions. The hospital can be reached at 701-256-6100 and on the internet at casey-bredeson.squarespace.com. The current and former administration and board members and the hospital by-laws can be found here: casey-bredeson.squarespace.com/administration/.



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