Wednesday, April 8, 2015

Scam at Hospital Comes to a Conclusion With Letter to the Compliance Officer


Reprinted from REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on Medicare compliance, Stark and other big-dollar issues of concern to health care compliance officers.

By Nina Youngstrom, Managing Editor

March 30, 2015 Volume 24 Issue 12

 

An anonymous letter sent to the compliance officer at Memorial Hermann, a health system in Houston, led to the arrest of a manager in an alleged $9 million, 14-year embezzlement scheme. The case underscores the value of ensuring that employees know how to contact the compliance officer and use the hotline.

Kenneth Joseph Wild II, 49, was accused of mail fraud and wire fraud in connection with the submission of phony vendor invoices, the U.S. Attorney’s Office for the Southern District of Texas said on March 23. Wild began working for Memorial Hermann, the largest nonprofit health system in the state, in 1996, and four years later became manager of printing and mail services in its printing services division, according to an affidavit submitted by a U.S. postal inspector to support the criminal complaint. The printing services division outsources the health system’s informational and promotional materials.

Two weeks after Wild took the management job, an entity called “Digital Designs Limited” started submitting invoices to the health system for printing and data conversion services, the affidavit alleges. The invoices often were approved by Wild and payments were mailed to a P.O. box in Houston. Digital Designs sent 200 invoices to Memorial Hermann, and the health system forked over more than $9 million to the entity.

Eventually, the walls came tumbling down. On March 11, 2015, a handwritten, anonymous letter was received by Memorial Hermann’s chief audit and compliance officer, the affidavit alleges. It said: “Please investigate the check payable to Digital Designs. I heard it is an anomalous, ghost account. Sincerely, Mr. Concern.” In response, the health system did a “preliminary review and could not find any evidence of work requested from Digital Designs by [the health system] nor locate any work product purportedly provided by Digital Designs,” the affidavit alleges. Two days later, the U.S. attorney’s office and U.S. Postal Inspector Matthew S. Boyden met with hospital officials and launched an investigation.

Letter to CCO Helps End Scam

The government alleges that Wild opened the P.O. box used by Digital Designs and that payments made to Digital Designs were deposited into a bank account assigned to Wild. He spent the alleged ill-gotten gains on “extensive international travel, luxury items and general personal living expenditures,” the affidavit states. It also turned out that Wild used to be a lawyer who served time in jail after a conviction for felony theft and fiduciary misappropriation of client funds in Harris County, Texas, according to the affidavit. During an interview with the U.S. postal inspector, Wild admitted to preparing phony vendor invoices in the name of Digital Designs, submitting them for payment, approving them for payment, using the P.O. box to get the money and using the “fraudulently obtained” hospital money to finance “a lavish lifestyle,” the affidavit alleges.

Embezzlement is a familiar problem in the health care industry and compliance training is a good opportunity to talk about it, says Minneapolis attorney David Glaser, who is with Fredrikson & Byron. “People may say it belongs in accounting, not compliance, but often embezzlement comes to light by someone using the compliance process for anything that can hurt the company, for anything that can get you on TV,” he says. When training employees about the hotline, Glaser recommends encouraging its use for anything that rings alarm bells, including sexual harassment and dumping toxic waste. Otherwise, employees won’t know where to go with their suspicions and may not act on them. “View your hotline broadly as a risk management tool to control almost any risk the organization might face,” Glaser says. “Make it a one-stop shop for employees to express concerns.”

The name of the compliance officer and hotline number should be kept in front of employees so they know where to report concerns, says Thomas Herrmann, senior vice president of Strategic Management in Alexandria, Va. Apparently that was the case at Memorial Hermann, because the compliance officer got the tip on March 11 and fewer than 10 days later, the U.S. attorney’s office filed criminal charges, he said. “They obviously had an effective communications process,” Herrmann said. “The complaint didn’t sit in an inbox for 10 days.”

Hospitals use all sorts of methods to remind employees of the compliance officer’s name and hotline number and the policy against retaliation for reporting wrongdoing, Herrmann says. Some hospitals place the hotline number and non-retaliation message on the reverse side of employee badges; others have it on their Internet and Intranet sites, he says. The compliance officer’s name, the hotline number and compliance tip of the day are on the screensaver at some hospitals.

“You can have all the policies and procedures, but if people don’t know how to follow them, it’s useless,” he notes.

Read the press release at http://tinyurl.com/nubns6t.

 

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