legal aspects 5

1.Download assignment from BB

2.Research a corporate scandal and share the facts with the class

3.What laws, if any, was anyone (who) accused of violating?

4.What code of ethics do you think were violated? Review the four slides from the BB assignment and reference in your response

——————————————-

1. Review the case study “Anesthesia Abuse and CEO Dilemma on Page 190 Chapter 9

2. Do you agree with the actions of the medical executive committee?  Why or why not?

3. Do you agree with the CEO’s assumption related to the Governing Body?

4. Do you agree with the CEO’s position? 

5. What would you do?

Individual Exercise

Research a corporate scandal or a case on corporate negligence or mismanagement

Research and summarize each case and outcome

Were any laws violated? If so, which ones?

Who (ex: CEO, Board of Directors, etc.) violated the laws?

Which code of ethics were violated from the sample below?

Code of Ethics (1 of 4)
Required compliance with the Code of Ethics
Honest & fair in dealings with employees
Develop and maintain an ethical & legal environment
Impartial when personal interests conflict with others
Freedom to speak-up

Code of Ethics (2 of 4)
Critical evaluation of ideas by “all” employees
Provide a safe environment within which to work
Drive to increase revenues will not be tied to unethical activities
Employees will avoid conflict of interest situations

Code of Ethics (3 of 4)
Provide high-quality care
Treatment with honesty, dignity, respect, & courtesy
Patients
Informed of risks, benefits, & alternatives to care
Treatment preserving rights, autonomy, self-esteem, privacy, & involvement in their care

Code of Ethics (4 of 4)
Respect for each patient’s culture, religion, & heritage
Provide patients and families access to a patient advocate
Provide support services for those with language barriers
Hearing, language, sight
Provide patients with a “Bill of Rights”
Honor advance directives

Corporate Structure and
Legal Issues
Antitrust

Corporate Authority
Express
Authority designated by statute
Articles of incorporation will stipulate the purpose of the organization and authorized powers
Implied
Authority not expressed by written words
Perform necessary acts to exercise a corporation’s expressly conferred authority and accomplish the goals of the organization
Ultra vires acts
Acting beyond scope of authority

Fiduciary Responsibility
Fiduciary
Relationship of trust or confidence with another
Designed to meet only needs of the organization
Must act without regard to one’s own needs
Entrusted with overseeing fulfillment of the organization’s mission

Corporate Committee Structure
Executive Committee
Bylaws Committee
Finance Committee
Joint Conference Committee
Nominating Committee
Planning Committee
Patient Care Committee
Audit and Regulatory Compliance Committee
Safety Committee

Executive Committee
Liaison between management and full board
Reviews and make recommendations on management proposals
Performs special assignments as may be delegated by full board
Business transacted reported at regular sessions of the governing body and ratified
Powers of the governing body

Bylaws Committee
Reviews and recommends bylaw changes to the governing body
Bylaws generally are amended or rescinded by a majority vote of the governing body

Finance Committee
Oversees financial affairs of the organization
Directs and reviews preparation of financial statements, operating budgets, major capital requests, etc.

Joint Conference Committee
Often consists of an equal number of representatives from:
Governing body
Medical staff
Administration and nursing
Acts as a forum for discussion of matters of policy and practice pertaining to patient care

Nominating Committee
Develops and recommends criteria for governing body membership
Recommends appointments for new board members

Planning Committee
Makes recommendations regarding the use and development of organizational resources
Ex:
Conducts community health needs assessments
Adds new services based on identified community need
Develops strategic plans and ongoing monitoring
Develops short-term and long-range goals
Maintains the organization’s physical facilities
Downsizes and closes services

Patient Care Committee
Reviews the quality of patient care rendered in the organization and makes recommendations for improving quality
Ex:
Identifies patient and family needs and expectations
Determines methodology for reviewing data
Identifies patterns of concern
Forwards information to those responsible change
Reviews, evaluates, & implements plans for improving performance

Audit and Regulatory Compliance Committee
Assesses the various functions and control systems of the organization
Provide analysis and recommendations regarding activities reviewed
Ex:
Develops corporate auditing policies & procedures
Reviews and evaluates financial statements
Promotes prevention, detection, and reporting of fraud
Ensures financial reporting functions comply with accepted accounting principles
Reviews reliability and integrity of financial and operating information

Safety Committee
Oversees safety management programs
Emergency preparedness
Equipment management
Fire safety
Risk management
Utilities management

Corporate Ethics
Promote responsible behavior in the decision-making process
How to respond to internal or external circumstances that affect the organization
Provide a written code of conduct
Provide training & education
Provide guidelines for behavior
Build trust

Corporate Ethics
Increase awareness of ethical issues
Guide decision making
Encourage staff to seek advice
Provide for confidential reporting
Report misconduct

What are some examples of unethical corporate conduct?

Corporate Conduct Under Scrutiny
False advertisements
Knowingly using flawed data
Schemes designed to deny patients insurance benefits
Accepting kickbacks
Entering into financial arrangements that are conflicts of interest
Covering up wrongdoing
Falsification of records
Fraudulent activities (e.g., reimbursement schemes)

Sarbanes–Oxley Act
Sarbanes–Oxley Act was signed into law by President Bush on July 30, 2002 in response to the Enron scandal and several high-profile cases of corporate mismanagement

The Securities and Exchange Commission (SEC) implements rulings on requirements to comply with the Act

Major Provisions of the Sarbanes–Oxley Act
Certification of financial reports from top executives
Ban on personal loans to executive officer and director
Accelerated reporting of trades by insiders
Prohibition on insider trades during pension fund blackout periods
Public reporting of CEO and CFO compensation and profits
Inside audit board independence

Sarbanes–Oxley Act of 2002:
Promoting Due Diligence
The Act is not about regulation; it’s about self-regulation
Selecting a leader with morals and core values
Examining incentives
Monitoring the organization’s culture
Building a strong, knowledgeable governing body
Searching for conflicts of interest
Focusing attention on the right things
Having courage to speak out

Sarbanes–Oxley Act of 2002:
For-profit & Non-profit
Prohibition from knowingly altering, destroying, mutilating concealing, and impeding or covering up government investigations

Proscription of criminal penalties for retaliation against whistleblowers

Assignment 1
Explain what certificate of need (CON) laws are and provide a brief overview of its history.
Describe what the current status of CON laws are in the United States.
Research and discuss the pros and cons of CON laws
Make sure you discuss antitrust (restraint of trade) concerns and arguments here
Based on your research, decide whether you are a supporter or opponent of CON laws
Make sure you justify your decision and explain your reasoning behind it
See writing requirements

Important Requirements
Times New Roman, Font 12, double spaced, between 3-5 pages
Bibliography and any tables must be single spaced
All papers require in-text citations and a bibliography that includes all sources cited in the paper
All references and citations need to be correctly formatted using APA 7
Links provided in assignment instructions, in feedback to in-class assignment, and in the writing requirements documents
Any assignments that are inconsistently or sloppily formatted (looks unprofessional) will not be graded until the issue has been fixed
Same goes for references and citations that are missing or not formatted correctly using APA 7
If this is not addressed and a paper is not graded, it will receive “0” credit

Exercise 1: Corporate Ethics
Download assignment from BB
Research a corporate scandal and share the facts with the class
What laws, if any, was anyone (who) accused of violating?
What code of ethics do you think were violated? Review the four slides and reference in your response

Corporate Compliance Program
Establish internal mechanisms for preventing, detecting, and reporting criminal conduct
Appointment of a corporate compliance officer
Development of standards of conduct
Assignment of duties, authority, and responsibility
Communication and education of all employees and agents

Corporate Compliance Program
Monitoring & auditing systems to detect criminal conduct
Policies must be consistently enforced
Respond appropriately to any offense to prevent similar offenses
Annually audit compliance program

Corporate Negligence
The doctrine under which the hospital is liable if it fails to uphold the proper standard of care owed the patient.
Duty of Care
Breach of Duty
Causation
Injury

Doctrine of Respondeat Superior
Respondeat superior
“Let the master respond”
Legal doctrine holding employers liable for wrongful acts of employees
Also referred to as vicarious liability, whereby an employer is answerable for the torts committed by employees

Doctrine of Respondeat Superior

To impute liability to the employer
Master–servant relationship between employer and employee must exist
Wrongful act of employee must occur within scope of employment

Employer may seek indemnification (compensation for negligent act) from the employee

Independent Contractors
Responsible for their own negligent acts
Principal must not have right to control agent’s work
Comes down to whether an employer has the right or authority to control the employee’s work (vs. actual control)
If so, then employer is vicariously liable

Corporate Officer/Director
An officer or a director of a corporation is not personally liable for the torts of corporate employees
To incur liability, the officer or the director ordinarily must be shown to have in some way authorized, directed, or participated in a tortious act

Benchmark Case Facts: Darling v. Charleston Comm. Mem. Hosp.
18-year-old football player injured
Fracture of tibia and fibula
Leg casted by general practitioner in emergency department (ED)
Patient complains of pain
No specialist called for consultation
Two weeks later, student transferred
Eventually leg amputated

Benchmark Case

No expert testimony presented
Documentary evidence included
Medical records
Hospital’s bylaws, rules, and regulations
Illinois Hospital Licensing Act
JCAHO standards

Benchmark Case

Hospital, as a corporate entity, liable for:
Negligent acts of nurses
Negligent acts of physicians

Benchmark Case Lessons

Provide competent staff
Verify licensure, as appropriate
Verify training and experience
Provide procedures for credential and privileging
Monitor quality of care
Require consultations
Alert supervisor of care concerns

Corporate Contracts
Limited by its powers as contained in or inferred from its articles of incorporation
Chief executive officer (CEO) limited in his or her authority to execute contracts.
Boards set limits of expenditures by CEOs
Corporations can act only through agents (e.g., officers)
Ex: physician contracts for hospital employment

35

Partnerships
Comprises two or more persons who agree to carry on a business for profit and share profits and losses in some proportions
Ex: A physician general practice or specialty group

36

Agent
One who has the power to contract for and bind another person, the principal, to a contract
Apparent or ostensible agent: One who a third person believes is acting on behalf of the principal.
If a hospital undertakes to provide physician services to a community, and the community reasonably believes that a physician is employed by the hospital to deliver services, then the hospital would generally be liable for the physician’s negligent acts

Independent Contractor

An individual who agrees to undertake work without being under the direct control or direction of another
Independent contractors are personally liable for their own negligent acts

Independent Contractor

Mduba v. Benedictine Hospital: Hospital liable for emergency room physician’s negligence despite independent contractual relationship, as this status was not readily known to the injured patient

Maristany v. Patient Support Services: PPS not liable for negligent hiring unless it knew, or in the exercisable care, should have known that the contractor was not properly qualified

Governing Body: Responsibilities
Exercising due care and diligence in supervising and managing the organization
Appointment of CEO:
CEO/Administrator plans, directs and coordinates the operational activities of the organization
CEO and organization are both liable for CEO’s negligent acts under respondeat superior
NO liability for the acts of others unless she/he personally took part in the negligent act and was not negligent in selecting or directing the person

Governing Body: Responsibilities
Medical staff appointments and privileging
Ensure medical staff competency
Discipline abusive behavior (e.g., rage in the operating room; disruptive physicians)
Suspension of privileges
Enforce standards of professional ethics

Governing Body: Responsibilities
Duty to be financially scrupulous: make informed business judgments

Duty to require competitive bidding
Eliminate/reduce the possibilities of fraud, favoritism, extravagance, etc
Contracts made in violation of a statue are considered illegal and could result in personal liability for board members

Governing Body: Responsibilities
Duty to avoid conflicts of interest
Disclosure of potential conflicts of interest
Self dealing (transaction is voidable by the org)
Duty to provide adequate insurance
Protect against negligence, fire and other risks
Keep the physical property in good repair
Duty to comply with law: compliance with all federal, state and local laws regarding operations
Civil liability and criminal prosecution
Address deficiencies identified during inspections

Governing Body: Responsibilities
Duty to comply with accreditation standards
Non-compliance  lose accreditation  payment denied
The joint commission is a nonprofit organization that accredits US healthcare organizations and programs
Required for state licensure in some states
National Patient Safety Goals

Governing Body: Responsibilities
Duty to provide adequate and competent staff
“The facility must have sufficient nursing staff to provide nursing and related services to attain or maintain the highest practicable physical, mental, and psychosocial well-being of each resident, as determined by resident assessments and individuals plans of care.”
“As a minimum, the nursing home shall provide 1.5 hours of care per patient each day.”
“Nursing service personnel shall be actively on duty. Licensed nurse coverage shall be provided 24 hours per day.”

Governing Body: Responsibilities
Duty to provide timely treatment
Duty to provide adequate facilities and equipment (for use in diagnosis and treatment)
Often defined in state Health and Safety Codes
Duty to safeguard patient valuables
Handle patient property in a safe manner
Deposit in a hospital safe area (e.g., safe)
Record all items & place in pre-numbered envelope(s)

Governing Body: Responsibilities
Duty to provide a safe environment
Develop a culture of safety
Physical environment
Unsafe walking and driving conditions
Construction hazards
Fire hazards
Chemical hazards
Prevent falls
Failure to properly maintain equipment

Exercise 2-Applying the Law
Review the case study “Anesthesia Abuse and CEO Dilemma on Page 190 Chapter 9
Do you agree with the actions of the medical executive committee? Why or why not?
Do you agree with the CEO’s assumption related to the Governing Body?
Do you agree with the CEO’s position?
What would you do?

Corporate Reorganization & Mergers
Hospitals, because of fewer revenues from traditional sources (third-party payers), have restructured to set up related business enterprises in order to increase revenues to support patient care operations

Potential legal issues may arise

Corporate Reorganization & Mergers
Tax Exempt status may be lost if:
Substantial portions of the corporation’s activities are related to nonexempt activities
Benefits of tax-exempt status accrue to individuals who control the entity directly or indirectly

Third-party reimbursement: no reimbursement is available for activities unrelated to providing patient care

Corporate Reorganization & Mergers
Certificate of need (CON): hospitals may not add additional programs or services without first obtaining approval from appropriate state regulatory agencies
Applicant needs to establish they meet the criteria for need within a specific geographic area
Disapprovals include noncompliance with state health plans designed to prevent over-bedding and financial feasibility

Corporate Reorganization & Mergers
Financing: beware of fraud and abuse laws
Corporate restructuring: serve as a corporate vehicle for the hospital to receive ultimate benefits from revenue-producing activities
Parent holding company model: government derived from governing body of hospital (controlling interest)
Controlled foundation: the new non-profit corporation is controlled directly by the hospital
Independent foundation: the two corporations are not necessarily linked, but like brother-sister relationship

Corporate Reorganization & Mergers
General considerations: piercing the corporate veil
When a court determines the activities of a corporation are indistinguishable from the activities of another corporation or its directors, officers or members
The court will hold the parent company’s shareholders or directors personally liable for the other corporation’s actions or debts

Corporate Reorganization & Mergers
Medical staff restructuring
Explanation to medical staff
Fundraising
Public must be informed completely as to who the ultimate beneficiary is and how the donated money will be spent

Competition and Restructuring

Careful planning, legal & accounting advice
Restructuring should be undertaken to provide the hospital with opportunities not available under its current structure
No collusive practices!

Regulatory Authority Checklist
Hospitals
Reimbursement regulations
CON regulations
Governing body bylaws and relationship to additional corporations
Fraud and abuse laws, rules, and regulations

Restraint of Trade
Antitrust Law: a collection of legislation preventing or controlling business corporations or other monopolies, with the intention of promoting competition in business
Federal Trade Commission: prohibits unfair methods of competition and deceptive practices, enforces federal antitrust laws
Sherman Antitrust Act: those who attempt to monopolize or conspire with any other person(s) to monopolize any of the trade or commerce can be guilty of a felony

Restraint of Trade Violations

Price fixing: when two or more competitions come together to decide on a price that will be charged
Group boycotts: an agreement among competitors not to do business with targeted suppliers/distributors if the group of competitors working together has market power
Market power results from the ability to cut back the market’s total supply then raise prices due to consumer demand for the product

Maybe add video of antitrust laws in a nutshell
58

Hospital Staff Privileges
The rights that a health professional has as a 
member of a hospital’s medical staff, which includes hospitalization of private patients, 
participation in committees, and in decisions
relevant to the hospital’s future

The closing of an org’s medical staff may have the effect of discouraging a competitive environment in delivery of health care

Hospital Staff Privileges: Restricting Privileges
An organization’s policy of prohibiting further appointments to its medical staff
Moratoriums: for a specified period, usually due to concerns such as high inpatient census and difficulties in accommodating new physicians
Closed medical staff: relates to the mission of the institution and based on selective academic or medical staff appointments

Antitrust

What are some pros and cons of antitrust laws?