Columbia/hca Fraud Case Study

CASE #5 QUESTIONS: COLUMBIA/HCA FRAUD

1. What factors about the organizational structure and working environment at Columbia/HCA made it more likely for fraud to occur? How do these factors relate to internal control? What could have been done to mitigate these risk factors?

a. The management system put in place was highly decentralized; a single manager was in charge of a region of healthcare providers. Managers were rewarded highly when they reached financial goals. Despite the lower than average base salary, managers could could nearly double their salary by meeting or exceeding these financial goals. This decentralized system grants a lot of power to local and regional officers, though these individuals were under intense amounts of pressure and the company was known to publicly criticize managers if tasks were not completed to Columbia’s specifications. This led to a high turnover in administration.

b. The managers were highly pressured to achieve certain financial goals and were harshly punished for not doing so. This made them desperate to reach these goals by any means necessary.

c. These factors could be mitigated by providing the managers with competitive salaries and significantly decreasing the bonuses and by restructuring the company so all the work does not rest on one person’s shoulders.

2. What factors made healthcare fraud particularly difficult to control in the early and late 1990’s? Have these factors changed since then? Is healthcare fraud still difficult to control?

a. The factors that made fraud difficult to control were the difficulty of determining what is or is not fraud and the fact that it suffered from weak enforcement efforts.

b. Yes, HIPAA provided generous funding for new fraud control programs and the False Claims Act was re-amended to protect whistleblowers from retaliation by their employers.

c. I would say that fraud is still difficult to control just because often it still happens in the healthcare field. There are also new and different ways of committing fraud now that were not mentioned in the article due to updates in technology.

3. What were the fraudulent practices uncovered at Columbia/HCA? Explain how each fraudulent practice works, how it was discovered, and what could have been done to prevent it.

a. Upcoding refers to the practices of inflating the seriousness of a treated illness to receive a higher payment from the insurer. It was discovered when The New York Times examined over 30 million billing records in Columbia-owned hospitals; the findings concluded that 90% of the time, Columbia hospitals were more likely than others to upcode. It could have been prevented by having more stringent policies in place for accurate billing practices.

b. Cost shifting is when a provider fraudulently shifts expenses from one program to another in order to increase reimbursement.

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