Case studies: the legal implications for health care's bad business practices

Physician Executive, March-April, 2005 by Timothy McIntire

* In good faith, with a level of inquiry and appropriate due diligence which allows for an informed business decision

* At a level of care that other corporate officers and directors in similar organizations would reasonably act

* In a manner that they reasonably believe is in the best interest of the organization.

Specifically, this duty of care encompasses an expectation by the rank and file clinic physicians that the officers and directors of the clinic will act in a business-like manner.

A physician executive or director does not have to be a CPA or billing expert to serve in an officer or director role, but they should ensure that systems and experts are in place to appropriately handle the operations of the clinic.

The responsibility of the board of directors is to provide oversight, not manage the day-to-day affairs of the clinic. Nevertheless, oversight includes building an organizational infrastructure that has a compliance program, an audit committee, access to experts such as CPAs or attorneys for complicated accounting or legal issues, and a commitment by the directors and officers to learn and keep current with the issues effecting health care as they relate to the operations, growth and strategic management of the clinic.

The bottom line is that corporate director and officer duties should be taken seriously and approached in a business-like manner. Gone are the days of the board of directors "rubber-stamping" any decision management makes.

While management is still charged with the day-to-day operations of the clinic, the physician officers and directors must--directly and through expert consultants--educate themselves to the point where they can oversee a clinic infrastructure possessing the checks and balances needed to ensure compliance with the law and good business principles.

In Jones' clinic, the officers and directors had a duty of care to act like any other reasonable business venture, including hiring trained professionals to run the operations of the clinic and to provide adequate oversight, through compliance plans and internal audits, of each physician revenue stream.

As the clinic grew, a more formal, upper-level management infrastructure should have been in place and the board of directors should never give any physician total autonomy over their billing, or any other aspect of the management of the clinic.

References

1. See http://oig.hhs.gov/fraud/complianceguidance.html#2

By Timothy McIntire, MD, JD, MBA, CPE, FACPE

Timothy McIntire, MD, JD, is an attorney with Baker, Donelson, Bearman, Caldwell & Berkowitz, PC. He is based in Nashville, Tenn., and his primary focus is defense law for physicians and health care organizations. He can be reached at 615-726-5620 or tmcintire@bakerdonelson.com

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