HCAD 650 UMDC Business Transactions Discussion


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Read and respond to peers’ discussions below.

Peer 1: HHS OIG Compliance Protocol

Part 1

1. The Physician Self-Referral Law is a federal law commonly referred to as the Stark Law. As a federal law, Stark Law is included in the U.S. Code of Federal Regulations, located in 42 USC § 1395nn. The Stark Law prohibits a physician from making referrals for certain designated health services (DHS) payable to Medicare to an entity with which the physician or an immediate family member has a financial relationship (Centers for Medicare & Medicaid Services [CMS], 2021). The law also prohibits the entity from presenting claims to Medicare for the referred services, establishes specific exceptions, and grants authority to create regulatory exceptions for financial relationships that do not pose a risk to the Secretary. Consequences may financial, reputational, and long-lasting. Consequences are (1) denial of payment for the services; (2) obligation to refund any payments made; (3) civil money penalties up to $15,000 for each illegal referral; (4) exclusion from the Medicare and Medicaid programs; and (5) civil assessment of up to three times the amount claimed (Showalter, 2020). This law is complex, and enforcement is strict. Failure to comply with the Stark Law may indicate a False Claims Act liability, which can have criminal penalties of imprisonment and fines.

2. One compliance tool provided by the U.S. Department of Health and Human Services (HHS) Office of the Inspector General (OIG) is information on how to administer a compliance program. A compliance program for fraud and abuse laws necessitates the designation of a compliance committee and a compliance officer. The OIG (2017) recommends the compliance program be defined with involvement of governance and oversight committees and with clear definition of the budget, goals, and functions of the oversight committee. The administrator must stay abreast of current regulatory changes and law interpretation and consult outside expertise. It is additionally important to implement a compliance education program and ensure compliance is incorporated into organizational culture (OIG, 2017). A successful program must include periodic risk assessments and internal controls. OIG supplies a breakdown of what to measure and how to measure to be used by the compliance program oversight committee to ensure the program is appropriately administered. It is necessary to have a reporting and review process for potential compliance issues so compliance failure can be avoided.

3. By following the OIG recommendations for compliance program administration under the adoption of the entire collection of program recommendations, the health care organization will be well-equipped to avoid violations of the Stark Law. The recommended program combines policies and personnel education with risk mitigation and monitoring to deter and prevent violations by discouraging risky practices and evaluating potential risks before agreements are pursued. If a violation is identified, the compliance program provides guidance on investigation and remediation (OIG, 2017).

Part 2

1. The failed merger described in Perry (2020), while not directly in violation of the fraud and abuse laws, created concerning cultural environments in the newly joined health system. Motives in the merger were financial, and the necessary preparations were not made to ensure the merger would benefit staff and patients. Without a clear strategic plan, decisions were baseless and led to the eventual fall of the system.

2. The governing board must take action to comply with fraud and abuse laws. Development of a compliance committee and appointment of a compliance officer will be the first action. Secondly, the committee will work with hospital leadership to approve and implement an education program regarding compliance with the Stark Law. Thirdly, the compliance committee will monitor risks of the merger with regard to compliance with fraud and abuse laws and develop plans to mitigate the identified risks. Any potential agreement will be submitted to the committee for evaluation and recommendation. Legal counsel will be included in deliberations.


Centers for Medicare & Medicaid Services. (2021). Physician self referral. Retrieved August 27, 2022, from https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/index?redirect=/physicianselfreferral/

Office of the Inspector General. (2017). Measuring compliance program effectiveness – A resource guide. Department of Health and Human Services. https://oig.hhs.gov/documents/toolkits/928/HCCA-OIG-Resource-Guide.pdf

Perry, F. (2020). The tracks we leave: Ethics and management dilemmas in healthcare. (3rd ed.). ACHE Management Series.

Showalter, S. (2020). The law of healthcare administration. (9th ed.). Health Administration Press.

Peer 2: Corporate Document for Compliance 

Part 1

           Many legal risks and consequences can arise for failing to comply with laws that impact contracts. One law that applies to contracts is the Antitrust Law, also known as the Sherman Antitrust Law (Showalter, 2020). The Antitrust law, developed in the nineteenth century, has evolved to promote competition while deterring practices such as price fixing, cartels, conspiracies, boycotting, and monopolies (Showalter, 2020). Failing to comply with the Antitrust law can be found guilty of a felony, punishable by a fine up to $100,000,000 for corporations, $1,000,00 for a person, and/or by up to ten years of imprisonment (Showalter, 2020).

           One risk mitigation tool which could be used as a contract clause is a limitation of liability clause. A limitation of liability clause limits the amount payable in damages on a breach, restricts remedies available or types of loss recoverable, and imposes a short time frame when damages are recoverable (Harvard University, 2022). This mitigation tool would help mitigate financial liability of damages to the organization, offering the opposite party limited resources and time frame to claim for damages.

           Cloud-based contract management systems can help limit contract risks. In the first example of Jim’s frustration in Qual Plus, having a cloud-based contract system would eliminate the need to have bids sealed and delivered by a certain deadline, setting a committee meeting for another set time, and then a board approval meeting. Rather, cloud-based contract management systems would allow companies, committee members and board members to work together using an email and shared network drive or portals, to share, review, and store legal contracts (Contract Logix, 2022). With the case of Richland River Valley Healthcare System, as different location systems are merging, utilizing a cloud-based contract management system would allow different board members to collaborate through a shared network without the need to meet in person. The ability to have direct communication could alleviate one issue from the merger, where the hospitals which are four miles apart were still duplicating all but business operations (Perry, 2020). Also, key physicians and medical staff leaders could all partake in discussions about the merger through active discussions, limiting the contract risk (Perry, 2020). A reliable and controlled contracting system could reduce risk and alleviate burden of staff members (Contract Logix, 2022).

Part 2

           The actions of Dollar Docs violates the State Incorporation Law and Sarbanes Oxley Law. The Dollar Docs own five of the nearby home health agencies, violating the State Incorportation Law, as the number one rule is that they are only able to own a share or stock of the corporation, but not the entire corporation (Davidson, 2011). Violation of the State Incorporation Law gives shareholders the ability to bring civil action in court and are held liable for business debts, also called “piercing the corporate veil” (Masters, n.d.). The Dollar Docs also violates the Sarbanes Oxley Law, where proper auditing and public disclosure was not met, as the Dollar Docs have been inflating numbers to show more profit than they actually earned (GovInfo, 2020). Violating SOL comes with proper sentencing set forth in section 3553 (a)(2) of title 18, United States Code (GovInfo, 2020). Altering documentation can also impose penalties of up to 20 years in prison, and an accountant or audit who knowingly or willfully violates the requirements to maintain records could face up to 10 years in prison (SOX Law, 2021).

           An action plan to correct the problem would include internal audits, checklists, and HHS OIG Compliance Protocol. Internal audits are similar to mock surveys, allowing audits to occur before submitting to an accountant for audit. Internal audits would help to minimize risk by identifying issues and finding solutions to prevent them from occurring. Different key solutions and a checklist used to document actual earnings could also help prevent fraud or mistakes in inputting numbers. Utilizing HHS OIG Compliance Protocol could help by using the hospital and home health agency protocol as guidelines when preparing a SEC report each year.   


Basic Guidelines for Contracts and Contract Risk Management. (2022). Harvard University. https://rmas.fad.harvard.edu/basic-guidelines-cont…

Davison, D. (2011). A Legal Guide to Maryland Corporations & LLCs. Diane Leigh Davison, Esquire. http://www.lawgal.com/topics/CorpFlyer.pdf

Masters, T. (n.d.). The Consequences of Violating Corporate Bylaws. CHRON. https://smallbusiness.chron.com/consequences-viola…

Perry, F. (2020). The Tracks We Leave: Ethics and Management Dilemmas in Healthcare, Third Edition: Vol. Third edition. ACHE Management Series.

Section 802: Criminal Penalties for Altering Documents. (2021). Sox Law. https://www.soxlaw.com/sox-section-802/

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