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Compliance Corner by Compliance Professionals, for Compliance Professionals

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Compliance Corner by Compliance Professionals, for Compliance Professionals Compliance Corner By Compliance Professionals, For Compliance Professionals. The Intersection of Compliance and Enterprise Risk Management: Similarities, Differences, and Opportunities By Cyndi Baily, Medical Metrics Inc Over the past 15 years, the idea of what constitutes operations, and mission as well as reduce redundancies and an effective compliance program has changed. increase efficiencies in risk identification, management, and Historically, many organizations viewed compliance as a set prevention. of policies with in-person training delivered to employees. It wasn’t a program, it was a set of rules. The best tie in to the Similarities business was usually some input on the policies and participa- ERM and compliance have similar responsibilities, goals, and tion in the training. objectives. A common definition for ERM is: That was then. This is now. Modern compliance functions A process, effected by an entity’s Board of Directors, are expected to act as trusted advisors closely collaborating management and other personnel applied in strategy [sic] with the various business units in health care organization so setting and across the enterprise, designed to identify poten- that the compliance function can appropriately identify and tial events that may affect the entity, and manage risks to minimize compliance risk for the overall organization. be within its risk appetite, to provide reasonable assurance Similarly, over the last several years, the importance of enter- regarding the achievement of entity objectives.2 prise risk management (ERM) for U.S. organizations has devel- According to ASHRM, key components of a health care orga- oped and matured, primarily in response to a number of highly nization’s ERM strategy include identification and manage- public corporate scandals such as Enron, WorldCom, Tyco, and ment of uncertainty, assessment of risk/readiness, employing others. ERM has become an important function within health data to prioritize risk, creating a culture of accountability and care organizations, as evidenced by the American Health readiness, and incorporating risk appetite in the organization’s Lawyers Association (AHLA) and the American Society for overall strategy.3 Many of these components overlap with the Healthcare Risk Management (AHSRM) partnering to publish U.S. Sentencing Commission’s elements of an effective compli- a resource guide on ERM for health care providers, which is ance plan, with risk identification and assessment being a 1 now in its third edition. critical intersection. Compliance programs and ERM programs have some Compliance programs and ERM programs both are rela- important similarities and certain key differences. By lever- tively new functions within health care organizations. The role, aging these similarities and differences, health care organi- scope, and reporting structures of both programs continue to zations can create opportunities to improve their culture, develop and mature. 34 AHLA Connections January 2019 Compliance Corner By Compliance Professionals, For Compliance Professionals. Multiple industries have added the position of Chief Risk federal environment, complex and diverse state environments, Officer since the early 1990s. While health care organizations global expansion, and changes in reimbursement—creates new have demonstrated efforts to build ERM plans, opportunities and expanding risks for health care organizations. for growth, improvement, and integration remain—sound These new and expanding risks create an opportunity for familiar? Compliance programs in health care organizations ERM and compliance functions. Through close collaboration are in a similar state, although arguably a few years ahead, and cooperation, ERM and compliance programs can improve thanks in large part to help from our federal and state regula- an organization’s risk management process and avoid duplica- tory enforcement and reimbursement authorities. tion that leads to confusion and frustration, both at the execu- Like compliance, ERM within a health care organization tive and board levels. should be everyone’s responsibility, with the board of direc- Rather than conducting disparate and distinct risk assess- tors and executive management setting the tone “at the top.” ments and risk management initiatives, compliance and ERM Best practice for both ERM and compliance is to embed their staff working in concert can develop a single lexicon and voice programs and principles into the organization. to senior management and the board—making the intersection a successful one for the organization. Differences An essential difference between ERM programs and health Cyndi Baily, JD, CIPP currently is the care compliance programs is their origin. In response to General Counsel for Medical Metrics Inc. Prior the increase in corporate scandals, particularly in the U.S. to her current role, she served as in General defense industry and the perceived inconsistency of criminal Counsel, Chief Compliance Officer, or in both sentencing, the U.S. Sentencing Commission created the first roles at publicly traded health care organiza- federal sentencing guidelines for organizations in 1991. These tions, global medical device companies, and guidelines articulated the specific elements of effective compli- a nonprofit academic medical center. She also has worked in ance and ethics programs and the possibility for more lenient Saudi Arabia, where she assisted in the start-up of the country’s sentences for corporations with effective compliance programs. first co-ed graduate-level scientific and engineering university. The structure and expectations for compliance programs She began her legal career at Fulbright & Jaworski (now known in the health care industry were further refined by federal as Norton Rose Fulbright). regulations, model compliance plans from the U.S. Department of Health and Human Services Office of Inspector General, U.S. Department of Justice guidance, and case law.4 Endnotes In contrast, ERM program principles are derived from the 1 AHLA ENTERPRISE RISK MANAGEMENT HANDBOOK FOR HEALTHCARE ENTITIES, private sector. Specifically, in 2001, the Committee of Spon- Co-Published with the American Society of Healthcare Risk Man- 5 agement (Sheila Hagg-Richert editor in chief 3rd ed. 2017). soring Organizations of the Treadway Commission (COSO) 2 Committee Sponsoring Organization of the Treadway Commission, engaged PricewaterhouseCoopers to develop a framework for Enterprise Risk Management—Integrated Framework, Executive integrated risk management. This framework was published in Summary. (Sept. 2004.). See also Thomas Stanton, Enterprise Risk 2004 and was revised in 2017.6 Management, YouTube. TEDxJHUDC (Feb 18, 2017) (“The whole These different origins directly influence how health care point of enterprise risk management is not to create another layer of bureaucracy, but rather to have your chief risk officer facilitate organizations approach and structure each program. Much the conversations and then the discussions about priorities—what has been written both by regulators and health care legal and are the really big risks we’ve got to grapple with.”), https://www. compliance “scholars” about the appropriate reporting struc- youtube.com/watch?v=voGyHN-tWMg. ture for the Chief Compliance Officer. The Chief Risk Officer 3 ASHRM, Enterprise Risk Management Resources, available at role, however, does not have the same mandate for indepen- http://www.ashrm.org/resources/ERM-Resources.dhtml. dence and often reports to the Chief Financial Officer. 4 In re Caremark Int’l’ Inc. Derivative Litig., 698 A.2d 959 (Del. Ch. 1996). A shareholder sued the Board of Directors of Caremark Another key difference is the scope of an ERM program for breach of the fiduciary duty of care. The lawsuit followed a is much broader than a compliance program when it comes multi-million-dollar civil settlement and criminal plea relating to the to risk identification and assessment. Compliance programs payment of kickbacks to physicians and improper billing to federal typically focus on legal and compliance risk to the health care health care programs. organizations. The ERM function, however, examines risks of 5 COSO is comprised of the following five organizations: (1) the many kinds—strategic, reputational, financial, and operational. American Accounting Association, (2) the American Institute of Certified Public Accountants, (4) the Association of Accountants Opportunities and Financial Professionals in Business, (4) Financial Executives International, and (5) the Institute of Internal Auditors, and (5). See The rapid and escalating pace of change in the U.S. health www.coso.org. care system—vertical and horizontal integration, exponential 6 See COSO Revises Its ERM Framework (Sept. 11, 2017), https:// technology change and innovation, a volatile and unpredictable erm.ncsu.edu/library/article/coso-revises-its-erm-framework. healthlawyers.org 35.
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