Board Member’s Compliance Obligations

Richard P. Kusserow | April 2015

In today’s heighten enforcement environment, it is not sufficient for healthcare providers to simply do the minimum when it comes to compliance activities.  It is expected that all individuals within the healthcare organization, from employees and medical staff to executives and Board members, comply with healthcare rules, laws, and regulations.

In particular, there is an increasing trend that members of the Board oversee the compliance program and its activities. The Department of Health and Human Services Office of Inspector General (OIG) stresses a top-down approach for the compliance program that begins at the Board level. A good place to begin understanding this expectation can be found in a joint publication by the OIG and American Health Lawyers Association, titled “Corporate Responsibility and Corporate Compliance: A Resource for Health Care Boards of Board members.”

Furthermore, under the Affordable Care Act (P.L. 111-148), the Centers for Medicare & Medicaid Services (CMS) are mandated to develop specific compliance measures. It is likely that CMS will use OIG’s existing guidance when developing such requirements. CMS is also likely to address:

  • Increasing exposure/liability for Board members for failing in their fiduciary duties and obligations;
  • Urging outside Board members to become independent; and
  • Expecting outside and independent Board members to have more skills, knowledge, and expertise in financial and compliance matters.

Traditionally, outside Board members are the primary watchdogs of any Board and typically oversee audit, compliance, and compensation committees, as oppose to Board members that oversee management of the organization.  Over the past decade the shift is toward Board members being more independent and accountable.  Ideally, to be independent the Board member should not:

  • Be affiliated with the organization as an advisor, auditor, or consultant;
  • Have personal services contracts with the organization; and
  • Be affiliated with a significant supplier or vendor.

Independence is also impaired if an immediate family member, i.e., spouse or child, of the Board member has a relationship noted above.

Taking a page from the Sarbanes-Oxley Act, which calls for financial literacy on Board Audit Committees, it is likely that CMS would place a similar level of competency on Board committees overseeing the organization’s compliance program. That is, at least one member of the compliance committee has an intimate knowledge and high level of comprehension of compliance, either through previous experience as a compliance officer, an attorney, or consultant who dealt with compliance issues.  It is a requisite that the compliance committee has knowledge and skills to critically evaluate the information relating to these areas.

To avoid legal exposure, many organizations have already included these types of members for their Board by enlisting members who are only outside of the organization and meet the standards of independence.  It is advisable to examine your Board members to ensure they have the prerequisites to do the job.

About the Author

Richard P. Kusserow established Strategic Management Services, LLC, after retiring from being the DHHS Inspector General, and has assisted over 3,000 health care organizations and entities in developing, implementing and assessing compliance programs.