Baptist Hospital and the State of North Carolina: Employee, Citizen, or Self?
ABSTRACT Do you know what choices you would make if faced with an ethical dilemma? This fact-based case includes situations and issues a real citizen considered when faced with the knowledge that his employer may have been overbilling the state of North Carolina for health care. Professionals, especially those in accounting and finance positions, are likely to face serious dilemmas in the course of their careers. These situations may require them to choose between honoring a confidentiality clause in an employment contract and acting according to ethical and professional values. This case provides real facts gathered from a real case, in which an individual faced this particular challenge. By working through the case, you should develop an appreciation of the pressures and personal ethical challenges you are likely to face in the workplace. By engaging in discussion and role-play, you will be more likely to recognize these issues when they occur, and will have already developed critical thinking skills to help you develop a plan of action. BACKGROUND The State Health Plan (SHP) of North Carolina provides health care benefits for 667,000 state employees including teachers, university faculty, and retired lawmakers. The state selfinsures, meaning that it pays providers for the actual health care costs, but contracts with Blue Cross Blue Shield of North Carolina (BCBSNC) to process the claims for a fee, which at the time of this case, was calculated as a percentage of the cost. In July 2003, the SHP signed a five year contract with Wake Forest University Baptist Medical Center (Baptist Hospital), located in Winston Salem, NC, to provide negotiated discounts on medical services. The contract allowed the state to pay a discounted amount, such that any increases in the billing above the rate of
the hospital did not have a legal obligation to honor the discounts. including rate increases. and raising premiums and deductibles for all plan participants.” After his employment was terminated by the hospital. toward the end of the contract. Aftermath In April 2011. A competitive bid process was put in place
. a Baptist Hospital employee brought the overcharges to the attention of the CFO and was told to “let sleeping dogs lie. Furthermore. Baptist Hospital was able to charge and collect between $770. Their contract with the hospital required the hospital to notify them of rate increases. and State Auditor.inflation would be nullified by the discount. he signed a confidentiality agreement and was a paid $10. to the SHP. All found that since the contract did not require the hospital to notify the state about available discounts. Because the SHP did not monitor the rate increases. although the suit was later dropped. (See Figure 1 for a diagram depicting these relationships). The employee then notified the state about the charges.000 and $1. which led to investigations by the SHP.000. over the course of the contract. In 2007. charging a premium to employees for the highest levels of health insurance. however it forbid BCBSNC from disclosing any information. The hospital eventually sued the employee (whistleblower) for breach of contract (violating a confidentiality clause). However. for the first time.000 more than they would have had the SHP requested the discount (Woods 2011). NC State legislators voted to make changes to the SHP to deal with a projected $515 million shortfall (Robertson 2011). the contract had expired before the investigations began. BCBSNC’s contract with the SHP did not require them to monitor the contracts for increases in excess of inflation. These changes included. there was no provision in the contract that required the hospital to notify the state when the increase was greater than inflation. BCBSNC had contracts with both the SHP and with Baptist Hospital. Attorney General.340.
. were outlawed and replaced with flat fee plans. like the one with BCBSNC.plus contracts. and cost.for SHP contracts. The reason given was that cost-plus contracts provided an incentive for BCBSNC to approve higher charges. The BCBSNC and Baptist Hospital contract specifies amounts that Baptist Hospital can bill for services for patients covered under plans administered by BCBSNC (including SHP participants).
Bill plus fee (3)
State Health Plan (SHP)
BlueCross Blue Shield (BCBSNC) Process Claims Retain Fee
Bill for service (2) Payment for service: minus fee (5)
Payment of bill (4)
FIGURE 1 Relationship among Parties
The SHP and BCBSNC contract provides that BCBSNC will process claims and payments for a fee.
In return.C.000. he discovered that his employer may have been overcharging the SHP for health care. The facts are unclear about the reason for his termination. 2011 headline. as their contract with the SHP paid them a percentage of each charge. In October 2007. as required by their contract. Baptist Hospital fired Vincoli. Baptist Hospital denied any liability in terminating Vincoli and paid him $10. “N. As an employee of the hospital. when Vincoli was hired as Managed Care Director for Baptist Hospital. BCBSNC benefitted from the higher charges. It appeared that the SHP was not monitoring the contract and was unaware that the rate increase exceeded the inflation rate. McLain Wallace.THE CASE The October 28. As part of the settlement. he noted that Baptist Hospital increased the charges for medical services at a rate higher than the inflation rate. Baptist Hospital said that they informed BCBSNC about the increases. The SHP paid the bills and did not request the discount to which they were entitled. In addition. sometime in the spring of 2007. According to Vincoli. a position he held until 2009. they advised him to “let sleeping dogs lie” and not to report his findings to the state. Vincoli signed a confidentiality agreement promising 1) not to speak in a disparaging manner concerning the Hospital to any outside party and 2) not to
. Baptist Hospital dismisses lawsuit against whistle blower” (Winston-Salem Journal 2011b) marked the end of Joseph Vincoli’s campaign to do what he felt was the right thing. and to the CFO. Vincoli first took his concerns to both the hospital’s general counsel. Soon after beginning work. Gina Ramsey. however. Based on his review of billings. who then became a self-employed consultant providing managed care and ERISA consulting services to area benefits consulting firms and law firms. Vincoli sued Baptist Hospital and reached a confidential settlement with them in May 2008. It all began back in July 2006.
In November 2009. on January 25. in light of the ensuing audit. before the SHP accepted the offer from Baptist Hospital. Based on Vincoli’s allegation. Baptist Hospital sued Vincoli. except as required by court order.disclose any proprietary or damaging information without the hospital’s prior written consent.000 offer or the SHP refused to accept it. and made a high-profile request for $4. alleging breach of the May 2008 confidentiality settlement. malicious and
. Vincoli submitted an online complaint to the NC Department of Justice alleging that the hospital was committing fraud against taxpayers. or regulation (GCJSCD 2011). Although the SHP subsequently collected $837. vindictive. Baptist Hospital alleged that Vincoli’s sharing of disparaging and/or confidential information with the State Auditor’s office precipitated the audit. the State Auditor notified Baptist Hospital that it was reopening the SHP contract issue. 2011. and in August 2009 offered the state $20. The suit alleged that Vincoli’s “unjustified.43 million in refunds from 30 hospitals. Either Baptist Hospital rescinded the $20. statute. which it later reduced to $388. A year later. The SHP requested $638. law. Shortly thereafter. The ensuing investigation was closed when the Attorney General’s Office informed the investigator that the issue was one of contract interpretation and not fraud. He took these actions even though the contract related to the overpayments expired July 2008 and despite his agreement to maintain confidentiality about the hospital’s inside information. In January 2009 Vincoli contacted state officials and emailed state lawmakers to report the past overpayments.485 from Baptist.000 to avoid unfavorable publicity and the expense of litigation. in March 2009. Baptist Hospital denied that it breached the contract.000 from other hospitals.895 based on a three-year statute of limitations. the SHP conducted an audit of its contracts with Baptist and other hospitals.
In September 2011. it is not likely that SHP and Baptist Hospital would agree on the overpayment amount. issued a report summarizing her investigation (Appendix A). the State Auditor. however.34 million. even if the contract allowed for a rate adjustment after the contract terminated.
NCBH is Baptist Hospital
. or obtain annual outpatient fee information from Baptist Hospital. Ms.gratuitous actions have caused NCBH1 to suffer embarrassment. loss of good will with the State of North Carolina and the communities that NCBH serves. and financial loss including but not limited to legal fees” (Winston-Salem Journal 2011a). Beth A. Ms. Wood estimates it to be $1. SHP estimated the overpayment at $638. seek. resulting in at least 96 possible combinations of calculations for the overpayment. Ms. SHP did not have a plan for monitoring fee increases and it did not receive. negative false publicity.485. Woods. Woods estimates that the range between the lowest and highest overpayment is $1.8 million. Many of the contract terms were not clearly defined. Given the lack of clarity in contract terms. Woods opines that a major element in estimating the over payment is the appropriate discount rate. The report confirms that the contract did not specifically require Baptist Hospital to notify SHP of outpatient fee increases.
“This is an appropriate disposition. after he knew about the alleged overpayments and before he reported them to SHP. On October 18.” meaning that it can re-file against him later. Why do you think took a payment and then reported anyway? b. Mr. the SHP did not pursue Baptist Hospital for the overcharges.Epilogue SHP officials confirmed that at least one employee had already reported the issue that Vincoli reported in January 2009 as early as 2006/2007. a. REQUIREMENTS Questions 1. Phil Michael stated. Did Vincoli act ethically in blowing the whistle? c. Reporting the overpayments to the state 2.000 in May 2008. Signing the May 2008 agreement and taking the money ii. Vincoli signed the confidentiality agreement and took the $10. 2011. lawmakers. SHP’s Executive Director told the employee not to pursue the matter. the same employee then alerted the NC Attorney General who decided not to pursue the matter. Each party paid their own costs and attorney fees. Baptist Hospital dropped its suit against Joseph Vincoli “without prejudice. his attorney. Per SHP accounts. Imagine that you are Vincoli – make a pro/con list for: i. Based on the audit report. nor did they collect the $20. While Vincoli remained silent. Some people portray whistleblowers as angry ex-employees trying to exact revenge while others hail whistleblowers as heroes performing heroic acts – what facts support these opposite portrayals?
. Vincoli had acted honorably” (Winston-Salem Journal 2011c).000 offer. and the NC Department of Justice.
Based on the legal definition of fraud (see criteria below). a law that regulates selffunded health plans. What level of responsibility does the SHP carry for the overpayments and why? 8. How does this legislation protect employees from employer retaliation? c. and correct overpayments in the future? 9. a. however. d. detect. Is an employee protected if he or she reports wrongdoing to a regulatory body other than the SEC? (Hint. Navigate to http://www. Intent to deceive d. Justifiable reliance e. 6.shtml. This SEC site includes answers to FAQ about the Dodd-Frank Whistleblower Program which took effect July 21. do you think plan administrators would have been guilty of non-compliance? Why or why not?
. False statement b. ERISA holds fiduciaries to the highest standard and requires that they make decisions with a single eye toward plan members’ best interests. Damages 5. What actions should/could the SHP take to prevent.3. What stakeholders would these actions affect and what could the possible effects be? 7. Is Baptist Hospital as an employer covered under either Dodd-Frank or SOX? Why or why not? 4. If SHP had been subject to ERISA (see Appendix B). List the stakeholders and discuss the harm and benefit each incurred/received.gov/about/offices/owb/owb-faq.sec. Material fact c. ERISA does not cover government plans. In your own words. b. It appears that SHP’s failure to pursue the matter directly cost taxpayers millions of dollars and affected State employees’ out of pocket costs as well. The state could rescind the hospital’s state-level status as a non-profit corporation (which could possibly lead to issues with its federal non-profit status) and/or refuse to contract with the hospital in the future. follow the link to the OSHA website). explain the purpose of the SEC Whistleblower Program. Most large employers must comply with ERISA (Appendix B). was Baptist Hospital guilty of fraud? a. 2010.
North Carolina State Health Plan for Teachers and State Employees.ncbar.org/media/9242976/ednov10. 2011a. 2010. N. J. 2011. Baptist Hospital sues fired worker and whistle-blower. 2011. (September). G. 2011c. Available at: http://educationlaw. Baptist Hospital Overpayments. State of North Carolina Performance Audit. Are you ready for the North Carolina False Claims Act? North Carolina Bar Association Education Law Section Online Newsletter (November). Associated Press (April 5). 2011b.pdf. Woods. General Court of Justice Superior Court Division. Robertson. Forsyth County (GCJSCD). Editorial: Baptist Hospital right to drop lawsuit against whistleblower. T. 2011.
. D. (November 3). January 25.REFERENCES Browner. Winston-Salem Journal. NC State Worker Health Plan changes get final OK. A.C. Winston-Salem Journal. Winston-Salem Journal. Complaint 11CvS 548. (September 12). Baptist Hospital dismissed lawsuit against whistle blower. (October 28). B.
The State Health Plan was unsuccessful in recovering the approximately $638.APPENDIX A State Auditor’s Report (Summary only) Complete report available at: http://www.
. because Baptist Hospital denied its attempts to recover the overpayment. Results The State Health Plan did not increase the outpatient discount rate as allowed in the contract because it did not have a contract monitoring plan and did not seek or obtain annual outpatient fee increase information from Baptist Hospital. The Plan did not attempt to increase the
“Overpayment” is the term used to describe the amount paid in excess of what would have been paid if the Plan had exercised its right to receive additional discounts from Baptist Hospital.600 it later estimated was overpaid after March 1.net/EPSWeb/Reports/performance/per-2011-7266. Because there was no contract monitoring.ncauditor.pdf Purpose This audit report evaluates the circumstances surrounding the overpayment2 of outpatient medical claims provided by Wake Forest University Baptist Hospital (Baptist Hospital) and makes recommendations so the North Carolina State Health Plan for Teachers and State Employee (State Health Plan or Plan) management can take appropriate corrective action. the Plan did not know outpatient fees increased. therefore it could not determine if an increase in the negotiated discount rate was allowed per the contract’s inflation adjustment provision. Baptist Hospital claimed it complied with the terms of the contract and further stated that only in circumstances of noncompliance on its part can the Plan seek an adjustment to the rate after expiration of the contract. 2006.
Using the combination of variables most closely aligned with the cost containment intent of the contract’s inflation adjustment provision. Many of the contract terms were not clearly defined. the estimated overpayment to Baptist Hospital for outpatient services is approximately $1. The contract did not specifically require Baptist Hospital to notify the Plan of outpatient fee increases. resulting in at least 96 possible combinations for calculating the over paid amount.
.outpatient discount rate until after the contract concluded. the Plan paid approximately $770. 2008) than it would have if the discount rate was adjusted for inflation. Agency’s Response The Agency’s response is included in the appendix of the complete report. a deviation from the terms the Plan commonly used to contract with other North Carolina hospitals.000 more to Baptist Hospital for outpatient services during the contract (July 1.34 million. Using the same method the Plan used for calculating the overpayment. or 75% higher than the Plan’s calculation method. 2003 to June 30.
they may not engage in transactions on behalf of the plan that benefit parties related to the plan. or disability laws. ERISA also does not cover plans maintained outside the United States primarily for the benefit of nonresident aliens or unfunded excess benefit plans. services providers. or plans which are maintained solely to comply with applicable workers compensation. and gives participants the right to sue for benefits and breaches of fiduciary duty. (emphasis added). such as other fiduciaries. In other words. requires plans to establish a grievance and appeals process for participants to get benefits from their plans. The primary responsibility of fiduciaries is to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses. ERISA does not cover group health plans established or maintained by governmental entities. provides fiduciary responsibilities for those who manage and control plan assets. they must follow the terms of plan documents to the extent that the plan terms are consistent with ERISA. churches for their employees. Fiduciaries must act prudently and must diversify the plan's investments in order to minimize the risk of large losses. ERISA requires plans to provide participants with plan information including important information about plan features and funding. In addition. They also must avoid conflicts of interest.APPENDIX B ERISA Notes The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. In general.
. or the plan sponsor. unemployment.
Education and policies contribute to assuring that we provide and bill for our services accurately and in
. and compassionate relationships with our co-workers Honest and ethical conduct.htm Accessed 12/7/2011
APPENDIX C Excerpts from the Code of Conduct What is a Code of Conduct? A Code of Conduct is a description of values and actions that are important to a culture or organization.
http://www. rules and regulations Prompt internal reporting of compliance issues
Management and staff at NCBH are individually and collectively responsible for compliance with laws. including board members.dol.gov/dol/topic/health-plans/erisa. collegial. Courts may take whatever action is appropriate against fiduciaries who breach their duties under ERISA including their removal. including adherence to the Policy of Ethical Behavior Compliance with applicable governmental laws. and Policies. Values. It describes what is expected from people who live or work in that culture. and sound business practices that govern our services. employees. regulations. it promotes:
Compassionate and excellent care for our patients and their families Respectful. Built on the foundation of our Mission.
This Code of Conductis a practical guide to handling important issues and deterring wrongdoing for all representatives of North Carolina Baptist Hospital and Subsidiaries (NCHB). and volunteers. or to restore any profits made through improper use of plan assets. Vision.Fiduciaries who do not follow these principles of conduct may be personally liable to restore any losses to the plan.
other appropriate support services may be contacted (e.http://www. However. both NCBH and WFUHS.).
.compliance with all guidelines. Employees are asked to take issues or concerns that might affect our compliance with laws. emotional.
The Code of Conduct cannot address every ethical issue that might happen and employees are encouraged to clarify questions through their supervisors. The following defines what the Values mean to us:
Excellence means being committed to consistently provide superior education. regulations. or the Compliance Office. If this is not an acceptable alternative. we must act on our knowledge and the Code of Conduct was created to help us understand what actions support compliance. etc.edu.edu/NCBH-Compliance/Code-ofConduct. In the spring of 2004. Human Resources. patient care and research.wakehealth.
Compassion means being aware of and responsive to the physical.htm accessed 12/19/11
Key Values and Standards of Behavior Key Values The NCBH Five Key Values are the characteristics which will move us towards our future state and help us achieve our Vision. through the WFBMC Hotline (877-880-7888). or by e-mail to ncbhcompliance@wakehealth. and intellectual needs of others.g. Risk Management. spiritual. with support from the Board. If these avenues for resolution are not successful. made the decision to add Collegiality to our Key Values. the Compliance Office may be contacted directly 336-713-4949. or appropriate business practices to their supervisors for clarification or resolution. Human Resources.
I will speak positively about The Medical Center and my co-workers. Innovation. honesty. and policies.
Innovation means discovering and developing new ideas for enhancing quality. Integrity.htm accessed 12/19/11 Interacting Ethically and Responsibly The organizational culture of NCBH & Subsidiaries is created through our actions and attitudes guided by our key values: Excellence.
Integrity means demonstrating fairness. Compassion. I will be sensitive to cultural and language difference.
Collegiality (The components of Excellence. and Collegiality are available on the web site.) http://www. and Collegiality.
Standards of Behavior Standards of Behavior are specific actions that support each of the Key Values.edu/NCBH-Compliance/Key-Values. Excellence Compassion Innovation Integrity
I will be honest and reliable in everything I do.
. Innovation. Compassion. regulations. sincerity and a commitment to our Mission. They guide our ethical behavior at all times and are woven through the Code of Conduct. efficiency and effectiveness.
Collegiality means promoting an environment that fosters mutual respect and teamwork while rewarding collaboration. Part of our culture is a dedication to behaving ethically and responsibly and to complying with applicable laws. I will set a good example. Vision and Values.wakehealth.
We evaluate and resolve compliance concerns and/or questions in a timely manner. administrative support functions.htm accessed 12/19/11 No Retaliation Against Employees Who Report Ethical or Compliance Concerns in Good Faith NCBH & Subsidiaries value employees and want them to feel comfortable expressing concerns regarding ethics and business practices. and policies that affect how we do business and deliver health care services. actual. Human Resources. The degree to which we achieve compliance for NCBH & Subsidiaries is the total of each of our individual actions added together.wakehealth. we commit to doing the right thing for the right reason even when no one is watching and to encouraging others to do the same.
We encourage employees to immediately report any suspicion or question of harassment or retaliation in response to raising a compliance concern. regulations. strict confidentiality to the extent allowed by law for employees who contact the Compliance Office or WFBMC Hotline.
We strive to create an environment where employees feel comfortable expressing their concerns about compliance issues. or potential compliance concern or question for clarification. the Compliance Office.edu/NCBH-Compliance/Interacting-Ethically.Each one of us has a vital role in making sure that NCBH & Subsidiaries are in compliance with all laws.
. in good faith. Therefore.
http://www. It is against the Policy of Ethical Behavior to retaliate against any employee who. We provide. notifies members of management.)
We discuss legal and ethical concerns with the appropriate party and report any suspected violations according to the NCBH & Subsidiaries Code of Conduct. upon request. (The additional twelve elements are available on the web site. and/or the WFBMC Hotline of a perceived.
We expect employees to use the Compliance reporting system as a way to communicate legitimate compliance concerns or questions about a compliance issue. regulations. or hospital policies.htm accessed 12/19/11
. or report non-compliance with laws.wakehealth. raise a concern.
We do not tolerate personnel who harass or retaliate against employees who seek advice.edu/NCBH-Compliance/No-Retaliation.