Mentors in Health: Interview with a Healthcare Compliance Expert

It would have been a breakthrough in medicine that would have changed our entire healthcare system—if it had worked.

At the time, her 11-year-old company was dead-center in the media spotlight. Holmes was being featured on the covers of Forbes and Fortune, getting invited to be interviewed on major news networks and being asked to deliver speeches on TED Talk. She was being marketed as a millennial genius and likened to a young Steve Jobs.

The same year she delivered her TED Talk weaving a salvationist narrative around Theranos, Holmes’ house of cards was beginning to collapse. It had been a decade since she’d founded her company and after much anticipation, her tests had finally been introduced to the market, but they were proving to be dangerously inaccurate. Some of the tests failed almost 90 percent of the time, giving patients sometimes devastating false-diagnoses.

But instead of admitting her failure, pulling Theranos from pharmacies, and going back to the drawing board, Holmes continued to try to conceal the short-comings of her product and appeared on various talk shows to defend herself and flagrantly deny the rumors, which turned out to be the truth.

In 2018, Holmes was indicted for fraud by the U.S. Attorney’s Office of the Northern District of California. Instead of becoming the Steve Jobs of medicine, the name Theranos came to represent one of the most well-known and salacious cases of fraud in the history of biotechnology so far.

Many powerful people bought into Holmes’ lie during her more than a decade-long hoax, including her board members, the likes of which included former secretary of state Henry Kissinger, former secretary of defense James Mattis, politician and economist George Shultz, and Channing Robertson, the head of the science department at Stanford, who left his tenured position to work for her.

This extraordinary case just goes to show that anyone—even the brightest minds—can fall victim to a convincing scam.

The National Healthcare Anti-Fraud Association estimates that healthcare fraud costs the nation at least $68 billion annually, or about 3 percent of the nation’s $2.26 trillion in healthcare spending—and that’s a conservative estimate. Others guess that it’s actually as high as 10 percent of annual healthcare expenditures (or $230 billion).

Of course, most cases of fraud are not as sensational as that of Holmes. Violations run the gamut, from small, often unintentional infractions, such as improper billing, to outright snake-oil empires, à la Theranos.

Depending on the specific infraction, a different agency is responsible for holding the individual or corporation accountable. That could be the FBI, the HHS-OIG, the FDA, or another federal or state-level government agency.

The individuals who prevent these crimes from occurring and catch them after they have slipped through the cracks are healthcare compliance officers.

“There is really a wide range that compliance officers have to deal with in healthcare, ranging from the more obvious types of fraud or theft and purely fraudulent billing to making sure that there is compliance with what are pretty complex regulations,” said Professor Jacob Elberg, a professor of health law at Seton Hall University’s School of Law in New Jersey.

The Sarbanes-Oxley Act of 2002 and the 2010 Dodd-Frank law have prompted firms to conduct more in-depth risk assessments and create ways for employees to report suspected misconduct, the Wall Street Journal reported. Elberg added that the U.S. Department of Justice has also had a hand in pushing the importance of fulfilling existing requirements over the last few years.

“With that, it’s a field that’s grown a tremendous amount,” he said.

Healthcare institutions spend nearly $39 billion each year on the administrative activities related to regulations and compliance, which translates into nearly $7.6 million in annual spending for an average-sized community hospital.

That’s why the Wall Street Journal labeled the compliance officer the “hottest job in America” back in 2017 and the U.S. Department of Labor predicts a 9 percent growth in demand for these professionals between 2016 and 2026.

But why do healthcare institutions have to spend so much just to play by the rules?

“Given how much money the government pays for healthcare, it’s not surprising that there are a lot of rules and regulations, and they’re often complicated. For example, the government has a whole set of complex laws about how prices are reported, which then impacts government reimbursements,” Elberg said. “Following those rules is not necessarily easy to do. They are complex and require a lot of careful analysis and thought but there are also opportunities for people who are not doing the right thing.”

According to a report from the American Hospital Association, hospitals and PAC providers have been required to comply with 629 discrete regulatory requirements across nine domains.

And often, physicians, nurses, and other direct care workers end up getting pulled away from their patient care responsibilities in order to contribute to the company’s effort to follow regulations. In fact, health staff members dedicate about one-quarter of hours worked to regulatory compliance on average, which is time that could be spent with patients, according to the same report.

The digital revolution has also played a role in changing the landscape of healthcare compliance. The rise of workflow automation and artificial intelligence have served to increase efficiency in the field and created demand for compliance officers who know how to maximize the benefits of these tools.

But while technology has been a boon to compliance in increasing efficiency, it has also opened up more opportunities for fraud that companies need to watch out for. At the same time, compliance issues that have been around for decades continue to be a significant focus both of prosecutors and compliance officers.

“Some of the most significant and most prevalent issues in the healthcare industry are the most difficult to prove. Those are issues of kickbacks and other types of improper payments. There are folks who are using all of these transactions as a way to try to gain an improper advantage.”

“There are just so many transactions in the healthcare industry, many of which are not only legitimate but actually helpful to consumers—helpful to payers and helpful to society as a whole,” Elberg said.

Commonly, these are violations to either the Anti-Kickback Statute, which prevents companies from bribing doctors to use a product or drug, or the Foreign Corrupt Practices Act, which prohibits firms or individuals from bribing foreign officials to further business deals, Elberg said.

“Some cases can be a real challenge because of the difficulty of sorting out what’s a legitimate payment from what’s not a legitimate payment. One transaction—depending on the intent of the parties—may be a legitimate transaction, or it may be a crime,” Elberg explained.

What are the real consequences of violating certain regulatory laws? Anything but a slap on the wrist.

“There are significant consequences and significant sentences of imprisonment that have involved CEOs and high-level folks, as well as sales reps and doctors—basically every place within the healthcare system and healthcare companies,” Elberg said.

Elizabeth Holmes’ trial is set to commence in the spring of 2021 and she is facing up to 20 years in prison and fines in the millions of dollars. But in smaller-scale cases, consequences can still be severe. Violators of the Anti-Kickback Statute face five years in prison plus a $25,000 fine. Violations of the Foreign Corrupt Practices Act can face criminal fines of up to $100,000 per violation and five years’ imprisonment.

Professionals that have a comprehensive understanding of healthcare systems and healthcare laws are needed to step in and analyze companies’ operations to ensure that they are not violating any regulations by the many agencies that regulate their transactions.

Had Holmes brought a healthcare compliance officer on board her team—instead of all of the star-powered business moguls—perhaps she would have been able to pivot the direction of Theranos early on to avoid the rabbit hole of lies that she ended up falling into, culminating in the end of her company and her reputation.

Despite the substantial demand for entrants, few young people pursue careers in compliance, the Wall Street Journal reported. The jobs require compliance personnel to stay apprised with “increasingly strict and complex regulatory systems around the world, and sometimes elicit skepticism or hostility from colleagues.” In other words, it’s not a job for the faint of heart.

“Compliance officers who are successful view themselves as part of a team and it’s a team that is trying to follow the rules, follow the law, do the right thing, and be successful from a business perspective,” Elberg explained. “They have to have a strong sense of ethics and a strong sense of knowing right from wrong, but they’re also able to communicate with business people in a way that is not adversarial and is a real team attitude.”

The role is suited for individuals that understand the law, business, and the healthcare industry. Ideally, a combination of the three would make a perfect candidate, but those that have a strong understanding of one area can potentially be well-suited for the role.

“The biggest [employers] are probably big pharmaceutical companies and big device manufacturers. There is certainly a lot of opportunities there, but one of the really interesting things about compliance is that there are compliance officers really everywhere in the healthcare system. There are significant roles for compliance personnel in hospitals and in healthcare systems, and at a smaller level, as well.”

At most healthcare companies, chief compliance officers sit somewhere near the top of the totem pole, often on the executive boards, because of the increasing importance of their role. These days, compliance officers make very decent salaries.

“One of the nice things is that there are compliance roles at all different levels so there are opportunities for both entry-level positions and for advancement,” Elberg said.

Starting salaries are on the rise growing by an average of more than 3.5 percent a year since 2011, according to data compiled by consulting firm Robert Half. In 2020, a health compliance director in New York’s salary is in the range of $127,504 to $270,462; by contrast, in Alabama, in the range of $86,212 to $182,875. And these are just the starting salaries. Experienced healthcare compliance officers can expect to make much more later on in their careers.

The field of healthcare compliance has been around since the government started regulating drug companies and hospital practices, but traditionally, the role has been fulfilled by individuals from a myriad of different educational backgrounds.

“It’s a field where many people have law degrees but many do not,” Elberg said. “It’s viewed not as a requirement, but as a plus.”

But in recent years, it has also become a career path that one can specialize in. Different certificate and master’s level programs in healthcare compliance have been appearing at various learning institutions across the U.S.

Seton Hall University, where Professor Elberg teaches, is one of them. Within its law school, there is a graduate-level track specifically designed for students who are interested in getting involved in compliance.

The university also offers seven short healthcare compliance programs, which are available in five different countries. These condensed education programs are designed for individuals from various backgrounds who wish to direct their career path into compliance.

“Really, folks who are smart, who are curious, and who are interested in diving into problems, I think can do well in compliance,” Elberg said.

Nina Chamlou

Writer

Nina Chamlou is an avid writer and multimedia content creator from Portland, OR. She writes about aviation, travel, business, technology, healthcare, and education. You can find her floating around the Pacific Northwest in diners and coffee shops, studying the locale from behind her MacBook.