Special Purpose Audit
Overview
This Audit has the single purpose of determining whether any acts of any health plan vendors or providers might be deemed unfair methods of competition or unfair acts or deceptive practices as contemplated by relevant state or federal laws. While the health care plan is the enterprise engaging the parties to the audit, the focus of the Audit is on vendor or provider activity which is only tangential to the subject health plan. That is, ERISA infractions are not the target of the Audit.
The Audit is presented in these parts:
Sources of Information
Unfair and Deceptive Practices
Description of Potential Infractions
Parties
The Parties to this Audit are as follows:
Plan Sponsor means
Health Plan means
Providers means
Producers mean
Stop-loss (S-L) Carrier means
Utilization Review (UR) means
Managed Care Organization (MCO) means
Claims and Recordkeeping Administrator (TPA) means
Managing General Underwriter (MGU) means
Auditor means
The Audit Sponsor means ___________. Such entity, unless otherwise shown, has financial responsibility for the Audit.
Purpose
The Report must make clear in its narrative as to whether the purpose of the Audit is to be:
This purpose is of the nature of an internal or prophylactic audit. Any infractions would be corrected so that the Audit Sponsor has the comfort of a clean bill of health.
This purpose is of the nature of an outside or regulatory audit. Any infractions might be used against the party (or Parties) involved.
The purpose of the Audit is to assert, positively or negatively, as follows:
Scope
The Scope of the Audit is to provide detailed responses to the following questions:
Hospital Billing
Did any hospital provider have a billing practice whereby its variations from a chargemaster are not economically justifiable? Explain.
Bundled Services
Are any of the four major vendors (UR,, TPA, S-L, MCO) tied together (by ownership, contract or otherwise) in a combination of either two, three or four in a manner whereby potential conflicted interest exists? If such response is yes, are any of the potential acts deemed to be unfair methods of competition or unfair or deceptive acts or practices? Explain.
Other Issues
To what extent, if any, might an
act, identified as a potential unfair method of competition or unfair or
deceptive act or practice, also be an incipient act of restraining trade or
creating a monopoly? Explain.
Auditor
The Auditor uses the following professional skills in the preparation of the Report:
___ Claims processing and recordkeeping
___ Accounting
___ Actuarial
___ Economic
___ Legal
___ Other.
The Auditor may be guided in its conduct of the Audit by the items set forth or referenced on the Appendices. The Auditor may find it needful to subcontract some of the special questions to professional skills not available through the Auditor (economist, attorney, actuary, e.g.). The actuary might be helpful if issues of pricing are germane. The Auditor must profess independence and the report, including the opinion of any contributing specialist professionals, must be acceptable as an independent report.
Results/Commentary
The text of the Audit Report is provided here.
Appendices
Sources of Information
· FTC Web Site
· State Attorneys General.
Description of Potential Infractions
Attached hereto is a sample listing of most of the possible infractions which should gain the attention of the Auditor.
Unfair and Deceptive Practices
Attached hereto is a brief critique of the statutory and/or common-law meaning of this term.
Unfair and
Deceptive Practices
Statutory Background
The United States Code (15 USC §45(a)(1)) declares as illegal the following:
1. Unfair methods of competition…
2. Unfair or deceptive acts or practices…
3. Which affect commerce.
The litmus test of whether an act is an unfair method of competition is three-fold:
1. Is commerce affected?
2. Is competition substantially lessoned?
3. Is there a tendency for a monopoly to be created?
This is ultimately a judicial and not an administrative decision.
The litmus test of whether an act or practice is unfair or deceptive is as follows:
1. Is commerce affected?
2.
General Questions
a. Is public policy offended?
b. Is the act characterized by any of the following, e.g.:
· Immoral
· Libelous
· Unethical
· Illegal
· Oppressive
· High pressure
· Unscrupulous
· Fraudulent
· Injurious to the general public.
c. Without regard to any acts, are there any unfair provisions in any contracts of adhesion?
3. Specific Questions
a. Are services of A passed off as services of B?
b. Does the act cause the likelihood of confusion or misunderstanding as to the source, sponsorship, approval or certification of services?
c. Does the act cause the likelihood of confusion or misunderstanding as to affiliation, connection or association with, or certification by, another?
d. Does the act use deceptive representations or designations of origin in connection with the services?
e. Does the act represent that the services have sponsorship approval, characteristics, ingredients, uses, benefits or qualities that they do not have or that an entity has a sponsorship, approval, status, affiliations or connection that it does not have?
f. Does the act represent that the services are of a particular standard, quality or grade, if, in fact, they are of another?
g. Does the act create the likelihood of confusion or misunderstanding?
Traditional
and Common-Law Meanings
Unfair
Competition
This is a widely-used term that has gained a place in common-law.
General
Use
Any dishonest or fraudulent act in trade or commercial rivalry.
Particular Use (Example)
The practice of substituting one’s own goods or services for those of another by capitalizing on such other firm’s reputation, name, etc. that is, infringement of trade-name or similar.
Unfair competition is a tort involving the misappropriation for commercial advantage of a benefit or right belonging to another. It is the simulation by Firm A of certain product or service characteristics of its competitor, Firm B, such as trade names, materials, services, etc. Thereby falsely inducing the purchase of goods or services. This act has the common-law name of passing off. In brief it is the selling of another firm’s services or products as one’s own.
Unfair competition includes the following:
· Deceitful advertising
· Bribery of employees
· Secret rebates and/or concessions.
The true test of unfair competition is, when comparing the two products or services, that:
· Perfect simulation need not be achieved.
· Similarity is all that is needed to make the act unfair.
Unfair
Methods of Competition
This term is unique with the FTC Act (15 USC§45) and is more broad than the term unfair competition. The term, by design, is not defined but its meaning is to be a function of the following:
· Particular instance…
· Particular competitive condition…
· Specific and substantial public interest…
All supported by evidence provided.
The concept of unfair methods of competition was not to restrict fair and free competition among honorable opponents, nor was it to give license to acts heretofore deemed immoral, unethical or against public policy.
Description
of Potential Infractions
Several examples of activities which would likely be deemed unfair trade practices characterized by both bundling and conflicted interest are these:
Instance Number One
The TPA is combined with an MCO which also provides its own UR services. A covered person with a serous health problem, capped by an outlier provision, presents a serious financial problem to the network hospital. The solution is to get the person’s consent and by air ambulance ship such patient to a non-network hospital. The stop-loss carrier will doubtless be apoplectic but it will necessarily have to pay the higher charges.
Instance Number Two
The TPA and the stop-loss carrier are combined and stop-loss benefits are easily manipulated by simple claims gaming. The employer likely is not aware of such activity.
Instance Number Three
The MCO, TPA, and stop-loss carrier are combined and aggressively slash the hospitals submitted charges. The hospital must acquiesce but recovers much of the cost direct by means of the Medicare Outlier and charity recovery relief.
Instance
Number Four
Hospital billing practice of making undisclosed and chaotic or discriminatory variations from its chargemaster with the Medicare Outlier conflicted interest.