IHS Investigating Health Center Finances, Audits And Possible Fraudulent Billing

Editor's Note: the following article is written by Joe Morey, News Editor for lcotribe.com, and submitted to DrydenWire.com for publication.

SAWYER COUNTY -- In the fall of 2019, following a series of concerns relating to the LCO Community Health Center, LCO Tribal Chairman Louis Taylor requested the Bemidji Area Office (BAO) of the Indian Health Service (IHS) conduct a performance monitoring visit of the clinic. The visit was conducted on November 4th and 5th and their report was submitted to the Tribal Governing Board (TGB) on Thursday, August 13, 2020.

Concerns Chairman Taylor had included;

• Clinic funds were not adequately protected and have been misappropriated or misused;
• Recurrent delinquent audits;
• Backlog of Essential Maintenance, Alteration and Repair (BEMAR) funds accounting and progress reports have not been received from the Tribe. Denial of access to Clinic financial records to appropriate Clinic staff and IHS reviewers;
• Clinic financial records in disarray – overdrawn bank account;
• Use of approximately $600k for Tribe’s general use;
• Possible fraudulent billing for chiropractic care and/or encounters;
• Supplement sales to patients by the chiropractor for personal gain;
• Clinic Human Resources practices terminating employees and rehiring with a full year’s back pay;
• Racial/gender discrimination and a toxic work environment at the Clinic; and
• Conflicts of interest regarding staff or Tribal Governing Board (TGB) members with litigation pending against the Clinic that also have access to clinic’s finances.

As a result of the performance monitoring visit, the BAO stated in their report, “based on the current state of affairs in the clinic,” that the LCO Health Center does not appear to be ready for their accreditation survey due in 2021 by the Accreditation Association for Ambulatory Health (AAAHC).

See Also: TGB Votes To Give Special Agents Access To financials

The BAO Report gave some background information relating to the cause for the visit which stated, “On October 8, 2019, an LCO member reported to Chris Poole, Agency Lead Negotiator (ALN) that he/she was concerned about possible mismanagement of the Clinic based on documents/allegations posted by Eric Terra on Facebook on October 8, 2019. The allegations included concerns over IHS funds, including two separate sets of financial books for the Clinic that did not agree. On October 15, 2019, the ALN received an email from Councilman Shuman with a letter attached citing financial bookkeeping discrepancies and requesting a “full audit” be conducted. On October 16, 2019, the ALN participated in a call with Chairman Taylor and Councilman Shuman, during which both expressed concerns about the lack of access to the Clinic financial records and possible mismanagement of funds by previous Clinic leadership.”

The Report goes on to say on October 18, 2019, Councilman Schuman forwarded via email a letter from Phyllis Wolf, Clinic Finance Director, who had just resigned. Mrs. Wolf cited lack of access to financial records resulting in her inability to provide IHS with an accounting for BEMAR funds that had been transferred to the tribe. Wolf requested a forensic audit of the Clinic citing concerns that funds were accessed improperly by previous Clinic administration.

On November 21, 2019, Councilman Schuman requested an update from the BAO asking if following the monitoring visit IHS had enough evidence to support a forensic audit. The Report also stated the Tribe’s 2018 audit has been delinquent since June 2019. Despite previous corrective action plans from the Tribe, late audits have been recurrent.

Clinic CFO Interview

After interviewing the acting clinic Chief Financial Officer Billie Jo Taylor who had only been on the job for a few days leading up to the monitoring visit, it was learned that the clinic financial staff had very limited access to financial information as the records are maintained at the tribal office Accounting Department. Taylor was unable to provide IHS with a budget and she said the clinic financial staff wasn’t even aware if they were over or under budget. She also stated the cash position of the facility was not available to her staff.

“IHS could not view comparison information, as reports we requested were very limited in detail and showed large variances,” the Report stated. “These variances likely stem from outdated current year budget information and failure to input prior year financial data into the finance system. Examples of comparison information that was not available include detailed statements of revenue and expenditures, third-party (Medicaid, Medicare, private insurance, VA, etc.) collections, and billable/unbillable visits information. Detail of payer mix or beneficiaries/non-bens ratio not available to LCOHC staff. The LCOHC CFO could not produce information on compliance of timely posting of payments. The lack of the above type of information can make it difficult if not impossible to responsibly operate a clinic.”

The Report cited further concerns identified during the visit, including the clinic does not have internal procurement ability. The report states no credit cards are maintained at the clinic and all purchases are managed at the tribal office.

“This has led to complaints of delayed purchases due to tribal slow procurement process. Patient care is affected by the Clinic’s inability to control internal procurement. One example that highlights the importance of this issue was the inability to pay for credentialing of providers in a timely manner. The credentialing delay lengthens the start dates of needed providers along with potential loss of revenue,” noted the Report.

Tribal CFO Interview

In the interview with acting Tribal Chief Financial Officer Sean McCabe, it was learned he was contracted to assist with preparing financial statements for the 2018 and 2019 tribal audits. The Report states McCabe said the 2018 financial information would be completed by Dec. 19, 2019, with the audit being completed by June 19, 2020, but to date, no financial information had been received.

“The FY 2018 audit was due to the Federal Audit Clearinghouse no later than June 30 2019. Therefore the 2018 audit is delinquent. The FY 2019 audit is due in June of 2020. Therefore the 2019 audit will also be late. This is a recurring issue for the Clinic,” the Report stated.

McCabe provided a September 30, 2018, LCO Health Clinic Statement of Revenue, Expenditures and Changes in Fund Balance. The report was at a very high level with only general financial summaries, lacking detail and comparison information. McCabe also provided a September 30, 2018 Balance Sheet of LCO Health Clinic. However, again, the report lacked detail and footnotes, the Report noted.

As a result of the clinic’s finances still being maintained at the tribal office, the BAO Report goes on to state, “the limiting of detailed financial information impedes the clinical staff in having valuable data to analyze spending levels, staffing productivity and clinical operations impacting the financial stability of the clinic. At a very basic level, it is difficult for staff to determine if there are adequate funds for the procurement of supplies, equipment or payroll.”

The Report also stated that a major concern during the visit was the denial of access to any type of financial records relating to the clinic.

“Despite ample notification of the monitoring visit, the IHS review team was unable to obtain any detailed Clinic financial records,” stated the Report. “This denial seemed to stem from a lack of access available to the Clinic’s administration. Additionally, BAO had previously sent multiple requests for a status report on BEMAR funds previously transferred. The staff was unable to provide a report on those funds.”

The Report goes on to say due to the denial of access to the basic clinic financial data, the Health Director is unable to adequately fulfill the leadership role. The tribal code identifies the responsibilities of the Health Director and one of those responsibilities is to ensure that all programs are meeting requirements pursuant to established goals and objectives including reporting, fund accounting, and compliance with federal regulations.

Also noted in the Report, during the visit, the team interacted with numerous clinic employees and during these interactions there were a number of staff members that voiced concern for the clinic and dissatisfaction with the current leadership situation. Many of the employees that voiced concerns also requested not to be named fearing retaliation from the TGB.

Credentialing and Privileging

The Tribe’s Accounting Department has not approved a requested credit card for credentialing and privileging activities for several months. The Report states when the previous credit card expired, the credentialist used her personal credit card for credentialing and privileging activities.

“The Finance Department was initially reimbursing the credentialist for credentialing and privileging activities that were charged to the credentialist’s personal credit card. At some point, the credentialist was instructed to stop using her personal credit card for credentialing and privileging activities,” the Report stated. “As of the date of this visit, there were two providers with lapsed privileges since March 2018 who continue to provide medical services; the clinic is billing for the services provided by the two providers with lapsed privileges. Billing for non-privileged providers could constitute fraud. Additionally, providers that are not privileged may not be covered under FTCA. Therefore, the Tribe may assume full responsibility for any liability issues that could arise from non-privileged providers. The LCO Credentialing/Re-Appointment Policy is not being followed.”

In addition to routine chiropractor billing, the Report goes on to state there have been instances where a medical doctor billed for services without a face-to-face encounter with chiropractic patients. The medical doctor involved in this billing practice no longer works at the clinic and this billing practice is no longer happening.

Summary of Findings

In the BAO Report’s Summary of Findings, it listed a number of findings;

The Tribe is required to conduct a single-agency audit on an annual basis per 25 U.S.C. §5305(f)(1); 25 C.F.R. § 900.40(b). The Tribe is not meeting this requirement, as the Tribe’s 2018 single audit is delinquent, and the 2019 audit could be also be delinquent. The Tribe has repeatedly failed to meet single audit deadlines;

The Tribe is required to maintain financial records and provide IHS with reasonable records access per 25 U.S.C. § 5329(7)(B). Additionally, the Tribe is required to provide audit access to all documents related to IHS funding per 25 U.S.C. § 5305(b). During the monitoring visit, the review team was denied access to any Clinic financial records. This denial appears to be the result of a lack of LCOHC financial records. Violating the standards at 25 C.F.R. § 900.45, records were either non-accessible, non-existent or in such disarray that any reporting on the Clinic was not available at the time of the visit;

Progress reports for BEMAR funds previously transferred have been requested by BAO on several occasions with no response. A progress report was requested during the visit and not provided. Lack of financial records access seems to be a major contributing factor;

A number of policies appear to have not been reviewed in three or more years. This could become problematic for the Clinic during upcoming accreditation visits;

The credentialing and privileging is the process of obtaining, verifying and assessing the qualifications of a provider, as well as authorizing a provider’s scope of practice within a facility. Failing to credential and privilege providers is a failure to ensure patient safety. It is an essential function of a healthcare program. Allowing providers to practice when not privileged increases the tort risk to the Clinic because providers that are not credentialed or privileged may not be covered under FTCA. The Tribe has failed to privilege/credential providers or renew privileges of providers. This seems to be largely due to a lack of a credit card or other effective procurement processes. The Tribe is continuing to bill for the services of providers who are not privileged, which is potentially fraudulent;

There is no established peer review process for the chiropractor despite being privileged at the Clinic. Peer review is an essential component of patient safety and quality of care. The lack of adequate peer review and clinical oversight may expose the Clinic to significant risk;

There were instances identified when the Clinic billed for MD visits in the absence of a face-to-face encounter with the physician. There have also been questionable billing instances regarding the chiropractor. In several instances it appears the Clinic used a medical provider to bill for a chiropractor visit. This type of practice is potentially fraudulent.

The BAO told the TGB they will be reporting these findings to the Office of the Inspector General for further review as well as these findings pertaining to financial records; Denial of access to Clinic financial records for Clinic leadership and the IHS review team; Denying IHS review team access to Clinic financial records; Clinic accounting systems reliability issues; Report of Tribe moving approximately $600k to tribal general fund; and Allegations of multiple sets of books for LCOHC that do not reconcile.

Potential consequences

The Report concludes pursuant to 25 U.S.C. § 5325(l)(1) and OMB Circular A-133, sanctions may be applied by the Awarding Official to T/TOs who fail to provide an audit report when they are required to do so. These include:

• a. Withholding a percentage of Federal awards until the audit is completed satisfactorily;
• b. Withholding or disallowing overhead costs;
• c. Suspending Federal awards until the audit is conducted; or
• d. Terminating the Federal award.

“Additionally, federal regulations provide sanctions that the Awarding Official may apply to T/TOs who fail to comply with corrective action plans resulting from monitoring visits. 25 C.F.R. §§ 900.247(b)), 900.249. These include partial or full rescission of the Federal award contract, and re-assumption of the health program,” the Report concluded.