This article first appeared in Corporate Compliance Insights on December 11, 2014.

“It is easier to cope with a bad conscience than with a bad reputation.” — Friedrich Nietzsche

The past few years have been fraught with litigation for the health care industry, with major companies feeling the sting of compliance in both their reputations and their pocketbooks. In early November, Stryker settled hip implant litigation for more than $1 billion. In 2012, GlaxoSmithKline paid $3 billion to settle claims of overcharging, kickbacks and other health care transgressions, while, Abbott Laboratories paid $1.5 billion and Johnson & Johnson $1.2 billion, both for alleged violations of law. Even so, during the first week of November 2014, Stryker traded at its 52-week high, as Abbott and Johnson & Johnson traded near their 52-week high, though GlaxoSmithKline dipped near its 52-week low. GlaxoSmithKline’s downward trend began before a court in Changsha, China fined the company $500 million after a bribery conviction, coupled with the company’s pending bribery charges in the United Arab Emirates, Syria, Jordan, Iraq and Poland. Sadly, bribery charges are not uncommon in today’s health care market, as can be seen by the events of 2013, when prosecutors in Poland investigated Stryker, and those in 2014, when Abbott settled claims in India. China also fined Johnson & Johnson in 2014 for bribery charges, with a penalty of just over $3 million.

Not surprisingly, each company listed above has an active corporate integrity agreement with the Office of the Inspector General (“OIG”), with the exception of Stryker, whose recent settlement may result in one. If nothing else, a corporate integrity agreement with the OIG obligates an entity to bolster, or in some instances create, a robust compliance program, complete with compliance officer and committee, detailed policies and procedures, and employee training. As our nation’s new health care system continues to mature, a health care company can do much worse than enter into an integrity agreement with the OIG, and for this reason the mere existence of one should not impugn a company’s reputation. To the contrary, acquiescence to the OIG should be a positive factor upon which to assess an institutional moral compass, especially when one considers the consistency with which the OIG unveils its regulatory direction each fiscal year.

With the release of its 2015 Work Plan, the OIG not only reminds health care providers that change is inevitable, it implies that resistance is futile, and an active compliance program would be wise to incorporate most if not all of its annual directive. For hospitals in particular, acquiescence with the OIG’s Work Plan has a strong reputational nexus, albeit a subtle one at times. For example, a cursory review of the ways in which hospitals treat patients on the cusp of an inpatient admission may not always allude to corporate compliance and reputation, but in fact this hot topic in health care addresses the core of modern American health care. At the eye of the storm commonly known as Recovery Audit Contractors (“RACs”), in 2014 the Centers for Medicare & Medicaid Services released its “Two-Midnight” rule in an attempt to define and clarify that specific period during a hospital stay when the patient transitions from outpatient to inpatient status. CMS attempted to bring clarity from chaos on this subject by introducing the presumption of inpatient status for an admission with an expected stay lasting two midnights or longer. While initially setting aside three months for education of this new policy, it took an additional nine months before implementation began on October 1, 2014. As the confusion over the Two-Midnight rule continues, the OIG has shifted its focus to the impact of these criteria on hospital billing, Medicare payments and beneficiary copayments. Convinced that hospitals received millions of dollars in overpayments due to short hospital stays improperly billed as inpatient admissions, the Work Plan concludes that when care is expected to last fewer than two midnights, the hospital stay is to be considered outpatient. To make sure its message is clear, the OIG reminds hospitals that this new criteria is “a substantial change in the way hospitals bill for inpatient and outpatient stays.”.

On the surface, the link between the OIG’s recent attention to a hospital’s governing body and institutional reputation may not be obvious. Scrutinized in accreditation by Joint Commission, among other entities, and certification by Medicare, not to mention the subject of state lawsuits around the nation, a hospital’s medical staff may not need added regulatory oversight. Nevertheless, in its Work Plan the OIG notes it will evaluate the hospital process of granting privileges for those institutions participating in Medicare. Federal law requires Medicare-certified hospitals to organize their medical staff, complete with appropriate bylaws approved by a hospital’s governing body. This same governing body must protect Medicare by holding health care practitioners accountable for quality of care. “Robust hospital privileging programs contribute to patient safety,” the Work Plan concludes, echoing the same patient safety topic on which public opinion places such an important emphasis.

Finally, even cutting edge technology has not escaped the watchful eye of compliance. While understanding the nuances of the 1996 Health Insurance Portability and Accountability Act (“HIPAA”) and the 2009 Health Information Technology for Economic and Clinical Health (“HITECH”) is no easy feat, health care providers should be mindful of the federal regulations requiring a contingency plan in the event of an emergency or other significant occurrence. Elements of data backup, disaster recovery and emergency mode operation plans will soon be compared with government and industry recommended practices as the OIG weighs in on a new area of compliance. While the OIG may hope that this particular item of compliance is never put to the test, those health care institutions that fail to meet such a challenge should a crisis occur will undoubtedly invoke the ire of the court of public opinion.

To be sure, health care entities that commit falsehoods in secret may not suffer the same injury to reputation as the target of a public federal inquiry. But those health care entities that do good each day thanks to a successful and robust compliance program designed to identify and isolate that which is typically considered bad practice stand a better chance of maintaining a positive public reputation. Let’s face it, remaining in good standing with the OIG and the public makes good ethical and business sense, especially when it comes to the provision of health care in today’s evolving market.