Research Hospitals in the Compliance Hot Seat May 23, 2006 By Richard Merli Managing Editor, Health Care Insider Major hospitals have become the target of federal investigators over the failure to address the misuse and misappropriation of medical research funds from the government. The problem -- which industry observers say is endemic in research -- has caused hospitals to overhaul their compliance policies and add oversight. But it has also created more paperwork and administrative duties for researchers, some of whom are much-sought-after superstars who will grouse at the additional burden. The stakes for proper compliance are enormous. Not only does a research institution face criminal prosecution and loss of reputation in such cases, but a scandal-tainted hospital is much less likely to get federal funding in the future. Hospitals have only recently started implementing robust compliance programs and accounting controls. "It is not simply a matter of inaccurate accounting for time and effort by researchers; there has been a conscious conversion of research funds to purposes other than those for which they were intended," says Jim Sheehan, associate U.S. Attorney for the U.S. Attorney's office in Philadelphia. "Simply, it is a failure to do what was supposed to be done with the funding." Research spending by the National Institutes of Health (NIH) has reached $20 billion a year, more than double the level from 1999.

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But if a 2005 survey by HealthPartners Research Foundation and the University of Minnesota is any indication, the misuse or misappropriation of federal research funds is deeply entrenched. The survey of 3,300 research scientists found that more than half of research scientists used funds designated for one project on a different project. Issues with federally funded research have come to a head the past three years, when a wave of research scandals started to break and the federal government began announcing a string of major settlements with research hospitals and institutions over the misuse of taxpayer funds. "Some academic and teaching hospitals are receiving hundreds of millions of dollars a year in grant money and have to do a much better job of accounting for how their research personnel allocate their time and effort and spend grant money," says Ken Zeko, a manager for KPMG Forensic in Dallas. Since 2003, Johns Hopkins University, the Mayo Clinic, Cornell University's Weill Medical College, Northwestern University, and the University of Alabama at Birmingham have agreed to civil settlements over the misuse of NIH research funds. In one recent example, in June 2005 Cornell Weill in New York agreed to pay $4.4 million to settle government charges that it had used funds from a $23 million NIH grant on the study of adults, rather than conducting studies of children's diseases. Zeko says that government prosecutors have become more successful in winning large settlements from hospitals. "The number of cases has reached a critical mass," he says. "The government has become more adept and comfortable with prosecuting these types of cases."

Both the number and size of government settlements have been increasing as whistleblowers aid the government in fraud investigations, Sheehan says. Whistleblowers can receive as much as 20 percent of the total amount of any settlement. "The audit and compliance functions of research institutions need to be more robust, stronger and regularly applied," Sheehan says. "It's not sufficient just to have a compliance process. The director of that program needs to have real clout." But rooting out violations of research grants also requires changing the culture of medical researchers, who traditionally loathe strict controls over their time and research efforts. "It is a tough challenge for research institutions everywhere to accurately track the time and efforts of its researchers, who are often working on more than one project at a time," says Alan Cubbage, vice president of university relations for Northwestern University in Evanston, Ill. "Tracking and documenting time and effort is not the most exciting task for a researcher; it's an administrative task," Cubbage says. "But then again, the costs of non-compliance are self-evident." Since hospitals are reluctant to alienate top research personnel over compliance matters, they must be willing to help lessen the burden. Northwestern developed and implemented a Web-based time-reporting tool for researchers to account for time and efforts spent on grant projects. A project manager also oversees the amount of time and effort spent on research. Northwestern has also revamped its compliance program since February 2003, when it reached a $5.5 million settlement with the government involving researchers who spent less time on NIH-funded projects than reported. The school now has an advisory committee review the use of research grants "from top to bottom," Cubbage says.

 "We took significant steps to improve our compliance processes to avoid a repeat of this conflict." In the same vein, Weill Cornell Medical College has appointed an assistant dean of research compliance, who coordinates and provides oversight for the research compliance program, according to Cornell spokesman John Rodgers. In addition, the institution has formalized policies and procedures for all research and financial management processes, while developing "an enhanced, vigorous" research training program for researchers, Rodgers says. Dr. Eric J. Topol, chairman of the Department of Cardiovascular Medicine and Professor of Medicine and Genetics at Case Western Reserve University in Cleveland, says that following the series of government investigations, medical researchers have had to dedicate more time and attention accounting how research dollars are spent. Topol oversaw an annual budget of $400 million and 1,000 employees in research and education at the Cleveland Clinic in his previous work. "No doubt there is more time spent tracking and dedicating resources to audit personnel effort," Topol says. "Researchers have had to spend more time and attention on how research dollars are utilized." But any robust compliance program must go beyond merely developing compliance guidelines, according to KPMG's Zeko; it must incorporate a comprehensive risk assessment and risk management process and "take a 360-degree look at the institution's global compliance risks and needs." # # # "Richard Merli is the managing editor of KPMG Health Care Insider, a daily electronic newsletter covering the global consumer markets industry. KPMG Health Care Insider can be accessed at "Article reprinted from KPMG Health Care Insider with permission of KPMG LLP. ©2006 ICPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved." "All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the facts of a particular situation." NextMore on Bank Fraud


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