Is it Really Cheaper to Defend?
- Reid Pearlman, JD, CCEP
- Sep 7, 2018
- 3 min read

Much of the work I do is reactionary. For instance, I work with companies to support the implementation and administration of their OIG CIA’s (aka corporate integrity agreements with the Office of the Inspector General of the U.S. Dept of Health and Human Services), which often result after a U.S. Dept. of Justice prosecution and settlement of a healthcare fraud case. This typically follows a lengthy DOJ investigation (usually a few years) that involves FBI and/or DEA agents interviewing staff, big productions of documents and interrogatory requests, along with all of the attendant defense costs, which could easily run into hundreds of thousand of dollars a year. If all goes well (relatively speaking) then there is a three to five year CIA (with five becoming the standard these days) to deal with.
To those who would say this is just a cost of doing business, or that they will take their chances because they think the risk of regulatory enforcement is remote, I say, based on my experience, you’re flat out wrong. Quite the contrary. As someone who has spent the last twenty years working inside of healthcare, I would say proactive compliance activity is downright cheap insurance. I base this conclusion on a few observations. First, even an only somewhat serious compliance program is likely to detect a significant issue, and the cost of fixing it, even if it can’t be prevented altogether, is likely far less than if a regulator or contractor finds it, let alone a whistleblower (who will be handsomely rewarded for disclosing what are often open secrets at their companies anyway). Second, it is misguided to believe that simply having something that you call a compliance program is actually going to mitigate the damage of the issue. I am referring to superficial programs, where there’s often no material involvement by anyone of authority, no resources, and no auditing of anything that might even potentially have significant financial impact. This is because the regulators have become quite adept at distinguishing between hollow programs, and those designed to actually find, fix and prevent problems.
Third, the final results of such ‘big surprises’ have lots of downstream consequences beyond the obvious hard costs. One organization I worked with saw the unexpected departure of its founding leader (who seemed to be burned out by the litigation and who may also have lost the trust and confidence of his stakeholders), and whose next generation of leadership quickly opted to take the safe route and sell off the company, though it had been a model of entrepreneurship before the litigation. Indeed, when these matters come up, business plans and careers can be and are derailed, and excellent, hard-won reputations are destroyed. All over mostly preventable issues.
Don’t get me wrong. I’m not suggesting that companies should take the high road to pursue saintly, unrealistic ethics. No, companies should have preventative programs in place because they are thoroughly practical, make good financial sense (in risk-benefit analysis terms), and let everyone sleep at night. This means providing leadership support and resources so that your program will actually be effective. Or getting a gap analysis or program review done by an independent expert every few years to see if you’re overlooking anything major (i.e., not to go looking for something that isn’t there but to acknowledge that you don’t know what you don’t know). In short, every company deserves to know what its true risks are. Which is, of course, different from already knowing what your risks are and deciding to take your chances anyway.
Again, to those who say, it’s cheaper to defend (and with all due respect to my defense counsel brethren), I would reply: no, it really isn’t. It’s way cheaper to avoid these train wrecks. Financially, emotionally, professionally, and in every other conceivable way. And now, as we look ahead to the final quarter of 2018 (yes, already) and begin making plans for next year, it's a great time to consider getting a gap analysis, program review, or starting another compliance effort (like refreshing a stale training program).
Reid Pearlman is an attorney and healthcare Principal-Consultant with True Compliance Consulting, LLC. He welcomes inquiries regarding gap analyses, program reviews or any other healthcare regulatory or compliance issues. Reid may be reached at Reid@MyComplianceOfficer.net.
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