New Evidence Shows the Efficiency and Benefits of Using an Internal Compliance Hotline System



Whistleblower Hotline System
New Evidence Shows the Efficiency and Benefits of Using an Internal Whistleblower Hotline System


(April 4, 2019):  In December of 2018 a study was conducted by Kyle Wench (George Washington University) and Stephen Stubben (University of Utah) to examine the use and extent of internal whistleblower hotline systems within publicly traded organizations. This study was the first of its kind. This kind of study had never before been conducted in the academic field. Their goal was to “… provide the first empirical examination in the academic literature of the determinants of an outcomes associated with the use of internal whistleblowing systems”.[1] While all publicly traded companies are required by the 2002 Sarbanes-Oxley Act to employ an internal reporting system (such as a “Compliance Hotline”), whether this internal whistleblower hotline is really used or just there to fulfill the requirement was not fully known prior to this study.  


Overview of this Landmark Hotline Study:


Wench and Stubben’s study was conducted by examining proprietary data derived from over 1.2 million internal whistleblower hotline reports filed within over 900 publicly traded firms inside the U.S. to “provide the first empirical examination in the academic literature of the determinants of and outcomes associated with the use of internal whistleblower hotline systems.” This study led them to want to answer two main questions. The first being, what firms are likely to actively use and internal whistleblower hotline system. The second being what the correlation was between the use of an internal whistleblower hotline and concomitant litigation.

This study used information and reports from a third-party internal whistleblower system. They examined a small amount of reports from hundreds of organizations and assessed a few aspects of each report. Those aspects being when the report was filed, who received the report, the type of complaint (whether it was harassment, unethical business practices, theft, or financial reporting issues) and finally the amount of times the report was accessed and viewed in the system.

What is an Internal Whistleblower Hotline System?

An internal whistleblower system is a method of reporting misconduct and fraud within an organization while remaining anonymous. This should be compared to the traditional way of reporting and monitoring which is usually external and involves a corresponding government agency. By having an internal whistleblower hotline, an organization provides its employees with a secure platform for reporting issues and allows those in management to become aware of problems quicker than they traditionally would have issues identifying. There are many different forms of internal whistleblower hotline but the most common and efficient is the ComplianceHotline.

Having an internal whistleblower hotline might be required in many cases, especially for a publicly traded organization, but its benefits also are what drives many organizations to establish one. Without an internal whistleblower hotline, employees may not choose to report fraud or misconduct to management for a number of reasons, the most important being the lack of anonymity. This can lead an employee to reporting fraud or misconduct to an external third party such as a government agency or even worse, not reporting the fraud or misconduct at all which can lead to much larger issues down the road. However, when it is reported to an internal whistleblowing system, management can address the issue that was reported and resolve it early before it becomes too large to manage or attracts the attention of a government agency.

Why Use a Compliance Hotline?

Compliance Hotlines are consistently chosen as the preferred method of internal whistleblowing. Unlike the traditional system of reporting issues to human resources or management, a compliance hotline protects the whistleblower. By having the choice to report something anonymously, the whistleblower can remain anonymous. With traditional methods of reporting misconduct, employees run the risk of retaliation which might include being reprimanded from their superiors, being judged and looked down upon by their peers and colleagues, and in some instances, losing their jobs. By placing an anonymous call to a third party internal compliance hotline, you can guarantee that the reported incident or misconduct is being directed to the appropriate parties and that it is dealt with promptly.

Reporting System / Compliance Hotline Findings:

The findings done with this study have been groundbreaking to say the least. Wench and Stubben first noticed that there was a large variation in how different organizations actually used their whistleblowing systems. They found that over time there was an overall increase in the use of whistleblowing systems and more specifically that while larger organizations had more reports, the companies that used their internal whistleblower hotline the most were more profitable, older, and had fewer employees. [1]They also note that companies that are growing at a rapid rate were less likely to use an internal whistleblower hotline.

Whistleblower hotlineWench and Stubben also found that companies with a greater amount of discretionary accruals did not use their internal whistleblowing systems compared to their counterparts. This could possibly be a reflection that more consistently used whistleblower hotline aids in the prevention of earnings management or that the companies that manage earnings choose to not promote or use their internal whistleblower hotline. “In addition, firms with stronger internal controls are more likely to actively use their internal whistleblowing systems. Finally, based on a subset of our sample in the S&P 1500, we find that firms with weaker corporate governance, as captured by the Bebchuk, Cohen and Ferrell (2009) entrenchment index, are less likely to actively use their internal whistleblowing systems.” [2]

Further, they discovered that organizations that had more active use of their internal whistleblower hotlines had consistently fewer material lawsuits filed against their organizations and significantly smaller settlement amounts. In a 3-year span, the found that with “a one standard deviation increase in the use of an internal whistleblowing system is associated with 6.7% fewer pending lawsuits and 21.1% less in aggregate settlement amounts.”[3]

While an increase in internal whistleblowing systems is associated with improved litigation results. With an internal whistleblowing system functioning as a tool for discovering and resolving issues before they become too large or costly, organizations that have them established and used are finding themselves in a much better position than organizations that don’t.

How Can You Effectively Employ a Compliance Hotline?

Overall the results showed that having an internal whistleblower hotline saved organizations from external whistleblowing which results in saving money over litigation and also creates a culture based on ethical responsibility. Through the findings in this study, Kyle Wench and Stephen Stubben were able to conclude that the involvement of an outside whistleblower hotline (ex. OIG, DOJ, SEC etc.) was associated with huge penalties resulting from investigations brought up by tips to these hotlines while internal whistleblower hotlines made these issues significantly easier and less expensive to deal with. By using an internal whistleblower hotline like the Compliance Hotline, an organization can save themselves millions by lowering the risks of misconduct, fraud, and reports of unethical business practices reaching government agencies.

Final Thoughts

Having an internal whistleblower hotline isn’t always easy to setup and manage. The most advantageous solution for these situations is an internal whistleblowing system that is available 24×7 that is confidential, anonymous and managed by a third party like www.ComplianceHotline.com

The use of an effective compliance hotline can better ensure complainant anonymity and confidentiality. Sometimes employees are scared for their jobs to report misconduct or unethical business practices straight within their organization so a third-party managed internal whistleblowing system usually gives these employees the comfort they need to be able to report these issues. The folks at ComplianceHotline.comare used to working with large profile clients as well as smaller organizations and help them meet their compliance needs. Our hotline is completely confidential and has helped organizations avoid costly litigation and helped their clients feel safe and comfortable in their work atmosphere knowing that incident reporting is as easier as a phone call or opening a new tab on their web browser.

For a free consolation, give us a call at (800)-294-0952, or fill out the form below. Make sure to check out their website, www.ComplianceHotline.com.

 




[1] Stubben, Stephen and Welch, Kyle T., Evidence on the Use and Efficacy of Internal Whistleblowing Systems (December 1, 2018).

[2]Stubben

[3]Stubben, Stephen and Welch, Kyle T., Evidence on the Use and Efficacy of Internal Whistleblowing Systems (December 1, 2018).

[4]Stubben,

How Compliance Hotlines Can Save You Money!

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Compliance Hotlines

By Paul Weidenfeld, March 4, 2016.  An essential element of all compliance plans is developing and promoting “effective lines of communications.” In support of that element, Health and Human Services Office of Inspector General (HHS/OIG) has been urging providers to adopt anonymous compliance hotlines since 1998. CMS, on the other hand, actually requires that Fee-For-Service Contractors (by its 2005 Guidance), and Managed Care and Prescription Drug Contractors (through manual provisions) have “mechanisms that permits anonymous reporting.”

But many providers, while complying, view hotlines with suspicion. They fear that a “successful” compliance hotline might incentivize “whistleblowers” and ultimately result in additional risk and cost to their organization. Though understandable, this fear is misplaced. Properly implemented and supported, hotlines provide valuable support to compliance plans and overall risk management programs. Rather than increasing risk and costing money, compliance hotlines demonstrably decrease risk and save money. Here’s how:

 

Tips are the Most Common Means of Detecting Fraud

Fraud accounts for an estimated 10% of healthcare spending (almost $1 Billion in 2013). The best way to reduce fraud’s impact is through early detection and quick resolution. According to a recent report on occupational fraud by the Association of Certified Fraud Examiners (ACFE) “tips” are easily the most common means of detecting fraud. It found that over 40% of all cases were detected by a tip — more than twice the rate of any other detection method – and as the percentage of detections by tip increases, detection by other, external means decrease.

The Importance of Compliance Hotlines in Generating Tips

The ACFE report referred to above also looked at the impact of compliance hotlines on generating tips and it found that companies with compliance hotlines discovered fraud through tips 51% of the time as compared to 33% for companies that didn’t have a hotline. Not surprisingly, the companies without compliance hotlines also had higher rates of detection through other means such as external audits and law enforcement. Several factors are cited for the disparity, but the principle reason is the anonymity and confidentiality afforded by hotlines. Indeed, it was reported that 60% of all employee tips were anonymous.

Why Detection by “Tip” is Important

In addition to being the most common means, tips are the most cost-effective way of detecting fraud by external means. Several factors contribute to this, but the report found a significant difference in results for frauds detected by tips as compared to any other external detection method. For example, the median duration and cost of a fraud discovered by tip was 18 months and $150,000, whereas frauds detected by external audit or by accident lasted at least a year longer and cost over twice as much to resolve. Matters detected by law enforcement, a worst case scenario, lasted 30 months and cost $1,250,000!

Compliance Hotlines Don’t Create “Additional” Problems

It is unrealistic to think that issues identified though a hotline would have “fixed themselves and gone away” or, perhaps, never have been found. More likely, the problem would continue unabated until it was discovered by accident or it was picked up by an audit (hopefully, an internal one), or until an employee who would have reported it lost faith in the organization’s ability to deal with the problem and aired his concerns outside the organization – perhaps to law enforcement, perhaps to a lawyer or maybe to both. Regardless, once a problem reaches that point, it is outside the control of the organization. Thus, any resolution will be a long time coming and expensive when it gets there!

Conclusion

Compliance Hotlines save organizations money. By increasing the number of tips, organizations can learn about more problems. This gives them the ability to respond to them sooner and fix them faster. Therefore, small problems won’t become big ones – and big problems can be managed before they become disasters!

Give us a call at 800-294-0952 or fill out the form below to hear how our cost-effective compliance hotline system can save your organization money!


Follow us on twitter to get all the latest news and updates on exclusion and compliance! https://twitter.com/@exscreening/

 

OIG Exclusion

Paul Weidenfeld is the CEO of Exclusion Screening, LLC and co-founder with Robert W. Liles. Both Paul and Robert are long time health care lawyers and both were also former Health Care Fraud Coordinators for the Department of Justice. Call or contact Paul today at paul.weidenfeld@www.exclusionscreening.com, or at (800) 294-0952 if you have any questions.

Auditing a Compliance Hotline Provider

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Compliance Hotline Auditing

Under the Affordable Care Act, medical service providers must establish compliance programs to enroll in the Federal health care programs. HHS has neither issued regulations on the core requirements of these compliance plans nor set a date for mandatory compliance. Providers, however, should consider adopting a compliance hotline program prior to the mandate not only because a requirement is imminent, but also to prevent fraud and demonstrate good faith.

Elements of an Effective Compliance Program

One of the seven elements of an effective compliance program is developing open lines of communication. CMS recommends that lines of communication run in multiple directions and include a process for anonymous reporting to provide an outlet for employees who may fear retaliation.

Many providers utilize an outside vendor to facilitate anonymous reporting. If you elect to use an outside vendor, you should choose a well-managed hotline that is focused on the health care sector. In addition, your organization should periodically audit the hotline to measure its effectiveness.

Considerations of a Compliance Hotline Auditing

When auditing a compliance hotline vendor you should consider (a) does the hotline have established policies and procedures, (b) how is the hotline managed, and (c) does the hotline meet its goals.

Some questions you might use to review the hotline’s management, operation, and effectiveness include:

  1. Does the hotline follow its established policies and procedures?
  2. Do the policies discuss how to document and follow-up calls?
  3. Does the hotline act on calls and/or emails promptly?
  4. Does the hotline follow up with callers who provide contact information?
  5. Are hotline administrators properly trained to answer calls and ask appropriate questions?
  6. Does your department tasked with reviewing hotline reports receive reports in a timely manner?
  7. Are the reports provided by the hotline detailed enough to allow your organization to follow up and investigate?
  8. Is caller anonymity being protected?
  9. Are hotline files protected?

In addition, you should also evaluate your office’s internal use of the hotline by considering the questions below.

  1. Are employees aware and reminded that the hotline is available?
  2. Does the department tasked with handling reports follow up properly?
  3. Are your employees using the hotline?
  4. Do employees seem confident about the effectiveness of the hotline?
  5. Does the department handling hotline reports file and protect reports appropriately?

If you answered “no,” to one or more of these questions, it may be time to consider a new vendor. Call Exclusion Screening, LLC today to discuss our ComplianceHotline, which is staffed by Certified Medical Compliance Officers, today at 1-800-294-0952.

Compliance Hotline Auditing

Ashley Hudson, Associate Attorney at Liles Parker, LLP and former Chief Operating Officer for Exclusion Screening, LLC, is the author of this article.

Why Timeliness Matters: From Hotline Tip Identification to Provider Case Closure

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ComplianceHotline – Best Practices

ComplianceHotline delivers reports to its clients one business day after it receives a call or e-mail from a complainant. What happens after the information is transferred is really up to a provider’s discretion. Best practices include following up with the complainant—if he or she provided contact information—or conducting an internal investigation. Regardless of the approach, it is imperative that the provider investigates a hotline tip in a timely manner. Failure to do so could hurt morale or potentially lead to a whistleblower suit.

According to a study published in the New England Journal of Medicine, nearly all whistleblowers raised their concerns internally first. Employees typically resorted to qui tam litigation only after it became apparent that mid and upper-level management were merely brushing their concerns aside. Some employees also resorted to whistleblower action for justice or integrity purposes. Others blew the whistle because they anticipated that the issue could negatively impact their careers.

In addition, according to a study conducted by NAVEX Global, the average number of days it takes a company to investigate and solve a case which was brought to light by a complaint has increased steadily over the past four years. The average case closure time in 2014 was 39 days. In comparison to 2010, it was only 32 days. Thirty-nine days is not likely an offensive amount of time to resolve a complaint. However, if an employee gets the sense that management is dragging its feet, or worse, totally ignoring the issue, then the company could be facing a much larger problem.  

What This Means

Utilizing a hotline service like ComplianceHotline is an excellent part of an effective compliance plan. The hotline, however, is a portion of the solution and it is critical that providers do not disregard tips they receive through the hotline. Providers should act swiftly and thoroughly to resolve the issue and ensure that their employees understand that the provider fosters compliance.

Contact The Compliance Hotline today for a free consultation by calling 1-800-294-0952 or by filling out the form below.

 



 

Ashley Hudson

Ashley Hudson, Associate Attorney at Liles Parker, LLP and former Chief Operating Officer for Exclusion Screening, LLC, is the author of this article. 

Anonymous Compliance Hotline Reports – Friend or Foe?

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In the compliance world, anonymous tip lines are touted as a simple and effective method to ensure that providers receive pertinent information about wrongdoing within their offices.  Compliance professionals, however, have divided opinions about the trustworthiness of anonymous compliance hotline reports. An argument in favor of an anonymous reporting option is that it provides an avenue for employees who fear retaliation. A criticism is that anonymous reports may be inaccurate or frivolous. Recent reports shed light on this interesting issue.

The Compliance Report Numbers

According to a 2014 Helpline Calls and Incident Reports survey conducted by the Society of Compliance and Ethics, 39% of compliance professionals reported that anonymous reports were substantiated at the same rate as named reports. Nine percent of respondents found that anonymous reports were substantiated more often than named reports. However, another 35% reported that they were substantiated less often than named reports. The 2015 Hotline Benchmark Report by NAVEX Global adds some clarity to these somewhat contradictory results. According to its data, anonymous reports were substantiated 36% of the time, or 9% less than reports from named individuals. The NAVEX report notes that the gap in substantiation between anonymous and named reports has actually remained at 9% during the last four years. It further goes on to suggest that the gap may be due to an investigator’s inability to follow-up anonymous reports.

Takeaways

An anonymous reporting option is a valuable tool available through ComplianceHotline and will enhance a provider’s compliance program. These reports may be substantiated at a slightly lower rate than named reports. Still, this is not necessarily due to nonsensical reports. Furthermore, capturing issues through both named and anonymous reports ensures that a provider is aware of all issues and may help to keep lawsuits at bay. Call Exclusion Screening, LLC today to enhance your compliance program with our ComplianceHotline solution at 1(800) 294-0952.

Compliance

Ashley Hudson, Associate Attorney at Liles Parker, LLP and former Chief Operating Officer for Exclusion Screening, LLC, is the author of this article.

Why Do I Need a Compliance Hotline?

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Compliance Hotline ReportingOne of the seven steps to an effective compliance plan is to develop effective lines of communication. While it is important to foster open lines of communication within your practice, many employees may fear retribution. Hence, they may feel more comfortable reporting complaints anonymously or at least to a third party vendor. Fortunately, providing an outside reporting mechanism such as the hotline offered by Compliance Hotline is an extremely cost effective solution. Within this article we will address some of the benefits of outsourcing your compliance hotline.

I. Minimize Risk by Fostering Confidential Compliance Hotline Reporting

Under Sarbanes-Oxley, certain whistleblowers are protected from employer retaliation for reporting instances of fraud. This provision permits an employee to file a complaint with the Secretary of Labor if he is discriminated against for “blowing the whistle.” However, many employees may not be educated about this law, or may still fear retribution. Therefore, they may not file a report to an internal department. By providing an outside confidential report line, like Compliance Hotline, your employees will be more comfortable reporting issues. You will also become aware of any lurking issues within your practice more quickly.

II. Protect your Practice from Fraud and Liability with the Compliance Hotline 

According to the Association of Certified Fraud Examiner’s Report to the Nations, tips are the most common mode of detecting fraud cases within organizations. Tips have a 40% fraud identification rate. Internal audits and management reviews follow as the second and third best detection methods. They have 15% and 13% identification rates, respectively.

Companies that utilized hotlines reported that 46% of fraud cases were reported as tips. However, only 10% of cases were discovered through internal audits, and merely 3% of cases were detected through surveillance/monitoring. Companies who did not provide hotlines had more abysmal numbers, identifying only 30% of fraud cases through tips.

ComplianceHotline powered by Exclusion Screening, LLC is a cost effective way to ferret out and minimize fraud within your practice. Contact us today at 1-800-294-0952 or online for a free consultation so that you can resolve any potential fraud issues before they get out of hand.

Read more about How Compliance Hotline Can Save You Money

Compliance Hotline Reporting

Ashley Hudson, Associate Attorney at Liles Parker, LLP and former Chief Operating Officer for Exclusion Screening, LLC, is the author of this article.