Julie O’Brien works for Optum Health in the compliance division. She graduated from Seattle University School of Law’s MLS in Compliance and Risk Management in December 2022, completing a capstone project that evaluated the effectiveness of a corporate compliance program in the merger and acquisition space within the healthcare industry. This blog will dive into her capstone and discuss why her work is vital to the compliance industry, as well as offer insight into the significance and purpose of every Seattle University student’s capstone project.
Choosing the Capstone
As part of Seattle University’s MLS in Compliance and Risk Management program, students undertake a capstone project that synthesizes their learning into a comprehensive paper or project, showcasing their competence in compliance. For a detailed overview of the capstone course, see our first article in this series.
Julie chose this topic for her capstone because it is a significant area of risk, given the extensive merger and acquisition activity within the healthcare space
Julie chose this topic for her capstone because it is a significant area of risk since there is much merger and acquisition activity within the healthcare space. One of the courses was with Professor Alanna Kroeker, and she had her students craft a checklist for a merger and acquisition. “I love it. I went above and beyond. Putting that list together really synthesized everything I’d learned from other courses at Seattle University up until that point.” The knowledge gained in classes with professors DiMarino, Wilson, and Racki all contributed to her capstone.
Julie realized that a key concept linking the information was issue-spotting. “I think that’s the big thing that I took away from my time at Seattle U; understanding where the pitfalls are and how to get some controls in place to prevent them. The capstone was the culmination of all the things I’d learned in each of the different courses around issue-spotting, put in a checklist for use at the mergers and acquisitions table.”
Liability and Due Diligence
A big part of that risk, especially in the healthcare space, is around successor liability. “Anytime you see something from the Department of Justice with your company’s name on it, it sort of strikes fear into your heart,” she laughs, luckily never having experienced that precise fear herself.
She shows an example of a case where Genesis Healthcare had acquired four entities, and, through a faulty due diligence process, missed significant problems within those programs. There were whistle-blower cases that eventually came out post-acquisition, unnecessary billings, and grossly substandard nursing care. Because of the inadequate due diligence, even though Genesis was not the perpetrator of these errors, it had to pay for the issues that went back as far as 20 years.
The guide that she chose to create was fashioned around the seven elements of an effective compliance program as published by the OID.
- Written Policies and Procedures
- Compliance Leadership and Oversight
- Training and Education
- Effective Lines of Communication with the Compliance Officer and Disclosure Program
- Enforcing Standards: Consequences and Incentives
- Risk Assessment, Auditing, and Monitoring
- Responding to Detected Offenses and Developing Corrective Action Initiatives
Preventing Risk
Julie’s capstone performed a deep-dive to figure out what they could do to prevent risk in the mergers and acquisitions cycle. The key is to use this checklist before signing the dotted line. Taking these steps will help determine if the merger or acquisition is a good fit. “Being this methodical and detailed in that review can help you make the right decision.” If, after review, the higher-ups still want to buy an entity with red flags, the guide can be used to help remedy those areas of concern.
It is important to distinguish whether the entity disclosed or tried to conceal these issues. If an organization attempted to conceal information with intent towards fraud, then there may be a criminal element added to the bigger picture. If the concealment was instead an act of negligence, and the organization perhaps overlooked information, then it is left up to the acquiring company whether or not to move forward with the acquisition.
Julie provides a glimpse at the checklist, which comes with diagrams, topics, guiding principles, and crucial elements. A series of questions helps the compliance professional dig in and review those areas of the program. A 50-page guide that goes along with the checklist further explains the code of ethics and prompts a better understanding of the code. Altogether, organizations can use the list before and after a merger or acquisition, then use it again, with any additional notes and updates, for the next transaction. It’s an evolving and customizable document that welcomes cooperative effort. “It’s about that repeatable process and documentation that makes it so successful.”
For more information about the SU capstone, read this blog!