Columbia fraud case

Accounting firms likely to be more independent

With the Big Eight accounting firm KPMG accused in a high-profile fraud case, accounting firms are going to be much more rigorous with cost reports from hospitals. Don’t be surprised if you encounter more hassles from your consultants as a result.

KPMG is a very well-known accounting firm, one of the big ones that other firms look to for guidance and trends. As KPMG is added to the bonfire of the Columbia/HCA scandal, you can bet that other accounting firms will take a more skeptical approach to working with hospitals, says Stephen Meagher, JD, an attorney with Phillips & Cohen in San Francisco.

Going along to get along

Meagher says that, for years, accounting firms have played along with hospitals in their efforts to maximize reimbursement and have not made the effort to put up roadblocks when the hospitals got too aggressive. That is likely to change, he says. "In the past, it’s been a very service- oriented, make the client happy, maximize the reimbursement type of market," Meagher says. "Now that KPMG is the subject of a lawsuit, and Columbia is pointing fingers as part of its defense and saying KPMG approved everything, you’re not as likely to see that service with a smile and the customer is always right’ attitude."

To those outside the mysterious world of industry accounting, it may seem surprising that accounting firms were willing to go along with a client’s efforts to maximize reimbursement in ways that were questionable at best. Meagher compares the practice to an individual taxpayer who asks his accountant to prepare one return for the government showing little income and another showing actual income that can be used to obtain a bank loan.

"No reputable accountant would agree to do that sort of thing for an individual, but you had major accounting firms giving that sort of thing an air of legitimacy for hospitals," Meagher says. "You’re not so likely to see that with hospitals anymore, now that accounting firms have seen what can happen."