Goodfellow & Perkins gained a new client, Brookwood PinesHospital (BPH), a private, not-for-profit hospital. The fiscalyear-end for Brookwood Pines is June 30. You are performing theaudit for the 2023 fiscal year end, and the audit is currently inthe risk assessment phase. The healthcare industry can be verycomplicated, especially in the area of billing for servicesprovided. BPH contracts with private physician groups who use thehospital facilities, equipment, and nursing staff to treatpatients. The physicians in the private group are not employees ofthe hospital; they are simply using the hospital facilities totreat patients. For example, a group of urologists have their ownpractice, separate from the hospital, where they treat patients. Ifone of these patients needs a surgical procedure that must be doneat a hospital, then the attending urologist will approve thepaperwork required to admit the patient to BPH. BPH offersinducements to the urologists so they will refer patients to BPHrather than a competing hospital. One of the inducements BPH offersis free office space in the hospital for the doctors to use whenthey are treating patients in the hospital. After the doctor andhospital services are provided to the patient, the patient and/orthe patient’s insurance company is billed. The doctor will bill forthe services he or she provided, and the hospital will bill for theuse of hospital facilities and staff. Doctors and hospitals billusing a coding system that is standardized across the healthcareindustry and consists of three main code sets: ICD, CPT, and HCPCS.Using a coding system is more efficient and data-friendly comparedto writing a narrative about the procedures performed. However, thecoding system is very complex, with thousands of different codesfor medical procedures and diagnoses. To complicate matters evenmore, for patients who are covered by government-sponsored Medicareor Medicaid, doctors and hospitals must adhere to complicatedgovernment regulations surrounding billings to Medicare andMedicaid. As healthcare costs continue to rise each year, BPHadministrators struggle to maintain consistent profitability. Theylook for ways to keep costs low and also to collect outstandingpayments from patients and insurance companies as quickly aspossible. In addition, BPH must have a strong risk management teamto handle unique situations that may occur in hospitals such asmalpractice lawsuits and periodic inspections by the stateregulators. Negative publicity for BPH could lead to decreasedrevenues if physicians decide to contract with a competinghospital.
a) Gather information: You have been assigned to evaluaterevenue from patients who are covered by government-sponsoredMedicare or Medicaid programs. What questions do you want to askabout BPH’s risk assessment controls?
b) Analysis: Assume that you are focused on the occurrence ofrevenue recognized from patients who are covered bygovernment-sponsored Medicare or Medicaid programs. What controlsdo you expect to be in place regarding this assertion?
