MHA 508 Week 4 Ethical Responsibilities of Health Care Leaders Example

The Bonus That Paid for Coding: Leaders' Ethical Duties When a Payment Target Reached the Nurses Who Assess Nursing Facility Residents

[Student Name]

University of Phoenix

MHA/508: The Regulatory Environment in Health Care

Week 4 Assignment

[Instructor Name]

[Date]

The nursing facility operator, its leaders, targets and decisions are composites written for a model paper; research findings and guidance come from the sources listed.

In February, the minimum data set coordinator at one of the fourteen buildings run by a composite Pennsylvania nonprofit nursing facility operator called the building's compliance liaison. Her administrator had asked her, three days before the assessment deadline, to go back through the charts of new Medicare residents and find more diagnoses. She wanted to know whether that was allowed. The liaison called the corporate compliance officer, and the question reached the chief executive within a day. This paper analyzes the ethical duties of the leaders involved.

The Incentive Behind the Request

The administrator was not acting alone. The previous fall, the regional vice president of operations had introduced a bonus plan that paid administrators up to 15% of salary for meeting targets, one of which was the building's Medicare case-mix index, a number driven by the diagnoses and conditions coded on residents' assessments. The administrator's building was below target.

Why Coding Carries Ethical Weight

Under Medicare's skilled nursing payment model, a resident's recorded diagnoses, conditions and functional status determine the daily payment. Accurate coding matters for payment and for care planning. Coding a diagnosis the resident has but that was missed is correct; coding one that is unsupported, or searching charts only for conditions that raise payment, is not.

How Strongly Payment Shapes Care

Research shows how quickly facilities respond to payment. Under the earlier model, payment rose with therapy minutes. When the 2019 redesign removed that incentive, therapy staffing fell: physical and occupational therapist hours dropped 5% to 6% and assistant hours about 10% within three months, concentrated among contracted staff (McGarry et al., 2021). A study of 201,084 admissions found first-week therapy fell about 12 minutes a day, or 13%, with no consistent significant change in readmissions or function at discharge (Rahman et al., 2022). When payment moved, therapy moved within a quarter, which tells leaders how fast staff respond to what the organization rewards.

The Lesson for This Case

If an industry's clinical practice shifts that quickly in response to payment rules, a bonus tied to case mix will shift coding within a single building. The regional vice president had built an incentive that pointed staff toward the payment number rather than the accurate record.

Principles in Conflict

Several principles apply. Honesty requires that records and claims reflect the truth. Beneficence and nonmaleficence require that coding serve residents' care rather than distort it. Justice and stewardship require responsible use of public funds. Respect for staff requires that no one be pressured to compromise professional judgment. The operator's duty to remain financially viable is real, but it does not justify pressure on the accuracy of assessments.

Legal Is Not the Same as Ethical

The administrator argued that she had asked only for accurate, supported diagnoses. Reviewing charts to capture missed conditions can be legitimate. But a review aimed only at payment, under a deadline, driven by a personal bonus, creates pressure that leads to overcoding, and the direction of the review, never looking for diagnoses that should be removed, revealed its purpose.

What OIG Expects of Leaders

OIG's guidance for nursing facilities treats quality as a compliance concern and expects the individuals responsible for the organization, including the board and senior leaders, to receive unfiltered compliance and quality information and to champion a culture of transparency. It also identifies Medicare billing, including the payment model, as a major risk area (Office of Inspector General, 2024).

Professional Codes

Professional codes for health care executives call on leaders to act honestly, avoid conflicts of interest, promote an environment where staff can raise concerns without fear and put the interests of those served above personal gain. A bonus that pays an administrator for payment codes places personal gain close to clinical records, which these codes warn against.

The Chief Executive's Decision

The chief executive acted in three ways. First, she withdrew the case-mix target from the bonus plan across all fourteen buildings, effective immediately, and replaced it with assessment accuracy measured by an independent audit, resident outcome measures and staff retention. Second, she asked the compliance officer to audit a sample of assessments at the building and two others to see whether coding had shifted. Third, she met with the regional vice president about the design of the plan.

Addressing the Administrator

The administrator received counseling rather than termination, since the incentive had come from above and she had not directed false coding. She was required to complete training and to meet with the coordinator to acknowledge that the question had been right to raise.

Protecting the Coordinator

The coordinator had done exactly what the program asks. The chief executive thanked her by name at the next leadership meeting, with her permission, and the compliance officer confirmed in writing that no retaliation would follow.

What the Audit Found

The audit of 90 assessments across three buildings found 6 diagnoses without adequate support, all coded after the bonus plan began, and 4 supported diagnoses that had been missed. The unsupported codes were corrected and the resulting overpayments returned to Medicare within the required time.

Why Speed Mattered

The chief executive acted within a week of the call. Every month the bonus plan stayed in place, more assessments would be completed under its pressure, and every building would learn from the delay how seriously leaders took the concern. A slow response, even a correct one, would have taught staff that raising a problem changes nothing.

The Regional Vice President

The regional vice president had designed the plan in good faith to improve financial results in buildings that were losing money. He had not consulted the compliance officer. The conversation with the chief executive focused on the process failure rather than blame: a metric that touched clinical records had been approved without anyone asking how staff might try to meet it. He now co-leads the review of incentive plans with the compliance officer.

Duties of the Board

The board's duty is oversight: to ask how results are achieved, not only whether targets are met, to review incentive plans for compliance risk and to hear directly from the compliance officer. The board's compliance committee now reviews every executive and administrator incentive plan before it takes effect.

Duties of Executives

Executives design the incentives, systems and culture. The chief executive's duty was to correct the incentive quickly and visibly, to accept responsibility for the plan her team had approved and to protect those who raised concerns.

Duties of Managers

Administrators and department heads translate goals into daily requests. Their duty is to refuse to pass on pressure that compromises accuracy and to raise concerns when a target seems to require it.

Building an Ethical Structure

The operator made four changes: incentive plans reviewed by compliance; accuracy audits in every building each year; ethics training for administrators focused on real dilemmas; and a quarterly message from the chief executive reporting concerns raised and how they were resolved.

Conclusion

The coordinator's question exposed an incentive that pointed staff toward payment rather than truth. Research on how quickly care changed when Medicare changed its payment model shows why such incentives matter. Applying principles of honesty, beneficence and stewardship, OIG's expectations and professional codes, the chief executive removed the incentive, corrected the records, protected the reporter and gave the board, executives and managers distinct duties. Ethical leadership in a regulated industry means designing systems in which doing the right thing is the easiest path.

References

McGarry, B. E., White, E. M., Resnik, L. J., Rahman, M., & Grabowski, D. C. (2021). Medicare's new patient driven payment model resulted in reductions in therapy staffing in skilled nursing facilities. Health Affairs, 40(3), 392-399. https://doi.org/10.1377/hlthaff.2020.00824

Office of Inspector General. (2024). Nursing facility industry segment-specific compliance program guidance. U.S. Department of Health and Human Services. https://oig.hhs.gov/compliance/nursing-facility-icpg/

Rahman, M., White, E. M., McGarry, B. E., Santostefano, C., Shewmaker, P., Resnik, L., & Grabowski, D. C. (2022). Association between the patient driven payment model and therapy utilization and patient outcomes in US skilled nursing facilities. JAMA Health Forum, 3(1), e214366. https://doi.org/10.1001/jamahealthforum.2021.4366