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Case Study:
AVP Accounting Operations and Chairman SOX Steering Committee
Healthcare
Business Transition and New Compliance Requirement
The Company: The Company was founded in 1993 to own and operate psychiatric hospitals. In 2001, the largest private equity investor in health care became majority owner and appointed a recognized industry leader president and CEO, bringing a new focus to the company. The company began to acquire medical/surgical hospitals and health systems. Based in Nashville, Tennessee, this Health Service Company’s network of health systems currently includes seven acute care hospitals, a rehabilitation hospital, a multi-specialty physician group, a 220,000 member health plan, retail pharmacies and a nationally-recognized medical laboratory.
The Challenge: The Board and executive management place a strong emphasis on corporate governance. When the company acquired its first major regional health system, the company did not possess the business process or internal control expertise it required to effectively assess or monitor operating, financial reporting, and compliance risks associated with the new acute hospital, physician organizations, and health plan revenue cycles. Shortly after the company completed its first acquisition, this privately-held company raised capital through a public debt offering to more easily pursue additional acquisitions. This transaction qualified the company to comply with SOX 302 and 404 reporting requirements the following fiscal year.
The Solution: The Company created a new accounting operations leadership position and hired Doug Simpson CPA to provide the technical expertise and leadership skills required to effectively assess operating, financial reporting, and compliance risks associated with its new business focus. Doug joined the company for the purpose of implementing a new COSO risk-based audit approach for the organization’s health plan, acute hospital, physician, and pharmacy businesses; and then to lead the company through all phases of its first year SOX initiative.
The Results: Reporting to the Corporate Chief Financial Officer, and serving as Assistant Vice-President Accounting Operations and Chairman of the SOX Steering Committee, Doug accomplished the following during a twelve month period:
Working with the AVP Internal Audit and the Internal Audit Team, implemented a new COSO risk-based audit approach for the organization’s health plan, acute hospital, physician, and pharmacy business units. While training and managing teams in the field, wrote new audit programs and test scripts needed to affect the new approach for activity and application controls for the organization’s significant business units at each operating location. When the audits were complete, submitted written findings related to complex and at times controversial financial and operational risk factors. The new audit approach was successfully implemented and the reports were submitted in a manner that achieved consensus with all participants.
Collaborating extensively with executive management and with E&Y partners and senior managers, completed the initial SOX-404 planning phase and then working in conjunction with PWC partners, provided overall PMO oversight for PWC consulting resources as they completed design assessments for entity level, general computer level, and activity level controls in sufficient detail for management to conclude on overall design effectiveness. The company repaid its public debt, returned to private status and concluded its SOX initiative when this phase was completed.
