Abstract
In for-profit and nonprofit companies, procurement and accounting departments are very tricky in terms of fraud. Transactions in these two units’ and their relationship should be audited meticulously and continuously by auditors. If the hospital management doesn’t like to hire an internal auditor or certified fraud examiner, they should be ready to face. As in the other sectors, various irregularities can also be seen in health institutions. Purchasing and accounting departments are the leading departments in the health companies where fraud activities happen frequently. It can be observed that the employees have misconduct towards the companies they work for. Especially the employees who are not happy with their salary think she/he works more than other employees may commit the crime. There is a need for a rigorous and practical audit and control mechanism in the purchasing department where fraudulent incidents can be seen in many different ways. In this chapter, the procurement procedure in hospitals, a procedure in procurement departments, fraud prevention techniques in the procurement department, and cases from Turkey are discussed in the chapter.
If the facts don’t fit the theory, change the facts.
—Albert Einstein (1879–1955).
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Notes
- 1.
Occupational frauds are those in which an employee, manager, officer, or owner of an organization commits fraud to the detriment of that organization. The three major types of occupational fraud are: Corruption, Asset Misappropriation, and Fraudulent Statements (ACFE, https://www.acfe.com/fraud-tree.aspx).
- 2.
When business frauds are analyzed, it is ascertained that three components come together when committing the white-collar crime. These are pressure, opportunity, and justification that constitute the “fraud triangle.” (Özkul & Pamukçu, 2012).
- 3.
In the healthcare industry, it is not uncommon for a hospital to contract with a medical device owner for the use of specific medical equipment for a major part of the economic life of the equipment. This type of arrangement is often priced in such a way that the consideration is based entirely on the hospital’s ongoing purchase of “consumables,” which allow the equipment to function as designed, and may have no minimum volume requirement. The medical device owner is willing to accept variable consideration in the arrangement because demand for the associated healthcare services suggests that a sufficient volume of consumables will be purchased by the hospital over the term of the contract to make the arrangement profitable (Deloitte, 2019).
- 4.
In some situations, tax-exempt debt is issued to finance construction of a facility, such as a plant or hospital, that is transferred to a user of the facility by lease. A lease may serve as collateral for the guarantee of payments equivalent to those required to service the tax-exempt debt. Payments required by the terms of the lease are essentially the same, as to both amount and timing, as those required by the tax-exempt debt. A lease modification resulting from a refunding by the lessor of tax-exempt debt (including an advance refunding) should be accounted for in the same manner (that is, in accordance with paragraphs 842-10-25-8 through 25-18) as any other lease modification. For example, if the perceived economic advantages of the refunding are passed through to the lessee in the form of reduced lease payments, the lessee should account for the modification in accordance with paragraph 842-10-25-12, while the lessor should account for the modification in accordance with the applicable guidance in paragraphs 842-10-25-15 through 25-17.
- 5.
Governmental authorities often use tax-exempt debt to finance the construction of a facility (e.g., a plant or a hospital) that they will lease to another entity. As noted above, the payment terms of the lease generally mirror, with respect to both amount and timing, “those required by the tax-exempt debt.” Such a lease “may serve as collateral for the guarantee of payments equivalent to those required to service the tax-exempt debt.”
- 6.
The U.S. Government Accountability Office.
- 7.
GAO has designated Medicare and Medicaid as high-risk programs, in part due to their susceptibility to improper payments—estimated to be about USD 70 billion in fiscal year 2010. Improper payments have many causes, such as submissions of duplicate claims or fraud, waste, and abuse (Ferilli, 2013).
- 8.
The Centers for Medicare & Medicaid Services.
- 9.
Procurement procedures for general procurement.
(a) Open Tender Procedure: It is the procedure in which the procurement transactions, whose cost value is determined as TL … and above, are realized.
(b) Negotiation Procedure: It is the procedure in which the purchase transactions are determined with a cost between … TL and … TL.
(c) Direct Procurement Procedure: It is the procedure in which large procurement transactions are realized with a cost of approximately … and less (is limited 12.000 USD or lower in big and 3800 USD small cities for governmental hospitals).
http://www.hukuknediyor.com/2019-yili-dogrudan-temin-limiti/.
(d) Leasing: It is a method of renting the product or service in cases, where it will not be used many times or if the unit cost is very high.
- 10.
Implementing Regulation on Procurement of Procurement.
http://www.mevzuat.gov.tr/Metin.Aspx?MevzuatKod=7.5.12917&sourceXmlSearch=&MevzuatIliski=0.
- 11.
Public Procurement Law
http://www.mevzuat.gov.tr/Metin.Aspx?MevzuatKod=1.5.4734&MevzuatIliski=0&sourceXmlSearch=
- 12.
The First Medicare Fraud Strike Force (Strike Force) was launched in March 2007 as part of the South Florida Initiative a joint investigative and prosecutorial effort against Medicare fraud and abuse among Durable Medical Equipment (DME) suppliers and Human Immunodeficiency Virus (HIV) infusion therapy providers in South Florida. The Strike Force teams use advanced data analysis techniques to identify high-billing levels in health care fraud hot spots so that interagency teams can target emerging and migrating schemes along with chronic fraud by criminals masquerading as health care providers and suppliers (Townsend, 2013).
- 13.
Model Corporate Compliance Programs: OIG has published compliance program guidance for 11 segments of the health care industry: hospitals, clinic laboratories, durable medical equipment, third-party equipment, prosthetics and supplies providers, nursing facilities, hospices, medicare + choice.
- 14.
Office of Inspector General’s Compliance Program Guidance for Pharmaceutical Manufacturers, OIG Compliance Program Guidance for Pharmaceutical Manufacturers, 68 Fed. Reg.23,731, https://oig.hhs.gov/fraud/docs/complianceguidance/042803pharmacymfgnonfr.pdf, (May 5, 2003).
- 15.
Using the RetSim Fraud Simulation Tool to Set Thresholds for Triage of Retail Fraud, October 2015, https://doi.org/10.1007/978-3-319-26502-5, Conference: The 20th Nordic Conference on Secure IT Systems.
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Çalıyurt, K.T. (2020). Developing Governance of Procurement Department in Hospitals. In: Çalıyurt, K. (eds) Integrity, Transparency and Corruption in Healthcare & Research on Health, Volume I. Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application. Springer, Singapore. https://doi.org/10.1007/978-981-15-1424-1_10
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