Purpose

To determine if incentive and bonus payments made by the Erie County Medical Center Corporation (ECMCC) were warranted, supported, and distributed appropriately based on program intent and/ or established criteria. The audit covers the period January 1, 2013 through December 31, 2015.

Background

ECMCC is a public benefit corporation created under Public Authorities Law §3626 to manage the Erie County Medical Center health network. Between January 1, 2013 and December 31, 2015, ECMCC reported 4,720 employees on its payroll, including 209 Management Confidential (MC) employees. During the three-year audit period, ECMCC offered two incentive programs to certain MC physicians — the Performance Incentive Program and the Productivity Incentive Program — and paid 16 of its physicians a total of $1,655,359 in these incentives. Also during this period, ECMCC offered a bonus program for all MC employees and paid 80 employees a total of $503,022 in bonuses.

Key Findings

• ECMCC did not properly administer and monitor its incentive and bonus programs, resulting in $76,254 in incentive payments that should be recovered because they were: not justified under the terms of the relevant incentive plan; distributed in error (as duplicate payments); or simply miscalculated.
• ECMCC did not maintain documentation to support the validity of another $86,261 paid to four physicians. According to ECMCC officials, the required written support was lacking because the doctors’ compliance with their contractual performance requirements had been conveyed verbally many times.
• Nine other physicians were paid a total of $510,062 in incentives based upon their performance as a group, despite the terms of their employment agreements that specified that such payments would be based on individual performance. Formal assessments and documentation of physicians’ individual job performances were not prepared, and consequently, we could not confirm the propriety of these incentive payments.
• ECMCC’s productivity incentive payments included $401,096 paid to three physicians in settlement of a threatened employment dispute. Included therein was $50,011 for purported administrative services that were unrelated to productivity (upon which incentives were to be otherwise based). The remaining $351,085 resulted from a retroactive increase in the incentive rates applied for each doctor. However, because the amounts in question were negotiated, we could not determine whether they were fully warranted or accurate and, therefore, reasonable.

Key Recommendations

• Recover the $76,254 in unwarranted performance and productivity incentives.
• Further assess the $86,261 of unsupported incentive payments to determine if additional disallowances and recoveries are warranted.
• For all incentive and bonus programs and payments: improve monitoring, maintain appropriate supporting records, and ensure that payments are in full compliance with contractual stipulations and commensurate with actual achievements.

Other Related Audits/Reports of Interest

Westchester County Health Care Corporation: Supplemental Payments to Executive Employees (2015-S-77)
Rochester-Genesee Regional Transportation Authority: Performance Incentive Program (2014-S-2)