Error causes Hospital pharmaceutical unit to overbill by $10 million

The Duke Hospital pharmaceutical unit inadvertently overbilled third-party payers by about $10 million in fiscal year 1996-97 because it misused its new software, Business and Finance Committee Chair Roy Bostock reported to the Board of Trustees Friday.

The error was discovered after the pharmaceutical unit noticed its revenue was unusually high-$10 million constituted seven percent of the pharmaceutical unit's charges for that year-and initiated an internal audit. The University is now negotiating settlements with the overbilled third-party institutions, which include government entities like Medicare and Medicaid. The University actually received only $4.2 million despite charging more than twice that because the government's spending formulas limit their expenditures.

Bostock noted that although the problem was being handled appropriately by the Medical Center, the example highlights the need for the trustees to maintain a vigilant oversight role as the Health System continues to expand. He added that the board should have been informed of the problem earlier.

Bostock also reported that the University found itself with $2.5 million in financial aid money left unspent. Of the $2.5 million figure, about $900,000 was earmarked for undergraduate financial aid. The surplus resulted when about 45 students who qualified for full tuition chose not to attend the University, noted Al Rossiter of the Duke News Service.

Jim Roberts, vice provost for budgets and management, was not available for comment Friday afternoon for information on the remainder, which was allocated for graduate and professional students.

Bostock added that President Nan Keohane requested the money remain in the financial aid coffer for use in next year's awards.

Bostock also noted that the two-tiered tuition plan instituted in 1993 had been successful in providing the University with funds to invest in renovating neglected facilities.

Finally, he said the University was on target in the first year of its six-year transition toward a five-percent endowment spending rate. The stock market's plunge in the last financial quarter, however, will make this goal harder to achieve, he said.

The 30 new eponymous chairs, the names of which will be chosen by the provost, will supplement the 15 eponymous chairs the trustees authorized in 1981 and the University's existing endowed chairs, which number in the 100s.

The eponymous chairs will not be used for internal advancement.

Also, the academic affairs and student affairs committees met in joint session to review the residential report developed by the six-member working group chaired by Provost John Strohbehn. Student Affairs Committee chair Julie Esrey said that the report was received favorably.

"While there was broad discussion, everyone felt the report was excellent. It includes a number of small steps to implement ideas in earlier reports," she said, referring to the 1994 report that established the all-freshman East Campus as a way to create a more universal residential experience.

Trustees spent the bulk of the meeting discussing possible layout and student make-up for a new dorm, she said. The committee will bring the report to the full Board of Trustees for discussion at its December meeting.

At its February meeting, Keohane noted, the trustees will vote on the issue.