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Raising the bar
UPMC achieves Sarbanes-Oxley certification
It’s now official: UPMC has become the first nonprofit health care system in the country to achieve the “gold standard” for internal controls and financial reporting. Auditing firm Ernst & Young has certified that, as of June 30, 2006, UPMC is compliant with some of the most stringent provisions of the 2002 Sarbanes-Oxley Act, or SOX, enacted by Congress in the wake of a number of corporate accounting scandals.
While some public companies are seeking to weaken the law, UPMC eagerly embraced SOX — particularly section 404, which deals with the effectiveness of internal controls over financial reporting and does not directly apply to not-for-profit organizations.
Robert DeMichiei, chief financial officer, calls the effort an “angiogram” for the health system, highlighting broken processes and the need to accelerate integration.
“For large hospitals, SOX is definitely beneficial,” says Mr. DeMichiei. “It can really raise the bar for our entire industry in financial control and financial reporting.” Bond-rating agency Fitch has declared that voluntary adherence to SOX provisions “can lend significant credibility to a hospital or health care system’s financial reporting.”
Begun two years ago at the urging of UPMC’s board and audit committee, the certification effort has involved nearly 60,000 staff hours, $1.5 million in external costs, and intense work by 70 project teams documenting and testing controls in every area of the health system, from the billing shops to information technology.
“Our employees stepped up to the plate. They owned this process,” says Linn Swanson, director, Internal Audit, and chief audit executive.
With certification complete for Fiscal Year 2006, the next step is to continue to refine the key controls to make subsequent monitoring and testing more efficient.