Healthcare organizations face many state and federal regulations. These regulations range from state licensing requirements and business and tax laws to labor standards, health inspections, and staffing minimums. Each of these can cost your practice, whether because you spend to comply or because of a penalty. Learning to weigh the costs vs. savings is essential.
Key Regulations to Consider in Healthcare Compliance
Navigating compliance requires careful attention to detail and new regulations that may require sweeping changes. While local and state laws vary, several national regulations govern the healthcare industry.
These include:
- HIPAA: Governs the privacy of patient information.
- Anti-Kickback Statute: Bans payment as a reward for patient referrals or business.
- Physician Self-Referral Law or Stark law: Bans clinicians from referring patients to services with which they or their family have a financial tie.
- No Surprises Act: Bans surprise medical bills.
- HITECH Act: Promotes digital records, mandatory data breach reporting, and sets security standards.
The Centers for Medicare and Medicaid Services (CMS) also has several reporting and data-sharing regulations that help monitor staffing minimums, quality of care, and overall healthcare performance.
Financial Impact of Compliance
There are two ways to look at the financial impact of healthcare compliance. The first is the cost and headache of meeting requirements. The second is the financial savings you gain from compliance, including the positive reputation and increased quality of care that improve your overall revenue and margins.
Increased Costs Associated With Healthcare Compliance
Healthcare compliance requires spending, and these increased costs often go to staffing and technology.
Staffing Costs
It takes significant staffing power to meet healthcare regulations, from the clinical staff required to maintain patient care, minimum ratios, and health standards to the administrative staff needed to manage patient information, report data, and complete billing.
Compliance teams must also be well-staffed to monitor and respond to potential risks, but labor is expensive. Staffing costs are an incredible 80% of total healthcare compliance costs for hospitals.
Technology Investments
As technologies advance, laws change to reflect the need for effective but secure tools that protect patient information and promote data-sharing within the industry. However, keeping up with these regulations means expensive software or new systems to improve data security or ease of use.
CMS data shows practices receive a median of $33.872 per total relative value unit (RVU) from CMS and spend $2.04 on IT staff and technology operating costs.
At the same time, data breaches are on the rise. A 2021 Office for Civil Rights report found a 58% increase in data breaches, primarily from cyberattacks or healthcare hacking. These breaches are becoming more frequent and severe, making it even more costly for organizations to stay ahead with better and more secure tech.
Healthcare Compliance Helps Avoid Costs
Despite the above figures, focusing on compliance helps you avoid more expensive costs, including penalties, legal fees, settlements, revenue loss, and audit fees.
Penalties and Fines
Violating a healthcare regulation leads to a civil monetary penalty. Depending on the specific violation, these can range from $137 to $68,928 per HIPAA violation to $10,000 per violation of the No Surprises Act.
Some regulations, such as the False Claims Act and Anti-Kickback Statute (AKS), come with criminal fines and prosecution. For example, under AKS, clinicians can receive a criminal fine of up to $50,000 per violation plus three times the amount of the kickback received. Violating these laws leads to steep noncompliance consequences, including possible jail time.
Therefore, following regulations and maintaining strict oversight can save you thousands of dollars, your reputation, and your license. Healthcare compliance, in this case, is good business.
Legal Fees and Settlements
Noncompliance may lead to civil lawsuits, pricey legal fees, and hefty settlements. For example, let’s say you have a data breach leading to a HIPAA violation. The government may audit your practice and fine you, but the patient may also launch a civil lawsuit for damages due to negligence.
Chances are you have insurance to cover these concerns, but it may still lead to outstanding legal fees or payments your practice must cover. However, investing in technology to maintain compliance can help avoid these extra fees that cut into your profits.
Exclusion From Programs
Some types of noncompliance may be severe enough that your practice becomes ineligible to participate in healthcare programs, such as Medicare. Known as exclusion, this form of penalty can devastate your finances and the stability of your practice.
Less than 2% of clinicians have opted out of Medicare, which means that a little over 98% of practices rely on Medicare as a source of revenue. Compliance with regulations maintains your ability to participate in these programs and helps provide additional revenue streams.
Lengthy Audits
You may occasionally do internal audits to confirm your business is in order and nip any concerning practices in the bud before they become regulatory issues. However, undergoing a government audit can be a time-consuming and expensive process.
Audits can occur at any time as part of random selection, but they also happen when the government receives complaints or spots an issue. Complying with an audit means turning over access to your data or submitting records, receipts, and other information for review. These processes take time and staff to complete, leading to high costs and potentially harmful outcomes.
Weighing the Costs vs. Savings of Healthcare Compliance
Simply put, compliance costs your practice, no matter which way you slice it. Across all industries, the average business spends between 1.3% and 3.3% of its total labor costs on regulatory adherence.
At first glance, the cost of keeping up with laws and standards is overwhelming. The sheer volume of regulations may seem completely out of pocket for some.
However, the alternative is noncompliance, and it’s not much of a substitute. The financial risks and potential criminal prosecution of noncompliance far outweigh the costs of maintaining conformance.
Drive Compliance With PUREDI
Technology has long been an essential tool to drive and simplify compliance. PUREDI’s cloud-based billing software streamlines billing, supporting compliance with error-checking features, clearinghouse integration, and connectivity. PUREDI billing services puts experts in your corner, managing credentials, contracts, coding, and your revenue cycle. Stay on top of trends and ahead of compliance with PUREDI.
