The cost of regulatory overload

Regulatory Overload: Assessing the Regulatory Burden on Health Systems, Hospitals and Post-acute Care Providers

American Hospital Association, October 2017

Every day, health systems, hospitals and post-acute care (PAC) providers – such as long-term care hospitals, inpatient rehabilitation facilities, skilled nursing facilities and home health agencies – confront the daunting task of complying with a growing number of federal regulations. Federal regulation is largely intended to ensure that health care patients receive safe, high-quality care. In recent years, however, clinical staff — doctors, nurses and caregivers — find themselves devoting more time to regulatory compliance, taking them away from patient care. Some of these rules do not improve care, and all of them raise costs. Patients also are affected through less time with their caregivers, unnecessary hurdles to receiving care and a growing regulatory morass that fuels higher health care costs.

This report assesses the administrative impact that existing federal regulations from just four agencies – CMS, OIG, OCR and ONC – have on health systems, hospitals and post-acute care providers across nine domains:

1. Quality reporting;

2. New models of care/value-based payment models;

3. Meaningful use of electronic health records;

4. Hospital conditions of participation (CoPs);

5. Program integrity;

6. Fraud and abuse;

7. Privacy and security;

8. Post-acute care; and

9. Billing and coverage verification requirements.

Major Findings

1. Health systems, hospitals and PAC providers must comply with 629 discrete regulatory requirements across nine domains.

2. Health systems, hospitals and PAC providers spend nearly $39 billion a year solely on the administrative activities related to regulatory compliance in these nine domains.

3. An average size hospital dedicates 59 FTEs (full-time equivalents) to regulatory compliance, over one-quarter of which are doctors and nurses.

4. The timing and pace of regulatory change make compliance challenging.

5. Among the nine areas investigated, providers dedicate the largest proportion of resources to documenting CoP (conditions of participation) adherence and billing/coverage verification processes.

6. Meaningful use has spurred provider investment in IT (information technology) systems, but exorbitant costs and ongoing interoperability issues remain.

7. Quality reporting requirements are often duplicative and have inefficient reporting processes, particularly for providers participating in value-based purchasing models.

8. Fraud and abuse laws are outdated and have not evolved to support new models of care.

General Opportunities to Reduce Burden

A reduction in administrative burden will enable providers to focus on patients, not paperwork, and reinvest resources in improving care, improving health and reducing costs. Given these findings, we have several general recommendations to reduce administrative requirements without compromising patient outcomes, both overall and within each domain.

• Regulatory requirements should be better aligned and consistently applied within and across federal agencies and programs, and subject to routine review for effectiveness to ensure the benefits for the public good outweigh additional compliance burden;

• Regulators should provide clear, concise guidance and reasonable timelines for the implementation of new rules;

• CoPs should be evidence-based, aligned with other laws and industry standards, and flexible in order to support different patient populations and communities;

• Federal agencies should accelerate the transition to automation of administrative transactions, such as prior authorization;

• Meaningful use requirements should be streamlined and should increasingly focus on interoperability, without holding providers responsible for the actions of others;

• Quality reporting requirements should be thoroughly evaluated across all programs to better determine what measures provide meaningful and actionable information for patients, providers and regulators;

• PAC rules should be reviewed and simplified to remove or update antiquated, redundant and unnecessary rules; and

• With new delivery system and payment reforms emerging, Congress, CMS and the OIG should revisit the Stark Law and AKS and their respective regulations, as well as other requirements aimed at combating fraud, and make meaningful changes to ensure that statutes provide the flexibility necessary to support the provision of quality, high-value care.

From the Conclusion

Health systems, hospitals and PAC providers are besieged by federal regulatory requirements promulgated by CMS, OIG, OCR and ONC, many of which are duplicative and cumbersome and do not improve patient care. In addition to the regulatory burden put forth by those agencies, health systems, hospitals and PAC providers are subject to regulation by additional federal agencies, such as the Department of Labor, the Drug Enforcement Administration, the Food and Drug Administration and by state licensing and regulatory agencies. They also operate under stringent contract requirements imposed by payers, such as Medicare Advantage, Medicaid Managed Care plans and commercial payers, which also require reporting data in different ways through different systems. States and payers contribute to burden through, for example, documentation, quality reporting and billing procedures layered on top of the federal requirements.

Regulatory reform aimed at reducing administrative burden must not approach the regulatory environment in a vacuum — evaluating the impact of a single regulation or requirements of a single program — but instead must look at the larger picture of the regulatory framework and identify where requirements can be streamlined or eliminated to release resources to be allocated to patient care.



By Don McCanne, M.D.

A quick look at the nine domains of regulatory overload is all you need to be reminded of the nightmare created by these evolving requirements. Inefficiencies, wasted resources, and provider burnout ensue, which negatively impact the primary mission of the health care system: patient care.

It is estimated that health systems, hospitals, and post-acute care providers spend about $39 billion per year on administrative activities related to compliance in these domains. This report provides suggestions for reducing this regulatory overload, though only a portion of the costs would be recovered since appropriate regulatory oversight is still essential.

For perspective, think of the recoverable administrative waste that characterizes our fragmented health care financing system - most of it in the private sector. We spend over a trillion dollars a year on administration, and somewhere around $300 billion to $500 billion is recoverable merely by transitioning to a well designed single payer system. Thus the total spending attributed to regulatory overload is, at most, only a tenth of what could be recovered.

The opportunities listed to reduce the burden of regulatory overload should be considered but with the realization that they are limited by the constraints of our current dysfunctional health care financing system. What needs to be done first is to correct the fundamental flaw in our health care financing infrastructure by enacting and implementing a single payer system, and then the list can be surveyed to fine tune any residual regulatory burdens.

We desperately need reform, but let’s get it right.

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