As the health care industry continues to grow at an explosive rate, the federal government continues to add new regulations and change existing ones to keep up.
Many of the changes made by the government aren’t noticeable by the general public unless they directly affect the health care service received by patients. However, the government has enacted many of these regulations in an effort to prevent fraud and abuse in the health care system.
“I don’t believe that the public is aware of the complexity of these regulations and how they affect the business relationships between health care providers,” says Kathy Butler, manager of the Health Law Practice Group at Greensfelder, Hemker & Gale, P.C. “I think they hear on a broader scale of the government’s numbers about how many billions of dollars it is collecting from people erroneously billing or committing fraud.”
Smart Business spoke to Butler about how often regulations change and how they affect the health care industry.
Do regulations change a lot in the health care industry?
Yes, they do. The Centers for Medicare and Medicaid Services regulate all the different types of service providers. These services include hospitals, physicians, diagnostic testing facilities, medical device suppliers, etc. There are various times throughout the year, on a fairly constant basis, when changes are being made.
Typically, any changes made to the Medicare physician fee schedule come out in the summer and are finalized by Nov. 1; we just finished up this process for the year. There are also rules for hospitals that change every year related to the inpatient services and for outpatient services that come out at a different times. The government can publish regulation changes at any time it feels there is a need.
In the last couple of years, there have been significant and sometimes complex changes that have had a huge effect on physician-hospital relationships and medical provider business structures. It is a constant education and effort to keep up with all the changes.
Are these changes necessary to keep up with the ever-growing health care industry?
The government believes, and rightly so in some cases, that some providers are billing inappropriately or engaging in fraudulent activity at the government’s expense. It is a complicated system and there is a lot of money involved in delivering health care services. Although most providers try very hard to comply with all the rules, whenever you have complexity some people will try to defraud the system to make money.
For example, in South Florida, the government is dealing with providers of various types of services, such as infusion clinics and medical equipment, which are under scrutiny because some providers are billing for services they have not provided or that are not medically necessary. It’s a complicated regulatory scheme and people take advantage of it, so the government has created regulations in an effort to minimize fraud and abuse.
As a result, the government applies its regulations with a broad brush, and sometimes those regulations frustrate legitimate business activities that may actually be beneficial and create efficiencies for patients, the community and the industry.
Can you give an example?
One of the most recent changes involves a rule change that allows hospitals to contract with other entities to provide services that the hospital doesn’t have, and then bill for the services ‘under arrangement.’ The hospital bills as if the service was provided by it and then pays the entity that performed the service a fair market value rate. But, due to concerns about financial relationships between hospitals and physicians, a new regulation, due to go into effect in October 2009, will prohibit that type of arrangement between a hospital and any entity that has physician owners that refer to the entity.
The government is concerned that hospitals inappropriately allow physicians to benefit financially by contracting with physician-owned companies. A small hospital with limited resources that contracted for MRI services with a physician group that already had an MRI may have to spend money to buy its own MRI and duplicate a service that already exists in the community. The hospital will then have less money to spend on other services that may be needed in the community.
What is the Stark Law?
It is a federal strict liability law that prohibits a physician from making a referral to certain types of entities (including hospitals), and prevents the entity for billing for that referral, if the physician has a financial relationship with the entity, unless the relationship fits within a specific exception.
For example, if a hospital contracts with a physician for administrative services, that physician, if he or she also refers patients to the hospital, must have a written contract that meets very specific standards. Failure to meet each standard, even if it is inadvertent, could result in the providers having to return the payment for the services they provided, and other severe penalties.
KATHY BUTLER is manager of the Health Law Practice Group at Greensfelder, Hemker & Gale, P.C. Reach her at (314) 516-2661 or firstname.lastname@example.org.