Many industries, be they financial services and banking, food manufacturing, or transportation companies, are overseen by extensive laws and regulatory requirements. Healthcare is no different; in fact, it might be the most regulated industry of all. This means that to stay in compliance with regulations and avoid fines and other penalties, healthcare organizations must stay up to date on all requirements and have systems and staff in place to do so. Compliance comes down to operating with financial integrity and having accurate healthcare accounting, not just as a legal obligation but as a crucial aspect of maintaining patient trust and safeguarding a company’s financial health.
Given the stakes, today, we explore this important topic and offer our readers best practices for implementing effective compliance programs in the healthcare space.
Understanding Healthcare Compliance
Healthcare compliance encompasses a broad range of tasks that cover various financial transactions, billing, and reporting so that they are conducted transparently and properly. Why is this important? To prevent fraud and abuse within the system, to maintain and secure patient information (both medical and financial), and to work to ensure that the healthcare organization’s financial procedures are sound and sustainable.
In other articles we’ve shared with our readers, such as a recent one on software systems used for healthcare accounting, we discussed how it’s not just about adhering to the letter of the law but also embedding into the workplace culture a mentality of integrity. This includes encouraging staff to be mindful when making decisions and taking actions that promote correct and ethical behavior.
These actions play a role in making sure healthcare organizations are stable and viable businesses so they can perform their mission: provide high-quality care for their customers. Sound fiscal management of healthcare entities is an underpinning for patient trust. It’s also how companies in the sector can be accountable to their stakeholders across their business.
Aspects of Financial Compliance in Healthcare
Let’s delve a bit deeper into what compliance looks like in healthcare. First, accurate financial record keeping and reporting is important. Organizations must comply with all practices needed for relevant accounting laws and regulations. Maintaining clear and detailed records of all financial transactions is a start so data can then flow into accurate financial statements. These important documents are what’s required by internal auditors, outside accounting firms, and government regulators (when requested). These must be clear and transparent. It’s foundational for compliance purposes. (We discuss more about the accounting components in the healthcare industry in our recent article, Healthcare Accounting: A Comprehensive Guide for Understanding.
Keeping correct financial records won’t just benefit the business itself. It will also help prevent fraud and abuse in an industry that is particularly vulnerable to such activities, especially one that often has problems with (or perceptions of) insurance payments and reimbursements. This includes false billing, overbilling, and other financial shenanigans. Compliance programs are designed to detect and prevent these activities so companies can avoid financial loss and potential civil and even criminal liability. These benefits will also flow through to patients so that on their end, transactions are accurate and fully transparent. It’s all key to supporting the reputation of the healthcare provider.
The government has issued various statutes that cover elements of healthcare compliance. Some you may know such as HIPAA, the Health Insurance Portability and Accountability Act, which oversees issues related to patient privacy, but also the Anti-Kickback Statute (AKS) and the Stark Law, both critical federal laws created to prevent abuse and outright fraud in the healthcare industry. Their intent is for decisions to be made based on medical necessity rather than monetary incentives.
Take AKS, for instance. This law prohibits any exchange (or any offer to exchange) of something of value to encourage and/or reward referrals or to generate federal healthcare system business, such as through Medicare or Medicaid. Specifically, it delineates as violations any offer, solicitation, or receipt of any payment for patient referrals or the generation of any service or business payable through federal healthcare programs.
The Stark Law, which is also called the Physician Self-Referral Law, blocks doctors from referring patients to receive DHS or “designated health services” that would be paid by either Medicaid or Medicare from businesses which a doctor (or an immediate family member of the doctor) has a financial relationship. This Law is broad and covers many types of healthcare service providers, such as physical and occupational therapists, radiological services, medical equipment and home health service providers, clinical lab services, and more. These laws must be adhered to, or healthcare organizations risk severe penalties.
As for billing, a major element of staying financially compliant in a healthcare organization, the federal government is often the payor. That said, government officials have empowered the Centers for Medicare and Medicare Services (CMS) to use what are called CERT Reports, or Comprehensive Error Rate Testing Reports. These monitor and report back to Medicare how accurate businesses are when billing for Fee-for-Service (FFS) payments. The system examines what they consider a “representative sample” of claims submitted to determine if they are properly processed, such as rules overseeing Medicare coverage, coding, and billing. This data is important as it monitors (and assists) healthcare providers in staying in compliance and will support their financial sustainability. The information is also helpful for companies to use in their broader compliance and educational programs and can be used for ongoing program adjustments.
Implementing Effective Compliance Programs
So, how do healthcare companies implement these important safeguard mechanisms? A recurrent theme when we talk about the operational and financial issues confronting such healthcare businesses is that while there are some basic, consistent operating procedures to be followed, customization is also in play. Each healthcare business operates under distinctive circumstances, so a one-size-fits-all attitude rarely works. You need programs that are tailored to fit the specific needs and challenges of a business. Consider things such as the size of the organization, the services provided, and whether certain regulatory issues affect the firm.
Another element for successful implementation is the human factor in the mix. Much like learning a new software system, employees need to be trained on an organization’s compliance initiatives. They need to be involved in the ongoing monitoring of the system and, importantly, be ready for potential auditing that may occur to guarantee compliance standards are met. It’s also key that each person involved with handling financially related tasks in the business be aware that they are even part of a compliance process. They need to know what their role is in the equation and what their responsibilities are.
Compliance isn’t a one-and-done type of situation, either. Given the fact that laws change, healthcare organization staff must be trained on an ongoing basis. This will help in minimizing risks. A way to streamline these systems and ensure ongoing monitoring and adjustments is to incorporate an all-in-one compliance platform. Many industry players offer such software systems, including some well-known products such as Sage Intacct, FreshBooks, and NetSuite. These give healthcare companies the tools to run a compliance program effort effectively and efficiently.
Overcoming Common Challenges in Healthcare Compliance
Effective compliance in healthcare certainly isn’t without its challenges. Many healthcare organizations struggle with limited resources, inadequate training, and ineffective policies and procedures. However, these can be overcome with the right approach.
A typical challenge is often the lack of resources to support comprehensive programs that make full compliance possible. Resources aren’t just dollars allocated; they are also time dedicated and the full support of top management. Healthcare employees are some of the most pressed-for-time people employed today. It’s challenging enough to just “get the work done,” file the necessary paperwork to maintain medical records, complete billing procedures, and on and on. Adding in the extra tasks that are necessary for compliance can feel burdensome.
So, having concise policies that outline the expectations for each team member is a solid start. Invest in training, provide the tools and technologies to assist in the process, and possibly hire a compliance officer, something we will address a bit later. As mentioned, providing employees adequate time–whether daily or weekly–to dedicate to compliance activities is necessary. It cannot be an afterthought.
A Best Practice in Healthcare: Hire a Chief Compliance Officer
To ensure sound fiscal management for regulatory compliance, healthcare organizations should follow best practices that have worked throughout the industry. These include the allocation of adequate resources, policies set in writing, clear communication amongst all stakeholders, and ongoing training and adjustment.
Overall, one of the best practices for managing financial risk and staying compliant is to hire a dedicated compliance officer. These executives are responsible for the organization’s compliance efforts so that they are implemented effectively. They must have the full support of management and be armed with the necessary resources to carry out the program. They will oversee all aspects, from training to monitoring and auditing.
As a leadership position within the organization, the Chief Compliance Officer will act as a steward and foster a culture of compliance we’ve been emphasizing. By overseeing specific tasks and promoting ethical behavior, the CCO will ensure staff knows what is expected of them and, if necessary, any changes that are occurring in the regulatory landscape. It will be up to the CCO to fully understand the compliance rules and what it takes for sound financial reporting. They will be tasked with finding appropriate technology and making decisions on which systems to implement.
Thankfully, compliance roles are increasingly better developed through various available programs of study. There are many, but some notable ones include those at GW (George Washington University), which offers a Healthcare Corporate Compliance Certificate through the Milken Institute School of Public Health. As they see it, healthcare is an “increasingly specialized and increasingly complicated field.”
Another one offered is a Masters in Law with a Specialization in Health Care Compliance through the University of Pittsburgh. Here, the program touts learning about and protecting against practices such as fraud, abuse, and waste. Participants investigate relevant federal and state laws and can gain an understanding of private insurance company methods. These programs give compliance professionals the tools to develop policies and procedures that promote legal and ethical business practices in their firms.
Final Thoughts on Compliance in the Healthcare Industry
Healthcare compliance is a critical aspect of maintaining the financial integrity of healthcare organizations. And being financially sound ensures compliance. It’s a virtuous cycle. By following the best practices we’ve mentioned above, healthcare entities can limit any financial mistakes, mitigate risks, and maintain patient trust and their ongoing relationships. It’s an industry where such matters reign supreme. Fortunately, today, there are established protocols to follow, advanced technology systems to use, and, as always, outside expertise, such as legal and accounting firms with quality experience to turn to when needed.
