Chapter 4 The Legal and Regulatory Environment of Health Care

Learning Objectives 1.Understand how legal and regulatory issues shape and define good financial management of a health care organization. 2.Appreciate the consequences of failing to manage the finances of a health care organization without regard for the complex and ever-changing array of laws and regulations that are unique to this industry. 2

Learning Objectives 3.Recognize when and how to involve legal counsel on a Medicare or Medicaid reimbursement issue or other financial matter that has regulatory compliance implications or would otherwise require you to seek legal advice before making a decision. 4.Identify the most common federal regulatory issues such as fraud and abuse, Stark, HIPAA privacy and security, EMTALA, and IRS requirements for tax- exempt organizations, as well as less common concerns that arise under the antitrust laws, Red Flag Rules, and state insurance regulations.

Learning Objectives 5.Identify the major components of a corporate compliance plan, including the establishment of internal controls relating to the finances of an organization. 6.Be prepared to respond to a compliance audit or investigation, particularly when the subject of that inquiry includes financial records. 7.Be aware of the most important aspects of the Patient Protection and Affordable Care Act of 2010 (Health Reform Act) as it relates to financial management in the post-Reform environment. 4

Law and Healthcare Financial Management –Corporate Compliance Plans Office of Inspector General (OIG) Requirements –Internal Control and Corporate Compliance AICPA Elements 5

Primary Regulatory Issues 1.Medicare Reimbursement –Parts A – Parts D –Certification of Providers –Payment to Providers 2.Medicaid Reimbursement –Eligibility Determination Federal Poverty Level (FPL) Supplemental Security Income (SSI) –Coverage of Services –Establishment of Payment Rates –Medicaid DSH Payments 6

Primary Regulatory Issues 3.Beneficiary Appeal Rights & Process –Medicare’s 5 Levels 4.Fraud & Abuse –False Claims Act –Qui Team Actions –Kickback’s and Self-Referrals Anti-Kickback Statute Stark Physician Self-Referral Law –Safe Harbors 7

Privacy of Healthcare Information (HIPAA) –HIPAA Overview –Privacy Standards Protected Health Information (PHI) –Security Standards 8

Third Party Payor Contracts –State Regulator “Any willing Provider” –Federal Law ERISA 9

Tax Exemption Issues –501 (C) (3) Organizations –Public Charity vs. Private Foundation –Charity Care –Unrelated Business Income –Form

Antitrust Issues –Purpose of Laws Promote a competitive free marketplace –Sherman Act Agreements that unreasonably restrain trade Price fixing –IPA’s and PHO’s –Per Se Violations 11

–Reviews of Mergers, Acquisitions, and Joint Venture Agreements “Statements of Antitrust Enforcement Policy in Health Care,” (August 1996) –Sharing Competitive Information Financial and/or clinical integration 12 Antitrust Issues

Prohibits mergers and acquisitions that may substantially lessen competition Analytical Methodology Provided –Will merger increase concentration in market? –Does increased concentration raise anti competitive concerns? –Can another competitor enter market? –Are there efficiencies to be realized? –Without merger would either or merging parties fail? 13 Clayton Act

Emergency Medical Transfer and Active Labor Act (EMTALA) –Prohibits hospitals from transferring an emergency patient because of inability to pay. 14

Summary Healthcare financial managers need to have some understanding of the major rules and regulations related to health care. The legal and regulatory environment in health care is increasingly complex. A prudent manager must plan for an adapt to this environment. Failure to comply can put the organization at significant financial risk and can put individuals at both criminal and financial risk. Proper planning, implementation, execution, documentation, and evaluation of corporate compliance programs is vital for the financial security of today’s health care organizations. 15