1. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Chapter 12 Health Policy and Regulation

2. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Objectives After completing this chapter, you will be able to: –Recognize why regulations matter –Describe the policy and operational context of health care regulations –Identify the most important state and federal regulations that affect health care organizations –Identify the key regulatory agencies and summarize their current policies

3. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Objectives (cont’d.) –Explain how regulatory compliance will affect health care organizations’ strategic decision- making –Formulate strategies for regulatory compliance –Discuss recent policy initiatives that have regulatory implications –Evaluate strengths and weaknesses in current regulatory efforts to achieve policy goals

4. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Purpose Introduce key regulatory challenges of health care organizations: –Health care executives must confront wide range of regulatory compliance issues –Describing regulatory and policy environment of health care organizations will aid in understanding how regulations are formulated and implemented

5. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Federal Policy and Regulation Health care industry heavily regulated at federal and state levels: –Regulation: governmental oversight of private marketplace –Intended to increase access, control costs, or improve quality –Regulation can be economic or serve social function

6. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Federal Agencies and Their Oversight Federal government has two key roles in health care: payer and regulator Department of Health and Human Services: –Principal federal government agency for health care Congressional committees: –Develop legislation, provides executive branch agencies authority to issue regulations –Oversight responsibilities

7. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved.

8. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved.

9. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Federal Agencies and Their Oversight (cont’d.) The regulatory process: –Administrative procedures act determines process of promulgating regulations –Notice of proposed rulemaking: stakeholders and others can submit comments and agency may choose to revise regulation –Negotiated regulation: regulatory agency meets with affected industry to develop regulatory approach acceptable to each side

10. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Medicare and Medicaid Law Medicare: –Federal health insurance program for elderly and disabled Medicaid: –Combined federal/state program providing medical assistance to those with low-incomes Reimbursement –Prospective Payment System (PPS): fixed payment system for inpatient services

11. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved.

12. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Medicare and Medicaid Law (cont’d.) Oversight and administration: –Medicare and Medicaid programs only reimburse health care organizations meeting specific eligibility requirements and thus influence providers’ structures and operations –Programs’ reimbursement mechanisms affect providers’ incentives to control costs –Medicare Payment Advisory Commission (MEDPAC): plays significant role in shaping variety of medicare reform initiatives

13. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Food and Drug Law Food and Drug Administration (FDA): federal agency responsible for ensuring safety/efficacy of drugs, medical devices Regulatory challenges: –Balance public demand for speedy access to newly developed drugs against risk –Ensure continued monitoring of drugs –Ensure information is appropriately disseminated

14. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Antitrust Law Promotes competition because markets bring benefits of lower consumer prices, higher output, and greater innovation Federal antitrust provisions applying to health care industry: –Prohibiting contracts restraining trade –Prohibiting activities to obtain a monopoly –Prohibiting mergers, acquisitions, and joint ventures that threaten to lessen competition

15. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Tax Exemption Law Majority of U.S. hospitals and some physician organizations, nursing homes, etc. have federal tax exemptions Organizations qualify for federal income tax exemption under section 501(c)(3) of Internal Revenue Code: –Must meet organizational criteria and operational criteria –Community benefit standard

16. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Other Federal Laws and Regulations Affecting Hospital and Health System Operations Federal Fraud and Abuse Laws HIPAA Privacy and Security EMTALA Health Care Quality Improvement Act

17. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. State Policy & Regulation State and local governments: –Provide care through public hospitals and clinics –Finance care through medicaid and other programs –Create and enforce health care-related laws and regulations

18. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Licensure Serves as primary mechanism by which states regulate quality of care provided by health care organizations: –Hill-Burton act (1946): major impetus for state-level licensure –Types of health care organizations required to obtain license vary somewhat across states –All states require organization undergo a site inspection

19. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Certificate of Need Regulation Certificate of need (CON): required for health care facility before construction, renovation, or expansion –Prompted by National Health Planning and Resources Development Act –All states require applicants to put forward evidence of need in support of request that speaks to issues of access, cost, and quality

20. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Relationships Between State and Federal Law State and federal laws interact in varied ways: –Preemption: if federal and state laws directly conflict, federal law applies –Forms of preemption are numerous and analysis involved is not always straightforward –Both state law and federal law can have a significant influence over health care entities’ activities

21. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Organizational Strategies for Regulatory Compliance Patient safety: –Mitigating risk of harm to patients Role of regulatory compliance officer: –Responsible for conducting all activities related to regulatory compliance Health care organizations’ regulatory challenges: –Need to invest a considerable amount of resources to ensure compliance

22. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved.

23. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Recent Policy and Regulatory Initiatives Transparency: –Patients know little about price or quality of medical services –Lack of information undermines competitive process –Number of recent initiatives attempt to address these problems by increasing price and quality transparency

24. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Recent Policy and Regulatory Initiatives (cont’d.) Prices: –Without price information, patients not able to take financial considerations into account –Government has responded to paucity of data Quality: –Limited availability of measures undermine providers’ efforts to improve quality –Governments have sought to fill information void via public quality and safety reporting

25. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Pay-for-Performance Links financial incentives to accomplishment of assigned performance goals, productivity or quality: –Physicians, physician groups, or hospitals are entities accountable for achieving assigned quality goals –Interest is in response to growing body of evidence indicating that quality of care in U.S. is suboptimal

26. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Specialty Hospitals Specialty hospitals are controversial: –In theory, narrow focus may lead to more efficient and higher-quality care than traditional general hospitals –However, physician-owned specialty hospitals are subject to general concerns underlying fraud and abuse laws –Congress responded to early concerns about specialty hospitals by imposing temporary moratorium

27. Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Comparative Clinical Effectiveness Compares medical treatments and strategies to enable healthcare providers to determine most cost-effective clinical treatments: –Each agency involved can use its own discretion in allocating funds –Key issue is how results of comparative clinical effectiveness research will affect policy and practice