TPG’s Healthcare Review: September, 2014
“Compliance”
Welcome to the ninth edition of TPG’s Healthcare Review, a forum to keep our current clients, prospective clients, and candidates apprised of the ever-changing landscape of healthcare in a post-reform world. Tracking the iterations, implementations, extensions and exemptions of the Patient Protection and Affordable Care Act of 2010 (PPACA) can be a full time job. Each new day seems to bring a wave of information which needs to be fully digested before the next news cycle starts. Again, it is our intent to update this newsletter monthly through the end of 2014 to keep you well-informed of the latest developments and their implications. We thank you for your interest so far this year, and welcome your comments and questions.
What is the first thing that you think about when you hear the word “compliance?” Do you envision an authority figure “persuading” individuals to conform to a standard? Or do you think of the exact opposite, like a room full of two year olds expressing themselves? Whatever your thoughts are regarding compliance, when it comes to PPACA, there has been very little discussion regarding regulatory compliance to the law. Written into the voluminous document is the notion that the Internal Revenue Service will be the enforcement arm of the government utilized for PPACA compliance. Now, don’t you feel better?
Having spent 26 years of my career in various corporate banking positions throughout central Pennsylvania, compliance means something completely different to me. The first things that I think of when I hear the word compliance are “audits, time and cost.” With PPACA being released as a comprehensive healthcare reform law of over 2,500 pages, and final regulations of over 13,000 pages and counting, there is a lot more to the compliance aspect of the law than anyone wants to talk about. Last October, former IRS Commissioner Fred Goldberg stated that in its current form, “ObamaCare will be a needless administrative and compliance quagmire for millions of Americans.”
It may not be completely accurate to compare the financial services industry with the healthcare industry, but in terms of size and scope, there are some similarities. In 2012, the financial services sector of the economy represented about 7.9% of the United States GDP as compared to the healthcare sector’s 17.9%. Within the financial services industry there are a number of regulatory bodies responsible for the health of the United States financial system. Regulators on a federal and state basis oversee safety and soundness, anti-discrimination statutes, anti-money laundering statutes, Bank Secrecy Act, disclosure laws and various other fair and equal credit laws, to name a few. Federal regulators work for a variety of Acronym Agencies (OCC, FDIC, OTS, FFIEC, NCUA) as well as the Federal Reserve Board. Each state/commonwealth also has agencies which mirror the federal regulators for the state chartered organizations. At this point, there is no corresponding infrastructure to deal with regulatory compliance within the much larger healthcare industry.
Another similarity between the healthcare and financial services industries is that both are operating with a large degree of uncertainty due to comprehensive reform bills. The cost of the new regulations under the Dodd Frank financial reform bill have been hotly debated since it was signed into law. The weight of the regulatory burden has been particularly hard on smaller community banks as the law requires the same level of oversight and reporting no matter what size the bank may be.
Applying these same principles to the healthcare industry explains why there has been such consolidation within the industry as large healthcare providers gobble up the smaller practitioners. PPACA has laid out specific requirements within the insurance and provider markets, yet we know little of how compliance to the “new rules” will be measured. What types of audits and/or inspections will the providers, insurers and employers be subject to? If any are found to be out of compliance will there be a period of time for corrective action? Will they face financial penalties? Cease and desist orders? These issues will become the focus of the next series of contentious debates over PPACA over the next few years. The answers to these questions may impact the implementation and amendment of PPACA as it now stands.
Last month, we shared The Performance Group’s solution for PPACA costs going into 2015 for contracted employees. Part of our service will be the generation of the necessary reports for government compliance purposes. Although adjustments may be necessary as final rules are released, we are confident that we will be able to supply the data you and your company may need to maintain compliance with PPACA requirements.
With little over a month to the crucial mid-term elections, we anticipate that the virtues and vices of PPACA will be hotly debated by incumbents and candidates alike. As we are back to politics as normal, we do not expect to see any meaningful healthcare legislation until after the election. Until then, health insurance renewal rates will be released on a staggered basis. Any feedback you could provide regarding rates of increase would be greatly appreciated and will be kept completely confidential. Thank you and good luck.
Thomas E. Readdy
President
The Performance Group
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