Insights

The Criminalization of American Healthcare

September 18, 2014

Property & Casualty

I have found The Economist to be the closest thing I can find to an “apolitical” news source.  The article, “The Criminalization of American Business” really resonated with me based on what I have seen with my Healthcare & LifeScience clients.  It is written largely from the perspective of the regulatory “shakedowns” of Financial Services companies in the US, but this practice has been the norm for years for the numerous regulatory bodies over the Healthcare and LifeScience sectors.  Whole industries exist both in the private sector and in the public sector to avoid and or respond to allegations of fraudulent practices (usually billing related).  This is especially troublesome in our industry because it is widely accepted that coding is as much art as it is science.  Furthermore, it has been stated (by CMS no less) that there is a 10 to 1 ROI on regulatory enforcement.  All this combines for the perfect storm that can, and routinely does, hit any given provider on any given day.

As healthcare costs continue to soar, widely outpacing inflation (estimates predict back up close to 6% next year) the court of public opinion is all too ready to try and convict healthcare providers and administrators at even the slightest hint of malfeasance. The reasoning goes; “Certainly these exorbitant costs are due to an unholy combination of fraudulent billing coupled with insurance company profit and greed.”  People tend to really like and value ”their” provider and we know that the reality is that these costs are primarily due to the fact that excellent, timely care delivered exclusively by one’s favorite provider is expensive. Furthermore a “routine” appendectomy or C-Section absorbs many years of healthcare premium payments…and that assumes everybody stays healthy! The causes and proposed fixes for these very real structural cost issues and system inefficiencies (plus the costs of “real” fraud) are the subject of a good portion of the popular dialogue today and well beyond the scope of this post. However, the reality remains that “the criminalization” of American Healthcare providers by industry regulators and subsequent settlement costs are very real indeed. This is to say nothing of the tremendous derivative costs related to this issue like external consultants, internal resources, and so on.

Once you have assessed your risks, designed and implemented best practice internal controls and performed mock audits, what else can be done when the inevitable allegation of billing errors, false claims, Stark violations, EMTALA violations and or anti-trust activities occurs? The insurance industry has rapidly responded and more now than ever, there are solutions to protect your assets and preserve your razor thin margin should you or your organization suffer a loss, fine or financial penalty. However, many of these risks are NOT covered by traditional programs or the coverage granted is deeply sub-limited or carved back to cover only a very thin portion of the actual risks. Especially if your coverage portfolio remains static to what was in place 3, 5 or more years ago, you should seek a coverage audit by a qualified broker or consultant to ensure that your program matches your current risk profile.

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All views expressed in this article are the author’s own and do not necessarily represent the position of Woodruff-Sawyer & Co.

Chad Follmer

Senior Vice President, Healthcare and Life Science Practices

Contributor, Property & Casualty

Chad leads the Healthcare Practice at Woodruff Sawyer. His expertise in the healthcare and medical industry includes regulatory risk, data privacy and cyber risks, alternative risk finance structures (captives, RRGs, SIRs and trusts) and risk solutions for ACOs and all forms of coordinate care structures. Chad is a Risk and Insurance Magazine “Power Broker” award recipient, and authors blog features on timely healthcare topics. 

415.399.6384

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Chad Follmer

Senior Vice President, Healthcare and Life Science Practices

Contributor, Property & Casualty

Chad leads the Healthcare Practice at Woodruff Sawyer. His expertise in the healthcare and medical industry includes regulatory risk, data privacy and cyber risks, alternative risk finance structures (captives, RRGs, SIRs and trusts) and risk solutions for ACOs and all forms of coordinate care structures. Chad is a Risk and Insurance Magazine “Power Broker” award recipient, and authors blog features on timely healthcare topics. 

415.399.6384

LinkedIn