1
Legal and Regulatory Issues
Kaitlyn T. Holder
Liberty University BUSI323
2
Abstract
The context of this paper is meant to discuss the legal and regulatory issues of a healthcare
organization. The major focus of this is to showcase the financial aspects of a healthcare
organization as it relates to these issues. The potential impacts of properly handling finances of a
healthcare organization will be discussed. There will also be coverage of what a compliance plan
is and how it benefits a healthcare organization. Other topics to be discussed are Medicare and
Medicaid and how the process works for reimbursement through either of these. The affordable
care act also falls under the guise of legal and regulatory issues in terms of financial
management. There are also federal regulatory concerns with things like HIPPA, stark law, and
EMTALA. Each one of the mentioned subcategories plays an important role of the legal and
regulatory ladder of the healthcare system. In the context of this paper there are several
explanations as to why one of those subcategories is dependent on another and how they
correlate to one another. It is important to understand these relationships so that you may better
understand the importance of the overall achievements of legal and regulatory issues in the
healthcare industry.
3
Legal and Regulatory Issues
There are many important issues to be concerned with in the world of financial
management as it relates to healthcare organizations. One of the important issues is legal and
regulatory issues. It is very important for a healthcare organization to be on top of its financial
management for it to function efficiently and effectively. When a healthcare organization can
function at its best it is beneficial for both the organization and the consumer population in which
it treats and serves. Over the course of this paper there will be a multitude of discussion points to
include what properly handling finances of a healthcare organization can result in. It will also
cover compliance plans, Medicare and Medicaid reimbursement as it relates to financial
management concerns, the affordable care act in relation to financial management, and federal
regulatory concerns.
First, there is the topic of how important it is for a healthcare organization to properly
manage its finances. One of the major turning points for the healthcare industry is the affordable
care act. “The enactment of the ACA in March 2010 represented a landmark change in the
federal law that shapes virtually every financial aspect of the nation’s healthcare delivery
system.” (Cleverley, 2017) The affordable care act encompasses health insurance coverage,
costs, and also preventative care. A little bit of background information about the law is that it
was signed into place first on March twenty-third of two thousand and ten, and it was also
amended on March thirtieth of the same year. Key points noted throughout the law include things
like improving coverage, preservation and expansion of coverage, state flexibility, small business
tax credits, shared responsibility between the individual and employers, better access to
Medicaid, better support for children, improvements to services through Medicaid and so forth.
The law was an inclusive bill that covered a range of topics that were seen as a concern in the
4
world of healthcare for Americans. Overall, the goal of this law was to make healthcare more
accessible as well as more affordable for the American people. (Rangel, 2010)
There are a lot of reason as to why the affordable care act has relevance to the world of
financial management. One of those reasons being that it directly affects the financial aspects of
a healthcare organization and its patients. One of the ways in which it does this is that it has a
purpose to help move healthcare organizations away from fee-for-service style payment models.
The way in which the affordable care act encourages the shift from fee-for-service also
encourages providers to provide more effective and efficient care with the incentive that there
can be a superior outcome by executing more value-based payment backed reimbursements. One
thing that can be said about the affordable care act is that while some things remain to be proven,
there is the proof that overall, healthcare for Americans has become more accessible seeing as
how there is a notable decrease in the number of uninsured individuals in the country as opposed
to before the law was put into place. (Cleverley, 2017)
Second, there is the concept of compliance plans and how it affects healthcare
organizations in a financial management aspect. Some important things to note about corporate
compliance plans that take precedent are reduction or “elimination of waste, abuse and fraud.”
(Cleverley, 2017) The main reason behind the push for corporate compliance plans is to help
mitigate some of the liability that falls upon directors and management and lessen the potential
risks of compliance errors in a healthcare organization. The general understanding about
compliance plans is to ensure that employers and employees understand regulations and laws
that apply to them and their organizations so that they can properly execute their duties while
abiding by these regulations. A well-assessed compliance plan can be the difference between a
lot of unnecessary costs to a healthcare organization as well as its ability to avoid fines that might
5
be incurred as a result of not following certain regulations. It is a good preventative method for a
healthcare organization to take the time and effort to put into place an effective compliance plan
and ensure that it is distributed throughout its organization with proper education and training to
its employees. A compliance plan is something that should be regularly monitored and reassessed
in order to ensure that it is keeping up with the most current standard and regulations that is
expected of the organization. One of the important ways in which a compliance plan relates to
financial management of a healthcare organization is ensuring that its monitoring is effective and
efficient in prevention of fraudulent billing incidents. “For example, billing for services provided
by inadequately supervised medical residents could result in liability under the False Claims Act.
Without a properly enforced compliance plan, relatively minor infractions left unchecked can
result in multimillion-dollar penalties to the organization.” (Cleverley, 2017)
There are more to a compliance plan than simply the plan itself. There are both inside and
outside entities that are necessary to implicate an effective compliance plan. Within a healthcare
organization there are designated entities who are meant to enforce and amend a compliance
plan. Usually this consists of a board of sorts, to include management, directors, and other
designated employees. There are five components that should be considered by this internal
board in a healthcare organization. Those five components should be risk assessment, control
environment, control activities, information and communication, and monitoring. (Cleverley,
2017) It is not only beneficial for a healthcare organization to have a compliance plan in place,
but it is also a requirement for certain entities such as Medicaid and Medicare for there to be a
compliance plan in place. It is very important for there to be means and methods of enforcing the
compliance plan because simply having one is not enough if it is not being enforced. This is
6
where it is necessary for a healthcare organization to have designated persons whose focus is to
ensure the application of the compliance plan is carried out accordingly. (Medley, 2019)
Next, there is the matter of Medicare and Medicaid as it concerns the financial
management side of healthcare organizations. Medicare and Medicaid are two of the most well-
known forms of health insurance to the public. Both programs are great options for the purpose
of which they serve. Medicare is provided to a group of individuals with the intention of serving
people over the age of sixty-five. Medicaid on the other hand serves as insurance for individuals
who meet the requirements of low income of any age group. (Centers for Medicare & Medicaid
Services, 2022) Medicare was brought into the healthcare world in 1965 as well as Medicaid. An
important part of participating Medicare and Medicaid patients is that they must be seen at a
clinic or hospital that participates in the program. Just as a healthcare organization has to be
eligible and certified to take Medicare and Medicaid patients to receive the reimbursement from
the insurance for services provided. (Cleverley, 2017) A provider must go through a set process
to become eligible to be a Medicaid and Medicare provider. Becoming a Medicare provider can
have benefitting financial aspects for providers and healthcare organizations alike. There are
things like incentives that are put in place to offset some of the shift of patients that an
organization or provider takes on by accepting Medicare patients. One of the incentives is that
Medicare will allow hospitals to “receive additional outlier payments for extremely costly
procedures, for the cost of graduate medical education if the hospital has an approved program,
and for treating a disproportionate share of low-income patients, as well as for the use of certain
new technology.” (Cleverley, 2017)
All too often there are cases of Medicare and Medicaid fraud happening throughout the
healthcare world. This sort of issue goes back to the concern of having a working compliance
7
plan in place for every healthcare organization. If there are proper methods and channels in place
for a compliance plan, it is less likely that a fraud or abuse case will occur involving Medicare or
Medicaid. This does not eliminate the risks, but it does significantly reduce them. (Cleverley,
2017) Some of the Medicare fraud and abuse laws are the FCA (false claims act), AKS (anti-
kickback statute), physician self-referral law (stark law), social security act (CMPL), and the
United States Criminal Code. The FCA serves the purpose of conducting cases against
individuals who knowingly commit fraudulent claims. The AKS exists to prevent the solicitation
or unlawful payment for and of referral from a physician to a patient. The stark law is meant to
prevent a physician from referring a patient to another entity in which they have a vested interest.
The criminal health care fraud statute is to prevent or give consequence to individuals
intentionally lying in relation to filing a claim that is knowingly fraudulent. This is one of the
more commonly known issues with healthcare fraud cases. There is also an exclusion statute in
which there is consequence for any situation involving fraud of Medicare or Medicaid, abuse and
neglect of patients, any form of financial misconduct or other forms of healthcare misconduct
such as unlawful dispensing of controlled substances and more. (Centers for Medicare and
Medicaid Services, 2021)
An interesting thing about Medicaid is that there is no federal cap on the amount of care
and coverage that it can provide and dispense to its insured. It follows a basis of as needed and is
disbursed to the states accordingly. (Cleverley, 2017) States must come up with allocation plans
for Medicaid in order to receive proper funding and access for the necessary population who
utilizes its services and coverage. It is stated in the text that there are financial rewards for
providers who participate in Medicaid coverage and care to patients. (Cleverley, 2017)
8
The previously mentioned fraud and abuse claims and repercussions are a major concern
in the world of healthcare. There are many cases in which a provider or other employees may
commit a cause of fraud and in their mind, it may be for a good cause. This is not always the case
but in some, there are good intentions behind the fraud. This does not make it acceptable, nor
does it make it ethical. Some cases that a provider might intentionally commit fraud would be in
order to treat a patient who does not have or does not qualify for certain insurance benefits.
Therefor a provider may be compelled to commit fraud as to help the patient receive the
treatments necessary to save their life. Unfortunately, there is no case in which fraud is
acceptable and the person who commits the fraud will be convicted all the same.
Another common issue in healthcare is the matter of HIPAA. HIPAA is put in place to
protect patients and their healthcare information. It also serves to “improve the Medicare and
Medicaid programs and the efficiency and effectiveness of the healthcare system by encouraging
the development of a health information system through the establishment of standards and
requirements for the electronic transmission of certain health information.” (Cleverley, 2017) So
while the common meaning behind HIPAA is to cover a patients privacy it also serves to better
Medicare and Medicaid programs so that the systems run smoothly in the relay of information.
(Cleverley, 2017)
The EMTALA, or emergency medical transfer and active labor act, also falls under legal
and regulatory issues. The emergency medical transfer and active labor act was passed in 1985
and serves the purpose of preventing hospitals from shoving off a patient who is having a
medical emergency to another location or hospital simply because they are unable to pay for the
medical treatment they require. (Cleverley, 2017) This sort of thing is more likely to happen at
private hospitals although it can happen anywhere.
9
Next, is the subject of tax exemption issues and how it relates to healthcare organizations.
One of the most prominent reasons for tax exemptions is the matter of nonprofit healthcare
organizations. The reason that nonprofit healthcare organizations are given a tax exemption is to
make up for some of the room in their budget in which they can utilize to give back to their
community in the form of providing services and care. A nonprofit must follow the necessary
process to be eligible for the tax exemption status and once they are approved then they will be
labeled as such. (Cleverley, 2017)
There are also antitrust laws that are put into place. These laws serve the purpose of
running interference with the idea of there being a monopoly in the world of healthcare. “The
three main sources of federal antitrust law are the Sherman Act, the Clayton Act, and the Federal
Trade Commission Act.” (Cleverley, 2017) These kinds of laws are very important because
without them, there would be free reign to have a monopoly in the world of healthcare and the
financial effects of such a thing would be devastating. (Cleverley, 2017) If a monopoly were to
ever take place in healthcare, it would crumble systems and leave many without the means to
access or afford healthcare they need. It would allow for a single entity to do whatever they
pleased and charge whatever they felt like for services as well as choosing to deny anyone they
felt like denying medical care regardless of their ability to pay for the services. A monopoly
would be detrimental and therefor these types of laws are extremely valuable in the healthcare
industry to maintain a healthy balance among organizations and the patients who utilize them.
All of the aforementioned subjects that fall under the umbrella of legal and regulatory
issues hold weight. Each one of them is important in their own way and are all valuable to the
healthcare system. It is necessary for them to exist because several of them are dependent on
another to make the systems run smoothly. The healthcare industry should always strive for the
10
betterment of its methods and procedures because there is always room for improvement. That
being said, it is a fairly balanced system that is currently in place at this time and is consistently
striving to be better. “This will bring health to your body and nourishment to your bones.”
Proverbs 3:8 (Proverbs 3:8 NIV - - Bible Gateway, n.d.)
11
References
Centers for Medicare & Medicaid Services. (2022). Medicaid. Medicaid.gov.
https://www.medicaid.gov/medicaid/index.html
Centers for Medicare and Medicaid Services. (2021). Medicare fraud & abuse: Prevent, detect, report.
https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/
MLNProducts/Downloads/Fraud-Abuse-MLN4649244.pdf
Cleverley, W. O. (2017). Essentials of Healthcare Finance (8th ed.). Jones & Bartlett Learning.
https://libertyonline.vitalsource.com/books/9781284142808
Division (DCD), D. C. (13 C.E., February 11). What is the Affordable Care Act? HHS.gov.
https://www.hhs.gov/answers/health-insurance-reform/what-is-the-affordable-care-act/
index.html
Medley, J. (2019, January). PolicyStat :: PolicyStat. Thehealthplan.policystat.com.
http://thehealthplan.policystat.com/policy/8341125/
Proverbs 3:8 NIV - - Bible Gateway. (n.d.). Www.biblegateway.com. Retrieved May 6, 2024, from
https://www.biblegateway.com/passage/?search=Proverbs
%203:8&version=NIV#:~:text=Proverbs%203%3A8%20New%20International%20Version
%208%20This%20will
Rangel, C. B. (2010, March 23). Text - H.R.3590 - 111th Congress (2009-2010): Patient Protection and
Affordable Care Act. Www.congress.gov. https://www.congress.gov/bill/111th-congress/house-
bill/3590/text
