Navigating Regulatory Changes in Healthcare: Insights from Kathryn Beard 

Regulatory compliance in healthcare is all about keeping patients safe, providing top-notch care, and protecting their data. It means following the rules and guidelines set by authorities. Compliance can be challenging, but it helps healthcare providers avoid mistakes, reduces fraud and keep patient information secure. Compliance with regulatory changes and new requirements builds trust between patients and providers, as patients know their care meets high standards. On the flip side, not following these rules can lead to legal trouble, financial losses and a damaged reputation. So, sticking to these regulations is key for running a healthcare organization smoothly and ethically. 

Kathryn Beard, senior manager of regulatory compliance and regulatory affairs at R1 RCM, recently offered her thoughts on navigating regulatory changes in today’s healthcare landscape. An attorney before moving to regulatory compliance, Beard is uniquely positioned to understand the legal complexities of compliance and their impact on health systems.  

Beard’s team provides guidance on regulatory requirements, as well as analyzes risk, determining how best to mitigate them. She notes that many healthcare organizations are more reactive to regulatory change or legislative change, rather than proactive and wants to help them manage change before it happens. “Our team is involved in working with folks outside of the organization, with our customer, with government affairs teams, and others to really influence legislation and regulations before they go into place,” Beard says. “We also try to influence changes to existing pain points to physicians, to hospitals and to the revenue cycle.” 

How Can Administration Changes Impact Healthcare?  

It’s important to note that, when an administration changes, it’s not just a new president coming in. They will also change the heads of all of the executive branch administrative agencies.  

“For healthcare specifically, that will mean a new head of Health and Human Services, as well as the Center for Medicare and Medicaid Services (SMS, the Department of Labor, Department of Justice and other spaces that are involved in healthcare,” Beard explains. “The leaders of the smaller groups within those departments will all have to be appointed by the president and confirmed by the Senate.” She notes that this is not an overnight process.   

New appointees and leaders will then enact the president’s agenda, which always involves policy changes from on administration to the other. That includes changes in priority, such as focuses on commercial payer routes, such as greater emphasis on Medicare Advantage plans over traditional Medicare. We ma also see changes in the way some policies are enacted, such as coverage of preventive care services under the Affordable Care Act.  

“Some of these shifts will take a lot of time,” Beard explains. “Others might happen pretty quickly through an executive order or other mechanism. But it’s also important to note that certain things will not change. The care payment rules that come out every single year to tell you what your payment rates are going to be and what covered services are, will continue to come out at the same time and will generally have the same rules because a lot of that is governed by statute. The agencies don’t really have a lot of room to do anything other than what the statute already says they can or must do. Now Congress can start changing laws, which the agencies would then also have to react to and enact, but that’s a slower process as well.”  

What is the Impact of Recent Regulatory Changes?  

 It’s common knowledge that Medicare payment rules come out in two cycles, Beard says. “The first is the fiscal year rules. Those go into effect October 1 of every year and they last through September 30. “The big one is the hospital inpatient payment or perspective payment system, or IPPS. That rule came out in August and went into effect October 1. The next big set issued final rules the first week of November, the calendar year rules that go into effect January 1 and will last through December 31.”  

 The most recently issued rules are the Medicare physician fee schedule and the hospital outpatient perspective payment system (OPPS), which also covers ambulatory surgical centers. These rules define reimbursement rates and make changes as to covered items and services, what codes mean or how they’re valued and more.  

“Generally speaking, the biggest change we’re seeing in terms of reimbursement is going to be happening in the physician fee schedule. The physician fee schedule has a lot of statutory requirements related to budget neutrality,” she explains.  “when something additional becomes covered, other areas of the fee schedule have to be reimbursed at a slightly lower rate to compensate and maintain that neutrality. This is usually a very small amount, but it can add up overall. What they’re proposing for this next calendar year is overall a decrease in the conversion factor, which is multiplied by your RVUs to give you your reimbursement, then that’s going to decrease by 2.93%, which is quite significant.”  

Similar decreases have happened in the past several years. And in many of the cases, Congress has acted before the end of the year to adjust that, to make the decrease smaller or to negate the decrease for a year. That’s been happening just one year at a time. There’s nothing certain about it and no way to know if it will happen this year or not.  

Beard says there is good news: a lot of people are looking at permanent fixes for the annual change. One plan being considered is tying the fee schedule to the Medicare Economic Index or some other inflationary related measure, as most Medicare payment rules are already tied to that. The physician fee schedule is not.  

“We’re waiting to see if Congress is going to act there or what else could happen. But that’s a significant decrease in reimbursement. It also echoes throughout the industry because a lot of commercial payers link their payment amount to Medicare as a percentage of what the Medicare reimbursement would use,” Beard says. “So if your contracts look like that, you may see a decrease across the board rather than just with Medicare.”  

Beard recommends that providers review payer contracts to see how reimbursement structure is scheduled, particularly over several years – is it tied to inflation? Providers should work at increasing efficiencies. “Whenever your reimbursements are going down, you have to find better ways to partner with your RevCycle partners and throughout your organization,” she says. “Find automation to reduce touches and make everything move smoother and quicker to save money.”  

What Challenges Are Payer Behavior Presenting to Providers?  

Changes in payer behavior and relationships are increasingly cited as a driver of burnout and other workforce challenges for healthcare systems. “We’ve been seeing continued and potentially increasing instances of what I would call bad payer behavior, where they are making it harder for patients to get the care that their doctors have determined is medically necessary for them,” Beard says. “It’s making it harder for people to timely be seen or have a necessary procedure.” 

Prior authorization continues to increase across the board, more for Medicare Advantage plans than traditional Medicare because those are run by commercial payers. In addition to slowing patient care, the extra work dramatically increases administrative burden for healthcare providers.  

If care isn’t being delayed on the front end, it may be denied afterward. “With some Medicare Advantage plans, prior authorizations per patient have stayed about the same, but the number of denials has increased over time. So things that would have been approved two years ago may not be approved now,” Beard explains. The fact that so many denials are reversed on appeal frustrates providers even more.  

Regulations are attempting to address these challenges, but it’s slow going. The first step right now specifically is looking into more transparency about how many requests a payer is receiving, how many denials they issue, how many of those are overturned on appeal, more detail on those overturns and also looking at timeliness. There’s a new regulation this year for Medicare Advantage plans related to prior authorization. It requires payers to make determinations on care in seven days instead of 10 for a regular request and in less time for urgent requests. This also applies to managed Medicare plans and qualified health plans on the Affordable Care Act exchange.  

Even Medicare is seeing changes in prior authorization. Traditional Medicare started requiring prior authorization for some procedures a couple of years ago, according to Beard. In the newest OPPS rule, regulators imposed shorter requirements on responses, similarly to those for Medicare Advantage. States are also noticing problems with prior authorization and are imposing their own requirements on timeliness.  

“We have seen payers who in their own advertising materials, say we can decide, our software can decide on a prior authorization in an hour, but they may not tell the provider or the patient for up to a week. And that’s just a shame,” Beard says. “It causes patients to forego care or to delay it when they could just be scheduling and moving on with their life with their procedures. So that’s a big issue.”  

Denials are the other major payer issue right now, and that includes MA plans: increases in denials, more documentation requests.  

“All of the things that commercial payers are doing overall are also echoing in Medicare Advantage,” says Beard. “We have found that, for a Medicare Advantage claim, a clean claim that Medicare traditionally would approve and call clean, Medicare Advantage denies about twice as often as Medicare traditionally would, even though it’s supposed to be following the exact same rules as Medicare. We are finding much longer days in AR. It takes them longer to adjudicate claims and pay them out. More appeals are necessary.  

So for every Medicare Advantage plan, there are more touches, there is more time involved and greater administrative burden. Medicare Advantage keeps growing as a percentage of the Medicare population. This year, about 50% of eligible Medicare beneficiaries have chosen to be in a Medicare Advantage plan, and so we’re really looking at opportunities to make Medicare Advantage more equivalent with traditional Medicare and make sure that the payers are following the rules that already exist. A lot of oversight agencies have found that Medicare Advantage plans are not doing things by the book and are making significant profits above what they should be for administering Medicare. We don’t need new rules; we need to enforce existing ones.”  

What Changes Have Been Made to the False Claims Act and Overpayment Rule?  

One of the more important regulations in federal payments is the False Claims Act, which says that claims submitted to Medicare, Medicaid or any other government payer, must be real. Dating back to the Civil War, the False Claims Act was initially created to deal with suppliers defrauding the United States Army. It now covers any suppliers of goods who are paid by the U.S. government.  

Heathcare providers cannot submit claims that are  

• Beyond the services provided 
• Services not provided at all  
• Services provided by breaking other payer rules  

 “But what’s really interesting in the False Claims Act now, is there’s a new court decision in Florida and this is one limited court decision at the moment, but I wouldn’t be surprised if it is adopted elsewhere in the country,” Beard notes. The Florida court looked at a portion of a court decision written by Justice [Clarence] Thomas. He suggested that perhaps the qui tam provisions of the False Claims, which allow any person to be a whistleblower on false claims, are not allowable under the Constitution. 

 The Department of Justice has always been given a chance to review and decide whether they want to run the case. If the DOJ chooses not to, though, the whistleblower is able to continue prosecuting that case through the civil system. If they win, they do get a percentage of the overpayments to them as a service for them bringing this to the federal government’s attention. But what this court said is that the qui tam provisions are not allowable under the Constitution, because the only people who can prosecute a case on behalf of the federal government must be appointed under the Constitution and confirmed by the Senate. That’s not the case with whistleblowers.” 

 If this becomes established, the risk profile for healthcare organizations will significantly change: the actual risk of massive monetary and other penalties coming from whistleblower claims may decrease.  

 Currently, a lot of organizations spend a lot of time working with their teams to minimize any risks of whistleblowers from a disgruntled employee or ex-employee. It’s probably still a best practice to continue working with potentially disgruntled people to make sure that everyone is above board, that you’re doing everything properly and that people don’t have the wrong idea or start talking poorly about the organization.  

In a related matter, as part of the ACA in 2010, Medicare established the 60-Day Overpayment Rule: if Medicare overpays a provider for any reason, the provider has 60 days to return the funds. When the rule was initially established, overpayments included payments a provider knew they weren’t entitled to and ignorance that they had a payment they never should have received.   

 One of the new rules now allows a 6-month period for due diligence investigation before the 60-day clock starts.  Providers now have time to look at that overpayment, the cause of it and whether there are other similar overpayments. They can determine the scale, the scope and the total overpayment received is, so then they can report it and return it. That helps reduce stress and administrative burden on healthcare providers as well as time to establish why the overpayment happened in the first place.  

 The regulatory landscape changes rapidly. Having a revenue cycle management partner with specialized expertise in both government and commercial regulations can help any healthcare provider maximize their revenue and cash flow while staying in compliance with less effort and administrative burden. Contact R1 to learn more about what that means.