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What is the Financial Impact of HIPAA and Other Regulations on Medical Practices?

Posted by Erick Cutler, CPA on Feb 27, 2014 3:10:40 PM

Many doctors begin practicing medicine because they want to help people, but most don’t consider the mountains of paperwork and miles of red tape created by complying with federal and state laws. Everything from medical privacy to staying up-to-date with health codes is governed by regulatory agencies, leaving doctors to navigate a bureaucratic maze.

Many doctors begin practicing medicine because they want to help people, but most don’t consider the mountains of paperwork and miles of red tape created by complying with federal and state laws. Everything from medical privacy to staying up-to-date with health codes is governed by regulatory agencies, leaving doctors to navigate a bureaucratic maze.

Unfortunately, these regulations impact your medical practices far beyond creating headaches for busy physicians. Staying up to date with HIPAA, Medicare and Medicaid billing practices and specialty-specific regulations often requires a financial investment.

Adapting to today’s rapidly evolving technology has proven extremely costly for medical practices. Most recently, the conversion of medical coding practices from ICD-9 to ICD-10 codes is resulting in significant technological upgrades for most physicians. This transition in billing practices is estimated to cost small practices at least $85,000, and the figure grows exponentially as the practice gets larger.

A new change in privacy regulations could also be expensive for your practice. Known as the Accounting Disclosures provision of the HIPAA law, this rule requires physicians to provide patients with a record of all information disclosed to others by the physician. According to the law, that person is called a “business associate.”

The HHS defines a “business associate” as “a person or entity, other than a member of the workforce of a covered entity, who performs functions or activities on behalf of, or provides certain services to, a covered entity that involve access by the business associate to protected health information.  A ‘business associate’ also is a subcontractor that creates, receives, maintains, or transmits protected health information on behalf of another business associate.  The HIPAA Rules generally require that covered entities and business associates enter into contracts with their business associates to ensure that the business associates will appropriately safeguard protected health information.”

To put it simply, this provision is extremely worrisome for doctors, especially those of you running small to midsize practices. The added time and expense of complying with the contractual agreement clause can be huge. In addition, when you hand over patient information to a business associate, that is when you make a non-authorized disclosure, you must now document the date of the disclosure, to whom you disclosed the information, and why. This information must be made available to your patients upon written request for up to 6 years. It is likely many practices simply are in noncompliance.

The Department of Health and Human Services has not issued a final ruling on when or to what extent practices must implement the new HIPAA provision, but it is expected that at least some of this data will need to be stored for patients to access. As providers wait for a decision, they lose valuable training and implementation time, which could lead to more costs down the road.

Training expenses are often overlooked when figuring the cost of compliance for medical practices. As the shift from ICD-9 to ICD-10 occurs and HIPAA updates are made, office staff must learn new codes and a new system, requiring a large investment of time. Whether you decide to conduct training in-house or outsource, it’s likely you’ll have to pony up cash to bring your practice up to speed.

Staying compliant with federal and state laws that govern medical providers may be costly, but it’s better than the alternative. Failure to comply with these changes could result in longer processing times for claims with Medicare and Medicaid or, worse, thousands of dollars in fines.

If you have any questions, contact  Erick Cutler at 214-635-2541. 

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.

Topics: Medical