New report details the high cost of regulatory compliance for hospitals

According to a new report commissioned by the Oregon Association of Hospitals & Health Systems (OAHHS), some rules governing hospital operations put a significant financial burden on community hospitals and siphon off dollars that could go to patient care. 

Setting out to evaluate the financial impact of regulatory compliance on Oregon hospitals and health systems, the report found that acute care inpatient hospitals in Oregon must comply with over 2,000 rules created by the state. 

Acute care hospitals provide inpatient medical care and other related services for surgery or short term acute medical conditions, injuries, and illnesses. 

 

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Through survey responses collected from 44 acute care hospitals in Oregon and interviews with OAHHS officials and healthcare executives, the report’s authors — a team of researchers from the Master of Healthcare Administration (MHA) program at Pacific University — determined that Oregon’s 62 community hospitals collectively spent $126 million a year solely on labor to comply with the rules.

As the state looks at the total cost of health care, we hope legislators consider the financial burden on providers from compliance with these regulations,” said Becky Hultberg, President and CEO of OAHHS.

On average, each hospital spent approximately $3.9 million annually, $0.5 million of which was spent on labor to comply with state regulations.    

In a preceding report issued by the American Hospital Association (AHA) in October 2017, which outlined the administrative costs of federal healthcare compliance requirements, staff salaries were found represent 85% of total compliance costs. The remaining costs were comprised of IT, infrastructure and vendor related expenses.

The report stated that time constraints were the largest barrier to achieving compliance with state laws and regulations, followed by constraints to funding and staff resources. 

Additionally, Oregon’s nurse staffing law was singled out by the report’s authors as the most significant burden on hospitals, due to the sentiment relayed by providers and staff that the law disproportionately focuses on record keeping rather than on quality of staff hiring and patient care.

The report laid out several recommendations state legislators and policymakers to reduce the regulatory burden of compliance rules. Chief among the recommendations is that the state be mindful of the cost burden on healthcare providers and the healthcare system when developing new compliance rules.  

Money spent ineffectively on compliance could be going to patient care,” said Laura Dimmler, director of the School of Healthcare Administration & Leadership at Pacific University, and the report’s lead author. 

Next, the state suggests writing new rules in clear and easily understandable language. By doing so, the authors believe hospitals can save on the administrative costs spent downstream of complicated rules written with inconsistent formats. The 2017 AHA report on federal compliance requirements found that 25% of hospital spending, roughly $200 billion, goes to administrative costs.

On top of the labor needed to interpret complicated rules, the report also points to Oregon’s existing nurse staffing laws as an area where administrative costs could be reduced through reform, saying the state should “ensure that the laws focus not on paperwork and documentation but on hiring effective nurses and improving patient care.”

Regarding the overarching role of federal compliance requirements , the reports calls for the state to “avoid regulatory redundancy” by ensuring that the new regulations do not conflict with or duplicate existing federal rules. 

At a time when health care affordability is top of mind for everyone, we need to streamline the regulatory environment to create rules that prioritize and enable high quality care for everyone,” said Hultberg. “These reports point out the need for efficiencies in our laws and regulations so that resources go to taking care of patients, not needless record keeping.”