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What Is Healthcare Compliance? (+HIPAA Violation Costs)

June 17, 2019

Do you know the current health of your compliance program?

Every industry deals with some level of corporate compliance on a day-to-day basis. For some, compliance is as easy as following a few state and federal laws. For others, it’s a maze of new legislation and industry specific regulations.

The healthcare field is one of the few industries where compliance is more complicated and more important. In this article, we’ll look at what healthcare compliance entails, the specifics you should keep an eye on, and how you can create a comprehensive healthcare compliance program.

Looking for a specific topic regarding healthcare compliance? Use the links below to jump ahead:

What is healthcare compliance?

Healthcare compliance refers to the specific rules, regulations, and laws that relate to the healthcare field. It covers a variety of internal and external compliance measures and can relate from anything to billing practices to patient information and privacy laws.

The healthcare field is different from other industries when it comes to compliance. There are specific rules and regulations healthcare professionals must comply by to fulfill the two ultimate goals of healthcare compliance: patient safety and information privacy.

What is HIPAA?

If you’re familiar with healthcare compliance, you’ve probably already heard of the Health Insurance Portability and Accountability Act of 1996, also known as HIPAA. Before we can dive into the details of HIPAA compliance, we need to define HIPAA.

HIPAA is the U.S. legislation and compliance method used to protect sensitive patient information maintained by healthcare providers and health insurance industries. It also protects patients from identity theft and fraud and provides limitations on health insurance providers.

HIPAA has evolved a lot since its inception back in 1996. According to SearchHealthIT, the most recent incarnation of HIPAA focuses on:

“Proving continuous health insurance coverage for workers who lose or change their job, and to reduce the administrative burdens and cost of healthcare by standardizing the electronic transmission of administrative and financial transactions. Other goals include combating abuse, fraud and waste in health insurance and healthcare delivery and improving access to long-term care services and health insurance.”

Related: Learn more about identity theft and what you can do to protect your personal information!

What's the hidden cost of a HIPAA violation?

The modern incarnation of HIPAA puts a lot of responsibility on healthcare providers to take a proactive approach to patient protection. In fact, a HIPAA violation could cost your company a lot of money.

Below is a graph outlining the varying costs of a HIPAA violation using data from The Federal Register:

HIPAA Violation Tier Cost of Compliance Failure
Tier 1: The covered entity did not know and could not have reasonably known about the breach Cost: $100 – $50,000 per incident up to $1.5 million
Tier 2: The covered entity knew, or by exercising reasonable due diligence, would have known of the violation, but did not act with willful neglect. Cost: $1000 – $50,000 per incident up to $1.5 million
Tier 3: The covered entity acted with willful negligence, but corrected the problem within a 30-day time period. Cost: $10,000 – $50,000 per incident up to $1.5 million
Tier 4: The covered entity acted with willful negligence and failed to correct the problem in a timely manner Cost: $50,000 per incident up to $1.5 million

In the cases outlined above, a covered entity is anyone providing treatment, payment, and operations in healthcare. This can include hospital staff, insurance providers, and more. Anyone who works with or deals in patient healthcare is subject to HIPAA regulations.

Tip: Learn more about HIPAA and check out our free HIPAA compliance checklist

Why is healthcare compliance important?

We’ve already outlined a few reasons why healthcare compliance is important, but the primary reason is that technology is changing faster than most of us can keep up.

The HITECH Act of 2009 and the Affordable Care Act, for example, are two of the latest additions being made to protect patient information and data through healthcare compliance. The changing nature of technology and healthcare is what makes healthcare compliance important. As new trends, technologies, and challenges emerge and new laws are being passed, it takes a lot of work to remain compliant.

Healthcare compliance provides a framework for healthcare providers to give patients the most up-to-date and effective medical treatment. Most healthcare companies employ a full-time Chief Compliance Officer whose sole focus is to stay up to date on the latest laws and ensure company compliance.

healthcare compliance

When it comes to staying compliant, the stakes are higher for healthcare providers than most other industries. Any healthcare provider ignoring healthcare compliance could be putting the lives of their patients in danger.

Tip: Learn more about the most disruptive medtech trends of 2019

What is required for healthcare compliance?

There’s a lot that goes into maintaining healthcare compliance, and with that comes a lot of rules. Healthcare compliance is unique in the compliance sphere because it has several external agencies and governing bodies working together to provide oversight to healthcare providers.

To give you perspective, here are just a few of the governing bodies and federal regulations that oversee healthcare compliance:

  • HIPAA and the HITECH Act – protects patient privacy, prioritizes patient record and information safety
  • The Office for Civil Rights (OCR) – holds healthcare providers who violate HIPAA accountable
  • The Affordable Care Act – outlines new requirements for insurance providers, Medicaid, and patients with pre-existing conditions
  • The Department of Health and Human Services – helps protect patients against fraud
  • The Social Security Act – oversees the funding and requirements for Medicare, Medicaid, etc.

Again, these are just a handful of the regulatory bodies tasked with overseeing healthcare compliance. Hopefully, this will help begin to paint a clearer picture of the scope of healthcare compliance.

How to create an effective healthcare compliance program

Creating a healthcare compliance program from scratch can be tricky. Healthcare information and patient data are being digitized, which makes it more difficult to have a comprehensive healthcare compliance program without the help of software.

Because there are so many governing bodies and federal regulations required for healthcare compliance, many companies find it best to utilize a healthcare compliance software to help keep track of everything. Healthcare compliance software is popular because it offers healthcare providers with the tools specific to their industry.

Here's what healthcare compliance software allows you to do:

  • Revise compliance practices based on changing regulations
  • Avoid incurred compliance violation fines
  • Decrease the costs and resources dedicated to maintaining compliance
  • Train all employees to ensure compliance is maintained

The initial cost of a healthcare compliance software might scare some companies, but the cost of a compliance breach is what should really frighten you. According to a 2018 study done by IBM, the healthcare industry saw the highest cost for data breaches per capita over any other industry.

Cost of a data breach

The above graphic outlines the per capita cost of a data breach in incurred fines and penalties. Those numbers can add up. For example, if your office mishandles 2,000 patient files, you’d be out more than $815,000 for your error.

The real question when it comes to healthcare compliance isn’t will you spend money, it’s how you want to spend your money. Do you want to invest in a sophisticated program that can train your employees and protect patient information? Or would you rather pay heavy fines and penalties after a preventable data breach?

Looking for an easy way to provide the best compliance options to your staff?

Find the best Healthcare Compliance software on the market. Explore Now, Free →

Run a check up on your healthcare compliance program

Having a healthcare compliance program in place is just part of the battle. Ensuring that you’re getting the most bang for your buck while providing the best program for your employees is another thing entirely. If you haven’t looked over your compliance program in the last year, make an effort to give it a checkup. You might be surprised by what you find.

Interested in learning more about how your company can stay compliant? Identify your company's compliance and security risks using G2 Track.

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