New Regulatory Requirements for Hospitals Present ARM Opportunities

Some pending regulatory changes impacting hospitals in the coming months will present opportunities for account receivables management vendors and service providers, experts say.

Come November 1, the Federal Trade Commission is requiring health care providers to develop and implement an identity theft prevention plan to comply with “Red Flag Alert” consumer protection rules. And beginning next year, hospitals must begin to comply with some revisions the Internal Revenue Service has made to Form 990 for tax-exempt organizations. 

Currently, hospitals need only a written plan in place for how they will comply with the red flag legislation. However, the plan must be tailored to the hospital’s specific risks based on their history with identity theft, approved by the hospital’s board of directors, and updated annually.

Regulators are requiring the changes to ensure patients aren’t misdiagnosed or receive improper treatment because their medical records have been contaminated with misinformation. The new rules also seek to prevent medical information from becoming vulnerable to identity theft.

“It’s going to require that registration staff take extra steps to verify a patient’s identity,” said Kathy Babcock, vice president of health care for TransUnion, a Chicago based credit and information management company.

TransUnion and health care software vendor nTelagent both offer hospitals analytic software that can verify and validate a patient’s identity to mitigate identity theft and reduce the risk of misdiagnosis, improper medical care, and fraud.  Babcock said TransUnion already has deployed 16 critical alert messages within in its Revenue Manager software suite that is currently used by more than 100 hospitals to ward off potential fraud or misidentification.

TransUnion’s and nTelagent’s analytic tools help health care providers identify errors such as invalid social security numbers, suspicious age information, insurance information, and other demographics. And they instruct hospital staff on how to proceed, according to the hospital’s plan. 

Babcock says TransUnion’s Revenue Manager can also help hospitals keep track of the number of patients who apply for charity care and the outcome of those applications.  But some industry experts expect many hospitals looking to address the challenges the new regulations will bring will be hampered by a likely recession and current credit conditions that would raise the cost of borrowing.

Michael Klozotsky, health care analyst for Kaulkin Ginsberg, says that’s where traditional medical ARM professionals with significant investments in identity technology may be able to help.

“You can provide more than collections and first party services,” Klozotsky said. “You may be able to up sell or cross sell services that would ultimately save the hospital money. Hospitals still need to spend money, but less money.”

Brian Stevens, vice president of HealthShare, a division of the Texas Hospital Association that identifies services and products from outside vendors for Texas hospitals, said many hospitals are investing to address the regulatory issues on an as needed basis. However, he expects more intense capital investments by hospitals as the regulations evolve and become more specific.

“Hospitals don’t really move until they have to,” he said. “If there are penalties in place there will be more robust plans in place.”

Hospitals will also be scrambling to comply with new rules handed down by the Internal Revenue Service.

Although not-for-profit hospitals aren’t required to detail their bad debt expense and charitable giving until the 2010 filing year, revisions to IRS Form 990 means hospitals will have to document governance and management policies, political campaigning and lobbying activities, non-cash contributions and information on tax-exempt bonds.

“There’s a lot of paperwork,” said Danny Chun, spokesman for the Illinois Hospital Association. “Some organizations could be filing out 10 forms.”