Abstract The Affordable Care Act (ACA) brings a myriad of changes to the healthcare system and hospitals must adapt accordingly or face dire financial challenges. Some of the financial challenges will originate from the influx of Medicaid patients due to the Medicaid expansion. Based on these changes, there is an increased tendency for hospitals to engineer ways to reduce costs such as patient selection and staff reduction. However, for a hospital to participate in Medicare, which accounts for more than 50% of hospital budgets, certain laws and regulations must be followed. This paper discusses these laws and regulations and offers suggestions on how to adjust successfully to the upcoming changes.

The Affordable Care Act (ACA) and Hospital Compliance In light of the current changes in the healthcare industry, it is imperative for every healthcare organization to adapt accordingly or face dire financial challenges. A major change included in the Affordable Care Act (ACA) is the expansion of Medicaid, which will provide coverage to millions of formerly uninsured US citizens and permanent residents (Rosenbaum, 2011). However, Medicaid is notorious for much lower reimbursement compared to Medicare and private/commercial insurance (M. Schmitt, personal communication, October 7, 2013).
In addition, hospitals are now required to prove that the services they bill for actually improve and maintain patients’ health (Leonard, 2013). Hospitals are also required to cover the cost of medical errors and hospital-acquired infections as well as face penalties for re-hospitalizations for the same problem within a specified amount of time (Leonard, 2013). Even more alarming is the fact that the ACA projects huge cuts in Medicare and Medicaid reimbursement to hospitals (Leonard, 2013). In light of all these changes, it is understandable for healthcare organizations to search for ways to avoid or reduce the numbers of Medicaid patients that are seen at their facilities.
Nonetheless, there are regulations that apply to patient selection that must be followed in order to ensure compliance with federal laws and prevent legal action against the healthcare organization. One of such regulations is the Emergency Treatment and Active Labor Act (EMTALA), which requires any hospital that participates in Medicare to provide medical treatment to all individuals that present at their emergency department with an emergency medical condition (EMC), regardless of their ability to pay (CMS, 1986). The ACA requires continued adherence to EMTALA and goes further to require non-profit hospitals to openly publish information about how individuals can receive financial assistance for their bills. Failure to comply with EMTALA’s guidelines may result in termination of the hospital’s participation in Medicare, as well as monetary penalties.
Another regulation of importance is the “Conditions of Participation” in the Medicare and Medicaid programs. Of particular importance is the rule that requires an increase in patient-centered care for all hospitals through internal assessment of quality, safety, and studying adverse events (CMS, 2003). These measures apply to all patients in the hospital with no room for selectivity and are accessed during onsite visits by Medicare officials. For instance, hospitals should not reduce the number or type of tests/treatments offered to a patient based on the type of insurance coverage they have or if they are uninsured or covered by Medicare/Medicaid. Since Medicare supplies more than 50% of the hospital’s reimbursements, it is imperative that these guidelines are strictly adhered to.
A third regulation, the False Claims Act (FCA) oversees inaccurate billing for services covered by Medicare and Medicaid (Kim, 2009). For instance, overbilling, under-billing or waiving the fee for a service covered by the government or private insurance is considered a false claim. According to Weiner (2001), the tendency to over-, under-, or not bill for a service arises mostly when providers are faced with patients that need a certain standard of care but the reimbursement from their third party payer is insufficient. Thus, physicians may opt to waive the coinsurance or copayment fees for patients who express financial difficulties (Weiner, 2001). Persistence of such practice may lead to violations of the Medicare and Medicaid anti-kickback statute, because providers who consistently waive fees for patients, may become favored by certain patients, providing unfair marketing advantage to the hospitals or practices they work for (Weiner 2001).
In order to adapt to these changes, while remaining compliant with healthcare laws and maintain quality care, the following suggestions are warranted. First, the hospital should consider developing increased affiliations with primary care physician groups, urgent care centers, and retail clinics such as the CVS pharmacy minute clinics. Affiliating with these groups will ensure a pipeline of patients for specialist and/or inpatient care, while relieving the burden on the hospital’s clinics. Second, the hospital should consider creating specialty clinics in the community, such as orthopedics clinics. Patients would find it easier to get to a specialist located within a five-mile radius to where they reside, especially if such a location offers free parking.
Third, the hospital should consider recruiting more nurse practitioners and physician assistants to handle preventive care, relieving physicians to deal with more complicated patients. Finally, the hospital should prepare for lower Medicare and Medicaid reimbursements by creating a budget where Medicare is the best case scenario and making necessary adjustments.
The ACA provides coverage to existing insurance by abolishing the lifetime minimum, extending coverage for children to 26 years of age, removing preexisting conditions, and setting minimum coverage standards (Rosenbaum, 2011). These changes may cause an increase in the hospital’s contribution to its employee’s healthcare. Consequently, a hospital might consider reducing its staff and abolishing certain services such as physical therapy, or shift more patients to outpatient care, in order to accommodate these expected financial losses.
In terms of saving cost through personnel reduction, an alternative to consider is “Lean Management” practices introduced by the Toyota Company (Graban, 2012). Lean practices necessitate the involvement of staff, rather than experts, to restructure hospital processes and services to reduce costs and eliminate waste. Graban (2012) reports that lean management practices have been instituted in several hospitals with a no-layoff policy, such as Park Nicollet Health Services in Minneapolis, with successful results. Although laying-off personnel to curb costs may appear to be a viable solution, there are many advantages to gain from avoiding such a drastic measure. Avoiding layoff results in employees that are more engaged and motivated to help the hospital contain costs while maintaining high quality standard of care. Besides, considering the aging US population and the expected influx of patients through the ACA, it makes sense to maintain the already-trained hospital staff rather than layoff presently and then rehire in the future.
However, if the hospital decides to proceed with laying-off personnel, there are certain recommended best practices to implement in order to be compliant with federal labor laws and avoid legal repercussions (Punke 2013). First, layoffs should be logical and should make operational sense. For instance, layoffs do not need to be proportional among departments – some departments may face a higher number of layoffs if found to be overstaffed. Second, department managers should be fully educated on the rationale and justification of the layoffs so that the process can proceed smoothly. Third, communication with employees that will be laid off and employees that remain is essential. Communication to all laid-off employees should be standardized and for employees that remain, the communication should be geared to boost morale and dispel fear about losing their jobs. Lastly, the hospital should communicate clearly with the community, emphasizing that the layoff will not affect the quality of care provided by the hospital. These measures, if applied correctly, should help the hospital avoid negative effects of layoffs and strategically position the hospital for success.

References
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