The Multi-Billion Costs of Excessive Regulation

No one argues that healthcare – a major component of the economy – should have strict guardrails influencing its direction and operation. But do the ever-increasing number of mandated reports and regulations result in providers having to hire more administrative staff to handle paper as opposed to clinical staff that improve patient care?

New data now exists on the federal level that provides proof that the regulatory state may be affecting care. A report from the American Hospital Association (AHA) released on Wednesday shows that hospitals, health systems, and post-acute care providers spend nearly $39 billion a year on administrative activities related to regulatory compliance. The average-sized hospital spends $7.6 million annually to comply with federal regulations, equal to $1,200 every time a patient is admitted, and dedicates 59 full-time equivalents to the task, more than one-quarter of whom are health professionals who would otherwise be caring for patients, the study found.

"There is growing frustration for those on the front lines providing care in a system that often forces them to spend more time pushing paper rather than treating patients," said AHA President and CEO Rick Pollack.

Those are federal numbers. In Massachusetts, hospitals and health systems report regularly to the Health Policy Commission and Center for Health Information & Analysis (both agencies’ budgets are funded primarily by hospitals), as well as the Attorney General’s Office, Division of Insurance, MassHealth, DPH, each insurance plan – among many other entities.

While debate in Massachusetts and in Washington focus on healthcare costs and healthcare access, a more general question merits attention: In the incessant effort to regulate all aspects of the healthcare community, is government creating a regulatory quagmire that is driving up costs?