What is the effect of medical billing audit non-compliance?

mm Paul Verbiton March 16, 2020
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nurse checking the pulse trace

Although California is only the third-largest state in the United States in terms of territory, it is also the most populous, with nearly 40 million people. For example, it pioneered the health insurance marketplace following the passage of Obamacare.

As of 2017, California only trailed Texas as the state with the most number of hospitals. While the Lone Star State had 407 tertiary healthcare facilities, California had 341. All in all, there were nearly 4,800 critical access, acute care, and children’s hospitals in the country by the end of 2016. But only 19 states have more than 100 such establishments.

The HIPAA was signed into law by President Bill Clinton in 1996, and it laid down the foundation of the modern medical billing and coding system that hospitals adopt today. Meanwhile, it also gave rise to the prevalence of medical billing companies in California, which are providing services for external audits on hospitals to ensure compliance.

Consequences of Non-Compliance

The agencies that are responsible for enforcing the privacy and security regulations in the HIPAA are the Department of Health and Human Services and the Office for Civil Rights. Their primary function is to minimize fraudulent activities in the process of billing claims, as well as ensure that patient information is secured.

There are two penalties that the entity may face: civil sanction or criminal liability.

For the civil penalty, there are three tiers:

1. If the violator is not deliberate (unknowing), then the company or individual may pay from a low of $100 or a high of $50,000 per violation. So, if you failed to comply with the standards for 100 people, it means $10,000 for the minimum amount.
2. If there is reasonable cause, your penalty amount range is still the same. However, you may pay $100,000 each year for repeat violations.
3. If the company knows about the violation and there is willful neglect, the penalty will start at $10,000 up to $50,000 per violation. For succeeding offenses, the erring entity will pay $250,000.

There is a caveat for the third item. Even if there is willful neglect, the company must have already taken steps to rectify the mistake. For instance, the violator has contacted medical billing companies in California for an external audit of their system.

Companies that have not corrected their faulty system will face an annual penalty of $1.5 million.

That is not even the worst thing.

Non-compliance also has an accompanying criminal liability for violators. The Department of Justice will handle each case. For example, insurance companies, clearinghouses, and healthcare providers who knowingly share private information of patients will face one-year imprisonment on top of the $50,000 fine.

The penalties would increase to five years imprisonment and $100,000 fine if the organization committed the offense under false pretenses.

If the state prosecutors find that the individuals intended to sell the confidential information for profit and malicious harm, they will face up to 10 years imprisonment and $250,000 in fines.

As you can see, it pays to ensure that your organization has complied with the medical billing and coding system as outlined in the HIPAA. More than the penalties, healthcare providers would hesitate to work with you again for fear of being scrutinized by government regulators.

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Paul Verbiton

I enjoy spotting opportunities and doing my best to grab them if I can. I am eager to see the world, I love taking photos and writing, coming up with topics that are pleasant to read, funny, and interesting at the same time.

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