Listen and you can almost hear the sucking sound of hundreds of millions of dollars going down the black hole of regulatory compliance. The hole is big and filled with a multitude of local, state and federal reporting rules governing healthcare operations plus emerging clinical care directives such as evidence-based medicine guidelines.

Compliance with the staggering number of detail-oriented deliverables and deadlines is expensive. According to the most recent Healthcare Informatics research report, “Trends in Healthcare Financial Systems,” annual spending for regulatory compliance averages nearly $350,000 across all types and sizes of healthcare provider organizations. For hospitals and healthcare delivery networks (excluding ambulatory care centers) the average spend is nearly a half million dollars.

The larger the organization, the larger the budgetary allotment for compliance efforts. Those reporting the highest rates of spending are large hospitals, hospitals in healthcare delivery networks and those located in urban settings. Ambulatory care centers, which are typically smaller and less complex, report much lower compliance-dedicated spending.

Privacy issues trump most other compliance demands as the most difficult, say nearly half of the Healthcare Informatics Research Panelists responding to the online survey. Naturally, this includes, but is not restricted to, Health Insurance Portability and Accountability Act of 1996 (HIPAA) mandates.

But for most of the other panelists, the greatest compliance challenge isn't Sarbanes-Oxley or the Centers for Medicare & Medicaid Services' Medicare Hospital Cost Reports. It's pay for performance (P4P) programs. Addressing compliance concerns precedes participation for many.

Although all types of organizations indicate much interest in these incentive programs and the intent to become involved within the next couple of years, participation remains low now.

The future, however, looks more promising. At a minimum, most organizations have some level of involvement or interest in P4P programs. Nearly one in three of those surveyed say their organization is either actively participating in a program (17 percent) or beginning to align documentation with financial systems and make the changes necessary to enable them to do so (16 percent). And another third are pondering their approach and evaluating how they can best meet the necessary criteria required for participation.

Currently, hospitals, and especially large hospitals, are more likely to be involved in P4P programs than ambulatory care centers. Seventeen percent of this group is already participating in a P4P program, 19 percent is beginning to make the changes necessary to meet requirements and 53 percent say they are considering their strategic response.

Compliance with P4P programs relies on careful attention to documentation of care delivered and adherence to evidence-based medicine guidelines. Providers must be able to defend the care they provide, especially in cases where the patient did not achieve optimal desired outcomes.

Not unlike CMS' final acute care hospital inpatient prospective payment system rule that was published in August and offers the carrots of additional incentives to hospitals for participation in quality improvement efforts, but also “sticks” of excluded hospital-acquired conditions from Medicare reimbursements, P4P programs will be tough undertakings without the benefit of sophisticated documentation tools and robust analytical report capabilities.

More information about “Trends in Healthcare Financial Systems” is available from Vendome Group, LLC at http://www.vendomegrp.com/research or by calling (212)812-8439.