THE HIDDEN PRICE PROVIDERS PAY TO COMPLY WITH HEALTHCARE REGULATION

When most people think about the cost of healthcare, they look at billing, drug prices, or insurance premiums. What they don’t see is the hidden cost that providers shoulder to comply with the rules.

Every regulation comes with a price, not just in dollars, but also in terms of time, infrastructure, staffing, and attention. And when policymakers underestimate that cost, it distorts everything from reimbursement to patient access.

WHY COMPLIANCE COSTS AREN’T “EXTRA”

From a regulatory standpoint, there’s often an assumption that the costs of compliance are somehow separate from the cost of care. But that’s not how it works in practice.

Take a simple policy change, say, a new data collection requirement or a change in billing codes. Implementing that change requires:

• New systems

• Workflow redesign

• Updated training for staff

• Increased documentation time

• IT support and potential downtime

Those costs are real. They don’t disappear just because they weren’t in the agency’s original math. And if those costs aren’t reflected in payment rates, providers are left to absorb them or cut elsewhere.

WHAT REGULATORS OFTEN MISS

When I served at the Maryland Health Services Cost Review Commission, I saw firsthand how agencies often model hospital reimbursement based on “ideal” assumptions: clean patient records, stable systems, and no administrative friction. But that’s not the real world. In the real world, hospitals are dealing with:

• New tech rollouts

• Turnover and retraining

• Multiple compliance systems

• Resource juggling to meet competing mandates

When regulatory cost estimates don’t account for those realities, payments fall short. And over time, that shortfall compounds.

IT’S NOT JUST ABOUT BUDGETS — IT’S ABOUT PATIENT CARE

When hospitals are forced to stretch their budgets to meet underfunded mandates, they don’t just cut administrative corners. They may delay hiring. Reduce staffing ratios. Postpone technology upgrades that directly impact patients.

In other words, underestimating the cost of regulation doesn’t just hurt the bottom line. It undermines care delivery.

AN EXAMPLE THAT GOT IT RIGHT

One example I often point to is Maryland’s Medicare waiver system. When the state negotiated its waiver with CMS, it committed to an inflation cap in exchange for payment flexibility. Still, it also included language recognizing the ongoing cost of regulation and compliance.

That was intentional. It was one of the rare cases where policymakers acknowledged that regulatory burden is part of operational cost, not something separate. More systems should follow that model.

WHAT NEEDS TO CHANGE

If we want a sustainable healthcare system, we need a policy that reflects the real cost of running it. That means:

• Engaging providers earlier in the policy development process

• Including compliance burden in all economic impact analyses

• Building realistic cost assumptions into reimbursement models

• Recognizing that regulation without resources doesn’t serve anyone, least of all the patient

FINAL THOUGHT

Healthcare doesn’t happen in spreadsheets. It happens in real places, with real people, managing real constraints. When we ignore the cost of compliance, we risk undercutting the very outcomes we claim to support.

Regulation is necessary. But only when it’s matched with a clear-eyed understanding of the work it actually requires.