The past 12-15 months have been witness to monumental changes in the health care industry. On the compliance front, we saw the finalization of the Phase II regulations under Stark II. The government has made clear that now that the final regulations are in place, it intends to aggressively enforce the Stark laws and regulations. We also saw the government continue its aggressive stance in its criminal and civil monetary actions as well as in its recoupment efforts. In addition to excluding record numbers of providers from the Medicare and Medicaid programs, the government successfully recovered billions of dollars from providers. On the liability side, we have seen wholesale changes to our medical malpractice laws beginning with the introduction of fee caps on non-economic damages and the subsequent passage of three constitutional amendments.

Going forward, and on the compliance side, the government is likely to increase its aggressive stance with regard to overpayments and fraud and abuse. Recently enacted reporting requirements, sophisticated computer programs and the efforts of the Program Safeguard Contractors will all lead to greater levels of scrutiny. The OIG, in its 2005 work plan, has identified several areas where it perceives abuse and has reiterated its intention to focus on improper coding and the enforcement of the supervision requirements applicable to many procedures. Once again, there will likely be much more aggressive enforcement of Stark given the lower burden of proof required of the government (in comparison to enforcement of the Anti-kickback Statute, which requires that the government establish intent). Medicare recently reported that intermediaries and carriers made nearly $20 billion in erroneous or questionable payments last year – an error rate of 9.3 percent. In many instances, the claims were paid despite being medically unnecessary, inadequately documented or improperly coded. Medicare intends to reduce this error rate by half, which is certain to translate into greater scrutiny of claims. Finally, the HIPAA Security Standards must be implemented no later than April 20, 2005. Compliance with these standards will require the adoption of a series of administrative, technical, and physical security procedures for covered entities to use to assure the confidentiality of electronic protected health information. On the medical malpractice side, we will see how the statutory and constitutional amendments will play out. How will they be implemented? How will the legislature enact laws to coincide with the constitutional amendments? Will the amendments be challenged? How will they affect practitioners in the real world? Will they really do anything to lower malpractice premiums?

Given the foregoing, 2005 is almost certain to be a pivotal year for the health care industry.