Law of Healthcare Administration in America

Abstract

The law of health care administration in America is a mixture of federal, state, and local statutes, rules, and regulations. At the federal level, Congress passes a statute that is often enforced in the executive branch by an administrative agency. The US Department of Health and Human Services, composed of several administrative agencies, is the federal department that implements national health policy. It is important for actors within the health care industry to be aware of the authority of and relationships between each body that regulates the industry. It is also important to be acquainted with the sources of potential liability of health care professionals and institutions toward their patients. This article reviews the governmental structure of health care regulation and a few sources of liability for actors in the health care industry.

Overview

Health care in the United States is a hot political topic that ignites much debate. The number of uninsured Americans is often cited as a problem for the country. The cost of medical insurance is generally rather high, in many cases prohibitively so, with many people forgoing the expense and suffering the crush of medical bills in the event of illness. The seemingly dire financial outlook for Medicare, the federal health care program generally provided to those Americans receiving Social Security, is another cause for concern. While the Affordable Care Act of 2010 took some steps toward addressing these issues, it did not solve the problem. A universal health care program is often discussed as a way to cure some of the ills of the American health care system, but opponents of such a system often cite the attendant cost and presumably large tax increase necessary to fund such a program. They may also mention that the United States has some of the finest medical professionals in the world, and socialization would adversely affect the country's position as a leader in global medical innovation. The health care debate also affects the doctors themselves, who may have difficulty receiving reimbursements from insurance companies and are often subject to their own large premiums for malpractice insurance. In the business world, individual companies are having trouble keeping pace with competition from lower-cost producers around the world, in part because of the high cost of providing health care benefits for employees.

Each of the potential problems mentioned above impacts business because they impact almost every American. Every issue also involves law, but the law of health care is a vast subject. To try to reduce the subject to a manageable size, this article will first describe the sources of the laws that control the field of health care and then discuss a few legal topics related to the business of administering medical services, including the regulation of health care institutions and the liability of health care professionals and institutions.

The Structure of the Law & an Introduction to Federal Health Care Agencies. This discussion of the structure of the law in the United States is generally applicable to every area of US law and is therefore valuable for all those interested in the government regulation of conduct. Of the three general sources of law described below, each may apply in certain circumstances with more vigor or primacy than the others, and the relationship of each to one another is critical. While the description of law is keyed to the federal system, each state, as a separate governing authority, typically has an analogous structure to the federal system. While a discussion of the relationship between state and federal governments is beyond the scope of this article, as a general rule, federal law supersedes state law.

The three sources of law are common law, statutory law, and administrative law.

• Common law is judge-made law; it is derived from judicial decisions. When a court decides on an interpretation of a law, that interpretation is binding on lower courts in other cases with sufficiently similar facts.
• Statutory law is the body of laws, or statutes, that were passed by a legislature. Legislative action is the first step in the process. After Congress (or a state legislature) passes a law, it may be administered or enforced by an administrative agency, which is part of the executive branch of government.
• Administrative laws, or more appropriately administrative regulations, are rules passed or promulgated by an administrative agency. If Congress desires to enforce a statute with an agency, the statute itself creates that agency and empowers it to create regulations to enforce that law. The process by which Congress creates agencies, the degree of power and latitude those agencies have, the method by which the agency may create rules, and the judicial oversight of the process are all part of what is generally referred to as administrative law, which is largely governed by the Administrative Procedure Act (APA), passed by Congress in the 1940s. The body of rules produced by an agency is usually referred to as rules and regulations. The complete set of all of those rules and regulations from all federal agencies is contained in the Federal Register for public access.

Agencies typically have significant latitude to fulfill their congressional mandate. In other words, the agencies enjoy deference from the courts that agency rules and decisions should be upheld. That deference to agencies is called Chevron deference, named after the 1984 United States Supreme Court case of Chevron v. Natural Resources Defense Council. Parties seeking to challenge or appeal an administrative ruling are typically required to seek recourse within the agency itself before a court will hear the case. The important general point is that an agency regulation, once established according to the rules prescribed by the APA, has the effect of law, and in many cases an agency interpretation of that law will be respected by the courts, although courts retain the power to disagree with and overrule an agency decision or interpretation.

Agencies enforce their congressional mandate through internal legislative, judicial, and executive functions, the general arrangement of which is similar to the structure of the government at large. Accordingly, the agency has the authority to create rules (the legislative function), enforce those rules (the executive function) and adjudicate the cases (the judicial function). As mentioned, all of these activities occur within the executive branch of government, which is charged with the duty to enforce the law passed by Congress. The executive branch is organized into departments, with the heads of those departments forming the president's cabinet. A few examples of federal executive departments are the Departments of Defense, State, Justice, Education, Energy, and Homeland Security, as well as the Department of Health and Human Services (DHHS).

The Department of Health & Human Services. The DHHS enforces most of the health-related laws passed by Congress. The secretary of the DHHS is the administrative head of the department and a cabinet-level adviser to the president. The DHHS is responsible for developing and implementing regulations that carry out the national health policy objectives and is the main source of regulations that affect the health care industry. Some of the main agencies of the DHHS are listed below.

The Administration for Children and Families. The Administration for Children and Families (ACF) describes its mission as "to enhance the health and well-being of Americans by providing for effective health and human services and by fostering sound, sustained advances in the sciences underlying medicine, public health, and social services." The ACF lists five main goals: to "promote economic and social well-being for individuals, families and communities," to "promote healthy development and school readiness for children in low-income families and other special populations," to "promote safety and well-being of children, youth and families," to "support underserved and under-represented populations," and to "upgrade the capacity of the administration for children and families to make a difference for families and communities" (Administration for Children & Families, 2012).

The Administration on Aging. Created in 1965 by the Older Americans Act (OAA), the Administration on Aging (AoA) provides home- and community-based care for older persons and their caregivers. In 2012, the AoA became part of the Administration for Community Living (ACL), which "is charged with working with states, tribes, community providers, universities, nonprofit organizations, businesses and families to help older adults and people with disabilities live in their homes and fully participate in their communities." The mission of the ACL is to "maximize the independence, well-being, and health of older adults, people with disabilities across the lifespan, and their families and caregivers" (Administration for Community Living, 2013).

The Centers for Disease Control. The mission of the Centers for Disease Control and Prevention (CDC) is "to protect America from health, safety and security threats, both foreign and in the U.S." The CDC pursues that mission by "confronting global disease threats through advanced computing and lab analysis," "tracking disease and finding out what is making people sick and the most effective ways to prevent it," "bringing new knowledge to individual health care and community health," "detecting and confronting new germs and diseases around the globe to increase our national security," and "building on our significant contribution to have strong, well-resourced public health leaders and capabilities at national, state and local levels." Public-health decisions are based on "the highest quality scientific data that is derived openly and objectively" (CDC, 2013).

The Centers for Medicare & Medicaid Services. The Centers for Medicare and Medicaid Services (CMS) were formed in 1977 as the Health Care Financing Administration. They have the mission of "strengthening and modernizing the nation’s health care system to provide access to high quality care and improved health at lower cost." The Affordable Care Act "effectively task[ed] CMS to lead the charge to provide high quality care and better health at lower costs through improvement to health care for all Americans," which "includes a greater emphasis on its continuing efforts in program integrity, health care innovation and health disparities reduction, as well as the establishment of Affordable Insurance Marketplaces." CMS seeks to "achieve [its] vision of a high quality health care system" by striving to meet four strategic goals: "better care and lower costs," "prevention and population health," "expanded health care coverage," and "enterprise excellence" (Centers for Medicare & Medicaid Services, 2013).

The Food & Drug Administration. The Food and Drug Administration (FDA) "is responsible for protecting the public health by assuring the safety, efficacy and security of human and veterinary drugs, biological products, medical devices, our nation's food supply, cosmetics, and products that emit radiation," as well as "for advancing the public health by helping to speed innovations that make medicines more effective, safer, and more affordable and by helping the public get the accurate, science-based information they need to use medicines and foods to maintain and improve their health" (FDA, 2013).

The Health Resources & Services Administration. According to its website, the Health Resources and Services Administration (HRSA) "is the primary Federal agency for improving access to health care services for people who are uninsured, isolated or medically vulnerable." With six bureaus and ten offices, HRSA "supports the training of health professionals, the distribution of providers to areas where they are needed most, and improvements in health care delivery"; "oversees organ, bone marrow and cord blood donation"; "compensates individuals harmed by vaccination"; and "maintains databases that protect against health care malpractice, waste, fraud and abuse." In addition, "HRSA's grantees provide health care to uninsured people, people living with HIV/AIDS, and pregnant women, mothers, and children." HRSA was formed in 1982 by the merger of the Health Resources Administration and the Health Services Administration (Health Resources and Services Administration, 2013).

The Indian Health Service. The Indian Health Service (IHS) "is responsible for providing federal health services to American Indians and Alaska Natives. The provision of health services to members of federally-recognized tribes grew out of the special government-to-government relationship between the federal government and Indian tribes. This relationship, established in 1787, is based on Article I, Section 8 of the Constitution, and has been given form and substance by numerous treaties, laws, Supreme Court decisions, and Executive Orders. The IHS is the principal federal health care provider and health advocate for Indian people, and its goal is to raise their health status to the highest possible level" (Indian Health Service, 2013).

The National Institutes of Health. According to its website, the National Institutes of Health (NIH) "is the largest source of funding for medical research in the world, creating hundreds of thousands of high-quality jobs by funding thousands of scientists in universities and research institutions in every state across America and around the globe." Its mission is "to foster fundamental creative discoveries, innovative research strategies, and their applications as a basis for ultimately protecting and improving health; to develop, maintain, and renew scientific human and physical resources that will ensure the Nation's capability to prevent disease; to expand the knowledge base in medical and associated sciences in order to enhance the Nation's economic well-being and ensure a continued high return on the public investment in research; and to exemplify and promote the highest level of scientific integrity, public accountability, and social responsibility in the conduct of science" (National Institutes of Health, 2013).

The Regulation of Health Care Institutions & Professionals. Only licensed health care professionals may practice medicine, and those professionals must answer to their own licensing authorities for their conduct with health care organizations. The licensing of health care professionals is governed by state law, under the state's general authority to protect the health, safety, and general welfare of its citizens. State law governs entry into the medical professions, disciplinary actions, and the delivery of health care services by unlicensed persons. The licensing of professionals is part of a more comprehensive quality-control structure that includes certification by voluntary professional boards and credential systems for clinical staff within hospitals and other institutions.

In addition to the quality of the professional, the quality of care received by patients is significantly impacted by the quality of the institution itself. Institutions are regulated by local, state, and federal authorities; through the Medicaid and Medicare programs, the federal government extends the regulation. In order for an institutional health care provider to receive payment under Medicare, the major federal program, the provider must be certified and must sign a provider agreement with the CMS. In this way, the federal government, as a purchaser of services, can regulate by requiring institutions to meet certain standards.

One way the Medicare statute regulates hospitals is through certification requirements for participation in the Medicare program. The federal government relies on private-sector certification from companies such as the Joint Commission (TJC), the leading accreditation organization, previously the Joint Commission on Accreditation of Healthcare Organizations. Under the Medicare Improvements for Patients and Providers Act of 2008, the CMS was put in charge of certifying any organizations seeking accreditation authority, including TJC. The Medicare program also uses other private parties for quality control. The federal government contracts with private quality improvement organizations (QIOs), one in each state, to review the services provided to Medicare beneficiaries and address complaints, appeals, and other legal matters.

Liability of Health Care Professionals & Institutions. Litigation over patient injury caused by a health care professional dates back to early English and American law. Over the past fifty years, medical malpractice litigation has exploded, perhaps due in part to the increased number of invasive procedures enabled by technology, the wider availability of those procedures due to third-party payment structures, the ease of use of modern legal systems, the lack of sympathy modern juries have for doctors, and the willingness of physicians to testify against one other. Additionally, courts are recognizing new theories of recovery, including mental distress, strict product liability, and new types of award damages. Traditionally, doctor liability was based on contract warranty theory (the failure to perform as promised) and negligence (the failure to exercise the required degree of care, skill, and diligence). There are myriad potential issues in a medical malpractice case that allow a patient to recover from a doctor, and the basic duty arises from the doctor-patient relationship.

Prior to 1940, most hospitals were protected from suit by either charitable or governmental immunity. Hospitals, supported by charitable donations, were protected by the courts on the theory that the donations to the hospital constituted a public trust that could be diverted to pay a claimant. Additionally, the idea that a single large award could bankrupt a charitable hospital would threaten future donations. Governments are generally immune from suit and may only be sued to the extent the government allows; that immunity extends to governmental sub-units acting on behalf of the government. The Federal Tort Claims Act defines the allowable actions against the US federal government (Furrow & Greaney, 2000).

As a result of judicial and legislative action, the modern view is that hospitals are liable for the torts, or civil wrongs, of their employees via the doctrine of vicarious liability. However, the hospital may be able to establish the independent contractor defense to liability. Hospitals are not liable for independent contractors because the hospital would not have exercised control over an independent contractor. Apart from the potential liability a hospital may have for medical professionals performing services on-site, a health care institution is also liable for negligence pertaining specifically to the maintenance of its facilities; provision and maintenance of its medical equipment; hiring, supervision, and retention of nurses and other employees; and failures to have procedures in place to protect patients (Furrow & Greaney, 2000).

Conclusion

The law of health care in the United States is a mixture of federal, state, and local statutes, rules, and regulations. At the federal level, Congress passes a statute that is often enforced in the executive branch by an administrative agency. The US Department of Health and Human Services is the federal department that implements national health policy. It is important for actors within the health care industry to be aware of the relationship and authority of each body that regulates the industry. It is also important to be acquainted with the sources of potential liability that health care professionals and institutions have for their patients. This article merely touches on those potential sources, and the prudent actor in the industry will always make a comprehensive review of the complicated health care law in America.

Terms & Concepts

Administrative Agency: A body created by statute to administer and enforce that statute.

Administrative Law: The laws that govern the organization and operation of the executive branch of the US government, including its administrative agencies, and the relationships of the executive to the legislative and judicial branches of government.

Administrative Regulations: The rules created by an administrative agency.

Common Law: The body of law derived from judicial decisions rather than from statutes or constitutions.

Independent Contractor: A person or business that performs services for another person or entity according to a contract that spells out the terms of the work to be done.

Statutory Law: The law derived from acts of a legislative body.

Bibliography

Administration for Children & Families. (2012). HHS Administration for Children & Families strategic initiatives: Goals, strategies & objectives for future work of the Administration for Children & Families. Retrieved November 26, 2013, from http://www.acf.hhs.gov/about/strategic-initiatives

Administration for Community Living. (2013). ACL strategic plan, 2013-2018. Retrieved November 26, 2013, from http://acl.gov/About%5FACL/StrategicPlan/docs/ACL%5FStrategic%5FPlan.pdf

Agency for Healthcare Research and Quality. (2005, November 1). AHRQ at a glance. Rockville, MD: Agency for Healthcare Research and Quality. http://www.ahrq.gov/about/ataglance.htm

CDC. (2013). Mission, role and pledge. Retrieved November 26, 2013, from http://www.cdc.gov/about/organization/mission.htm

Centers for Medicare & Medicaid Services. (2013).CMS strategy: The way forward. Retrieved November 26, 2013, from http://www.cms.gov/About-CMS/Agency-Information/CMS-Strategy/Downloads/CMS-Strategy.pdf

Daly, R. (2012). Still in the dark. Modern Healthcare, 42, 36-38. Retrieved November 26, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=73500996&site=ehost-live

FDA. (2013). What we do. Retrieved November 26, 2013, from http://www.fda.gov/AboutFDA/WhatWeDo/default.htm

Fontenot, S. (2013). Will health care costs come down? Watch the IPAB. Physician Executive, 39, 84-87. Retrieved November 26, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=87628777&site=ehost-live

Furrow, B. R., & Greaney, T. L. (2000). Health law (2nd ed.). St. Paul, MN: West Publishing.

Health Resources and Services Administration. (2013). About HRSA. Retrieved November 26, 2013, from http://www.hrsa.gov/about/index.html

Indian Health Service. (2013). Agency overview. Retrieved November 26, 2013, from http://www.ihs.gov/aboutihs/overview/

National Institutes of Health. (2013). About NIH. Retrieved November 26, 2013, from http://www.nih.gov/about/

Pozgar, G. D. (2007). Legal aspects of health care administration (10th ed.). Mississauga, Ontario, Canada: Jones and Bartlett Publishers.

Suggested Reading

Carpenter, C. E. (2009). We've been down this road before: Health reform in the United States. Journal of Financial Service Professionals, 63, 23-26. Retrieved November 26, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=42999222&site=ehost-live

CMS explores consumer-directed health plans in Medicare program. (2006). Managed Care Outlook, 19(11/12), 18-19. Retrieved July 25, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=22095214&site=ehost-live

Stoil, M. (2005). The 75 percent solution. Nursing Homes: Long Term Care Management, 54, 12-14. Retrieved July 20, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=16206210&site=ehost-live

Taurasi, R. (2007). Making sense of the alphabet soup of SPD regulations. Healthcare Purchasing News, 31, 42-43. Retrieved July 25, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=25733138&site=ehost-live