Healthcare // Analytics
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8/14/2013
04:22 PM
Rob Preston
Rob Preston
Commentary
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Death By A Million Regulations

It is long past time to assess the consequences of the endless laws, codes, rules, licenses and guidelines governing just about every human activity.

Consider the push to require companies to notify customers in the event of a security breach that involves their private information. A no-brainer, right? But what happens when 20 or 30 or 40 states insist on crafting their own breach-notification laws, and they overlap and/or conflict with one another? A case in point is a Texas bill that Gov. Rick Perry signed on June 14, which requires any person who conducts business in the state to notify "any individual" whose information was involved in a breach, ostensibly extending the Texas law to all U.S. residents. As Morrison & Foerster attorney and InformationWeek contributor Nathan D. Taylor wrote in a column on this hairball of a proposed law, it raises all kinds of commercial and constitutional questions -- and related costs.

There's a regulation or set of guidelines governing just about everything: food, energy, rent, transportation, fishing, medicine, gambling, securities trading, outer space. Licenses are required to become not just doctors, lawyers, electricians, plumbers and financial planners, but also (depending on the state and locality) funeral directors, real estate agents, manicurists, hairdressers, sprinkler installers, armored car guards and horse track exercise riders. The rent-a-cops enforcing the concession monopoly on Long Island's Jones Beach used to physically chase me as a 14-year-old boy because I didn't have a license to sell Italian ices to sunbathers. (Those portly patrolmen never did catch me, even as I fled lugging a Styrofoam cooler packed with Marino's ices.) Rough estimates put the percentage of U.S. occupations that require a license at about 20%; many of them require no test of competency -- they're just another tax on business.

People like the sound of more rules and regulations as a matter of principle, because they're intended to protect consumers, employees and society at large. And many regs do just that. Environmental, construction and pharmaceutical codes and tests come to mind. They're critical. Look at China for an example of a country in chaos because of a lack of regulatory oversight.

But even the best regs tend to go overboard, and they pile up quickly, as do the unintended consequences of innovation-sapping bureaucracy, specious lawsuits and other direct and indirect costs ... which businesses just pass on to their customers.

When laws and regulations prove to be overly broad or imprecise, they live on (and on) anyway, due to inertia or the thinking that a flawed rule beats none at all. Remember the Can-Spam Act, put into practice in 2004? It canned nothing; it only nabbed a handful of trophy offenders while conning people into thinking it would unclutter their inboxes. Yet is there any talk of repealing this bureaucratic waste of taxpayer money and government effort?

I'm not optimistic things will change. Regulatory overload goes back many years. In 2006, a frustrated VP of IT told me: "There are weeks, even months, that go by when I don't feel like I'm doing anything for my company because all I'm doing is complying with Uncle Sam. It's just insane." Said another IT exec at the time: "I'm not driving jack. I'm being driven. We're all being driven by lawyers."

For every new regulation we create, we should be required to retire at least two that have outlived their usefulness. That's right: We need a new regulation to regulate regulation sprawl. Lord help us.

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sjacks982
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sjacks982,
User Rank: Apprentice
8/17/2013 | 11:25:17 AM
re: Death By A Million Regulations
When I hear "too much regulation" I hear "oink, oink". Wasn't SOX an outgrowth of Enron? Didn't email retention rules tighten up after Microsoft tried to con the DOJ? At the turn of the century, UofW Medical Center settled for $10 million (potentially ~$50 million) on overcharges for misrepresenting the care provided (e.g. charging for "ghost" staff), and recently caught again trying to defraud the Government. Private insurance investigates and settles numerous of these cases outside the public eye. Regarding onerous report requirements: outside private insurers and insurer/hospital companies internally (like the Blues) require more detail than the Fed agencies. I would wager your guests were either grossly incompetent CIOs or you don't recognize thinly disguised greed. (And the AMA protects negligent doctors better than the Catholic church covers up for priests.)

These are the same arguments given by Bank IT execs, yet any nearly intelligent human being (sorry, but accountants aren't known for high IQ) could guess that their practices were against the law.
Oh and the statistical chance of your going home from surgery with an errant surgical instrument sewn up inside you hasn't changed from two decades ago. Incompetence: one hospital's charging Medicare for the missing instruments was key to one investigation.
Michael Endler
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Michael Endler,
User Rank: Author
8/17/2013 | 5:57:51 AM
re: Death By A Million Regulations
I sympathize with this point of view. Many regulations are, as Rob effectively illustrated, a quagmire of jurisdictional questions, redundancy, and overall b.s. But there's a problem: some companies look for any absence of regulation they can exploit.

It's almost like some companies know laws will be written later to outlaw their activities, so they figure they have to maximize their bad behavior while it's still legal. It's that gray area where "ethical" and "legal" start to separate from one another. The garbage with Goldman Sachs trying to affect aluminum prices is a recent example of this sort of thinking.

And when the companies get punished, the fines are never enough to appease public disapproval. If you make the mistake of parking in the wrong space in San Francisco and your car gets towed, the penalty you'll pay to get your car back is more severe, in relative terms, than what many fines related to the financial crisis have been. It's no wonder people have, as Rob pointed out, a natural affinity for more rules, more regulation and - so they hope - more protection. When companies so often do things that make people think, "Someone should stop that!", calls for more regulation are difficult to avoid.
majenkins
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majenkins,
User Rank: Ninja
8/16/2013 | 3:59:15 PM
re: Death By A Million Regulations
The little up and down arrow head thingies.
MyW0r1d
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MyW0r1d,
User Rank: Strategist
8/16/2013 | 2:55:33 PM
re: Death By A Million Regulations
Insurance companies! Are you kidding? Where they fought tooth and nail to keep subscribers and sell them every conceivable add-on as they tried to reduce the costs, the government now obliges a practically 100% participation. There is a word for it - windfall - any complaint in light of the benefits would be lame. A positive side effect, long term unemployed could consider a career change and start to study now to enter a possibly expanding market to deal with the increase of business.
RobPreston
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RobPreston,
User Rank: Author
8/16/2013 | 1:08:56 PM
re: Death By A Million Regulations
Where's the Like button on Comments?
cbabcock
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cbabcock,
User Rank: Strategist
8/16/2013 | 5:56:15 AM
re: Death By A Million Regulations
When it comes to mortgage industry regulation, we could say not too long ago, What regulation? Many parties saw that it was running amuck but there was no countervailing force to pull up short its bad practices. Too many rules, forms and blind policies? Yes. But regulation? Not in the 200r5-2008 time frame.
KBurger
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KBurger,
User Rank: Apprentice
8/15/2013 | 8:47:33 PM
re: Death By A Million Regulations
I have mixed feelings about this. Rob, you are right on about the inefficiencies and costs due to redundant and overlapping regulations (no different from redundant/overlapping systems that incur from mergers, growth, etc.). And it's very true that IT often (usually) bears the brunt of compliance requirements, especially when it comes to providing reports, analysis, audits, etc. But I also think a tremendous amount of time is wasted complaining about and fighting regulations such as Dodd-Frank. No one likes to be regulated, but I see a growing number of organizations just dealing with it and moving on. Ideally, the investments made in compliance can be leveraged for better risk management, customer insight and competitive intelligence. I know that's an elusive goal but it's possible. One final note -- for all the complaints about the Affordable Care Act, one group you're not hearing much from is insurance companies. Although they will be dealing with restrictions, scrutiny, etc., they also have the potential to gain new customers. So regulation can cut (so to speak) both ways.
Thomas Claburn
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Thomas Claburn,
User Rank: Author
8/15/2013 | 8:17:09 PM
re: Death By A Million Regulations
The entire tax code needs to be revised. Ideally, it should fit into 140 characters. Here's 33: All income shall be taxed at 15%.
RobPreston
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RobPreston,
User Rank: Author
8/15/2013 | 8:12:45 PM
re: Death By A Million Regulations
Ah, excellent question. A committee of the good and great? I was half joking.
mjensen810
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mjensen810,
User Rank: Apprentice
8/15/2013 | 8:05:54 PM
re: Death By A Million Regulations
Unfortunately, the innocent get pilloried along with the guilty. As a small country bank, we certainly did nothing to contribute to the melt down or any of that, yet we get to adhere to the same regulations as the big boys.
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