By Mohammed Vaid, Founder & CEO, Chief Solution Architect, Simplify Healthcare
LinkedIn: Mohammed Vaid
LinkedIn: Simplify Healthcare
Penalties reduce revenue, but their real significance lies in what they reveal about payer operations. A single error in plan materials can cascade into thousands of disputes, costly claim adjustments, and delayed reimbursements. The effects rarely end with the payment of a fine. They disrupt provider relationships and weaken member trust across the system.
Hospitals and health systems already carry heavy administrative burdens. The American Hospital Association estimates nearly $39 billion each year is consumed by compliance with payer requirements. Adding regulatory violations compounds the strain. Corrective audits, revised communications, and ongoing regulator engagement extend the disruption. Providers are left managing denied or delayed claims, while members encounter uncertainty and frustration at the very point they expect clarity.
An oversight environment defined by urgency
CMS enforcement is accelerating at a pace not seen in prior years. According to CMS government data, civil monetary penalties issued in 2025 have already exceeded $3 million, surpassing the combined totals of the past three years. Hospitals face the same trend, with fines for price transparency violations escalating from modest levels to more than $2 million annually. Yet even with stronger enforcement, widespread noncompliance persists: a February 2023 report from PatientRightsAdvocate.org found only 24.5% of hospitals were fully compliant with the federal price transparency rule, more than two years after it took effect.
This reflects a regulatory posture that values speed and accountability over gradual adaptation. Escalating penalties are designed to compel rapid course correction, while public reporting heightens scrutiny from stakeholders beyond regulators. With new mandates on interoperability, data transparency, and consumer protections ahead, payers must prepare for compliance to be judged continuously rather than episodically, with little margin for delay.
Embedding compliance into the operating core
Audits and after-the-fact corrections cannot keep pace with current regulatory demands. Compliance must be integrated into daily operations rather than treated as an end-of-cycle task. This means validating benefit data before release, aligning claims systems with current rules at the point of processing, and applying monitoring tools that surface risks in real time. Organizations that embed these practices lower the risk of penalties and reduce downstream disruption for providers and members.
Leading payers are building resilience by focusing on structural solutions. Automation is taking over repetitive manual checks, centralized governance is creating consistency across teams, and real-time validation is enabling issues to be addressed before they reach regulators or members. This approach moves compliance from an obligation to a core discipline, positioning payers to meet rising expectations with speed and reliability.
The burden borne by providers and members
While fines target payers, the operational fallout often rests with providers. Claims stalled by inaccurate benefit data reduce cash flow, and staff are forced to spend time reconciling errors rather than supporting care delivery. For practices operating with thin margins, even modest increases in administrative work can destabilize finances and weaken service capacity.
Members are equally affected. Coverage discrepancies and processing errors can appear as surprise bills, denied claims, or delays in treatment. Each instance undermines confidence in both payers and providers, creating friction at a time when value-based care depends on trust and coordination.
Regulatory readiness helps reduce these pressures. When data is accurate upfront, providers spend less time on disputes, members experience greater clarity, and the overall system gains reliability. The outcome is not only fewer penalties but also stronger relationships across the care delivery chain.
Compliance as a marker of credibility
The current enforcement climate requires structural change and decisive action. In August 2024, CMS issued a final rule adjusting civil monetary penalty amounts for inflation under the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, reinforcing that accountability will intensify. Payers that embed compliance into their operating model strengthen financial resilience, build durable provider relationships, and reinforce member trust.
The organizations that advance will treat compliance as a core capability. Embedding regulatory readiness into governance and daily operations signals to regulators, providers, and members that accuracy and reliability are priorities. It also frees resources currently tied up in remediation, enabling payers to reinvest in modernization and innovation. In this environment, compliance functions as a safeguard and a differentiator.
Turning the page on reactive models
Payers face a clear decision. One path allocates resources to firefighting, absorbing fines, reissuing member communications, and repairing strained provider relationships. This approach consumes capital and undermines credibility. The alternative invests in readiness that prevents failures, builds resilience, strengthens collaboration, and provides members with accurate information from the start.
Readiness should be understood as a strategic foundation. It supports long-term sustainability in an environment where regulatory scrutiny continues to intensify. Payers that embed readiness today meet current requirements with confidence and are better equipped to navigate future waves of regulatory change with speed and stability.