Archive for the ‘Management’ Category

For a number of years federal laws and legislation related to anti-kickback restrictions, often referred to as “Stark Laws”, have restricted the ability for physicians to own inpatient healthcare facilities, such as acute-care hospitals, long-term care facilities, etc.  The primary impetus behind the Stark Laws was to limit the ability for physicians to refer patients to an entity that the physician has a financial interest of some sort; this could include equity ownership, creditor or incentive-based compensation arrangements based on referrals.  In case you are not familiar with the inner workings of the healthcare industry, this is generally referred to as “self-referrals”.

Just recently the Centers for Medicare and Medicaid Services (CMS) released a “final rule with comment period” relating to regulations around physician-owned hospitals.  The changes were relatively minor, making slight modifications to the “process through which physician-owned hospitals …

Continue reading Give Physicians a Chance to do Something About Improving Healthcare »

The delivery of U.S. healthcare services is going through a profound change. Yet this change is occurring in the background and not apparent to the general public. The driving force behind this change is payment reform to healthcare providers for medical services delivered. The underpinning of this change is the reduction of cost in the delivery of healthcare services to make it more affordable. The initial step of payment reform has been the reimbursement models of Bundled Payments and Accountable Care Organizations. These new forms of reimbursement are forcing healthcare providers (hospitals, physicians and other care delivery services) to re-examine and redefine the delivery of services and working relationships. The changes being initiated are positive and took something extreme like payment reform to push organizations to look at how healthcare is delivered and make changes in the manner business is done. The outgrowth of these changes will be positive for our society by …

Continue reading The Direction of the U.S. Healthcare Services »

Moody’s continuing negative outlook for the entire sector of healthcare certainly plays a part in the “flight to quality.”  We’ve discussed previously that the largest lenders in healthcare have moved up stream, providing ample capital and solutions to the highest investment grade providers.  This is certainly beneficial to these larger, or financially strongest hospitals and systems because it has caused a rate compression of unprecedented levels.  That means the spread over the lenders cost of funds is deeply reduced from normal, target spreads.  This results in lower profit for the lenders for these loans, but the trade off is the greater security of the largest and most stable credits in the sector.   What about the rest of the sector and what are some creative approaches to solve current capital needs?

The rest of the sector is largely left underserved.  The community hospitals or smaller systems either un-rated or non-investment grade are turning largely …

Continue reading Flight to Quality: The Banking Crisis and Healthcare »

So often hospitals think of growth in terms of dollars and sense.  When a hospital administrator evaluates opportunities to expand their services, the metric that frequently carries the most weight in deciding whether to commit funding to a project is a financial one, like return on investment.  

This isn’t necessarily wrong.  Even for nonprofit systems that are seen as the stalwarts of their community and provide millions of dollars in charity care year-over-year, the old truism “margins = mission” is still relevant.  In order to fulfill even the most high-minded mission, hospital leadership must be financially responsible and take caution in committing funds to any venture that may lose money, as it will inevitably hold larger consequences for the entire system (whether in terms of credit ratings, solvency issues, community perceptions, etc).  

However, as frequently reported in the press, we know that there still exists a substantial need for better and more …

Continue reading The Case for Metrics in Improving Access »

It was a different story only five years ago.  For most medical students finishing their residencies and many in the medical profession, primary care as a medical field represented the ugly stepchild of the family and the last to picked in gym class.  The jocks and cheerleaders (e.i., cardiologists and radiologists) were looked up by everyone in the playground and were the kings/queens of the school.  And when compared to specialists, primary care physicians (PCPs) were in fact generally paid less and subject to working longer hours with many days filled with fevers and strep throat.  

However, that is dramatically changing in our post-reform environment.  With headlines like “recruitment demand high for primary care doctors” dotting newspapers and blogsphere, the field of primary care has emerged as the new “it” profession in medicine.  According to a 2010-2011 study by Merritt Hawkins, family practice and general internal medicine physicians were the top two …

Continue reading Primary Care: The New King of the Schoolyard »

Healthcare Reform is missing the mark to reduce a key driver of healthcare cost, chronic diseases. It does not contain a strategy or approach to control or reduce the costs associated with chronic diseases. A chronic disease is a medical condition that cannot be cured and usually lasts a lifetime. An example of a chronic disease is Diabetes. The CDC estimates that seventy five percent of U.S. healthcare costs can be attributed to chronic diseases and is responsible for seven out of ten deaths. There is also the associated cost of disability with chronic diseases that takes productive people out of the workforce. When this occurs, a financial burden is placed on their family and subsequently the U.S. healthcare system.

Healthcare reform under the stewardship of the current administration and Centers for Medicaid and Medicare Administration (CMS), are testing various healthcare delivery models and forms of payment such as an Accountable Care Organization (ACO) and Bundled …

Continue reading Healthcare Reform is missing the mark to reduce a key driver of healthcare costs »

Periodically, the topic of nonprofit executive compensation arises. As a CPA working with healthcare organizations, I am often involved in structuring, reviewing and reporting on compensation plans for our clients.

On July 5, 2011, an article written by M. B. Pell was published in The Atlanta Journal Constitution addressing the topic of chief executive compensation at several tax-exempt, Atlanta area hospitals. In that article, a former state Department of Community Health Commissioner expressed an opinion that when a tax-exempt hospital’s CEO has a salary rivaling that of corporate executives, the charitable work [of such hospitals] is obscured by the pursuit of profit. The individual is quoted as saying [about high CEO salaries], “I think it makes a statement about what their priorities are, and I think that’s the bigger issue. It displays a lack of sensitivity for the communities they serve.” I disagree.

Tax-exempt organizations do not have shareholders in the …

Continue reading The Call for Fair Compensation »

The challenge of reducing healthcare costs in the U.S. is analogous to our country trying to be energy independent. Both are complex, achievable, will take time to solve and require a combination of solutions. Until we discover technological breakthroughs that cost effectively meets the market demand, challenges can be overcome with existing resources.

A foundational component to reducing the cost of healthcare is a reimbursement model for hospitals and physicians called “Bundled Payments”. This form of reimbursement addresses one of the underlying reasons for the escalating expense of healthcare. This is the misalignment of how hospitals and physicians are compensated. For example, hospitals are paid a set fee by Medicare for patients with a specific diagnosis. So regardless of how long a patient is in a hospital or the number of medical tests performed, the hospital is not compensated any more than the specified amount. Therefore, hospitals are incentivized to deliver …

Continue reading A Foundational Component to Reducing Healthcare Costs – Bundled Payments »

Two weeks ago, I noted the heightened M&A activity across the nation and here in Georgia for hospitals.  Other bloggers on HealthFlock like Mark Reiboldt have also noted the expected wave of consolidation in a recent post.  With so much talk about the topic, I think it worthwhile to pause and ask ourselves what value consolidation brings to our industry.   From my vantage point, I have heard some argue that this is desperately needed for entity survival; others loudly state that it’s a fade and will inevitably lead to poor returns and future divestitures, as seen by failed mergers in other industries. 

To give an opinion, I’ll first note a few reasons why we’re seeing increased M&A activity in the industry.  According to in-depth analysis, The Advisory Board Company has claimed that five forces are responsible for this trend (to which I would generally agree):

• Favorable Market Environment (e.g. low interest rates ease access to capital)
• Increased Revenue Pressures …

Continue reading Is Consolidation a Good Thing for Healthcare? »

As I discussed in my first blog, revenue recognition is a fertile area for healthcare financial fraud.  What measures can be taken to prevent this problem.

The potential of being caught most often persuades likely perpetrators not  to commit the fraud.  Stated another way: if you think there is a good chance of being caught you will not commit fraud.  The potential of being caught and the existence of a thorough control system are critical to any effective fraud prevention program.  It is best to be proactive rather than reactive. At Healthsouth the first time we fraudulently adjusted our revenues we  discussed the chance of being caught. All involved agreed we did not think what we were doing would attract the auditor’s attention.

The audit committee of the board must be staffed with people with some understanding of healthcare revenue recognition.  These board members must spend more time at the  company than just board and committee meetings.  The directors must …

Continue reading The Value of Good Auditors »