Surviving in Today’s Healthcare Environment · • OMIG • Changes in ownership / sponsorship...

• Surviving in Today’s Healthcare Environment

Presented by:

James Budd, CPA- Partner Brian Lee, CPA, MBA- Partner HMM, CPAs LLP

Intercounty Health Facilities Association November 30, 2017

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AGENDA

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☑ Operational Analytics ☑ Reimbursement and Regulatory Implication of Data Reporting ☑ Key Conclusions from Today’s Presentation

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• Operational Analytics

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• Challenges in Today’s Healthcare Environment

Healthcare reimbursement is undergoing fundamental changes: • Stagnation of traditional per diem rates • Rates linked to quality measures • Value Based Purchasing • Episodic/PMPM Rates • Outcome based reimbursement

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Clinical and Financial are the

SAME DATA• Quality = Payment Not getting paid for the service, getting paid for the outcome


In the healthcare environment going forward, the old methods to increase reimbursement won’t necessarily increase margins. Instead, a new approach will be required in order to operate a successful facility…

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Operational Analytics is the process of: • Analyzing financial and clinical data in order to

evaluate efficiency of operations. • Answering the question “How much does it cost to

care for a resident?” • Evaluating Value Based Purchasing and Outcome

Based Reimbursement Contracts. • Benchmarking operations and developing a

strategic plan.

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• Operational Analytics

Operational Analytics has 3 main approaches for analyzing operational data: • Volume Based Approach • 2-D Statistical Approach • 3-D Statistical Approach

Each approach has its pros and cons in terms of the data and its usefulness.

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• Analyzing Operations

The Volume Based Approach to Operational Analytics uses the gross costs and a volume based driver (Patient Days). • Pros

– Easy to obtain data and calculate. • Cons

– Can’t easily distinguish cost increases from spikes in utilization.

– Analytical result doesn’t account for different functional units or service offerings.

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• Volume Based Approach

Example: ABC Nursing Home is a 120 Bed SNF. • Patient Days: 39,420 Days (equal to 90%

Occupancy) • Dietary Costs: $788,400

• Dietary PPD is $788,400/39,420 or $20 PPD

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• Volume Based Approach

The 2-D Statistical Approach to Operational Analytics uses the gross costs and a statistical based driver covering the entire facility. • Pros

– Utilizes statistics which are typically found in cost or quality reporting

– Distinguishes cost increases from utilization spikes. • Cons

– Analytical result doesn’t account for different functional units or service offerings.

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• 2-D Statistical Approach

Example: ABC Nursing Home is a 120 Bed SNF.

• Patient Days: 39,420 Days (90% Occupancy) • Dietary Costs: $788,400 • # Meals Served: 100,000

• Dietary Cost per Meal Served is $788,400/100,000 or $7.89 per meal.

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The 3-D Statistical Approach to Operational Analytics uses the gross costs and a statistical based driver covering an individual functional unit. • Pros

– Analytical results account for different functional units or service offerings.

– Distinguishes cost increases from utilization spikes. • Cons

– Statistical Data requires employees to gather and track data in addition to normal daily functions.

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Example: ABC Nursing Home is a 120 Bed SNF.

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Unit Unit 1 Unit 2 Unit 3 Facility Total

Unit Size 30 Bed S.T. Rehab

24 Bed Vent 66 Bed Geriatric

120 Beds

Resident Days 9,300 6,900 23,220 39,420

Gross Cost $280,000 $112,000 $396,400 $788,400

Meals Served 28,000 14,000 58,000 100,000

Cost per Meal $10.00 $8.00 $6.83 $7.89

Operational Analytics has many applications: • Identification of cost drivers for functional units. • Analysis of functional departments to determine

“How much does it cost to care for a resident?” • Break-even analysis • “Error Check” between reports. • Benchmark Analysis

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• Applications for Operational Analytics

Your data tells people about you. Nursing Facilities report data to a variety of stakeholders for a plethora of purposes.

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• Data Reporting

Managing your data story is critical. Operational Analytics can help!

Keys to Data Reporting include: – Understand the Reporting Requirements – Map out data sources – Pinpoint financial, regulatory, and quality impacts

of financial reporting.

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• Data Reporting

Operational analytics provides a framework for quantifying reporting decisions.

Benchmark analysis is a good opportunity to measure the efficiency of your operations as compared to your competitors. Resources for Benchmark Data include: • Medicaid and Medicare Cost Reports • Health.Data.NY.gov • Data.Medicare.gov • Your accountant or consultant • HMM’s Cost Analysis Book

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• Benchmark Analysis

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• Reimbursement and Regulatory Implications of Data Reporting

•Reimbursement and Regulatory Implications

• Data specifically impacts several regulatory and reimbursement initiatives, including: • Executive Order 38 • NYS Equity Withdrawal • Universal Settlement • OMIG • Changes in ownership / sponsorship

• Providers should be aware of the various impacts reported data may have under these initiatives.

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•Executive Order 38 - Background

Governor Cuomo's Executive Order #38 "prevents(s) public funds from being diverted to excessive compensation and unnecessary administrative costs, and ... ensure(s) that taxpayer dollars are being used to help New Yorkers in need" (Governor Andrew Cuomo, Executive Order #38).

21Source: http://executiveorder38.ny.gov/

• Regulations effective July 1, 2013 • Applies to many agencies including DOH • Currently does not apply to Nassau County • Initial exemption for State, County or local governmental unit entities • Filing deadline for RHCF’s no later than RHCF cost report due date • Filing exemptions are not common

• Executive Order 38 General Rules

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• Covered Provider Determination (must meet all) – Provided Program Services during CRP – Received > $500k SF/SAP (average of CRP and

period immediately proceeding the CRP) – 30% + SF/SAP (in both CRP and period

immediately preceding the CRP) • Note: EO 38 calculations should use same accounting

method entity uses in production of annual financial reports


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• Executive Compensation – $199k limit (salary and non-routine fringe)

AND – $199k from SF/SAP – Salary Survey (ie: Guidestar) – Waiver Request Available – Compensation generally for “services rendered”

• Administrative Expenses – Excludes Capital and Assessment

AND – 25% (2015) CRP, then 20% (2016), then 15% (2017)

• Executive Order 38 - ApplicationSalary 185,000$ Non-routine fringe 13,000$ Total 198,000$

Not in excess of $199k limitNo waiver required

Salary 200,000$ Non-routine fringe 13,000$ Total 213,000$ SF/SAP % 95%SF/SAP $ 202,350$

In excess of $199k limitSF/SAP in excess of $199k limitIs within the 75th percentileWaiver required

Salary 200,000$ Non-routine fringe 13,000$ Total 213,000$ SF/SAP % 80%SF/SAP $ 170,400$

In excess of $199k limitSF/SAP not in excess of $199k limitIs within the 75th percentileNo waiver required

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• Executive Order 38 – Application (2014 CRP examples)

Expenses 20,000,000$ Less, capital (1,000,000)$ Less, assessment (950,000)$ Covered expenses 18,050,000$

Program expenses 16,000,000$ 89%Administrative expenses 2,050,000$ 11%

Under 25% cap, no waiver needed

Expenses 20,000,000$ Less, capital (1,000,000)$ Less, assessment (950,000)$ Covered expenses 18,050,000$

Program expenses 13,000,000$ 72%Administrative expenses 5,050,000$ 28%

Over 25% cap, waiver required

Covered Reporting

Period (CRP)

Maximum Administrative

Expense Percentage

2014 25%2015 20%2016 15%

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• All covered providers must file via their Grants Gateway account on an annual basis. – The due date for SNF’s is generally the RHCF due date.

• Filing is required even if waivers aren’t being requested.

• Providers who determine they are not ‘Covered Providers’ need only keep their determination worksheet in their records for production upon request.

• ALL documentation used in determination and in preparing your EO-38 responses should be kept on file

•Withdrawal of Equity and Transfer of Assets

Background • Section 400.19 dates back to 1989 • 2009 DAL and form, 3% of PY Medicaid revenues • 4/1/2010, no new form, 3% of PY reported revenues • 8/31/2017 DAL and revised form, 3% of reported

revenues on most recently filed RHCF-4, Schedule 7, Column 161, Line 020

• If your withdrawal or transfer is > 3% you must request and be granted permission pursuant to the new DAL.

• Intended to ensure revenues received for care are spent on care

• Applies to non-public RHCF’s

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General Rules for the new form: • Excess withdrawals (> 3% of revenue) are allowed at the

Commissioner’s discretion • Must submit a cover letter, completed request form signed by the

operator and other required information via email to [email protected] 60-days prior to the anticipated withdrawal or asset transfer

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General Rules for the new form: • Section 2808(5): Equity withdrawals INCLUDE those

made for the purpose of paying Federal / State taxes. • Salaries paid to owners appear to be included as well

(request form requires disclosure) • “Equity Distributions paid to other companies or

consulting fees affiliated with owners” must be identified and quantified.

• Outstanding loan balances of owners must be disclosed. • Previous withdrawals in the calendar year must be

disclosed.

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General Rules for the new form: • Must include facility’s latest quarterly financial reports or

unaudited financial statements with request. • Opportunity to provide any additional information or

comments that will assist DOH in evaluating the request. • Decisions must be made within 60-days of DOH’s receipt

of facility’s request and based on facility’s overall financial condition and quality of care

• Liabilities to NYS and creditors & indicators of financial stress (ie: negative equity, etc.)

• Cannot have IJ or substandard quality of care

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Past experience: • In the past, utilizing the old form, DOH typically allowed

an opportunity to respond to their denial of an equity withdrawal request.

• Additional information or analysis provided to DOH based upon their indicated reason for denial.

• In many cases the request was eventually approved. • It is unclear if this opportunity will continue going forward.

• Challenges to denials based on “quality of care” issues typically unsuccessful.

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Violations: • Violators have the opportunity for a hearing • Commissioner may require replacement of excessive

withdrawal • Commissioner may impose a penalty of up to 10% of

amount withdrawn without prior approval

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•Withdrawal of Equity and Transfer of Assets - Application

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EXAMPLE #1PY REVENUE 15,000,000$ 3% THRESHOLD 450,000$

OWNER SALARY 199,000$ W/D FOR INCOME TAXES 200,000$ OTHER/PRIOR W/D -$

TOTAL W/D 399,000$ 3% THRESHOLD 450,000$ OVER/(UNDER) (51,000)$ RESULT NO REQUEST

REQUIRED


OWNER SALARY 199,000$ W/D FOR INCOME TAXES 200,000$ OTHER/PRIOR W/D 50,000$

TOTAL W/D 449,000$ 3% THRESHOLD 450,000$ OVER/(UNDER) (1,000)$ RESULT NO REQUEST

REQUIRED

Assumes no related companies and no owner loans.

•Withdrawal of Equity and Transfer of Assets - Application

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OWNER SALARY 199,000$ W/D FOR INCOME TAXES 275,000$ OTHER/PRIOR W/D -$

TOTAL W/D 474,000$ 3% THRESHOLD 450,000$ OVER/(UNDER) 24,000$ RESULT REQUEST

REQUIRED


OWNER SALARY 199,000$ W/D FOR INCOME TAXES 250,000$ OTHER/PRIOR W/D 50,000$

TOTAL W/D 499,000$ 3% THRESHOLD 450,000$ OVER/(UNDER) 49,000$ RESULT REQUEST

REQUIRED

Assumes no related companies and no owner loans.

•Temporary Funding Awareness Universal Settlement

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• Rate Appeals, Litigation & Audits – Eliminated Thousands of rate appeals and litigation,

facility financial impacts were both + and - – Appeals not accrued for = no financial statement impact – For accrued appeals, financial statement impact should

be present (one-time adjustment +/- upon reversal) – Appeals not eliminated will eventually be processed – Certain ongoing audits both + and – were eliminated – Many audits not covered by US were temporarily

halted, then restarted, and recently completed or in the process of being completed.

•Temporary Funding Awareness Universal Settlement (U.S.)

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• Settlement Funding – $850 million in 5 annual installments beginning in

early 2016, subject to global budgetary constraints

– Possible prior / current owner issues on which party gets the benefit

– Facilities that did not sign U.S. – Contingent fees (attorneys/consultants) – Assessable if received by current operator – .8% assessment tax remains in place funding 41%

of U.S. payments

•OMIG Rate Audits

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• Capital – Capital rate audits resumed last year – Scope is rate years 2012 forward (cost years 2010

forward), Universal Settlement blocks audit of years prior.

– Scope may also include rate years prior if the base year cost report was utilized to promulgate those rates.

•OMIG Rate Audits

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• Capital – NEW last year: For some audits of multiple rate years,

OMIG said they are using a sample of 1 of those years, if no issues are noted in that sample year, no adjustments are made in any of the years being audited.

– NEW last year: We’re being told that audits must be completed timely (around 3 months) and can no longer drag out a year or more.

•OMIG Rate Audits

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• Capital – Be aware of ‘catch up’ adjustments – Be aware of clerical and other errors (OMIG is only

human!) – Autos must be documented by logs for patient use – Crime insurance is being disallowed as non-property – Be sure to report data in the correct spot on the RHCF

and to have adequate documentation to produce upon audit.

– Appeals: OMIG is apparently no longer authorized to process appeals as part of their audits. The legality of this position is unclear.

•Temporary Funding Awareness Other Considerations

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• Statewide Pricing Transition ended in 2017 • Transition adjustments (+/-) cease • Managed care in full effect

• CMI 5% Cap • If CMI changes by more than 5% from one

measurement period to the next, the adjustment is capped at 5% until such time OMIG audits and approves the change

• Facilities may or may not have accrued for the capped amounts (both + and -)

•Temporary Funding Awareness Other Considerations

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• Retroactive Rate Changes – Results when changes for a prior year become known

or are processed and/or paid and recorded in the current year

– Are generally non-recurring in nature but in today’s reimbursement environment we do see these frequently (OMIG audits, CMI changes, etc.)

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• Key Conclusions from Today’s Presentation

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•Key Conclusions from Today’s Presentation

• Today’s healthcare operating environment is undergoing fundamental changes

• Operational Analytics is a framework to analytically evaluate operations and make decisions.

• Regulatory and Reimbursement matters demand special attention.

• Healthcare entities must adapt to changes in reimbursement, regulation, and operations.

Questions?

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•Thank You

HMM, CPAs LLP 527 Townline Rd, Suite 203

Hauppauge, NY 11788 (631)-265-6289

James Budd, CPA [email protected]

Brian Lee, CPA, MBA [email protected]

•Contact Information

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Surviving in Today’s Healthcare Environment · • OMIG • Changes in ownership / sponsorship...

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