community benefit

HFMA ANI 2008: Financial, regulatory pressures broaden healthcare CFO role

Anne Zieger — Tue, 24 Jun 2008 17:26:40 -0400

The role of the healthcare CFO is changing--and growing broader--as regulatory and social pressures force CFOs to think beyond the balance sheet, according to a new study by Ernst & Young announced at the HFMA ANI 2008 conference. The consultants, who held two focus group sessions with 23 CFOs, found that the CFOs are being asked to confront health policy issues in addition to addressing challenging financial management concerns.

The healthcare CFOs agreed that seven key issues were most likely to reshape the industry (and their jobs) over the next few years:

The growing number of under- and uninsured patients are likely to have a big impact on their bottom line. Most CFOs say that improving workforce productivity may be their last chance to improve margins.
Restricted access to capital, triggered by a combination of weaker credit and tougher bank lending standards, may slow down the hospital construction explosion of recent years and reduce strategic options. To cope with this, many CFOs are looking at methods for consolidating resources and organizations.
Tighter physician relationships may prove to be key in getting ahead and surviving regulatory changes. Many believe that it's now important to attempt joint ventures with physician-owned businesses and employ physicians where possible.
A shortage of key personnel, notably nurses, is driving up the cost of labor substantially.
Pay-for-performance initiatives have called for costly investments in quality measurement, but haven't necessarily generated quality improvement. CFOs say these efforts won't work unless doctors are involved in hospital leadership and drive quality improvement.
A new technology arms race is underway, with many CFOs feeling record pressures to invest in new clinical and information systems. To pay for such systems, CFOs believe consolidations of hospitals may be necessary.
Demands for transparency and proof of community benefit are changing the industry with ongoing demands to disclose patient safety, quality of case, costs and charges. Not-for-profits must go further, explaining policy on bad debt and collections, charitable care and community benefit. CFOs say that adding these compliance demands to their plate will require great effort.

Interestingly, none of the points above address relationships with health insurers or changes in Medicaid. Oddly enough, it could be that right now, health plan reimbursement is the least of their worries.

To get a copy of the report:
- visit Ernst & Young's website

AHA says IRS form 990, Schedule H need revision

Wed, 21 May 2008 06:59:58 -0400

The American Hospital Association has filed a letter with the IRS arguing that the agency could do more to accommodate small, cash-strapped institutions in its instructions for filling out Form 990 and the accompanying Schedule H aimed at not-for-profit hospitals. The AHA's input comes as part of the IRS comment period on the draft instructions, which will remain open until June 1st.

In its nine-page comment letter, the AHA raised a number of concerns over core definitions. For example, it cited worries over the agency's definition of "subsidized services," which would exclude physician clinics, skilled nursing and ancillary services. The AHA argued that these services can often be part of a non-profit's charitable mission.

The AHA also cited several definitions that it considered to be too broad, including "key employee" and "facility," which it argued would result in healthcare organizations having to engage in onerous amounts of reporting which don't provide value to the organization itself.

To get more information on the AHA's critique:
- read this Modern Healthcare article (reg. req.)
- read the AHA letter (.pdf)

Related Articles:
AHA makes headway on community-benefit reporting
IRS rolls out not-for-profit reporting rules
IRS says 'uncompensated care' definition is dicey
Proving community benefit by reducing sickness

Following peers, Kaiser profits plunge

Wed, 07 May 2008 06:59:58 -0400

As FierceHealthFinance readers probably know, the last few weeks have been ugly for health plans, many of which announced disappointing first-quarter results. True, it's worth bearing in mind that most are still profitable, but on the other hand, their margins seem to be in freefall--something neither shareholders nor Wall Street take lightly. Many of the industry's big names are being hit by this trend, including UnitedHealth Group, Humana, Cigna, WellPoint and Health Net.

This week, Kaiser Foundation Hospitals and Health Plan joined the list of unfortunates, announcing that it saw a 64 percent drop in net income during the first quarter of this year compared to the same quarter last year. Profits plunged $698 million during the first quarter of last year to $250 million for the first quarter of this one. The descent includes a loss of $295 million in non-operating income for the first quarter of 2008 versus a $177 million profit during the first quarter of 2007, which it attributes to weakness in its investment portfolio.

Meanwhile, Kaiser increased net income from $521 million during the first quarter of last year to $545 million this year, a boost that includes the addition of 25,000 members. Operating income climbed from $9.4 billion during the first quarter of last year to $10.1 billion for the first quarter of this year. Furthermore, Kaiser said it provided more than $1 billion in community benefit during 2007.

To learn more about Kaiser's results:
- read this East Bay Business Times article
- read this Kaiser press release

PLUS: Kaiser has announced that it's completed the rollout out of its immensely expensive outpatient electronic medical system, which cost the organization a cool $4 billion, executives said. Article

Related Articles:
UnitedHealth suffers financial setback
WellPoint profits fall 25 percent during first quarter
Cigna first-quarter profits drop 80 percent

IRS seeking input on instructions for Form 990

Wed, 09 Apr 2008 06:59:54 -0400

As most FierceHealthFinance readers know, the IRS released a redesigned Form 990 last year. The new Form 990, which has sparked much discussion and controversy among not-for-profit healthcare organizations, includes a new schedule for hospitals (Schedule H) and tax-exempt bonds (Schedule K). Schedule H, which is likely to prove taxing to hospitals for the first year or two, requires hospitals to provide a lot of information on operations that it didn't before, including community benefit levels, charity care, aggregate bad debt expense, Medicare shortfall information and more.

Now, the IRS is asking the healthcare community to let it know whether its instructions for filling out this form, which include tools designed to make it easier to answer questions and to promote uniform reporting, are clear enough for public use. Through June 1 of this year, it's accepting comments on the draft instructions. The agency will post all comments on its website. To comment, you can email thoughts to Form990Revision@irs.gov in text form. Yeah, I know, this doesn't sound very exciting, but the truth is, if you don't like what they've got, it never hurts to declare that clearly in a public forum. Hey, sound off while you can!

To learn more about the Form 990 update process:
- read this Modern Healthcare piece (reg. req.)

Related Articles:
Trend: Non-profits broadening charity care access. Charity care report
In 2007, bad debt rising for hospitals. Hospital report
Bad debt savages HCA, LifePoint profits. HCA, LifePoint report
Bad debt hits Health Management Assoc. earnings. Health Management Associates report
Ratings firms slam nonprofit hospital finances. Financial ratings report
Officials say 'prove it!' on charity care. Charity care report