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Hospitals & Healthcare – 10 Business Considerations for Hospitals & Healthcare Systems During COVID-19

By Jonathan Miller, on March 31st, 2020

We are committed to assisting hospitals and health systems as they navigate their way through the current pandemic. Many questions have been posed by our clients over the past several weeks while emergency Federal legislation was being debated and enacted. The following “Top 10 Practical Business Considerations” should be considered vital to meeting the impact and challenges associated with the COVID-19 crisis.

1. Cash Flow Analysis – The disruption to your services will have implications on your cash flow. Healthcare organizations will experience a reduction in utilization of services, including elective surgeries, outpatient procedures, and emergency room visits and a reduction of ancillary charges. In addition, during the crisis your payor mix is likely to shift to a greater volume of government payors from commercial payors. A scenario analysis can assist healthcare organizations in analyzing the implications of these changes to their cash flow to determine working capital needs and the appropriate course of financing, which includes government loans and grants, traditional bank financing, or use of internal reserves.

2. Dashboard Development – To monitor operations and cash flow during the crisis, management teams are dependent on accurate and timely metrics. A dashboard can assist healthcare organizations in the development of a dashboard that can be reviewed daily by management to gauge current performance, identify areas of concern, and address gaps.

3. Revenue Cycle Management – Any interruption of typical cash flow during a crisis must result in organized and coordinated efforts to maintain reasonable cash flow from third-party payors, grants, and other revenue sources. For example, Governor Cuomo’s mandatory cancellation of elective, non-critical surgeries, and use of telehealth/telemedicine. A specific example in this area includes the changes made to procedure codes to establish new billing codes for COVID-19 tests and treatment, which may or may not impact the timing of future cash flow for program services provided.

4. Unemployment Insurance Impact – Many healthcare organizations are self-insured for NYS Unemployment coverage. Self-insurance for unemployment costs results in additional negative financial impact to the provider agency if temporary or permanent layoffs have been implemented. Alternative considerations to minimize the impact of unemployment costs include, but are not limited to, staff job sharing, reassignment of responsibilities, and potentially outsourcing your employees to another provider, as opposed to a direct layoff of personnel who will apply for unemployment benefits. The Federal emergency legislation known as the CARES Act provides certain loan incentives and other financial support to encourage employers to continue staff employment through June 30, 2020. The information provided in the topical links included above will provide more detail related to these areas of support.

5. Health and Workers Compensation Insurance – Each employer may have variable fringe benefit models for health and/or workers’ compensation coverage. Most employers fall in the following categories:

  • Self-insured
  • Experience rated
  • Community rated
  • High deductible
  • Consumer-directed

We strongly recommend that you contact your insurance broker to request any and all recommendations that could be implemented to mitigate the risk of increased costs to your organization as a result of incremental COVID-19 claims. In addition to regulatory precautions recommended by government sources, we believe that timely and frequent recommendations from your insurance broker and/or insurance carriers will be critical to effectively managing incremental costs in both mandated and non-mandated fringe benefits. Please implement procedures to maintain contemporaneous documentation related to any incidents/accidents that may occur during the COVID-19 crisis time frame.

6. Information Technology/Enterprise Risk Management – For employees who don’t normally work remotely, these times can be daunting and frustrating. Internet service providers such as Spectrum, Comcast, and Verizon are being overwhelmed by almost the entire country working from home and using their Internet connections. This can bring slight delays in Internet communications from remotely connecting to an employee’s work network to using services such as Zoom and WebEx for remote meetings. In addition to Internet connection speeds, information security concerns abound, especially for those who deal with protected health information. Provider employees may unknowingly take pictures of their work from home technology while inadvertently displaying a screen of protected health information or the type of technology being used, giving hackers the ability to target that specific user or provider. The same HIPAA security and privacy measures should be taken when working from home as if working in the office. For example, anything printed at home should not be left in the open. If it contains protected health information, do not throw that paper in the garbage without shredding it. If you don’t have a shredder, save it to be shredded once you return to work.

7. Human Resources: Recruitment, Retention, and Training – Almost every organization has acknowledged that qualified and well-trained staff are their most important and valuable asset. The COVID-19 crisis requires every employer to ensure that all safety and health requirements are met. Accordingly, each employer should evaluate and consider modifications to its traditional procedures in recruiting, assignment of staff, wage structures (e.g., enhancements), and disciplinary processes. Last week, 3.2 million Americans applied for unemployment, and a result, the workforce crisis, and low unemployment statistics have reversed. Given the requirements of social distancing, recruiting, retention, and training of personnel must make maximum use of on-line applications. Those individuals who have recently been laid off may represent an excellent source of new applicants for your personnel vacancies.

8. Financial Procedures to Recognize COVID-19 Loss – Almost every tax-exempt organization will experience loss of revenue and incremental costs directly associated with the COVID-19 crisis. Accordingly, Organization Management, specifically your Finance Office, should implement and maintain separate and distinct account codes that will accurately track revenue loss and incremental costs associated with the COVID-19 crisis. This approach may require the use of the new account and departmental codes, and modified labor distribution codes (e.g., payroll incentives, shift differentials, and program location changes). The objective of this recommendation is to ensure that all relevant documentation is maintained for purposes of identifying revenue losses and incremental costs in support of Business Interruption insurance claims and/or applications for additional Government / Foundation financial support.

9. Stakeholder Communications – During the course of the COVID-19 crisis, it will be critical for organizations to have timely and informative communications with key stakeholders. These communications must demonstrate that your organization has the ability to communicate timely, clearly, and effectively to funders, program service recipients, parents, families, employees, Board members, and contributors, among others. These communications should be focused on the topics of service quality and continuation, financial stability, and requests for additional financial/volunteer support. We believe that maintaining regular and routine communications with key stakeholders is imperative throughout the COVID-19 crisis.

10. Mitigating the Risk of Fraudulent Transactions – The requirements of social distancing and working from home fundamentally change daily, weekly, and monthly internal control procedures for many tax-exempt organizations. The COVID-19 working requirements increase the possible occurrence of fraudulent transactions, errors, or omissions since the normal internal control environment is not being followed. We believe that whenever Management or staff personnel are working from remote locations, the validity and accuracy of essential business function transactions (e.g.., payroll processing, cash disbursements, cash receipts, vendor payments, loan/banking transactions, and ACH revenue remittances) are at an increased level of risk. Accordingly, we recommend that Management evaluate and identify those essential business functions and internal control procedures that are impacted by temporary changes in its normal processes (e.g., remote working arrangements). Corrective action procedures should be implemented to reduce the risk of fraudulent transactions, errors, or omissions occurring without being detected.

For additional information or questions related to any of the information we provide, please directly contact a member of your Bonadio client service team. If you are not currently a Bonadio client, please contact the following below.

The information and advice we are providing for this matter relates to COVID-19 legislative relief measures. Because legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that could modify some of the advice and information provided to you, after the conclusion of our engagement. We therefore make no warranties, expressed or implied, on the services provided hereunder.

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