Sarbanes-Oxley Act & the importance of healthcare asset inventory

MANAGE RESOURCE GROUP, INC. –  NEWS & VIEWS – FEBRUARY, 2012

In today’s highly competitive hospital environment, capital asset management is becoming more important than ever. Asset management is still one of the weakest areas of internal control and with the passing of new legislations; facilities have to be more accountable.

In 2002, the Sarbanes-Oxley Act was enacted as a reaction to the number of major corporate financial scandals including those from Enron, WorldCom, Tyco, and others. This set new standards for U.S. corporate auditing and holds CEO’s and CFO’s personally responsible for the accuracy of the company’s financial reporting. Institutions such as hospitals must also follow Sarbanes-Oxley. Any organization seeking grants, large insurance policies, or additional forms of funding must adhere to Sarbanes-Oxley.

Maintaining accurate records of all assets the facility is managing is imperative to proper auditing practices. It is recommended hospitals record/reconcile their capital equipment list every 3-5 years. Movable medical equipment is lost, replaced, and stolen more often than administrators think.

So, how can one accurately report the capital assets currently owned if you don’t KNOW what you have? Out of date information on your hospital’s capital asset ledger can have a major compliance and financial impact.

Things to think about:

1. How are you auditing your capital assets?
2. What processes do you have in place?
3. Supply inventories may be conducted yearly, but when was your last capital audit?

Industry experts and analysts agree hospitals that maintain an effective asset management program have an overall lower cost of ownership, reduced procurement, operations, and other costs.

 

Benefits of selling an independent physician practice to a hospital

Changes in Medicare and the Healthcare reform are driving down the profitability of physician practices.  The impending reform will place greater stress on practices to receive Medicaid/Medicare reimbursements, maintain current technology, and provide quality care while maintaining business efficiencies. As this continues, doctors will opt for more resources, billing expertise and fewer administrative burdens over owning an independent practice.

In an effort to improve efficiencies and bundle costs, hospitals are acquiring physician practices to put all the players on the same team.

Below are some advantages to selling to a hospital or system:

• compensation security
• collections / coding, billing & insurance handled by hospital system
• clinical efficiency
• income from ancillary services
• integration efforts
• sophisticated electronic medical record (EMR) systems

In 2008 nearly half of all physician practices were owned by hospitals. Now four years later, physicians are finding this arrangement even more attractive than independent practice.

Advantages of acquiring a physician practice

With the increasing number of mergers and acquisitions that are taking place between hospitals and independent physician practice we thought it might be a good idea to look at a few advantages of purchasing an existing physician practice. For this posting we will look at the advantages from the hospital/buyers perspective:
• Increasing market share in a geographical area where you’re not actively present
• Adding professional expertise and specialties to your hospitals service line
• Increase patient volume by adding active patient base
• Minimizing startup cost by purchasing an active practice with established operations
• Minimizing risk associated with new startup
• Acquiring a competitors market area
• Increased revenue potential through active files

As with any acquisition, buyers have both short and long term strategic plans behind purchasing a practice and the advantages may consist of many reasons that may not have been outlined above. Based on MRG’s industry experience the advantages we have identified are some of the common ones that many providers benefit from.

2012 Forecast for M&A activity

2011 was a record year for healthcare acquisitions and mergers. With over $227 billion in deals 2011 was the 4th largest M&A year since 2001. One of the surprise areas for M&A activity was rehabilitation facilities, laboratories and managed care which contributed to an 11% increase for 2011. The independent physician practice continued to be a strong area for M&A activity last year as well.

With the ongoing changes in healthcare reimbursement, the economy and an overall volatile marketplace MRG anticipate a continued increase in the number of independent physician practices acquisitions for the next couple of years. The trend over the past couple of years has been to employ physicians through acquisition and those hospitals that didn’t have acquisitions as part of their growth strategy are changing directions to get in the game.

Industry experts agree that 2012 is shaping up to be more active than 2011. Hospitals will continue to increase market share by employing more physicians as well as looking for opportunistic deals that align with short and long term strategies. Fasten your seatbelts and get ready for a very active year.