Why Are Hospitals Missing Payroll?

Companies like Americore and EmpowerHMS are missing payroll at several hospitals across the country. Americore’s Ellwood City Hospital in Pennsylvania missed payroll multiple times over the last year and, more recently, has been shortchanging workers’ paychecks by only giving them minimum wage. Missouri-based EmpowerHMS has also been late in meeting obligations including payrolls, rents, and utility bills at facilities across the country, most notably in Midwestern states such as Missouri, Kansas, Arkansas, and Oklahoma. Their facilities have had to reduce services and lay off employees, some closing their doors indefinitely.

https://www.kansascity.com/news/business/health-care/article223265995.html

https://www.beckershospitalreview.com/finance/pennsylvania-hospital-shortchanges-workers-paychecks-again.html

Healthcare used to be a stable and reputable career field. Now with rural hospitals at an all-time high of 1 in 5 facilities at risk of closure and an increase in instances of missed payrolls, the future of healthcare jobs is perilous and leaves a lot of workers at risk. With EmpowerHMS, it seems to boil down to a systemwide management disruption, as these financial troubles come amid a legal investigation into their lab services. Across other hospitals, however, lack of reimbursement from CMS is often cited as the predominant factor in these missed payments.

Is this a result of a declining healthcare market or a mismanagement problem at a corporate level? Is it limited to only one/a few health systems or is it becoming a trend we will see more of? And finally, what will healthcare workers do if this trend of missed payrolls continues? The search for answers is ongoing, and we hope to gain clarity soon.

Hospital M&A: “Good or Bad?”

The healthcare market has seen ongoing consolidation the past 15 years, and we will continue to see mergers and acquisitions within the healthcare landscape. It is not the intent of this blog to take a position on M&A being “good or bad” but rather to provoke thoughts from the reader on where things are heading in healthcare.

https://www.axios.com/rep-jim-banks-hospital-consolidation-bill-c08e1a68-8729-412e-a1f8-9ea5717130da.html

MRG has provided services surrounding audits for acquisitions for many years.  We have seen markets shift from multiple stand-alone hospitals competing in the same geographical area to one or two health systems taking over the market through hospital acquisitions or facility closures.  MRG has also witnessed doctors go from wanting to be in private practice to being acquired by hospitals and hired as an employee of health systems.

The reality is that the market seems to continue down this path of consolidation.  We are now beginning to witness mega health systems spanning multiple states, some to a national scale.  The question becomes: is this fair competition for stand-alone hospitals or physicians who want to maintain their autonomy?

The attached article indicates that the government may have concerns with monopolies forming from M&A activity and creating unfair leverage for larger health systems.  I think one could make a list of positives and negatives for both sides of this argument.  Will M&A activity create higher quality of care and minimize cost to the consumer?  Or will lack of  regional competition drive prices up and limit access for healthcare consumers? These are the questions we urge our readers to consider.

MRG Newsletter January 2019

Navigating the Hospital Closure Crisis

At least 90 rural hospitals across the United States have closed since 2010, with an additional 600 that are vulnerable to financial crisis and potential closure. Trends show that a majority of these closures have occurred in southern states, with Texas, Tennessee, and Georgia leading with the most closures in the last decade, and in states that have not expanded Medicaid. Critical access hospitals and for-profit health organizations were especially at risk, making up 40% of the closures already.
Rural hospital closures typically occur when hospitals have negative margins and are unable to cover fixed costs. Two notable changes in rural demographics hint at a loss of revenue:
  1. The populations these hospitals serve are older, poorer, and have more complicated and chronic health issues than those in urban communities. They are also less likely to be insured, leading to a rise in uncompensated care.
  2. People are moving from rural communities to urban living, meaning rural hospitals generally have fewer beds filled at a time to cover costs.
In addition to losing the existing patient population and compensation for care, rural hospitals also lack funds to repair facilities and update aging clinical equipment. Their outdated assets make them less marketable to attract new patients, who instead go to larger health systems that offer the newest in medical technology and a wider range of outpatient and specialty care.
So what can at-risk hospitals do to mitigate financial loss and potential closure? Gaining an understanding of existing assets and facilities could be a good place to start. The process consists of:
  • an Inventory of what items and facilities the hospital already has
  • an Assessment of what condition they’re in and what those items are worth.
This is especially useful if an independent hospital is looking for a larger health system to acquire the facility.
If there are no exiting plans for consolidation, rural hospitals can make themselves more marketable to prospective buyers and health systems by targeting limited funds to the most critical updates or towards specific services that other health systems may lack in their network and the surrounding area. At-risk rural hospitals may also be purchased and transformed into outpatient facilities. Using the asset evaluation, hospitals can determine which departments are no longer vital to an outpatient setting, liquidate the items that will not be needed, and use the return towards improving the remaining clinical and outreach services for incoming patients.
Even though many rural hospitals are still at-risk, we now know the signs and trends that ultimately lead to closure. In addressing asset management and taking proactive approaches to finance and consolidation, these hospitals can open up more possibilities to sustain services and provide for their communities. To learn more about asset appraisal, go to www.go2mrg.com.
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MRG Projects:
  • I&A service for KY Health System
  • Remote audit for MI Health System
  • I&A of multiple practices for MI Health System
  • Resale Service Cleanout Project for MI Health System
  • Resale Service for OH Health System
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MRG Appraisal of the Month:
1qty 2003 GE Lightspeed 16 slice CT Scanner
Fair Market Value: $102,500.00

 

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MRG Fun Facts:
Cleveland physicist Dayton C. Miller at the Case School of Applied Science developed his own x-ray machine and completed the first x-ray scan of an entire human body – his own – in 1896. This technology drives everything from MRIs to CAT scans today.

How Competition in Healthcare is Ruining Rural Hospitals

https://www.beckershospitalreview.com/finance/the-rural-hospital-closure-crisis-9-things-to-know-110118.html

According to this article in Becker’s Hospital Review, the United States is facing a rural hospital closure crisis. The article lists important trends on these closures: how many, where, and what kind of hospitals face the greatest risk. These trends lead me to believe that these hospitals are mostly critical access facilities that don’t compare to the modernity and versatility of larger health systems.

 

Indeed, health care systems that take on a value-based approach attract more patients. They are making themselves more marketable to patients by providing a wide variety of health services in smaller facilities and using the most up-to-date equipment. Even when the hospitals are further away from rural citizens, they are able to bring new patients into their health system with specialty care facilities, and that encourages patients to continue their healthcare with that system regardless of distance.

 

Singular critical access hospitals don’t have the resources to reach out to more patients. They’re there when you need them and in emergencies, but cannot compete for patients with less money for updating and expanding facilities. They also have less of a financial cushion to take on uncompensated care. The rural communities they serve are older, have more complicated health conditions, and are more likely to be uninsured. These people need critical care, but these hospitals aren’t bringing in enough business to cover costs, with almost half of beds remaining empty.

 

While critical access hospitals are a vital part of any rural community, their lack of resources to appeal to new patients becomes their downfall when faced with the competition of comprehensive care systems with consolidated finances.

MRG Newsletter August 2018

Nontraditional Partnerships Part II: Timesharing in M&A

 

The Timeshare Arrangements exception to Stark Law permits the sharing of space, equipment, supplies, and services on non-exclusive leasing terms between healthcare providers. As an alternative to a full-time lease, timesharing makes it easier for physicians and hospitals to share resources on an as-needed basis and expand available services for patients without transferring ownership of properties.

 

 

So you’ve decided to timeshare or lease your physician practice to a healthcare system. Great! There are many reasons and benefits to doing so, but the tricky part is navigating the compensation arrangement in order to protect your interests as a business owner and maximize returns for your practice. Here’s what you need to know:

 

Set in advance the premises of the arrangement

  • Timesharing grants a license, or permission, to the lessee to use space or equipment instead of possessory interest, with the leaser remaining in control of assets.
  • Determine which resources are going to be shared with the lessee, how often these resources are shared, and for how long.
  • Equipment, space, staff, items, supplies, and services should all be covered in this part of compensation negotiations.

Appraising your assets

  • Timeshare compensation must be consistent with fair market value (FMV) and exclude volume and value of patient referrals.
  • Get an accurate appraisal of fixed/capital assets (equipment), real estate (space), and business costs (staff and services) to know what you should be asking for in terms of compensation.
  • Accurate appraisals of assets, with a timeshare or lease arrangement, helps avoid the high valuations of property and assets that could deter a health system from making an acquisition.

Determining compensation

  • Stark law exemption only covers flat-fee or time-based compensation to avoid incentivizing overutilization and patient steering.
  • Use this in conjunction with the FMV of your assets to know how much to ask for in compensation negotiations with the lessee.
  • Note that AHA is currently pushing for Stark Law reform and exceptions to better accommodate a coordinated, value-based care model and promote a team environment, so keep an eye out for these changes and how they may affect your arrangement.

Though working out leasing arrangements can be grueling and confusing for some, getting a better understanding of how much your interests and assets are worth can help protect your business and foster better relations with the health systems you’ll work with. To learn more about asset appraisal, go to www.manageresourcegroup.net


MRG Projects:

  • I&A service 9 Lab Departments for KY Health System
  • I&A service for Fitness Center in KY
  • I&A service for 21 Clinics in OH
  • Liquidation service for Lab Department in OH

MRG Appraisal of the Month:

Siemens Advia Centaur XP Analyzer

FMV: $21,000.00

 


MRG Fun Facts:

Let there be light! Cleveland, OH was the first city to be lit electrically in 1879. It’s also the first to use an electric traffic signal, installed on Euclid Avenue and East 105th Street.

 

 

 

Manage Resource Group, Inc. has updated our email addresses

Manage Resource Group, Inc. is pleased to announce that we have updated our email addresses to make it easier for clients to contact us.
Please update your records with the new email addresses:
Brad Andrew     bandrew@go2mrg.com
Brian Hoehn      bhoehn@go2mrg.com
Celeste Weise    cweise@go2mrg.com
Dave Holy           dholy@go2mrg.com
General inquiries can be sent to:
Thank you,
Manage Resource Group, Inc
682 W Bagley Rd #B15
Berea, OH 44107
Phone: 888-557-4797

The Key to Profiting from Physician Acquisitions

Physician group acquisitions are still on the rise in healthcare.  Hospitals and health systems have been losing money annually on physician contracts and enterprises. The biggest problem is the lack of a clear and consistent physician acquisition strategy. One health care system changed their strategy 5 times in 8 years, resulting in a $100 million loss per year. Hospitals tend to buy up physician practices by region, by specialty, etc., and tend to change strategy as a reaction to the revenue loss and the changing economic climate.

We have seen recently a more proactive approach to this problem starting at the initial contracting and acquisition phase, rather than solving the revenue loss through reevaluating existing physician contracts. Physician practices have been engaging in timeshares and other nontraditional partnerships as they are added to a health system’s clinically integrated network. These partnerships consider the goals of all parties involved, encourages dialogue and collaboration between parties, and benefit in ways that align with some of the suggested strategies and solutions.

Health systems first need to define and enact a consistent, strategic rationale for partnering with physicians. They need to account for the expected return on operational losses and hospital revenue generated from physician recommendations. Does it make sense financially to fully acquire the practice, or should the hospital consider a leasing option? After determining a strategy,  set corresponding goals, either value or performance based, across the system. Lastly, incorporate these goals into physician compensation and incentives, insurer contracts, support systems and operations, and motivation strategies for their employed and independent physicians as ways to manage and increase revenue.

 

Harvard Business Review has a good article on the physician acquisition strategies, to read more, go to:

https://hbr.org/2018/05/do-most-hospitals-benefit-from-directly-employing-physicians

MRG Newsletter May 2018

Nontraditional Partnerships in M&A

 

 

Manage Resource Group continues to see a spike in activity associated with I&A services and has noticed that hospitals and providers are looking at nontraditional partnerships within M&A activity.

 

Mergers and acquisitions between health care providers have more than doubled in the last ten years, with a particular rise in nontraditional partnership transactions, such as:

  • Joint venture agreements
  • Minority investments
  • Clinical affiliations
  • Timeshare agreements

Traditional partnerships were driven by the needs of smaller organizations and physician practices, where they could improve clinical programs and services by merging with a larger health system. The move to nontraditional partnerships stems from long-term care strategies and value-based care across all organizations, with health systems leading the way in expanding their reach to patients and implementing these ideals across facilities.

 

Changes in healthcare partnership are also facilitated by changes in health services legislation, especially in terms of leasing arrangements for healthcare providers. Stark Law required that physicians enter a formal lease providing exclusive use of their premises and equipment to the lessor, usually a hospital or physician group. These leases had a one year minimum and prohibited the physician and lessor from sharing space and equipment during the term.  This led to inefficient, inflexible, and impractical arrangements for all parties involved.

 

In 2016 the Center for Medicare and Medicaid Services added a Timeshare Arrangements exception to Stark Law, permitting the sharing of space, equipment, supplies, and services on non-exclusive leasing terms between healthcare providers. As an alternative to a full-time lease, timesharing makes it easier for physicians and hospitals to share resources on an as-needed basis and expand available services for patients without transferring ownership of properties.

 

Hospitals and health systems will continue to make strategic alignments with providers along the continuum of care allowing for creative teamwork within the industry. Such partnerships result in the centralization of essential functions such as IT, purchasing, and human resources for larger organizations, while increasing resource availability and data collection power to small physician practices.

 

In a continually consolidating healthcare environment, traditional mergers and nontraditional counterparts should all be considered and weighed to determine the best route of action to fit the needs of physicians, hospitals, and patients.


MRG Projects:

  • I&A services for Respiratory Clinic in KY
  • Desktop Appraisal for Diagnostic Imaging Group in WI
  • Resale and salvage clean sweep project for OH Hospital
  • Remote I&A service for MI Health System

MRG Appraisal of the Month:

1 qty Siemens 1.5T Espree MRI System with Syngo A40 software

FMV: $600,000.00


MRG Fun Facts:

Many hospitals in China don’t label the fourth floors of their buildings because the words “four” and “death” are too similar in Chinese.

Mergers and Acquisitions are off to active start for the 1st quarter of 2018

https://revcycleintelligence.com/news/healthcare-mergers-acquisitions-activity-strong-in-q1-of-2018

Manage Resource Group has seen a spike in activity for 2018 from clients they have worked with to provide tangible asset inventory and appraisal services.  As the merger and acquisition activity continues to heat up, we thought it might be a good opportunity to review a few valuable points if your facility plans to engage in M&A as part of their strategic initiative.

 

Inventory & Appraisal Services for FFE/Tangible Assets

When selecting a firm to conduct I&A work, make sure of the following:

  • They are using USPAP Uniform Standards of Professional Appraisal Practice for FMV
  • They provide a third party unbiased/objective view of the assets
  • Request examples of deliverables showing reports and methodology to the valuation engagement
  • Request that firms outline their process for engagement and expectations for timelines to conduct site visits and sending deliverables
  • Request references outlining comparable projects

Understand the appraisal methodology that will be applied to the assets.  Fair market value is the estimated value of an asset between a willing seller and a willing buyer.

  • Fair market installed/in-use value is typically used for continued use of the asset in its current state
  • Fair market liquidation value is typically used if the assets needs to be liquidated to the open market

Consider what demographics will be captured on assets during the inventory.

  • Facility, Room, General Description, Manufacture, Model, Serial Number etc. should typically be included
  • Obtain a condition assessment of the asset to understand its viability after the purchase

There are many scenarios to providing asset valuations but applying some of the general guidelines outlined above will help you determine the best direction for your organization.  If you are interested in learning more about tangible asset valuations, please contact one of MRG’s sale professionals at 888/557-4797 or info@manageresourcegroup.net and we would be happy to discuss needs or questions you might have.

Do hospitals donate too many of their supplies?

 

 

Hospitals donate millions and millions of dollars worth of disposable supplies to charitable organizations each year.  They send these supplies to companies who will sort and send the items to needy healthcare organizations throughout the world.  Mostly, recipients are third world hospitals who have doctors visiting on medical missions.  Donation shows a hospital’s willingness to do good for other facilities while also receiving a tax break from Uncle Sam.  However, hospitals may be donating too many of these supplies.

There is a large marketplace for in date, out of service supplies/disposables, especially supplies used in the Operating Room like staplers, trocars, single use handpieces, endomechanicals, etc.  These items can be resold by the hospital for cash.  While the tax benefit with donation is nice, cash from resale can be used in many different ways. The cash received can be used to upgrade departments or purchase newer equipment and needed supplies.

Another factor to consider when deciding to donate or resell disposables is the advanced technology.  Some of these disposable items are paired with the latest, most advanced technology version of equipment.  Thus, these disposables are useless when sent to a third world hospital where their equipment is generations older.  Charitable organizations are aware of this issue and know what items they can send overseas.  If an item is not compatible, the charity will resell on their own and use the cash how they see fit.

Donating surplus disposables can be a good thing for hospitals.  However, it is not always the best avenue for all of the supplies.  A hospital must maximize its resources, and determining what disposables to resell and which to donate will make a hospital more efficient.

To learn more, go to www.manageresourcegroup.net