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Authored by Mark Ross
Boards of directors for healthcare providers play a crucial role in preserving financial integrity and operational efficiency. It is essential for boards to remain attentive to emerging industry trends to proactively address potential challenges and exploit opportunities. Awareness of trends allows boards to adjust financial and expansion strategies, refine risk management protocols and update compliance measures accordingly.
In the evolving landscape of healthcare provider organizations, technological advancements and ever-changing healthcare reimbursement and regulatory policies can significantly influence financial stability. By proactively staying up-to date on trends, boards of directors can make well informed decisions, bolster long-term financial sustainability, and ensure that provider organizations are equipped to accomplish their number one objective, which is to deliver high-quality care while upholding fiscal responsibility.
Beyond elevating awareness relative to industry trends, the remainder of this article addresses a few specific topics that should be front of mind for boards in the healthcare provider space.
Price transparency
Ever-changing regulations enacted by the Centers for Medicare & Medicaid Services (CMS) raise increased scrutiny and steep penalties for noncompliance. Boards of directors should ensure that organizations are aware of applicable law and regulations, and an effective compliance program is in place to ensure compliance with these laws the regulations.
A timely example of the ever-changing regulatory environment for healthcare systems would be the price transparency regulations. Navigating the intricacies of the updated price transparency guidelines presents hurdles for hospital organizations, often requiring modifications to systems, processes, and reporting. For the deadline approaching July 1, 2024, and thereafter, provider boards of directors should ensure hospitals standardize and simplify reporting responsibilities to ensure adherence to these regulations as recent CMS enforcement actions against noncompliant providers are on the rise.
Although price transparency is viewed as a regulatory compliance matter by many, providers can now use pricing information in the public domain to analyze and benchmark competitor and payer pricing. The process can add significant value to a provider organization. Boards of directors should ensure providers have processes in place to comply and benefit from this new legislation through improved pricing strategies and more effective managed care contract negotiations. Viewing this legislation as an opportunity to improve will help to change the mindset from compliance to value added.
Mergers and acquisitions
The ongoing merger and acquisition (M&A) activity in the healthcare provider sector poses opportunities and challenges for provider organizations. Despite the opportunities that can be gained through M&A strategies (e.g., enhanced reimbursement opportunities, expanded geographic reach, creating economies of scale, etc.), provider boards of directors should establish rigorous oversight protocols as organizations execute due diligence processes over the target organization. This can involve examining, and evaluating the accuracy of, historical and prospective financial information, assessing the targets strategic plan, and identifying potential compliance and other risks connected to target organizations. Boards can help ensure that the M&A process adheres to regulatory requirements and best practice industry standards, mitigating risk and elevating the chances of success. One of the most critical components of any M&A transaction is the integration process. Boards of directors need to ensure integration plans are well thought out and understood by all stakeholders. Integration goals established as part of this planning process need to be closely monitored on an ongoing basis to ensure the benefits of the M&A transaction are ultimately realized; this is often not the case with M&A transactions, specifically in the healthcare system space.
Healthcare information technology
Assessing the risks and benefits of healthcare information technology (HIT) initiatives, such as electronic health records (EHR) and enterprise resource planning (ERP) tools, can be a difficult task. Provider boards of directors should ensure provider organizations have effective processes in place to evaluate the performance and effectiveness of HIT systems. Most organizations today focus on optimization of their IT platforms to help drive down expenses, better capture revenue, improve workflows for clinicians, and improve patient satisfaction. The goal here is simple; eliminate unnecessary steps in clinical and other workflows and integrating and streamlining the overall technology environment. With data privacy and security being a priority, provider boards of directors should ensure cybersecurity risks are appropriately mitigated. Further, provider boards should ensure data analytics are being deployed in key operational and strategic areas across the organization, and that action plans are developed to leverage the insights surfacing from the use of data analytics. By providing effective oversight, provider boards support provider organizations as they strive to optimize their electronic environment, effectively managing HIT initiatives which will contribute to the success and effectiveness of the healthcare organization.
Inflation Reduction Act
Following the enactment of the Inflation Reduction Act (IRA) of 2022, healthcare organizations, including tax-exempt entities, are now eligible to receive tax credits connected to eligible clean energy projects. Navigating the eligibility and compliance requirements of the IRA can be difficult for provider organizations. Provider boards of directors should be aware of the opportunities created by the enactment of the IRA and should ensure the organization is properly analyzing capital projects for eligible capital spend on energy and utilities infrastructure, and pursuing tax credits for which they may be eligible. There may be a sense of urgency on this particular issue as energy tax credits have certain eligibility timelines under law and regulation. In addition, as the upcoming election approaches, the possibility of changes to the IRA may be elevated.
Takeaways
By keeping up with industry trends, boards of directors enhance their ability to exercise their fiduciary responsibility by assisting provider organizations confront the challenges of today and seize the opportunities of tomorrow. Boards support provider organizations as they assess financial stability, address current operational and compliance issues, and seek growth strategies to capitalize on opportunities. Moreover, boards should ensure provider organizations strive to maintain best in class polices, procedures, regulatory compliance protocols, etc. in response to both current industry challenges and the ever-changing environment will help provider organizations achieve both “provider of choice” and “employer of choice” designations in their market. There are no guarantees for success in the healthcare sector today, but those two designations will certainly elevate your chances of success.
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