HORNE Research Finds 'Business as Usual' Not Acceptable in Current Recession for Healthcare Accounting Executives

Share Article

With the unemployment rate rising to 9.7% in August, the United States is in the biggest recession since the Great Depression in 1930's. HORNE LLP Partner David Williams, who leads the firm's health care reimbursement and advisory services, recently interviewed healthcare CEOs and CFOs about the future of their hospital systems, questioning them as to how these changes would affect access to capital.

Maintaining patient market share has been the most difficult part of maintaining the health of my organization.

With the unemployment rate rising to 9.7% in August, the United States is in the biggest recession since the Great Depression in 1930's. HORNE LLP Partner David Williams, who leads the firm's health care reimbursement and advisory services, recently interviewed healthcare CEOs and CFOs about the future of their hospital systems, questioning them as to how these changes would affect access to capital.

Williams found that although most organizations are sustaining their current financial position, these healthcare organizations are strategically assessing and positioning to address the anticipated delivery of services and how they will be paid for.

"It became quite evident following the first couple of conversations with healthcare accounting executives, that 'business as usual' will not be acceptable in the current recession for healthcare organizations," Williams said. In order to keep healthcare organizations healthy, leaders of healthcare entities will need to raise new concerns.

One healthcare CEO, based in a rural area said, "Maintaining patient market share has been the most difficult part of maintaining the health of my organization." Changing patient demographics has caused attracting the needed physicians especially challenging and because of the inadequate number of medical staff, the system has seen a decrease of volume of 3 percent. This volume is 1 to 2 percent higher than the national average.

Another problem the current economic environment has produced is soft patient volumes nationally, with 56 percent of hospitals seeing a decrease in volume. Many patients are tightening their health care budgets, causing the system to have to take a closer look at marginal services.

"People have become the most difficult part of maintaining my organization's health," said an urban hospital system's CFO. "Take a look at every hospital across this country and you will see that greater than 50 percent of the expenses are related to personnel and benefits. When looking to improve financial health there is no way to consider reductions without taking people into account."

Consequently, health systems and hospitals are aiming attention on physician alignment strategies to anticipate continuing shortages of surgical and medical specialties and challenges associated with increases in market share and retention. Other areas of focus are national patient safety goals, coding and documentation as a way to position hospitals for payment bundling and/or value based purchasing, and core measure scores.

"An additional factor that the existing economy has significantly affected is access to capital," Williams said.

One CFO challenged with fulfilling the capital requests required in his organization said, "My organization's ability to keep pace with equipment upgrades that are essential to offering quality health care and maintaining the confidence of the patient may be adversely affected." The CFO noted that regular additions of equipment and technology are up-to-date, but future major renovation phases will require strict evaluation. In order to fulfill the facility's mission to deliver to the community, capital needs are a must and not an option. Until the economy improves, healthcare facilities will have to look for partners, re-evaluate its mission and future delivery of care with the available capital resources, and defer or lengthen the time for deployment of major capital projects.

Recently, the healthcare sector had a 3-to-1 downgrade ratio. The main point healthcare accounting executives are trying to make is that the possibility of abundant capital market access is highly unlikely, even for a healthcare organization with a strong balance sheet. As operating margins continue to be flat, it is quite evident that the credit markets are not going to be generous to organizations looking to continue with major projects.

As a note, the acquisition and merger activity in the healthcare industry is essentially dormant. Until the main healthcare initiatives of President Obama are proposed and the financial impact of those changes is analyzed, most are continuing their existing positions with capital.

"Today, healthcare providers seem to be concentrating on making investments that will situate them to deal with any reform initiatives. The prevailing goal is to be more efficient regardless of the measure and guarantee that what an organization efficiently develops currently also becomes more effective," Williams said.

The depiction will become clearer as the new administration's footprint becomes more apparent for the national healthcare system. In order to continue to meet the demand for health care services in the future, hospitals and physicians will need to work in a more cooperative and efficient fashion, regardless of what form healthcare reform takes.

About HORNE LLP:

HORNE LLP, located in Jackson and Hattiesburg, Mississippi and Nashville, Tennessee, has become a leader in the CPA and business advisory industry. HORNE LLP provides healthcare accounting services; small business accounting; tax services; retirement plan consulting and administration; fraud, forensic and litigation services; investment advisory; disaster relief management; and government outsourcing and compliance services.

About David A. Williams:

David A. Williams has more than 25 years experience in the health care industry providing reimbursement, advisory and assurance services, and is leader of the Health Care Services Reimbursement and Advisory Services for Horne LLP. David also serves as chairman of HORNE's personnel committee.

###

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Vicki Harper-Blake
Visit website