Regulation and Reporting for What's Next
Even as the healthcare industry continues to confront the lingering impact of the pandemic and workforce and supply chain challenges, the regulatory environment is far from static.
According to the 2022 BDO Healthcare CFO Outlook Survey, healthcare regulatory and compliance changes are coming from many directions: a new administration and Congress with different priorities, expected tax changes, new accounting rules, pandemic stimulus funds that may come full circle, a growing focus on environmental, social and governance (ESG) impact and reporting, and patient demands from privacy to pricing.
These changes would be difficult to adapt to in a period of relative calm and pose significant challenges during a sustained global crisis.
Regulatory Worries Are Widespread
When it comes to specific regulatory concerns, the healthcare industry is not aligned on one major risk; rather, concerns are spread nearly equally over several regulatory issues that exist or are expected to occur in the near future.
While Medicaid expansion is still being debated at the state level, the CMS Hospital Price Transparency Rule has been in effect for one year as of January 1, 2022. However, some organizations are still behind and facing fines of up to $300 per day for noncompliance. In September 2021, CMS issued warnings to more than 250 hospitals not yet in compliance, and the Patient Rights Advocate nonprofit organization reports that 94% of hospitals haven’t met at least one of the requirements.
An additional regulatory change that hospitals should pay attention to is the No Surprises Act, which went into effect on January 1st, 2022. Intended to protect patients from surprise bills, the Act seeks to hold patients responsible only for in-network cost-sharing amounts, while also protecting uninsured or self-paying patients. Providers will need to implement new patient processes to confirm consent and offer Good Faith estimates of prices, and generate documents for different scenarios, including a pricing methodology for uninsured patients.
The Provider Relief Fund Provides Both a Lifeline and Compliance Problems
The CARES Act — while offering much-needed support to healthcare organizations throughout the past year — may also bring challenges in the year ahead.
The healthcare industry received more than $186 billion through the Provider Relief Fund (PRF) since April 2020. However, now many healthcare organizations will face challenges proving the funds were used as mandated and risk having to pay them back.
In January 2021, HHS released updated guidance on reporting requirements for healthcare organizations that participated in the PRF program. Healthcare providers who received $10,000 or more from the PRF during a given period must report on usage. There are a number of questions on how to accurately report and illustrate fair use of funds, some of which are still pending guidance.
While the HHS acknowledges that healthcare organizations are still managing COVID surges and other challenges, organizations will need to prepare to carefully document and report PRF usage to avoid penalties.
Cracking the code on PRF reporting
- Register on the HHS Provider Relief Fund Reporting Portal and establish an account as soon as possible.
- Revisit lost revenue calculations to determine if your current methodology is appropriate or if an updated methodology would be more appropriate under the new guidance.
- Understand the ability to transfer General and Targeted distributions and the impact on reporting of these funds.
- Develop reporting procedures for lost revenue and increased expense for reporting in the HHS portal.
- Review audit and compliance requirements that pertain to your organization.
In addition, a facility’s PRF are subject to a Single Audit if allowable expenditures or lost revenue amount to $750,000 or more during periods outlined by the HHS.
Over the next two years, many entities that have received federal funds and have incurred expenditures or lost revenue exceeding the $750,000 threshold may require a Single Audit for the first time.
To find out if your organization needs to file a Single Audit, complete BDO’s Single Audit Assessment.
For more information, access our PRF Reporting FAQ resource.
Managing PRF and other stimulus reporting is only one of healthcare’s financial reporting challenges in the year ahead.
From technology infrastructure that lacks connectivity or functionality, to finding time to manage deadlines and report accurately internally and externally, to the high cost of compliance, healthcare organizations are preparing for a year of increased financial reporting responsibilities.
Even as the industry continues to face challenges related to the pandemic, many healthcare CFOs are taking action to improve the financial reporting process.
SPOTLIGHT: Evolution of ESG
Environmental, social and governance (ESG) efforts are increasingly important in boardrooms and C suites across almost every industry, and healthcare is no different. When it comes to care, the central ESG industry issue is clear: health equity.
Inequity in our society and across the healthcare system prevents people from accessing the quality care they need. The events of the last two years have led to increased scrutiny on the issue of health disparities, and many in the healthcare industry are determined to remove barriers and address challenges on the path to true health equity.
BDO’s 2021 Health Equity Survey found 74% of hospitals currently have or plan to implement a health equity strategy in 2022. However, challenges remain in bringing together the full group of executive, clinical, patient and community stakeholders to define the strategy, and in determining a standard set of metrics and KPIs to measure progress.
Many healthcare CFOs confirm that ESG and health equity efforts are essential to improve patient care and organizational value.
- 59% think an ESG program will have a positive impact on their long-term financial performance.
- 35% are investing to improve health equity.
- 32% will pursue an ESG strategy in the next year.
The pandemic turned the spotlight on health equity, but the reality is that the health equity conversation has been ongoing for decades, with hospitals at the center of efforts to distribute equitable care to vulnerable communities. Although it’s far from a new concept, we have yet to see industry standards for management, measurement or improvement of health equity. As an industry, we have to work together to create a cohesive vision and understanding of health equity in order to make progress across the U.S.
HERMAN WILLIAMS, MD
A defining theme of healthcare’s ESG and reporting priorities seems to be: What gets measured gets done.
Whether it’s carefully documenting PRF usage and complying with the Single Audit and other reporting requirements or planning for the future of ESG reporting and governance, the industry should keep reporting a front and center priority. It will not only help prevent a return of critical stimulus funds, but also help set healthcare organizations up for success in the future.
Planning for expected and emerging accounting, ESG and financial reporting needs often starts with information gathering and synthesis, but then quickly turns to building the right processes and leveraging the right resources and technology to streamline and secure relevant data. An effective reporting function is best supported by collaboration across the entire organization and strong governance and controls that provide effective oversight.
Concerned about fulfilling your upcoming financial reporting requirements?
The 2022 BDO Healthcare CFO Outlook Survey polled 100 healthcare industry CFOs with revenues ranging from $250 million to $3 billion in October 2021. The survey was conducted by Rabin Research Company, an independent marketing research firm, using Op4G’s panel of executives.