Healthcare leaders are feeling the stress
RUNNING A HEALTHCARE COMPANY WAS NEVER EASY, AND IT’S ONLY GROWING MORE DIFFICULT.
Healthcare company executives understandably feel embattled. They want to get ahead or at the very least, keep up. But the crises seem to have no end:
• Staffing shortages — first nurses, now accountants
• Legislation and taxation — e.g. provisions of the Tax Cuts and Jobs Act
• Fewer younger workers while more are retiring
• Reimbursement pileups, claim errors, and payer policies
• Cybersecurity breaches, including the software provider Epic
• Growing pressure for consolidation due to lack of working capital
This guide will empower you with information about the single most important task you can undertake for your organization right now: ensuring its financial health. Within these pages, we explore ways a tax, accounting, audit, and operations advisor can help stabilize a healthcare company or group, so it can grow stronger and face whatever’s next.
Michael E. Criscione Partner and Healthcare
Co-Leader
Kieran Higgins Partner and Healthcare
Practice Co-Leader
Citrin Cooperman
The four most urgent areas to address
Many healthcare companies eventually discover that their internal finance generalists need help from outside specialists. There are many changes and companies are moving so fast that they may not have the infrastructure to stay up to speed on the ever changing healthcare landscape.
Additionally, you don’t necessarily have to increase your revenue to make more money. A team of financial advisors can help generate insights to lower costs and improve the quality of care that increase your margins while also reducing risk.
In this chapter, we explore four areas you can address along with ways a specialist advisor can deliver quick results that strengthen the business and help it on its mission.
STRENGTHEN THE BUSINESS WITH FINANCE FUNDAMENTALS
What information helps you make decisions about the business? Does your current reporting leave questions unanswered? A financially fit healthcare company should understand its cost structure, be able to see projections well into the future, and understand its revenue cycle intimately enough to know what levers it can pull to grow continuously more efficient.
Services to consider:
ENACT STRONGER ACCOUNTING AND FINANCIAL REPORTING TO MAKE DECISIONS
• Define and measure key statistics
• Compare budgets to actuals
• Benchmark against similar organizations
• Manage debt and regulatory compliance
• Assess and report on internal controls
OUTSOURCING SOME BUSINESS PROCESSES FOR EXPERTISE AND COST
• Speed up period-end close with outsourced bookkeeping
• Generate new financial insights with fullservice outsourcing
• Improve processes: finance, reporting, steady state, decision support
"Companies that embrace the open-talent model get their work done just as well but 4-5x faster and 8-10x more cheaply."
"Outsourcing finance is an underused tool that can dramatically increase profitability while leaving that existing team better trained."
Kieran Higgins
MODEL YOUR REVENUE CYCLE TO FIND OPPORTUNITIES
• Assess and strengthen internal controls and audit trails
• Streamline transaction coding and processes
• Start billing on time, automate follow-ups, and manage denials
• Implement revenue cycle management software (RCM)
• Launch data analytics to monitor performance
• Financial planning and forecasting
• Receivable tracking and follow-through
GENERATE MORE REVENUE BY OPTIMIZING YOUR BILL COLLECTION
• Implement tracking systems to automate billing
• Implement internal controls
• Generate documentation and records
• Train staff
• Clarify patient communication
• Foster more collaborative payer relationships
• Conduct regular reviews or audits
IMPROVE COST REPORTING TO GENERATE BETTER, MORE EFFICIENT INSIGHTS
Get help navigating the complexities of Centers for Medicare & Medicaid Services (CMS) cost reporting and related audit requirements:
• Prepare and review cost reports
• Ensure accurate cost allocation
• Ensure regulatory compliance
CONDUCT AUDITS AND ANALYZE THEM TO STRENGTHEN INTERNAL CONTROLS
• Advice on internal controls
• Audit analysis
• Study the revenue cycle
• Track receivables and follow-through
• Implement best-practice procedures and policy
• Implement cost reports
• Implement new accounting standards such as:
◊ 842 Leases
◊ Estimated Credit Loss (CECL)
◊ 606 Revenue Recognition
PROTECT INCOME WITH TAX STRATEGY AND PLANNING
The U.S. tax system isn’t easy, which is why it ranks 43 out of 64 on the international Tax Complexity Index. That difficulty rises in complex, regulated industries such as healthcare, where there are multiple ways to file at the federal, state, and local levels. Every healthcare company needs specialists on call to ensure it is considering all its options and operating as tax-efficient as possible.
Services to consider:
FEDERAL, STATE, AND LOCAL TAX PLANNING
• Evaluate tax efficiency at all levels
• Ensure you take advantage of savings and positions
• Assess state tax filings and pursue pass-through entity tax opportunities where applicable
• Amend and refile past tax returns
• Ensure proper allocation of income and expenses with respect to the shareholder/ partnership agreements
• Reevaluate entity structure
• Review capitalization policy and optimize tax depreciation
• Review owner/partner retirement plan pre-tax deferral strategies
• Reevaluate accounting method (cash versus accrual)
“Every healthcare company should consider the full span of tax strategies including optimal tax depreciation deductions, pre-tax retirement plan contributions, state pass-through entity tax deduction opportunities, and more."
Blake Spina Partner and Healthcare Practice Co-Leader Citrin Cooperman
IMPROVE PATIENT CARE AND REDUCE RISK
Shockingly few healthcare organizations have a clear understanding of how their financial metrics impact patient care. But without this understanding, they can’t make interventions to reduce waste, eliminate paperwork, and improve the patient experience through backend changes. The right operational partner can help with this and ensure more transparent billing, clearer communication, stronger cybersecurity, and an overall higher quality of care.
Services to consider:
IMPLEMENT STRONGER INTERNAL CONTROLS
• Ensure compliance, safeguard patient data, etc.
• Create a culture of integrity
• Assess HIPAA and HITECH compliance, patient safety, billing fraud
• Monitor cross-department communication
IMPLEMENT STRONGER CYBERSECURITY LONG BEFORE A CRISIS
• Conduct a risk assessment
• Conduct penetration testing
• Patch dated devices
• Conduct employee training and simulations
IMPLEMENT STRONGER PROCEDURES AND POLICY
• Assess and plan for regulatory compliance (GAAP, IFRS)
• Draft policies, implement, and train employees
• Create internal controls and procedures, segregate duties
• Enforce operational policies and procedures
PREPARE FOR M&A (BUY OR SELL SIDE)
What truly drives value for your business? How can you protect assets and employees when the market continues to shift so dramatically? Consider engaging an advisor to help understand the fair market value of your company, to prepare for M&A and assess all your options.
REQUEST A CREDIBLE THIRD-PARTY VALUATION
• Adopt a best-practice valuation strategy
• Benchmark against comparables
• Take a long-term perspective
CONDUCT M&A TAX SCENARIO PLANNING
• Analyze tax consideration and scenarios
• Pre-transition tax planning
• Tax modeling and projections
• Support reviewing agreements
• Factor in the environment and interest rates
• Supplement with advanced analysis
• Due diligence
• Quality of Earnings (QOE)
• Financial analysis / cash to acrual
COMPANIES MUST CONSIDER ALL THE VARIABLES AT PLAY
Consider that the Inflation Reduction Act extends federal health insurance subsidies to 2025, that recent CMS changes to telemedicine coverage lowers access, and that a lag in healthcare prices have only begun to catch up with the industry. These are just a few examples.
“A properly structured transaction is critical to a successful deal."
Michael E. Criscione Partner and Healthcare Practice Co-Leader Citrin Cooperman
CUSTOMER STORY
How one pharmacy and agency restored its credibility and saved $2M
CLIENT TOOLS OFFERINGS
Specialty pharmacy and mental health agency
Sage Intacct, SAP Concur, Oracle Cerner, AvidXchange
Outsourced finance operations and decision support
When this specialty pharmacy’s CFO abruptly left, the board stopped receiving accurate financial information. This caused the company to not file a report necessary for its debt covenants, which triggered an alarm.
The intervention: The team brought in Citrin Cooperman to serve as outsourced CFO and controller and oversee the company’s internal accounting staff.
After an assessment, the Citrin Cooperman team helped them restructure their finance function and implement the processes necessary to deliver reliable reporting and find savings — that reporting helped management curtail a $2M loss. The team trained the company’s staff, helped automate accounts receivable processes with the ERP system, and ensured timely month-end closes.
BEFORE
Damaged reputation with board and lender
◊ Aging ERP system
◊ No clear month-end close process
◊ No reliable information for management
◊ No defined budget process
◊ Late on audits and reports
AFTER
Restored credibility and new momentum
◊ Modernized ERP system
◊ Defined month-end close process
◊ Reliable, rich reports for management
◊ Reduced finance staff by 30%
◊ Timely audits
◊ Strong internal controls
◊ Improved relationship with lender
Healthcare organizations continue to confront and adapt to significant challenges associated with new payment models and stagnant reimbursement, rapid consolidation, new market entrants, changing technologies, growth of telehealth, enhanced patient expectations, and more.
Citrin Cooperman’s Healthcare Industry Practice is well-positioned to help healthcare organizations navigate the current environment. With a suite of services specifically designed to add value, we help organizations position themselves for short-term profitability, long-term sustainability, and strategic growth. Our dedicated healthcare team supports efforts throughout the full continuum of care while servicing providers, payors, and investors.
We work with owners, operators, and investors in the healthcare space and we are well-versed in the complexities of the different industry segments.
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