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Issue #11-2 | April 18, 2013

Hospitals sidestep big penalties using Stark self-disclosure

Hospitals and other healthcare providers have embraced the Stark law self-referral disclosure protocol (SRDP), allowing them to avoid huge penalties, according to several sources.

Popular program: Troy Barsky, the director of technical payment policy at CMS, spoke about the SRDP at a recent conference, as reported in a Bloomberg BNA blog. He said CMS has received 18 submissions through the first three months of 2013, and the agency expects to receive roughly 100 for the entire year. Barsky said the SRDP has become much more popular than CMS expected when it was first launched in September 2010.

Barsky said CMS has received a total of 258 disclosure submissions since 2010. Out of the 258 disclosures, CMS has settled 19 of them, he said.

Cutting losses: Most of the settlements so far appear to involve hospitals and nonegregious violations of the Stark law, according to a report in JD Supra Law News. Public disclosures suggest that by reaching a settlement under the SRDP, some providers are able to “evade the imposition of substantially greater repayment sums,” the analysis indicates.

“For example, in February 2011 the Saints Medical Center in Lowell, Mass., agreed to pay $579,000 to settle alleged violations relating to issues with night coverage, medical directorships, and stipends,” says the report. “Subsequent media reports indicated that the underlying overpayment amounts spanned between $785,000 and $14.5 million.”

The SRDP, which was authorized by the Affordable Care Act (ACA), offers healthcare providers and suppliers the chance to disclose and resolve actual or potential violations of the Stark law. CMS can reduce the amount owed as a result of violations and can suspend the 60-day deadline for the reporting and return of overpayments.

Key issues for hospitals seeking growth via outpatient departments

Disparity in reimbursement rates and the desire to grab market share are the main reasons behind the increase in the number of hospital outpatient departments. However, hospitals need to be aware of several important issues when starting or acquiring such an operation.

On the rise: The healthcare market has seen an uptick in both the number of hospital outpatient departments (HOPDs) and the frequency with which they provide services that were once rendered in freestanding facilities and physicians’ offices, according to an article from the American Health Lawyers Association. Because reimbursement rates for certain services are higher for HOPDs than for counterparts that are not hospital-based, hospitals are setting up or acquiring the ancillary services and allowing physicians the chance to manage the operations. This gives hospitals back the control they once had over these services before they were taken over by facilities outside the hospitals’ medical perimeter.

However, there are regulatory considerations to address before a hospital converts a freestanding facility into an HOPD.

  • Medicare’s provider-based regs: These regulations require the HOPD to be financially, clinically, and operationally integrated with the hospital. For example, from a financial perspective, the HOPD should have shared income and expenses with the hospital, be reported in the hospital’s cost center, and have its financial status be easily identifiable within the overall financial books.
  • State licensing: Hospitals should check the licensing requirements in their state, including any applicable certificate of need (CON) requirements. The article points out that in one state (Illinois), which requires a CON, a hospital that wants to acquire a facility to convert to an HOPD may need to apply for a special permit because of rules on capital expenditures.
  • Seller considerations: The ability to participate in the revenue from the new HOPD is a concern because the hospital must wholly own the department. If a comanagement agreement is used, both sides must be aware of potential violations of federal and state fraud and abuse regulations and the increased scrutiny now being placed on such agreements. In a nutshell, a comanagement agreement is on safe ground if it aligns incentives and includes sufficient safeguards to avoid running afoul of the rules. The agreement should follow guidelines set forth in OIG Advisory Opinion 12-22.

HOPDs are a crucial component of many hospitals’ growth plans, but failure to address state or federal requirements could derail them.

Farming out accounting tasks hits cost-reduction targets

To cut costs, hospitals have already targeted the low-hanging fruit, so now’s the time to consider revamping work processes for further cost reductions. One strategy is to outsource some portion of back-office operations, such as accounting.

Proven performance: A new report from KPMG and HfS Research reveals that 90% of finance and accounting business process outsourcing (F&A BPO) engagements have been consistently meeting their cost-reduction targets and initial delivery performance.

“More enterprise leaders are now looking at more radical strategies to increase productivity and global business effectiveness,” says the report. “Recent activity shows an increasing number of enterprises getting more aggressive with globalizing their finance operating models to include outsourcing services.”

Spending on F&A BPO services will surpass $25 billion globally in 2013 and will rise at an annual compound growth rate of 8% through 2017, according to the report. The pharma, life sciences, and healthcare sector has substantial growth potential, as only 5% of these firms report doing any outsourcing along these lines. The technology sector is at the forefront, with 18% of these firms reporting that they outsource finance and accounting operations.

True, outsourcing is a radical change, but from a pure business sense, there is no competitive advantage to doing accounting in-house. These tasks do not represent a hospital’s core business, so why invest the internal resources to a noncore operation?

The success that organizations are having with F&A BPO makes it difficult for finance leaders to avoid evaluating its potential.

How hospitals can target HR to boost bottom lines

It costs hospitals much more to find new executives from the outside than it does to develop leadership from within, a new study from Pepperdine University concludes. While it was generally known that hiring from the outside costs more than promoting from within, the extent of the cost difference is surprising.

For example, hospitals hiring from outside spend four times more to replace and train nurses than hospitals that practice leadership development, says the 2012 Healthcare Management Survey, conducted by Talent Management Consulting.

Big savings: Hospitals that used formal programs such as talent assessment and performance management reported productivity equal to $164,154 per full-time equivalent, compared with $132,685 for those that didn't, the survey found. The productivity metric is calculated as net revenue divided by the number of full-time equivalent workers (FTEs).

Dr. Kevin Groves, associate professor of theory and management at Pepperdine University's Graziadio School of Business and Management and principal of Talent Management Consulting, says: "The data suggests that the era of endless recruiting in hospitals needs to come to a close."

What to do: The survey recommends that hospital HR departments focus more leadership development efforts on women and minorities, creating transparent processes for identifying potential leaders and giving those potential leaders projects that are important to the hospital’s overall strategy.



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