The Challenge Ahead for NY’s 2021 Healthcare Planning

The Challenge Ahead for NY's 2021 Healthcare Planning

Before the pandemic, New York’s hospitals already had the thinnest statewide average operating margin in the nation. They face $20 billion to $25 billion in revenue losses and extraordinary costs due to COVID-19 – and that does not include the financial damages accruing during this latest surge of COVID-19 cases we are currently experiencing. Nearly a year into fighting this deadly virus, the financial situation has only become more dire. Facing a continued public health crisis, a complex vaccination rollout process for millions of New Yorkers, plus a historic deficit, healthcare industry leaders have a lot on their plates. According to the most recent information from state officials, New York projects a $13.3 billion shortfall, or 14%, in revenue and estimates a $61 billion decline through 2024 as a direct consequence of the COVID-19 pandemic. So, what are the top financial focuses of the health industry? PwC’s new study and issues report examines healthcare’s future uncertainty by outlining six major 2021 challenges:

  1. rightsizing after the telehealth explosion
  2. adjusting to changing clinical trials
  3. encouraging digital relationships that ease physician burdens
  4. forecasting for an uncertain 2021
  5. reshaping health portfolios for growth
  6. building a resilient and responsive supply chain for long-term health

The fiscal year (FY) 2021 New York Executive Budget recommends $88.5 billion for DOH, including $76.7 billion for Medicaid, $5.3 billion for the Essential Plan, and $6.5 billion for remaining health program spending. This reflects a decrease of $71.7 billion from the FY 2020 Enacted Budget due to the discontinuation of two-year appropriations for Medicaid. Below, we will touch on some 2021 state healthcare budget highlights to anticipate. What is the future of Medicaid, prescription drug pricing, medical transparency, and new mental health funding in our region?

Redesigning Medicaid and Health Care

The FY 2021 Enacted Budget calls for Medicaid spending to increase by 3%, or about $500 million. The Medicaid Redesign Team II, a cross-section of health care providers, labor, local government, and other industry stakeholders offer up their recommendations in the FY 2021 Enacted Budget which include a transformation of the hospital reimbursement structure to support services to the uninsured, increases investments in primary care, and new requirements that enhance oversight of managed care and transportation. The reforms also address managed long-term care, by far the fastest-growing sector of Medicaid. These include aligning New York State’s eligibility requirements with those of other states for new applicants for Consumer Directed Personal Assistance Program and Personal Care Services and enhancing reporting requirements for both programs; capping statewide enrollment in managed long-term care to incentivize plans to assist in ensuring appropriate enrollment, and creating a statewide independent assessor to achieve efficiencies by removing duplicative efforts to determining eligibility and enrollment in the managed long-term care program.

Prescription Drugs

The FY 2021 Enacted Budget includes a three-part plan to lower prescription drug costs for all New Yorkers. The Budget caps insulin co-payments at $100 per month for insured patients to help address the rising cost of insulin that has resulted in diabetes patients rationing, skipping doses, and not filling prescriptions. A commission of experts will also be recruited to study the feasibility and benefits of a Canadian drug importation program and submit a plan to the U.S. Department of Health and Human Services for review.

Medical Transparency

To increase healthcare service accessibility, New York plans to create a consumer-friendly, one-stop website, called NYHealthcareCompare where New Yorkers can easily compare the cost and quality of healthcare procedures at hospitals around the state. The website will be created by the Department of Health, the Department of Financial Services, and the New York State Digital and Media Services Center.

Student Mental Health Program

Some describe the ongoing COVID-19 pandemic as a psychological pandemic, as health service providers statewide have become overwhelmed with an increase in mental health requests. To meet the rising demand in light of school closures, the budget provides $10 million in funding for grants to school districts to address student mental health needs. These grants are intended to improve student access to mental health resources and assist students who have experienced trauma that negatively affects their educational experience. This program will be administered by the Office of Mental Health and developed in consultation with the State Education Department.

As we have seen, organizations need resilient infrastructures and supply chains to absorb future shocks. They need detection systems to spot financial trouble ahead and identify the right partners or deals. We understand that on every level, this industry is facing unprecedented pressures and stressors. We highly encourage management to frequently check in with employees. As a reminder, health care workers can text NYFRONTLINE to 741-741 to access 24/7 emotional support services. Any New Yorker can call the COVID-19 Emotional Support Hotline at 1-844-863-9314 for mental health counseling, and as always our dedicated RBT team is here to help you create a financial plan to navigate these complicated times.

Sources: PWC, NYS

Crash Course in Cash Management

Crash Course in Cash Management

A new year means a fresh look at what’s working and what’s not – in all aspects of life. Here we are (finally) in 2021, and while the Covid-19 pandemic rages on, there are some bright spots to keep in mind. 140,000 New Yorkers have received the first Covid-19 vaccine dose to date and New York expects to receive another 259,000 doses this week. But while we are taking steps to protect the physical health of our frontline heroes, it doesn’t mean that the healthcare industry as a whole has good financial health – in fact, far from it. The American Hospital Association (AHA) estimates that from March to June, the pandemic cost hospitals around $202.6 billion. If you’ve been scratching your head trying to reimagine cost-savings measures, you’re not alone. For starters, you’ve probably re-examined supply chain operations and discussed opportunities to beef up your organization’s personal protective equipment (PPE) inventory for the coming months. But what emerging best practices can your team adopt to help achieve better working capital amidst this unpredictable environment?

Liquidity

Your healthcare system’s ability to pay off its obligations is a central measure of its financial health. Improve liquidity ratios by paying off liabilities, cutting back on costs, using long-term financing, and managing receivables and payables. There are many ways to approach liquidity, but for starters, we suggest that you examine areas your team can cut costs and consider your accounts payable. You can often negotiate longer payment terms with certain vendors – but if you never ask, you’ll never get the extension. Remember to frame your request in a way that makes the arrangement mutually beneficial. For example, more cash flexibility could be exchanged for several glowing referrals to industry connections. A hospital that can pay its expenses and pay down its debts through the profits it generates from its operations is one that is likely to succeed.

Trim Wisely

When it comes to cutting costs, always align professional fees with clinical demand. If you notice a particular service lacks a financially positive growth trajectory, it’s time to modify or eliminate it. You can also consider removing capital projects that are no longer feasible or lack full funding. On the flip side, prioritize high-demand clinical services you expect to grow, and explore partnerships to create regional solutions that share cost and risk. You can also perform rolling budget updates to consider the ongoing economic impact on payor mix and volume.

Tech Flexibility

Embrace and expand telemedicine options. Despite the overwhelming challenges of the past year, Moody’s ranks U.S. for-profit hospitals as stable, with volumes expected to gradually recover from 2020 levels, while continued government aid and positive commercial and Medicare rate increases will drive growth. According to Moody’s latest report, technology and innovation will allow more procedures to be conducted outside of the hospital, and can also significantly help hospitals increase efficiency, improve patient outcomes, and save costs. By integrating long-term telehealth services, you will be saving money and expanding access to underserved communities, a true win-win.

Balancing Act

There are four common balance sheet (statement of financial position) mistakes we’d like to help your organization avoid:

  • Omitting transactions
  • Recording transactions incorrectly
  • Not classifying data correctly
  • Forgetting to record inventory changes

The best way to avoid these errors is to check your balance sheet frequently (not just when you need to), and keep your financial documents organized. Compare the current reporting period with previous ones. Calculating financial ratios and trends can help you identify lurking financial pitfalls. Ask your team a few questions to gain a more transparent understanding of your financial makeup. Do you have more assets? Have you accrued more debt or invested in new equipment and facilities? Are your financial obligations (current liabilities) under control? Is the amount that payers owe you growing?

Without additional funding and significant transformation, the healthcare industry is likely to experience rapidly eroding liquidity in the coming months. On our road back to normal, organizations need to make drastic structural and operational changes. Now is the time to revisit cost-saving ideas your team may have previously considered but not set in motion. Acting now will improve short-term liquidity and pave the way for a more sustainable operation in the years to come.

Additional Sources:

Healthcare Financial Management Association

ToneyKorf

The Invisible Healthcare Threat You Didn’t Know About

Ransomware Attack

As an industry, we have been consumed and devastated by the ongoing impact of the COVID-19 pandemic.

For months, oversaturated healthcare systems were pushed to their breaking points, in dire need of personal protective equipment (PPE). Still, some smaller buyers report struggling to maintain ample supply as we face a surge in cases. But as we battle one threat, another is silently lurking. If ransomware attacks aren’t on your radar, you need to consider the massive toll these cyber threats can take on your system’s financial health and reputation.

Did you know that just a few weeks ago, New York-based St. Lawrence Health System’s computer network was shut down after a ransomware attack?

The three-hospital health system with locations in Canton-Potsdam, Massena and Gouverneur discovered a new variant of Ryuk ransomware within hours of the initial attack and acted quickly to disconnect its IT systems. If you’re not already familiar, ransomware is malware that locks up a system’s computers and data until a ransom is paid. The New York Health Department acknowledged the attack and has been in communication with the health system. Late last month, Sky Lakes Medical Center in Klamath Falls, Oregon was also hit. Both providers maintain there’s no evidence patient information was compromised, but troubling data suggests this trend is a growing threat that isn’t going away. In 2020 alone, a total of 59 U.S. health care providers or systems have been impacted by ransomware, disrupting patient care at up to 510 facilities, according to Brett Callow, an analyst at the cybersecurity firm Emsisoft. In a joint alert, the FBI and two federal agencies said they had credible information of “an increased and imminent cybercrime threat” to U.S. health care providers. The alert said malicious groups are targeting the sector with attacks aiming for “data theft and disruption of healthcare services.”

The reality is, our healthcare systems have more data than ever before, but providing protection for that data is often an afterthought.

Internet-enabled medical devices are fantastic tools to increase speed and efficiency but many are poorly secured and come with additional risks. As patient records become more digitized and people depend on telehealth services, healthcare providers need to protect sensitive data. On average, the cost to recover from these attacks – without paying the ransom – totals more than $732,520 in the US, which includes business downtime, lost data, operational costs, device costs, and other expenses. But when the organizations paid, the recovery costs nearly doubled to $1.4 million. So you can’t afford to just hope it doesn’t happen to you. What steps can your team take now to proactively protect your system? Kevin Coleman, executive director of the National Cyber Security Alliance recently suggested implementing the following best practices:

  • effective security policies
  • training road maps for IT teams
  • integration of proactive cybersecurity education

“It’s essential for facilities to regularly create backups of critical systems and files, and to house those offline from the network. Healthcare and public health facilities should also be vigilant about upgrading and updating their legacy hardware and software; ensuring that all connected devices and applications have multi-factor authentication enabled; and that employees know how to identify and avoid malicious email links and attachments,” said Coleman. We understand for an industry already under immense pressure, adding this concern to your plate may trigger more stress. As always, if you have specific questions about strengthening your organization, please reach out to a dedicated RBT team member to schedule a consultation.