Healthcare Blog

When the Patient Protection & Affordable Care Act (PPACA) was passed in March 2010, a number of mandates became law. While some of these mandates have been widely discussed – such as the employer requirement to provide affordable health coverage and the requirement for individuals to buy health insurance by 2014 – other directives are not as well known. One of the lesser known mandates is the act’s new Form W-2 reporting requirement. Effective for 2012 W-2s, employers must report the cost of coverage under an employer-sponsored group health plan.

To learn more about the new reporting requirement, view the full article on our website.

On Nov. 23, the congressional “Super Committee” of 12 members failed to reach an agreement on deficit reductions. This will trigger previously enacted budget cuts beginning in 2013. Particularly, Medicare reimbursement may see up to 2% payment cuts with a majority of the cuts to hospitals and a minority to physicians. Potentially hospital and physician Medicare reimbursement cuts from 2013 through 2021 will be $88 billion. Note that the scheduled cuts will not affect Medicaid reimbursements.   

To alleviate the Medicare reimbursement cuts, hospitals and physicians will need to align efforts by honing in on clinical efficiency. One avenue to align efforts is to implement a co-management agreement. Co-management agreements are centered on bringing physician and hospital leaders together, allowing for continuum patient care. One of the advantages of this arrangement is that physicians can remain independent in nature from hospitals.  

In this formal, legally contracted and Stark compliant arrangement, physicians and hospitals can mutually agree on procedures and evidence-based protocols to improve care. Many of the improvements can affect quality, efficiency, IT utilization and recruitment. The anticipated improvements can result in cost savings which will financially benefit hospitals and physicians while offsetting the looming cuts in Medicare reimbursement.         

Eric Leafgreen is a member of Katz, Sapper & Miller's Healthcare Resources Group. For more information, contact Eric at 317.844.4861 or eleafgreen@ksmcpa.com.

U.S. manufacturers face a steep hill to be competitive globally according to a recent report by The Manufacturers Alliances/MAPI and the Manufacturing Institute. The report, titled "The 2011 Structural Costs of Manufacturing in the United States," states that U.S. manufacturers are paying approx. 20% more in costs than nine of its largest competitors in the world (Canada, China, France, Germany, Japan, Korea, Mexico, Taiwan, and the United Kingdom). The impact on manufacturing profitability can be quite large.

The study looked at five key elements, which included corporate taxes, employee benefits costs (including health care costs), tort (legal costs for lawsuits) costs, pollution abatement compliance costs, and energy costs.
 

“The story of the structural cost gap boils down to two issues: health care and corporate taxes,” says Jeremy Leonard, author of the study and an economic consultant with MAPI via the MAPI website. “We have the policy tools to deal with them, but lack the leadership to bring them under control. Absent structural costs, U.S. manufacturers are broadly competitive with their international peers thanks to the tireless efforts to innovate and become more efficient. It is up to the policymakers to step up to the plate to ensure a vibrant manufacturing sector in the years ahead.”

The largest barriers noted in the study relate to corporate taxes and employee benefits, mainly health care costs. The U.S. pays approximately 8.6% more for corporate taxes and 5.7% more for employee benefits on average then their competitors abroad. This can have a dramatic impact on the pricing model of U.S. manufacturers, which will ultimately impact manufacturing profits in the U.S.

Stephen Gold, president and CEO of MAPI stated, “This report tells an important story, one in which the White House and Congress should be very interested. While we recognize American manufacturers face a myriad of challenges from overseas, these data demonstrate that domestically imposed costs further undermine our ability to compete. We hear a great deal from policymakers these days about the need to bring manufacturing back to America, yet these challenges continue to undercut American manufacturing competitiveness.”

Justin Hayes is an accountant in Katz, Sapper & Miller's Audit and Assurance Services Department, which is comprised of individuals skilled at evaluating business and control risks for clients.

• call rotation
• frequency of calls
• hospital trauma designation
• backup availability
• physician extender, fellow, or resident availability and utilization
• hospital's location relative to supply of physicians

Yesterday Randy Biernat presented “Fair Market Value of Compensation – Appraisal Theory and Applications” in a webinar sponsored by the CPA Leadership Institute and National CPA Health Care Advisors Association. Randy’s presentation addressed both the regulatory aspect of compensation valuation and the actual preparation of fair market value analyses for a variety of common arrangements.

Highlights of his presentation included:

·          Healthcare Market Overview

·          Overview of Common Hospital-Physician Arrangements

·          Appraisal Process Overview

·          Regulatory Environment

·          Common Methodologies

·          Case Studies

The webinar was attended by valuation and healthcare professionals looking to expand their knowledge regarding current valuation theory and application in compensation issues; and hospital financial managers involved in transactional matters.

To view a portion of the webinar, click the video below. You may also visit the program website to purchase the full recording.

KSM Webinar Preview from Katz, Sapper & Miller, LLP on Vimeo.

For more information, contact Randy Biernat, a director in Katz, Sapper & Miller’s Healthcare Resources Group. 

1. Risk - Medical direction involves no direct life or death decisions and the odds of committing malpractice are slim to none. Because part of the compensation Medicare pays is tied to the cost of malpractice, it is hard to argue that the compensation for clinical work does not involve a direct reward for the risk of touching patients.
   
2. Complexity of Work - The more the specific medical director's duties replicate C-Suite activities, the more likely it is that the compensation should include data points for executive-type positions. However, when using clinical compensation as a starting point, it can be difficult to assess the relative complexity of one set of tasks versus another.
   
3. Scope of Work - The amount of time necessary to commit to a medical direction appointment also impacts the data that might be used. Specifically, one may include incremental data points that resemble the costs of employment if we find a physician is spending 500 or more hours a year on a medical direction arrangement.  In fact, if items such as on-call compensation are buried within a comprehensive medical directorship, one would certainly have to bring in other data points.

1. Neurosurgery
2. Cardiovascular surgery
3. General surgery
4. Orthopedic surgery
5. Plastic surgery

1. Psychiatry
2. Pediatrics
3. Family medicine
4. Dermatology
5. Pathology

The 2011 session of the Indiana General Assembly delivered numerous changes to Indiana’s tax landscape. The most talked about change was a reduction in Indiana’s tax rate for C corporations from 8.5 percent to 6.5 percent. The rate reduction, which will be phased in over a four-year period beginning July 1, 2012, will come at a price. To offset the fiscal impact of this rate reduction, Indiana will begin taxing out-of-state bond interest and eliminate net operating loss carrybacks as of Jan. 1, 2012. The General Assembly also pulled the plug on four tax credit programs, including the teacher summer employment credit, maternity home tax credit, credit for offering health benefit plans, and small employer wellness program credit.

Two tax procedures saw significant change, and a new tax refund device was established. In a taxpayer-friendly move, the length of time to amend a personal property tax return was extended from six months to one year. On a less favorable note, the time to file a sales tax refund claim for utilities predominantly used in production was reduced from three years to 18 months. A mechanism was added to the budget bill that will provide Hoosier taxpayers with an automatic refund if state reserves ever exceed 10 percent of appropriations.

Two statewide economic incentive programs saw a boost. Eligibility for the industrial recovery tax credit, which incentivizes refurbishing vacant industrial facilities, was expanded to include buildings with at least 50,000 square feet that have been vacant for at least one year. In an effort to attract capital to new businesses, the cap on the venture capital investment (VCI) tax credit was doubled from $500,000 to $1,000,000 per eligible business.

Localities were handed two new incentive tools that will greatly expand the incentive options at their disposal. Whereas localities were formerly required to use a fixed abatement schedule with declining abatement percentages, they now have the choice of drafting an abatement schedule that uses negotiated abatement percentages over a maximum 10-year term. Localities receiving a local option income tax (i.e., County Adjusted Gross Income Tax, County Option Income Tax, or County Economic Development Income Tax) now have the ability to award a local option hiring incentive up to the amount of local option income tax withheld for new jobs created.

Tim Conrad is a staff accountant in Katz, Sapper & Miller’s State and Local Tax Practice. For more information, contact Tim at 317.452.1388 or tconrad@ksmcpa.com.

The face of healthcare is changing. "Accountable Care Organization" is becoming a common term in the industry. What exactly is an accountable care organization? On March 23, 2010, President Barack Obama signed into law the Patient Protection and Affordable Care Act, which empowers the Secretary of Health and Human Services to create a shared savings program to promote accountability of patient care through Accountable Care Organizations (ACO). As defined by the Centers for Medicare and Medicaid Services (CMS), an ACO is an "organization of healthcare providers that agrees to be accountable for quality, cost and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it.” Ultimately, Medicare is trying to create an incentive program to reduce its costs while increasing the quality of care provided to patients.

The regulations regarding ACOs are still in proposed form and 427 pages in length. At a very high level, these proposed regulations provide the following requirements of ACOs:

·          Provide care for at least 5,000 Medicare beneficiaries (based on their primary care physician)

·          Participate in the program for three years, beginning Jan. 1, 2012

·          Self-report 65 quality measures to the CMS

·          Meet various anti-trust regulations

Under the proposed rule, Medicare would continue to pay healthcare providers for specific services under the Medicare payment systems. The ACO would then receive a share of the cost savings based on their Medicare patient population spending compared to benchmarks determined by CMS. The concept is that by better coordinating patient care between the primary care physicians and the specialists, there will be more information sharing and quality of service will increase, thus reducing costs.

The proposed regulations require ACOs to notify their patients about their participation in an ACO. If they choose, the patients will have the ability to opt out of sharing their protected health information with the other ACO healthcare providers. Therefore, do not be surprised if you receive information in the mail or notice signs in your doctor's offices announcing their participation in an ACO.

Although ACOs, as defined in the Patient Protection and Affordable Care Act, only affect Medicare patients, it will have an effect on the entire healthcare system. Currently, many physician groups and hospitals are weighing the pros and cons of forming an ACO. CMS estimates there will be 75 to 150 ACOs formed by Jan. 1, 2012. Even with this relatively small number, a huge change in patient care is expected as a result of this Act.

Ellen Ferringer is a director in Katz, Sapper & Miller’s Healthcare Resources Group. For more information, contact Ellen at 317.580.2013 or eferringer@ksmcpa.com.

The American Institute of Certified Public Accountants (AICPA) finally introduced the SSAE 16 SOC 1 audit guide last week and it looks like it was worth the wait. While planning and fieldwork may have already started since the new standard went live on June 15, this audit guide does include several items that should ease the transition from the SAS 70 report format to the Service Organization Control Reports (SOC) format. 

The guide highlights the differences between the two formats and provides information to help determine the types of services appropriate for SOC 1 attestations. Primary components of SOC 1 attestation and information on how to test the operating effectiveness of controls at the service organization are also included. Additionally, the audit guide includes examples of various components from actual reports across multiple industries. 

An earlier release date would have been beneficial in facilitating preparation for the changes this new standard introduces. In sum, this guide is an incredibly useful tool for planning and executing an SSAE SOC 1 attestation engagement.

To learn more about how the SOC reports will affect your manufacturing, distribution, life sciences, technology or healthcare company, contact Ryan Elmore at 317.452.1714 or visit the KSM Consulting website at ksmconsulting.com.