Healthcare has become one of the most highly regulated industries in the county and maintaining regulatory compliance has a permanent spot on top of the to-do list. The role of HR staff is unique in that it is not only a large source of risk, but the HR personnel can also play an integral part in the risk management of a business if properly supported. Achieving and maintaining HR compliance can be elusive goals for an organization that does not recognize the critical HR-specific risk exposure areas that exist and develop a strategy to minimize them.

1. Background Checks. Hospitals, medical practices and other healthcare providers must perform thorough background checks on prospective employees. Since healthcare employees are entrusted with the care of patients and with sensitive information, hiring organizations are most concerned about those who misrepresent themselves or use drugs.
2. Certifications. Healthcare organizations should have the proper tools to track certifications, as medical professionals have continuing education credits they must renew every year. To reduce risk and liability, it’s crucial to have a reliable and consistent system to track and report on each employee’s certifications and license expiration dates.
3. Education and Training. Workplace education and training is important in all organizations, but arguably the most important in the healthcare industry. The HIPAA law to protect patient health information is one of the most well-known, for instance. There remains, however, confusion regarding HIPAA’s rules and regulations. Employees disclosing PHI, medical records mishandling, social media, and lost or stolen devices are just a few of the most lucrative violations for Health and Human Services (HHS) Office for Civil Rights (OCR) to collect on. In fact, in 2017 alone, OCR imposed $19,393,000 in fines from covered entities and business associates to resolve HIPAA violations.
4. High Turnover Rates. High turnover stems from several causes: According to healthcare management firm Leaders for Today, 58% of respondents left their current position for reasons including long work hours, frustration, burnout and a lack of training and development. Regardless of the cause, even a 30-day gap in the wake of a departing HR employee leaves a business open to an enormous amount of exposure.
5. Regulatory Compliance Nuances. While HIPAA will always be a hot button issue, the HR function is a key player within an organization’s compliance structure and also manages various other heavily regulated initiatives. Staff lack a resource for staying informed risk potential violations that could not only damage a practice’s reputation but cause criminal and civil fines.

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There is no such thing as a riskless healthcare business purchase, but it’s appalling that the due diligence standard for healthcare business purchasers is often limited to an intensive of company financials.  Such a limited focus will miss critical issues like—

• Structuring a transaction to ensure cash flow;
• Clearing unique state-based licensure hurdles that must be cleared before closing the transaction;
• A detailed view of the regulatory viability of current receivables;
• Healthcare regulatory risks associated with the business model to be purchased; and
• The long term viability and regulatory horizon of the type of business being purchased

The biggest problem healthcare business buyers have is a lack of certainty.  Unless the buyer has been intimately involved in healthcare operations and in regular contact with healthcare legal counsel, they are not likely to be fully aware of the business and regulatory risks.  Even more, healthcare is a very local phenomenon.  What’s happening with surgery centers, addiction treatment or medical practices in South Florida is very different than what’s happening with them in North Florida.

As such, any meaningful due diligence of a business in the healthcare sector should include—

• Vetting the transaction structure with healthcare legal counsel;
• Knowing all the state and federal laws that affect the structure and timing of the transaction;
• A deep view of whether receivables are collectible or are vulnerable to denial and clawback;
• The long range view of the industry (and geography) in which the business arises.

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• A purchaser bought a healthcare company, was ready to launch operations right after closing the $5M transaction.  The problem was that the buyer needed a certain state license specific to Florida that wasn’t apparent to their corporate lawyers.  This caused the buyer to have to wait for nearly 90 days to operate the business, while still paying all operating expenses!
• A client in the midst of an acquisition retained us after obtaining fully signed purchase agreements, only to find the transaction close date was required under Florida law to be pushed back.  The net effect was that the delay became a negotiation point costing the seller hundreds of thousands of dollars.
• Corporate purchaser of a medical practice completed their asset purchase with the expectation that the bulk of the income stream be preserved by the assignment of certain contracts.  After the transaction closed, they learned the agreements could not be assigned, even though the contracts stated they were assignable upon agreement of the parties.  It took the buyer roughly six months to restore the contracts and impaired the income stream by about 50% for twelve months.  It took the buyer 12 months post transaction to restore the income stream they expected and needed 12 months earlier.
• Purchaser of an healthcare facility based the purchase on the prior 24 month financials, but failed to ascertain (1) most of the accounts receivable were older than the underlying contracts allowed, and (2) the claims in progress did not adequately document medical necessity, resulting in a huge payer clawback.
• A corporate healthcare business buyer was not aware of its liability to governmental programs in a stock purchase transaction.  When a large Medicare claim was made and the new owner pointed the finger at the prior owner, they were unable to avoid repaying Medicare, and the signed transaction documents failed to (a) specifically address responsibility for this common healthcare transactional risk, or (b) reserve a sufficient amount of the purchase price to prefund such risks.

Knowing the numbers is one thing.  Knowing the regulatory risks is something very different!

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An additional $13M in revenue

1. The first is consistently identified as incomplete or inaccurate documentation.  As we well know, improper code assignment has a huge effect on claims processing so it is imperative that clinicians’ documentation is as accurate and thorough as possible.  The latest electronic health software scrubs information and provides indicators regarding deficiencies, and if detected early enough, leads to better care, coding and appropriate reimbursement.
2. Always pulled in different directions and spread thin, physician query fatigue has also be identified as having a negative effect on CDI.  Improved EMR workflow can help physicians answer inquiries in a single platform making more efficient use of their time.
3. Closing communication gaps between CDI Specialists, auditors and coders help to resolve issues quickly, avoid discrepancies, denied claims and re-billing.  Productivity can be improved by implementing a workflow that prioritizes the most valuable cases first with the easiest last.
4. Choosing and using the right CDI Specialist or technology reduces problems with coding, billing, and reimbursement while improving continuity of care and patient outcomes.

RiskShield Tools offers on-site CDI workshops as a service to our clients for compliant, improved patient care and revenue cycle.

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