Accountants are coming to the aid of doctors and health care organizations who are dealing with not only the COVID-19 pandemic and its variants, but also with changing tax laws and accounting standards.
The ever-shifting rules and uncertainties around the Affordable Care Act, the CARES Act and the proposed Build Back Better Act, as well as supply chain shortages related to the pandemic, are causing pressures on health providers like never before.
“Most of the clients I work with are tax-exempt entities, and some of the accounting pronouncements are impacting them, but many of them are reeling from the impact of COVID-19 and trying to restore the revenues and trying to manage the costs associated with clinical personnel,” said Rob Schile, managing principal of the health system practice at CliftonLarsonAllen. “Getting access to clinical personnel, specifically nursing staff, has been a challenge pretty much nationwide. Many of them are balancing that teeter totter of changing patient volumes and escalating costs to serve those patients in the time of this pandemic that’s creating a lot of complexities.”
Supply chain shortages are still a problem, though not as severe now for items like face masks and protective personal equipment as during the start of the pandemic last year. “Some of them are talking about the increase that those shortages have had on their supply costs,” said Schile.
Along with rampant inflation in the costs of goods, labor shortages are also a factor in the health care profession as in other industries, even as some workers risk losing their jobs for refusing to be vaccinated despite being intimately aware of the dangers of catching COVID-19.
“My perspective is that those are all cumulative impacts on their operations and challenges that many leaders in the health-care industry are trying to work through,” said Schile. “I think the impacts depend on the type of health care provider you are. The impacts might be different if you’re an acute care health system, versus if you’re a post-acute provider in the nursing home sector or home health, or if you’re a physician group. They all have unique issues attached to them.”
The new lease accounting standard, which will put operating leases on the balance sheets of many companies for the first time, is another worry for health care organizations. The standard took effect for public companies in 2019, but was delayed by the Financial Accounting Standards Board twice for private companies and nonprofits, most recently because of the pandemic. But it is due to take effect later this month on Dec. 15, and many organizations still aren’t ready. A survey released Thursday by the lease accounting software company IRIS Innervision found that 38% of senior finance and accounting executives of non-public companies still have not started their implementation project for the leases standard, also known as ASC 842 for its place in FASB’s Accounting Standards Codification. The survey, which was conducted in November, found that those that have started are mainly in the early stages, with 18% still gathering the required data, 15% in progress, and 15% still assessing the impact of ASC 842. Another 6% have delayed their projects while focusing on other priorities, and only 6% have completed the project.
“I think with the lease standard, there are some more complex organizations that have historically had quite a few operating leases,” said Schile. “It's quite a process to go through and now inventory those and quantify the impact of booking them. So, I think there is some impact from the lease standard that organizations are working through.”
Congressional legislation has been a major issue, and even tax-exempt health providers have needed to keep up to date with all the tax changes since last year, especially when it meant they would get extra funding and help. “The CARES Act was a huge asset to health care providers to be able to get access to that cash,” said Schile. “It was at a significant time, especially for health systems and some of the smaller providers, and even the complex ones when they had to shut down different facets of care, that had a significant impact on their revenue stream. So being able to get access to that cash helped them to be able to keep people around to serve their communities when COVID hit them.”
The Build Back Better Act that the Biden administration is trying to pass through Congress with support only from Democrats would also have wide-ranging effects. “With the Build Back Better Act, one of the things that we’re continuing to monitor is some of those provisions that expand coverage, specifically through the exchanges by enhancing the premium subsidies,” said Schile. “That is going to be very beneficial in the health-care industry because the aim is to get people that don’t have coverage right now, to get them some coverage so they can get consistent health care. And in the health-care environment right now, those people, when they access the system, typically have deferred care for a long time, and what conditions they had at one point have now grown to being very complex and, in many cases, clinically challenging because they didn’t have access to care. They didn’t have a way to pay for it, so they waited a long time. Hopefully the Build Back Better Act can put some of those provisions in place that will get those people access to coverage so they can get the care they need when they need it and help manage those conditions better. That’s a windfall for people, consumers of health care as well as health care providers.”
The legislation passed by the House gives the government more of an ability to negotiate prices for some of the highest-cost prescription drugs with Medicare after the pharmaceutical industry fought hard to defeat those proposals, but it’s unclear if that will survive in the Senate.
“I do like where they’re going with some sort of legislation around drug prices,” said Schile. “Seven of the top 10 drugs accounted for increased spending of about $1.7 billion last year. The cost of drugs is a significant issue in health care. I think it would be very beneficial to health care providers and consumers of health care if some sort of strategy could be put together to try to manage the escalation of those costs. I like some of the provisions that are being talked about in the Build Back Better Act that try to get a handle on the escalation of those drug prices.”
Schile also has advice for accountants who have clients in the health-care field, whether they're physicians or hospitals: “The biggest piece of advice I could give to accountants who are serving health care providers is to focus on research of the evolving trends of legislation and payment changes that are impacting their clients,” he said. “From my perspective, and with the clients we work with, that’s the way we can be the biggest asset to those organizations, simply because they don’t have the resources and the bandwidth to keep pace with that. It’s very complex and it’s moving very fast. As accountants serving those organizations, what they get paid and how they get paid is a significant factor in their long-term success. The more we can understand what’s happening from an annual payment-setting standpoint from Medicare and Medicaid — I call that the regulatory component of it — helping the clients we serve understand that is invaluable. Secondarily, when it comes to payment innovation, that is really driven through the Centers for Medicare and Medicaid Innovation, CMMI, keeping pace with what’s happening there as well so that the clients they serve can understand what’s the vision that CMMI is driving, and how does that impact the clients they are serving so they can plan strategically and be ready for those changes. I think those are the two biggest things that we can do.”
