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Financial Healthline | FA

LL 2016

www.wphfma.org

2 FALL 2016 Financial Healthline

contents

3PRESIDENT’S LETTERAnthony Waltos,WPHFMA Chapter President

416-17 WPHFMA LEADERSHIP

6FACILITY SPOTLIGHTMONONGAHELA VALLEY HOSPITAL IMPROVES PATIENT EXPERIENCE WITH FINGERPRINT TECHNOLOGY

7RETIRED MEMBER SPOTLIGHTTED DZURA, CPA

5MEMBER ACHIEVEMENTS

20EDUCATIONAL ARTICLEPNC HEALTHCARE ANSWERS YOUR QUESTIONS ABOUT HEALTH SAVINGS ACCOUNTSBy James S. Gandolfo, Senior Vice President for PNC’s Trea-sury Management Group

8NEW MEMBERSPOTLIGHTDOROTHY CARTERPresident & CEOCarter Health Management & Consulting

9EDUCATIONAL ARTICLERETHINKING PHYSICIAN COMPENSATIONBy Lynn Grennan, managing director, Craig Hittle, director, and Kritiya Gee, director, Huron Healthcare

16MEMBER SPOTLIGHTJOHN BERQUIST, CPAController, Millcreek Community Hospital

17EDUCATIONAL ARTICLEIS YOUR PENNSYLVANIA TRAUMA FACILITY BEING SHORT-CHANGED BY WORKERS’ COMPENSATION INSURERS? By Sean Audley, EsquireAudley Law Offices, P.C.

19MEMBER SPOTLIGHTCORY JACKSON, MBAController, Meadville Medical Center

23CHAPTER SPONSORS

wphfma.org FALL 2016 3

PRESIDENT’S LETTERI am writing this letter to you in advance of the elections on November 8th. After watching the final Presidential debate and regardless of which candidate wins the election, one thing is for certain, Healthcare policy will continue to change. Our plates are already full with policy and regulation changes in the Hospital Quality Star Rating System, Outpatient Prospective Payment System, MACRA, Healthcare Insurance Exchanges, Bundled Payments and the list goes on with more to come.

Our Western Pennsylvania Chapter of HFMA, with the support of National HFMA and our Sponsors, strive to be your “go to” resource to help you cope and deal with changes in Healthcare policy as they evolve. Both our WPA Chapter (wphfma.org) and National (hfma.org) offer robust websites that package a wealth of information to assist you in dealing with these changes. We both offer educational programs locally, regionally and nationally that are designed to educate you on these emerging issues. We value your membership and encourage you to utilize these tools and become change agents and pioneers for your organizations success.

As a reminder, we have several upcoming local conferences that may be valuable to you as a change agent:

• Duquesne CPE Conference – November 17, 2016 at Duquesne University• Holiday Education and Christmas Party – December 2, 2016, Treesdale Country Club• Accounting and Auditing Update – January 20, 2017, Regional Learning Alliance• The Spring Institute – March 13 and 14, 2017, Meadows Racetrack and Casino

Additional detail on these conferences is available on our chapter’s website (wphfma.org) or inside this newsletter.

Finally, I would like to wish you and your families a Very Happy Thanksgiving. Enjoy and Give Thanks!

Sincerely,

Anthony Waltos, CHFPPresident - FY 2017Western Pennsylvania ChapterHealthare Financial Management Association

Anthony Waltos2016-2017 President

Western Pennsylvania ChapterHealthcare Financial

Management Association

Are you seeking to build your

resume? Contact us to learn about

Western PA HFMA’s exciting volunteer

opportunities at [email protected].


2016 - 2017 WESTERN PA HFMA LEADERSHIP

MAKE SURE TO ADD WESTERN PA HFMA ON FACEBOOK, LINKEDIN, & TWITTER!

OFFICERSPresident Tony Waltos, Treasurer, Excela Health 724.832.4029 | [email protected] President Elect Jeffrey Petrell, Partner, Arnett Carbis Toothman, LLP 412.635.6270 | [email protected] Larry Rusnock, Controller, Monongahela Valley Hospital 724.258.1000 | [email protected] Allison Simmons, Owner/Creative Director iDesign Collaborative, LLC 412.523.5699 | [email protected]

BOARD OF DIRECTORSPat CouryKevin DadeyApril LangfordDenny LukesJack LynnAndrea MarnenCarol Scanga

COMMITTEE CHAIRS

PROGRAMS Kevin Dadey Mark Spehar

MEMBERSHIP Jack Lynn Kelly Brocious

SPONSORSHIP Benjamin Gleason Tony Waltos

CERTIFICATION Carol Scanga

FOUNDERS Brandon Harlan Tasha Anterock

save the datesYou do not want to miss these upcoming Western PA HFMA events.

November 17, 2016 Duquesne CPE Conference | Duquesne UniversityDecember 2, 2016 Holiday Education & Tax Update | Treesdale Country ClubJanuary 20, 2017 Accounting & Auditing Update | Regional Learning AllianceMarch 13 - 14, 2017 The Spring Institute with Three Rivers AAHAM | Meadows Racetrack & Casino

COMMUNICATIONS Allison Simmons

DCMS CONTACT Tony Waltos

LINK CHAIR Denis Lukes

WEBMASTER Allison Simmons

VOLUNTEER Dan Simmons

EARLY CAREERIST Allison Simmons


MEMBER ACHIEVEMENTS

R E C E N T L Y C E R T I F I E D M E M B E R S Congratulations to the following hfma members on becoming a Certified Healthcare Finance Professional....Marissa Dreucci, CHFP, Budget Manager, Monongahela Valley Hospital

Sean BurnsSara DerschVincent FryeSiobahn GallagherJeanna HannaTerence HarringtonStefani HelmRachel HeriskoAmy KnappKelly Wilson

H A P P Y A N N I V E R S A R Y ! Congratulations to the following hfma members celebrating an hfma Membership Anniversary....

5 YEARSTasha AnterockKelly BrociousJane CionniLisa CiotolaScott CohenSteve DunnJan JenningsJack LynnAndrea MarnenJason McCoyCarmella OrsiniChristina Panos

10 YEARSGregory CampbellPatrick CouryAmy GarciaStacy KemmlerChristopher LukaSusan McBrideMark PapaliaChad PetersJeffrey PorterCarol ScangaWilliam Walter

15 YEARSTina GowenJames HuntPauline NewtonKimberly PhillipsKaren Walker

20 YEARSJohn AndurskyNorman MitryPete CiceroBrian Kline

30 YEARSJohn BerzinskyWilliam CainJeff GallagherJeffrey HooverReneé MonahanKevin Varley

N E W M E M B E R SWestern PA hfma would like to welcomethe following individuals to our chapter!

W h a t ’s m i s s i n g n e x t t o yo u r n a m e ?

Certified Healthcare Financial Professional (CHFP) HFMA’s CHFP certification provides a broad range of business and financial skills necessary to succeed in today’s healthcare environment.

… A N D D I D YO U K N O W ?

For a limited time, the Western Pennsylvania HFMA Chapter is offering cost reimbursement upon successful completion of the CHFP certification. WPHFMA will reimburse 100% of CHFP fees paid by individual members (a savings of $700), or will reimburse employers 50% of CHFP fees paid on behalf of their WPHFMA member employees (a savings of $350 per certified employee).

To qualify:1. Register for CHFP and inform WPHFMA Certification Contact at [email protected]. Successfully complete CHFP certification within one year of registration

Please contact [email protected] for more information.Learn more about the CHFP certification and the following other available certifications at www.hfma.org/certification.

Certified Revenue Cycle Representative (CRCR) Advance your revenue cycle proficiency and technical expertise.

Certified Specialist Business Intelligence (CSBI) Learn how to use your healthcare organization’s data to make a wide range of business decisions.

Certified Specialist Physician Practice Management (CSPPM) Understand the full range of topics and techniques central to effectively manage physician practices.

Certified Specialist Managed Care (CSMC) Describe the “nuts and bolts” of managed care and thoroughly covers issues in the era healthcare reform.

Certified Specialist Accounting & Finance (CSAF) Strengthen your accounting and finance competencies and address financial reports and statements unique to health care.


Monongahela Valley Hospital made a significant advancement in patient access technology by implementing a device called SafeChx this past year. This community hospital has seen significant improvement in patient registration and patient satisfaction, and a reduction in identity theft, duplicate records and medical errors. Developed in Columbus, Ohio by the software company ChrossChx Inc, SafeChx scans the patient’s index finger and stores his or her identification as biometric mathematical data. Since implementing SafeChx, Monongahela Valley Hospital has realized a significant reduction in duplicate medical records and the time associated with patient registration.

HOW DOES THIS NEW TECHNOLOGY AFFECT PATIENT REGISTRATION? With CrossChx, medical records and patient information are retrieved in seconds once the patient’s finger is scanned. By integrating into the Patient Registration System, Monongahela Valley Hospital employees are able to receive the patient information immediately and trust that it is accurate. SafeChx eliminates insecure and outdated sign-in sheets previously used by the hospital that wasted time and money. There are no fees associated with integration, and the only limitation lies with Medical Oncology patients due to chemotherapy affected fingerprints. Other than this limitation, the employees and patients think the system is very easy to use and it requires minimal training.

IS THIS NEW TECHNOLOGY SECURE? Approximately 1.8 million medical identity thefts occur in America annually sacrificing 41.3 billion dollars. Using a fingerprint system makes it drastically harder to steal an identity. All new patients at Monongahela Valley Hospital must scan their finger five times to link their medical benefits and scan one time for each returning visit. This ensures that no other patient can use their medical benefits.

WHAT IS THE PRIMARY BENEFIT OF IMPLEMENTING SAFECHX? It is estimated that 10% of all medical record are duplicates, which cause additional expenses for maintaining and accessing those records. When a patient is registered with more than one record, potential for error is significantly increased. Now SafeChx eliminates the expense and risk of duplicate medical records. When the system was first implemented at the hospital, around nearly 500 duplicates were found. A notification to the Medical Records Department and these medical records were merged. The amount of duplicate records at Monongahela Valley Hospital has been decreasing since the implementation.

WHAT REACTION HAVE YOU SEEN FROM PATIENTS? The SafeChx system has been almost universally accepted since implementation. At Monongahela Valley Hospital there was slight pushback from senior citizens who did not use technology regularly. The hospital decided to roll out the system in the summer months so students could assist senior citizens until they became comfortable. Administrators acknowledge that the systems saves time and money, while most patients feel more confident that their information is secure. The overall acceptance rate for the system is almost unanimous at 97%. The improvements of this system in registration, medical errors and identity theft are likely to be taken advantage of in other industries in the near future.

If you are interested in learning more regarding Monongahela Valley Hospital’s recent advancemnet, contact Larry Rusnock at [email protected].

Monongahela Valley Hospital Improves Patient Experience with Fingerprint Technology


WESTENR PA HFMA

RETIRED MEMBER SPOTLIGHT

CAREER OVERVIEW WHAT IS YOUR BUSINESS PHILOSOPHY? Be the best I can be and never stop improving.

HOW DID YOU MAINTAIN A COMPETITIVE EDGE THROUGH YOUR CAREER? By heeding the advice of various mentors throughout my career including the CEO of Central Medical Center & Hospital, Thomas M. Gallagher. Also peer to peer mentoring was invaluable particularly with fellow HFMA members usually at HFMA meetings.

WHAT CAREER ADVICE DO YOU HAVE TO OFFER? If possible employ individuals who are more intelligent than you. It will make your career more successful. (advice from a mentor).

RETIREMENTHOW IS RETIREMENT TREATING YOU? Fantastic. Work is highly overrated.

WHAT ACTIVITIES ARE YOU INVOLVED IN? Golf is my main activity. I also have more time to enjoy the Pittsburgh sport teams along with Penn State. I also have significantly additional time for family activities .Finally, I am active with retirement finances.

HAT ADVICE DO YOU HAVE TO OFFER TO THOSE WHO ARE CLOSE TO RETIREMENT? For myself, it was the right decision. I enjoyed work but sometimes I believe I was overzealous regarding my career to the detriment of other life choices.There is a saying “No one on their deathbed said I wish I had spent more time in the office.”

HFMAHOW MANY YEARS HAVE YOU BEEN A MEMBER OF HFMA? Since 1975.

WHAT DO YOU LIKE MOST ABOUT HFMA? The networking opportunities provided by the organization. The camaraderie with fellow members is something I will always cherish.

WHAT IS YOUR FAVORITE HFMA EVENT OR MEMORY? Naturally, my favorite HFMA event was the annual golf outing. The Holiday Party is a close second.

Ted Dzura CPA, FHFMA,MBA

Mr. Dzura held a variety of financial positions throughout his career including VP Finance & CFO for a variety of healthcare provider organizations including Central Medical Center & Hospital, St. Francis Central, Aliquippa Hospital, Tandem Healthcare & The Bradley Center.

LAST PROFESSIONAL POSITIONDirector of Finance, The Bradley Center

COLLEGE ATTENDEDThe Pennsylvania State University

WESTERN PA HFMA

NEW MEMBER SPOTLIGHT

NAMEDorothy I. Carter

POSITION President and CEO, Carter Health Management & Consulting

COLLEGE ATTENDEDWinston Salem State University; BA in Business Administration

WHY DID YOU JOIN HFMA? I wanted to learn more about the challenges health care institutions are facing.

WHAT DO YOU LIKE MOST ABOUT HFMA THUS FAR? Meetups that include speakers have proved insightful!

WHAT DO YOU PLAN TO TAKE AWAY FROM YOUR MEMBERSHIP WITH HFMA?Continue building relationships.

CAREER OVERVIEW Worked for a private vendor for over 20+ years but has more recently pursued an entrepreneurial opportunity; Background is in Medicaid; Current business helps patients enroll in state Medicaid first and if not that, focuses on Affordable Care Act; Also involved in Hospital Charity Care.

WHAT IS NEW AND EXCITING AT YOUR COMPANY?Finished in house systems “PIMS” which allows integration with Hospital HIS systems as well managing workflow for tracking applications; Ready to bring new technology to market.

WHAT ARE SOME OF YOUR DEPARTMENT OR ORGANIZATIONAL GOALS THIS YEAR?More community Outreach. As a minority business owner I feel the need to make sure that reaching patients in communities that need help is actually being done.

WHAT IS YOUR BUSINESS PHILOSOPHY? “Our mission is your goal” – Put emphasis on learning facilities unique problems which then allows for a tailored customer solution.

WHAT IS THE BEST WAY TO KEEP YOUR COMPETITIVE EDGE? Listening, reading, and research.

WHAT IS YOUR CAREER ADVICE?Be fair to all people you work with or help, it will only make you better person!

WHEN YOU WERE A KID, YOU THOUGHT YOUR CAREER WOULD BE?Attorney (married one instead!)

PERSONALWHAT IS YOUR PET PEEVE? People who cut off others mid-sentence.

WHAT ARE YOUR GREATEST PASSIONS IN LIFE? Helping people! Loves healthcare and how current role allow to help others or programs in need.

WHAT IS YOUR FAVORITE MOVIE? “Imitation of Life” - classic Black n White movie from 1959

IF YOU COULD MEET ANYONE, WHO WOULD IT BE? It would have been Pat Summitt - Huge sports fan! Really drove women’s basketball to what it is today and what she demanded from her players.

IF HOLLYWOOD MADE A MOVIE ABOUT YOUR LIFE, WHOME WOULD YOU LIKE TO SEE PLAY THE LEAD ROLE AS YOU? Angela Bassett


RETHINKING PHYSICIAN COMPENSATIONINCREASE PHYSICIAN ENGAGEMENT, OPTIMIZE PERFORMANCE WHILE TRANSFORMING TO VALUE-BASED CAREBy Lynn Grennan, managing director, Craig Hittle, director, and Kritiya Gee, director, Huron Healthcare

COMPENSATION STRUCTURE VERSUS ORGANIZATIONAL CULTUREThe right compensation plan framework is an important component to becoming a high performing physician organization. It provides a tangible and aligned structure for a winning patient-provider-system-payer strategy. Creating a unified plan also helps integrate providers with each other and with the system—culturally, financially and clinically—via a common core that functions across multiple departments, yet, is flexible enough to contain specific departmental metrics, variables and incentives. Ultimately, this framework should facilitate a bridge to more risk-based population healthcare delivery as you gradually realign measures, metrics and compensation to suit shifting value-based care models.

Yet, a compensation structure is also dependent on a physician organization's group culture and dynamics. Given a group’s current status and infrastructure, where does it fall on the organizational maturity spectrum? Are the physicians ready and motivated to move to a unified and aligned compensation plan? Can this plan evolve and be repeated with other physician groups, or will you need to tailor the structure for each group you employ, thus defeating the implementation of a unified plan? A unified compensation structure with common principles and guardrails is important and should be pursued, but does not insinuate that a one-size-fits-all approach is effective

or even feasible. Rather, successful physician organizations should develop common principles that will apply broadly to all providers, but with specialty or group specific components that give leaders flexibility to meet the needs of providers and the physician organization. For example, common principles may be rewarding for patient satisfaction or a range of fixed and variable compensation.

ALIGNMENT AMONG MANY SECTORS

Compensation plans must be financially sustainable, reward physicians for meeting and exceeding clinical and non-clinical goals and balance physician efforts with a variety of leadership responsibilities. Above all, approach compensation planning with transparency and accountability and keep things simple and efficient.

Keep in mind that successful compensation plans are works in progress and should continually strike a balance among these sectors that impact alignment:

• Patients, consumers, the community –Encompassing population health, whichdetermines what the prevalent chronic andacute illnesses in your market are, the riseof consumerism, emerging patient accesschannels (for example, telehealth and retailclinics), and the impact of self-payers.

• Health Systems – Representing thecontinuum of care across the deliverysystem, from hospitals, academic medicalcenters, ambulatory practices and post-acute environments.

Rethinking Physician CompensationINCREASE PHYSICIAN ENGAGEMENT, OPTIMIZE PERFORMANCE WHILE TRANSFORMING TO VALUE-BASED CAREBy Lynn Grennan, managing director, Craig Hittle, director, and Kritiya Gee, director, Huron Healthcare

As reform moves toward value over volume and healthcare leaders take on increasingly complex payment and reimbursement plans, they struggle to align the physicians within their organizations to their system’s financial and quality goals, while balancing the ever increasing demands and stresses on physicians and their patient care teams. Physicians and advanced practice providers are crucial to every performance, quality, safety, care utilization and patient satisfaction goals. These factors significantly affect an organization's financial viability, which is why providers' compensation must be aligned with them. In addition, our research shows that providers are less likely to burn out when mutual goals have been established between them and their health systems. But, that is just part of the story when it comes to compensation planning.

KEYS TO A SUCCESSFUL PLAN

Transparency achieves buy-in

• Build trusting relationships with physicians.• Bridge gaps between providers and

management.

Efficient education and testing streamlines implementation

• Educate providers on plan nuances;address questions and concerns.

• Test the new model for consistency withguiding principles and efficiencies.

• Provide for confidential feedback; assureresults align with expectations.

Accountability leads to sustainable high performance

• Offer real-time individual, departmentperformance metrics.

• Gauge performance; project annualcompensation for each provider.

• Maintain accountability and visibility.

Simplicity helps facilitate understanding and discussion, tracks key variables

• Develop discussion tools to helpstakeholders model and make keydecisions.

• Factor in key variables – patientsatisfaction, quality, industry benchmarks, clinical FTE levels, productivity, andresearch – and make them easy to trackand report consistently.

10 FALL 2016 Financial Healthline3

• Government – Including federal, state, and local laws and policies that regulate your organization’s operation.

• Payers – With the Medicare Access and CHIP Reauthorization Act of 2015, reimbursement will continue to progress on the path to value; it is anticipated that commercial plans will follow suit.

OVERALL MARKET DYNAMICSThere has been a marked shift of independent medical groups to hospital-employed/owned physician organizations in the last decade and a half, and the trend continues. Mergers and acquisitions also create their own compensation dynamics. Often these deals are done one at a time, without a complete evaluation of the strategic goals and return on investment of all parties.

Physician organizations acquired in this way are promised autonomy, but since their legacy compensation plans often come with them, they are less inclined to embrace the parent health system compensation structure. The misalignment perpetuates itself as systems grow and acquire more medical groups. Though hospitals no longer employ physicians to increase admissions and gain favorable reimbursement rates for hospital-based services, the shift in focus from fee-for-service to value-based care is just that—still in transition. For compensation planning, there is a compelling need to recognize the impact that an evolving organizational structure has on staff and continue to develop models that reward quality and cost reductions. Many healthcare organizations, however, are at varying points organizationally and strategically in compensation planning.

IMPACT OF PHYSICIAN BURNOUT Relentless changes and the uncertainties of industry reform are driving these providers to join hospital environments because they no longer want the administrative details of owning a practice and they prefer medicine to business.1 But, when they make the move, they discover that they are needed as leaders on the business side of healthcare after all. They discover that it is about more than compensation.

When physicians, who are intrinsically driven and committed professionals, experience these disconnects, disillusionment can evolve into burnout. Quint Studer, founder of Studer Group, knows firsthand from his work with physicians around the country that these burnout factors generally can be grouped under the factors of healthcare environment, practical hurdles, psychological and training challenges, and organizational structure changes. Crossover occurs, as practical hurdles lead to psychological concerns and training is related to organizational change. He stresses, though, that burnout is not happening only because physicians feel personally overwhelmed or stressed, which would imply a lot of self-interest. Rather, this dedicated group experiences burnout because “they perceive that their most powerful driver—the ability to provide the best possible patient care—is being challenged.” When physicians team up with their health system leaders to pursue mutual goals, they are far less likely to burn out.2

Healthcare system leaders are realizing that getting physicians to align strategically with goals to improve key performance areas such as revenue, care redesign, and efficiency, but ignoring burnout, limits any physician engagement.3 A variety of strategies can combat the problem, such as addressing the problem through education and onboarding activities, working on patient care teams with non-physician providers to help spread out work and documentation. Additionally, training physicians to become team leaders and helping physician organizations become more successful in lowering costs and improving quality of care.

Also critical to understanding the relationship between performance expectations/compensation and how physician organizations can become disconnected from the health system is the financial affordability concept outlined in Figure 1 below. Although health systems recruit, retain and incentivize physicians for any number of clinical or strategic reasons, it is important to continuously evaluate the relationship between productivity and compensation.

Rethinking Physician Compensation

When physicians team up with their health systemleaders to pursue mutual goals, they are far less likely to burn out.”

Quint Studer Founder, Studer Group

“


Huron's leading practice for financial sustainability and affordability is no more than a 20 percent variance (positive or negative) in the respective percentiles for productivity and compensation. Misalignment greater than 20 percent puts physician organizations at risk for either losing providers or overpaying for them. Strategic or coverage needs may occasionally call for variances outside of this leading practice but should be the exception rather than the rule.

ALIGNMENT WITH HIGH-PERFORMING GROUPS Physicians who belong to high performing organizations have significant impact on their health systems—operationally and clinically—making for strong partnerships and improved financial performance. In our definition, high performing physician organizations must have sustainable performance as it relates to compensation across these key dimensions:

Organizational Effectiveness • Effective governance and management

structure to successfully develop and implement a leading practice compensation model

• Strong group culture and ethos to buy into market-driven models and incentives

Practice Efficiency• Highly efficient and appropriately staffed

operations• Able to respond to and track changes

driven by new provider incentives

Financial Sustainability of Plan• Financially viable to health system• Funded consistently and fairly• Reporting and transparency for

compensation model changes

Provider Alignment • Compensation is aligned between provider

performance and organizational goals which includes volume, outcomes and cost

Clinical Alignment• Effective compensation model addressing

primary care, specialty care, hospital services

• Incentives aligned with desired system and payer outcomes (performance, quality, utilization, safety, patient satisfaction)

However, where a physician organization may be at various points on the journey toward high performance can limit the ability to design and implement a compensation plan for its members. For example, an organization could be an emerging group practice, but its clinical, operational, and financial infrastructures are not in line with its culture, values, strategy, leadership and management.


CURRENT TOTAL COMPENSATION AND PRODUCTIVITY

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Can’t Cover Costs

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Flight Risks

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Step 1: Current StateProductivity/Compensation Alignment

Step 2: Target Productivity/Compensation and Affordability Analysis

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Low Comp/Low Productivity

High Comp/Low Productivity

High Comp/High Productivity Gap to Target

Incremental Productivity to afford target Comp

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Figure 1: Compensation Plan Affordability Analysis Concepts


An organization’s place on the development model (Figure 2) determines its focus and goals of care delivery. A provider group that is further developed and integrated is better positioned for strategic decisions and is better able to implement compensation plans that are in line with new payment models the health system is pursuing. In turn, health systems considering a new compensation model should examine what they currently have, what their competitors use, and what benefits they need to offer to attract and retain talent. Tying compensation to productivity and performance, however, can stretch an organization's tolerance for risk. For example, overhead and fund allocation may be difficult to plan for and the model may be tricky to implement fairly and consistently. The attempt to tie compensation to productivity and performance may result in an uproductive and competitive environment among practitioners.

COMPENSATION APPROACHESWith that in mind, Figure 3 charts several approaches that cover the range from increasingly guaranteed compensation to increasingly variable compensation.

Leading practice suggests a model whereby no more than 80-85 percent of a provider's total cash compensation target (e.g. 50th percentile Medical Group Management Association) should be fixed or guaranteed (with potential exceptions for new providers during the 1–2 year ramp-up period). The remaining variable, or “at risk” compensation, should be earned based on achieving and/or exceeding minimum work standards/threshold for productivity, quality, and engagement/citizenship. Incentive compensation can then be structured for providers going above and beyond the minimum work standards, giving high achievers the ability to earn more than the total cash compensation target.

Quality and citizenship requirements should always be part of any physician leadership onboarding and/or training so physicians know exactly how your organizational culture translates into care delivery performance. There should be minimum expectations for citizenship goals, both within the physician group and the hospital/system. Examples

include engaging in leadership opportunities, getting along with peers, having good charting habits, minimizing compliance risks.

Other compensation considerations include physician roles in administrative, management, leadership, and other variable pay that should be part of performance metrics. Be sure to make physicians aware of all the quality, citizenship, and leadership opportunities your organization offers.

For specialty physician organizations, compensation plan components and incentive metrics should be tailored to the specific group and provider environment and should ultimately coincide with the goals of each individual practitioner along with those of the department/division and organization.Key compensation metric guidelines include:

• Basing compensation on organizational priorities—physician engagement, quality, service line performance—and setting minimum standards for eligibility.

• Calibrating performance expectations per clinical, administrative, or other work effort criterion.

• Establishing metrics across specialties based on panel size, wRVUs, collections, shift, service line, and call coverage, etc.

• Using external benchmarking data (e.g., Medical Group Management Association) as needed.

• Establishing a component for not meeting performance expectations.

• Always recognizing performance—both quantitatively and qualitatively.


Alone Together

Department-Oriented Practice

Emerging Group

Practice

Evolving Group

Practice

Mature Medical Group

Growth/Recent Acquisitions

Individual Model

Strategic/Service Line Focus

Value Based Network

Organizational Model

Base and individual productivity incentives

Qualitative and Department Goals

Focus on aligning with overall organizational goals

Placement on Model

Care Focus

Compensation Model Alignment

Figure 2: Development Model and Care Focus

Figure 3: Spectrum of Compensation Plan types

Increasingly Guaranteed Compensation Increasingly Variable Compensation

GUARANTEED BASE

Production Incentive Production Incentive Performance (Quality and Cost) Incentive

Other Compensation

Other Compensation Other CompensationQuality Incentive

Guaranteed Base Salary

Production Revenue Less Expenses




REVENUE LESS EXPENSE

BASE AND PRODUCTIVITY

BASE, PRODUCTIVITY, AND QUALITY

BASE AND PERFORMANCE

INCENTIVES


COMPENSATION DESIGN, PLANNING, AND ALIGNMENTBegin compensation planning by examining current provider models. Complete the four-step process depicted in Figure 4 before starting to develop the goals and key objectives of any new or future compensation plan models.

Kickoff/Data Collection/Business Case

• Gather data and policies around provider compensation and productivity.

• Form a compensation plan work group consisting of key physician and administrative leaders.

• Communicate the need/business case for change with the provider organization and expectations for input, timing, and roll out of potential new plan(s).

Current State Assessment, Development of Guiding Principles, and Analysis

• Conduct interviews with physician and administrative leaders to understand what works within the current compensation plan and, more importantly, what does not work.

• Perform a benchmarking analysis, comparing current compensation models and affordability.

• Define and develop guiding principles for eligibility, minimum work standards, base salary, incentive compensation and funding.

Compensation Model Design, Testing, and Implementation

• Use agreed upon guiding principles to develop department/specialty specific compensation plans.

• Thoroughly “shadow test” by running concurrent calculations of compensation under old and new plans using actual performance data for several months to determine the financial impact (to providers and to the physician organization/health system) of each option.

• Finalize compensation model components.

• Develop policies and documents.

The best laid physician compensation plans are meaningless without proper execution of the implementation.

• Establish a communications plan and frequency with providers, e.g. monthly newsletters, email updates, surveys, etc.

• Create an implementation work team, work plan, and key milestones. Work teams are typically made up of key operations directors and financial analysts.

• Develop and schedule provider education sessions/town hall meetings and model working sessions with the work team.

Figure 5 shows what a multi-year transition plan looks like to move from a volume and guaranteed base compensation model to a value based scenario. While this road map example spans three to four years, it is important to note that the sectors from Year 2 to Year 3 stay the same. Only the weighting of each planning year changes based on revenues, incentives, alignment with contracts and other key factors.

While much is involved with physician compensation planning, bringing physicians into the planning process promotes the kind of engagement that encourages participation, reduces burnout and disenchantment with reform mandates, and creates the kind of leadership that allows them to appreciate the importance of linking their performance and what they earn with the health system’s financial, clinical, and quality goals.


Collect compensation data

Assess current state and define key objectives

Develop provider compensation models

Develop implementation and communication plans

1STEP

2STEP

3STEP

4STEP

Figure 4: Provider Compensation Current-State Analysis

Figure 5: Evolution of Compensation Structures

Guaranteed Base Productivity Incentive

Non Productivity and Quality Incentive Pool

Current

Year 1

Year 2

Year 3


KEY TAKEAWAYS

• Evolving provider compensation plans must strike a strong balance in aligning performance (production, quality, citizenship/engagement), variable and at-risk components, incentives, affordability, operational efficiency, and provider satisfaction and reduction of burnout.

• Systems and plans that simply incentivize providers to work harder without simultaneously engaging and enabling them to be more efficient and effective is a strategy destined to fail.

• Alternatively, a plan that focuses on organizational effectiveness, practice efficiency, financial sustainability, and provider and clinical system alignment will create the desired culture of accountability, performance, and long term organizational success.

• Developing new patient access channels, optimizing performance, reducing physician burnout, and aligning interests at the provider AND system level is paramount to creating a winning environment for patients, physician organizations, and health care systems.

Leading practices in designing aligned compensation plans and enabling a high performing physician organization include:

• Development of a common framework compensation plan for a unified plan, allowing for flexibility to meet the needs of various specialties and stages of alignment.

• Designing elements in the plan that address shifting reimbursement models.

• Aligning the framework with health system strategies and goals.

• Ensuring the plan is both financial affordable and sustainable.

• Implementation of the plan in conjunction with operational improvements (e.g. revenue cycle enhancements, productivity/access/throughput standards, and expense management) to enable physicians to succeed.

While marketplace and regulatory demands continue to put pressure on the healthcare delivery system, a carefully considered physician compensation plan can be used to leverage most of the relationships in the care continuum. It not only incentivizes a high performing physician organization but provides an aligned structure for a winning patient-provider-system-payer strategy.

Compensation Planning Methodology Overview and Tools

Leading practice compensation plan development and implementation should include:

Components of Compensation Incentive Payments Compliance

• Physician work effort definition and time allocation (clinical, research, teaching, etc.) analysis and calibration

• Explicitly stated minimum performance standards by specialty (productivity thresholds, clinical work week expectations, call coverage requirements, quality metrics, engagement/citizenship targets, etc.) to earn base salary and be eligible for incentives

• Variable/at risk levels of total cash compensation, set at a minimum of 15 to 20 percent of the total

• Competitive but financially sustainable and affordable compensation: productivity and compensation percentile variance 20 percent or less

• Revision/updates to the plan annually or bi-annually based on current market, metrics, and expectations

• Base salary adjustments• Incentive thresholds• Quality and engagement/citizenship metrics

• Base Salary—market-based, adjusted for FTE

• Productivity Incentive—based on applicable minimum work standard for personally performed services

• Qualitative Incentive—quality, citizenship, discretionary

• Administrative stipends

• Other, as specifically defined

• Incentive alignment with mission work effort standards and targets

• Consideration for individual and group incentive goals/targets

• Determination of qualifying factors for incentive payments (e.g. positive actual-budget variance, financially affordable, aligned with payer incentive programs)

Annual review of total compensation paid to ensure compliance with regulatory standards; including:

• Risk assessor tool (inclusive of fair market value and commercial reasonableness checklist)

• Consideration for recent Office of Inspector General case settlements

• Analysis of investment per provider to ensure consistency with physician compensation arrangements



CONTACTFor more information about how to use physician engagement in compensation assessment, planning, design and implementation, please contact:

Kritiya Gee, [email protected]

Craig Hittle, [email protected]

ABOUT HURON HEALTHCARE Huron Healthcare is the premier provider of performance improvement and clinical transformation strategies and solutions for hospitals and health systems. In 2015, Huron acquired Studer Group, the market leader in driving healthcare cultural transformation. The combination of Huron and Studer Group is focused on improving healthcare providers’ clinical, operational, and financial outcomes. By partnering with clients, Huron delivers solutions that improve quality, increase revenue, reduce expenses, and enhance physician, patient, and employee satisfaction across the healthcare enterprise. Clients include leading national and regional integrated healthcare systems, academic medical centers, community hospitals, and physician practices. Modern Healthcare ranked Huron Healthcare fourth on its 2015 list of the largest healthcare management consulting firms. Learn more at www.huronconsultinggroup.com/healthcare or follow us on Twitter: @Huron.

REFERENCES

1. “ Physicians Continue to Leave Private Practice for Employment,” Jackson Healthcare, June 23, 2015. http://www.jacksonhealthcare.com/media-room/articles/physician-trends/physicians-continue-to-leave-private-practice-for-employment/

2. Studer, Quint and Ford, George, MD, Healing Physician Burnout: Diagnosing, Preventing, and Treating, Fire Starter Publishing, 2015.

3. “ Physician Burnout Extinguishes Physician Engagement,” Becker’s Hospital Review, April 29, 2015. http://www.beckershospitalreview.com/hospital-physician-relationships/physician-burnout-extinguishes-physician-engagement.html

Lynn Grennan, managing director480-540-4451 [email protected]

© 2016 Huron Consulting Group Inc. All Rights Reserved. #160214 M

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WESTENR PA HFMA

MEMBER SPOTLIGHT

CAREER OVERVIEW WHAT IS YOUR BUSINESS PHILOSOPHY? Honesty and integrity always prevail in the end.

WHAT IS THE BEST WAY TO KEEP YOUR COMPETITIVE EDGE?To seek out new responsibilities and opportunities for growth.

HOW DO YOU MEASURE SUCCESS?Where I have given my best effort (I have given it all).

WHAT IS YOUR CAREER ADVICE?Seek first his kingdom and his righteousness and all else will follow (Matthew 6:33)

PERSONALWHAT IS YOUR PET PEEVE? Pointing figures and making excuses where there is a problem rather than working toward a solution.

WHAT ARE YOUR GREATEST PASSIONS IN LIFE? To love the Lord my God with all of my heart, soul, mind, and strength and to love my neighbor as myself.

WHAT IS YOUR FAVORITE MOVIE? Joseph (or possibly Les Miserable)

IF YOU COULD MEET ANYONE, WHO WOULD IT BE? Jesus Christ in the flesh (God Incarnate)

WHO IS YOUR FAVORITE SPORTS TEAM?Pittsburgh Steelers

IF HOLLYWOOD MADE A MOVIE ABOUT YOUR LIFE, WHOME WOULD YOU LIKE TO SEE PLAY THE LEAD ROLE AS YOU? My Father (as I am a lot like him)

HFMAWHAT DO YOU LIKE MOST ABOUT HFMA? CPE and the people.

WHAT IS YOUR FAVORITE HFMA EVENT OR MEMORY? My favorite event is the HFMA Annual Accounting and Auditing Update. My most memorable time was when my name had been drawn to win the iPod raffle. Unfortunately, I had left the class one hour early to buy my wife a gift (the prize was announced at the end of the class), and I did not receive the prize since it was conditioned upon being present. Nonetheless, my wife regularly reminds me not to leave CPE early at any cost.

John Bergquist CPAController, Millcreek Community Hospital

COLLEGE ATTENDEDMiami (Ohio) University

CURRENT RESPONSIBILITIESController for Millcreek Community Hospital. I also have functions related to the Health System self-insured professional liability Trust, the Health System group health plan, and the Health System 403b plan.

WHAT IS NEW AND EXCITING AT YOUR COMPANY? The Health System is in a constant state of growth and new learning opportunities

WHAT ARE SOME OF YOUR DEPARTMENT OR ORGANIZATIONAL GOALS THIS YEAR? To automate certain accounting processes and develop new internal and external reporting tools. Also to develop staff.


Is your Pennsylvania Trauma Facility being Short-changed by Workers’ Compensation Insurers? If you are a Pennsylvania Certified Trauma facility, you are invariably familiar with the significant difference in reimbursement for non-trauma workers’ compensation cases versus trauma cases. The Pennsylvania State Workers’ Compensation fee schedule carves out an exemption for treatment provided to seriously injured workers at hospitals with certified level I or II Trauma Centers or American Burn Association certified Burn Units. The workers’ compensation exemption states that in such matters hospitals are to be paid its “usual and customary charge”. For more than 22 years, this meant that the hospital was paid its full billed charges. That may be changing and it is important for trauma and burn unit hospitals to be prepared to react to the changing rules regarding such payments.

In 2015, one of Pennsylvania’s largest providers of workers’ compensation coverage began to pay trauma claims at less than the provider’s billed charges. Using a Bureau of Workers’ Compensation (BWC) “Statement of Policy” on a wholly unrelated matter, they determined that trauma and burn claims should only be paid in accordance with a usual and customary fee schedule put out by Fair Health, a New York based non-profit that studies medical payments. Where applied, this database has resulted in payments on trauma and burn claims being reduced by 25 to 33 %.

Several cases challenging this made it to the Commonwealth Court in 2016. In the initial decisions, involving challenges brought by Geisinger Medical Center, the Court questioned the use of the Fair Health Database but affirmed the reduced payment.

Most recently, however, in a case handled by Audley Law Offices we challenged the application of the Fair Health Database. Within case Allegheny General Hospital v. The Bureau of Workers Compensation, 143 A.2d 449 (2016) the Court held that a proper challenge had been raised to the use of the database to reduce a payment by nearly a third and stated that it was improper for the Hearing Officer to have relied on it. The decision upholding the reduced payment was reversed and the matter remanded to the Fee Review Hearing Officer.

The Court did not, however, hold that providers were to continue to be paid their billed charges. The court held that payment on such claims had to be the ‘“charge most often made by providers of similar training, experience and licensure for a specific treatment, accommodation, product or service in the geographic area where the treatment, accommodation, product or service is provided.” Because the Fair Health Database was not limited to trauma or burn units in the geographic area of Audley Law Offices’ client, using it was an error. Based upon this case, your facility should continue to expect no less 100% of billed charges.

HOW DOES THE CASE IMPACT YOUR FACILITYAs a result of Allegheny General Hospital v. The Bureau of Workers Compensation, 143 A.2d 449, whether you have noticed a reduction in payment to your facility or not, you should ask yourself the following questions:

1. Is my facility filing timely Applications for Fee Review on underpaid trauma and burn unit claims?

Once you receive an explanation of benefits reporting and payment other than the full billed charges, or if 60 days have passed since the claim was submitted and no payment has been made, your facility should immediately file an Application for Fee Review. The Medical Fee Review Division of the Bureau has not been using any database to reduce payments and are likely to direct full payment of claims that meet the trauma or burn criteria.

Sean Audley, Esquire, Audley Law Offices, P.C.


2. Does my facility flag trauma and burn cases so that Applications for Fee Review can be filed properly and timely?

Your follow up staff should be aware of the time limits for filing Applications for Fee Review, which are 30 days from the date of the EOB or 90 days from the date the claim is originally submitted. Too often, the timely filing limit passes while a provider rep is working with a claims adjuster to address the late or insufficient payment. The law does not excuse a late filing for that reason and the Application will be denied as untimely.

You should also make sure that there is little to no delay in getting the EOB to the appropriate provider rep to assure timely filing.

3. Are you challenging adverse fee review decisions by requesting a hearing?

If a provider receives an adverse determination by the Medical Fee Review Office, a Request for De Novo Hearing should be immediately be filed, preferably through legal counsel experienced in handling such matters. The insurance company has the burden of proving that their payment was proper under the law. There is currently no database that provides what charges are usual and customary for trauma or burn units by geographic region in Pennsylvania so a carrier is unlikely to prevail at any hearing. Failing to timely file a proper Request for De Novo Hearing can be fatal to any review. Not properly following the procedure or objecting to the carrier’s failure to do so can also result in unfavorable decisions on issues other than the merits of your case. Many trauma and burn claims involve hundreds of thousands of dollars in charges and avoidable errors can result in the loss of those funds.

YOUR FREE LEGAL ADVICE It is in your best interest to review every trauma and burn unit bill in a work-related case as soon as possible and to challenge any payment of less than the billed charges through the fee review process. Failing to so will result in your forfeiture of any right to secure the proper payment, leaving your facility “short changed”.

Is your Pennsylvania Trauma Facility being Short-changed by Workers’ Compensation Insurers? (cont)

Audley Law Office, P.C. is a boutique law firm dedicated to assisting hospital facilities in receiving the optimal reimbursement legally available to them. For more information about our law firm, please visit our website at: audleylawoffices.com or feel free to contact me at [email protected] or (412) 532-0089.


WESTENR PA HFMA

MEMBER SPOTLIGHT

CAREER OVERVIEW WHAT IS YOUR BUSINESS PHILOSOPHY? To overdeliver to customers both internal and external.

WHAT IS THE BEST WAY TO KEEP YOUR COMPETITIVE EDGE?Networking with peers.

HOW DO YOU MEASURE SUCCESS?I measure success in terms of overall customer satisfaction.

WHAT IS YOUR CAREER ADVICE?Work hard and put in your time.

PERSONALWHAT IS YOUR PET PEEVE? People who try to be something they are not by following the crowd.

WHAT ARE YOUR GREATEST PASSIONS IN LIFE? Sports, music, and movies.

WHAT IS YOUR FAVORITE QUOTE? Do. Or do not. There is n try. - Yoda

WHAT IS YOUR FAVORITE MOVIE? Star Wars

IF YOU COULD MEET ANYONE, WHO WOULD IT BE? Yoda

WHO IS YOUR FAVORITE SPORTS TEAM?Pittsburgh Penguins

IF HOLLYWOOD MADE A MOVIE ABOUT YOUR LIFE, WHOME WOULD YOU LIKE TO SEE PLAY THE LEAD ROLE AS YOU? Harrison Ford

HFMAWHAT DO YOU LIKE MOST ABOUT HFMA? HFMA is an organization that represents who I am and what I do.

WHAT IS YOUR FAVORITE HFMA EVENT OR MEMORY? HFMA ANI

Cory F. Jackson MBAController, Meadville Medical Center

COLLEGE ATTENDEDThiel College (1989)Gannon University (2006)

CURRENT RESPONSIBILITIESResponsible for overseeing the Accounting & Finance Functions of Meadville Medical Center.

WHAT IS NEW AND EXCITING AT YOUR COMPANY?Meadville Medical Center is currently in the process of completing a $90 million debt refinancing.

WHAT ARE SOME OF YOUR DEPARTMENT OR ORGANIZATIONAL GOALS THIS YEAR?Improved financial reporting associated with debt refinancing.


PNC HEALTHCARE ANSWERS YOUR QUESTIONS ABOUT

HEALTH SAVINGS ACCOUNTSBy James S. Gandolfo, Senior Vice President for PNC’s Treasury Management Group

Health Savings Accounts (HSAs) are not entirely new, but are receiving greater attention today in relation to high-deductible health insurance plans and the Affordable Care Act. They are often viewed as a strategy for reducing healthcare costs and for encouraging individuals to take greater responsibility for their health and the cost of care.

What is a Health Savings Account (HSA)?HSAs were first created by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, that amended the Social Security Act. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 also resulted in the amendment of Section 223 of the Internal Revenue Code (IRC). The legislation and the revised IRC permitted eligible individuals to establish Health Savings Accounts (HSAs) for taxable years beginning after December 31, 2003.

Think of an HSA as a tax favored medical spending and retirement account. HSAs are established to receive tax favored cash contributions by or on behalf of eligible individuals. Cash, (or investments into permitted securities), in an HSA may accumulate over the years or be distributed on a tax-free basis to pay or reimburse qualified medical expenses. Qualified medical expenses are specifically defined by the IRC. HSAs are wholly owned by individuals, making them portable and any (unused) cash or investments in the accounts roll over each year. There is no use it or lose it rule for HSAs.

Where do HSAs fit in the current environment of healthcare reform? HSAs play a major role in the current health care reform environment. The so-called “metal tiers” (bronze silver, gold and platinum) were created in the ACA as a means to determine and classify the actuarial value of health insurance policies that meet Qualified Health Policies standards as defined by the ACA and the United States Department of Health and Human Services.

In effect, HSA-compatible health insurance policies

meet the minimum standard levels set by the ACA in most cases and thus have been embraced by Health and Human Services as one form of the bronze and silver policies1.

In addition, because these so-called HSA-compatible policies have potentially lower actuarial values, they may not expose companies who sponsor health plans for their employees to the so called Cadillac Tax. The Cadillac Tax begins in 2020 and is an excise tax imposed by the ACA on insurance policy benefits that exceed certain ACA established thresholds. The potential savings for employers may be significant. In plain English, if a law compels individuals to own a health insurance policy, individuals are most likely to choose the lowest cost, highest value policy they can. In many cases, that means an HSA.

Conversely, part of the ACA’s aim was to “bend the cost curve of insurance.” One way the “cost curve” may be slowed or reduced is to encourage (through incentives or disincentives) companies to offer lower cost, lower actuarial value policies to the employees. HSAs and their corresponding health insurance policies are congruent with that aim. These policies generally cost much less than traditional, actuarially rich policies and so the savings may be passed on to employees through employer contributions to employee HSA accounts or in the effect of a lower cost to each employee, or both.

Finally, there are some good examples popping up around the country on a state level where the HSA concept is being used to help with other government sponsored entitlement programs. More and more individuals are likely to be covered by HSA-compatible polices in the future. One can only hope that employers and individuals continue to contribute to HSAs and individuals continue to use them for qualified medical expenses.

1 Medicare Prescription Drug Improvement and Modernization Act (2003)


Describe how an HSA can be an investment for an employeeHSAs may be one of the most tax efficient investment accounts currently in the market place today. They may be considered an investment for individuals (employees) in a number of ways.

Any money contributed by an employer enters the employee’s account tax free. Accumulations in the account grow tax free, (in most states), and if used for qualified medical expenses, are distributed from the account free from federal taxation. This effect is called “triple tax free treatment”, so the accumulation and spending phases of a HSAs are an efficient investment.

In addition, any investment that is permitted in an Individual Retirement Account (IRA) is acceptable for an HSA, including longer-term investments such as stocks, bonds or mutual funds, to name a few. The annual maximum contribution to a HSA in any given year is determined by the IRC, and proceeds taken from the HSA for qualified medical expenses are not taxed.

Individuals might consider paying for current qualified medical expenses from taxable accounts while saving receipts over time, withdrawing funds later and thus, allowing the HSA to increase in value.

How can an HSA program benefit employers? The legislation that created HSA accounts was developed by a group of individuals who favored market forces and tax incentives as protagonist agents for change2. Thus employers were given tax breaks as an incentive to make cash contributions to their employees’ HSAs, thus creating a vehicle for investment. The employer’s contributions into an employee’s HSA are exempt from social security (FICA) and unemployment (FUTA) taxes. Further, every dollar contributed voluntarily by an employee, through payroll deduction, is also exempted from those taxes, saving the employer money.

Various studies have shown that while change of any nature, especially change associated with health benefits, is frightening, over time, employees have embraced their HSAs and, as predicted, treat the money in the account as their own, because, of course it is. They spend those dollars as their own and thus any investment made by an employer into HSAs will be rewarded with more reasoned expenditures by those same employees.

Over time, health care expenditures (think claims) may be reduced, for example, as individuals begin to ask

for generic alternatives to prescribed drug therapies, or avoidance of the emergency room on a Saturday for non- emergency needs. HSAs can be an investment into behavioral change for employees. HSA compatible policies, by legislation, pay for preventative care for policy holders and studies have shown HSA owners use more preventative care options than non HSA owners3. HSAs are an investment by the employer into the accounts and into the future of its employees’ health care choices.

What are the current trends related to HSA balances held by consumers? Are these accounts really looking like significant portions of individual consumer investment portfolios? What do you predict for the future?A recent study by one firm, Devenir, a recognized industry authority, noted balances reached $19.3 billion by the end of 2013. It is important to note that there were no balances in these accounts at the beginning of 2004 and so the growth of balances as far outpaced many banking products over the years4.

The same study noted that the average balance per account holders reached $2,356 for the same period. Many are savers and investors, but many are not and spend the majority of their balances every year.

Also, HSAs follow the traditional eighty/twenty percent rule, in general. Twenty percent of owners hold eighty percent of the money. It’s important to note that the predecessor to HSA was the Medical Savings Account or MSA. Owners of those accounts typically have a much greater amount of money in their accounts due to the length of time they have existed.

Providers should be aware that balances in HSAs may grow throughout the year and therefore could influence the scheduling of procedures by patients, leading many to schedule their procedures later in the year such as between September and December.

In sum, HSAs are likely to become a significant portion of an individual’s portfolio, if not in terms of the overall amounts, then in terms of the safety net they provide.

2 Medicare Prescription Drug Improvement and Modernization Act (2003)3 Seventh Annual Choice Fund Experience Study, Cigna, 20124 Year-End 2013 Devenir HSA Research Report, for the period 12-31-12 to 12-31-13


Any recommendations for how much an employee should “invest” in an HSA on an annual basis?An employee should fully fund the account to the limits of the IRC for a number of reasons:

• First and foremost, an employee can typically cover any deductible amount with contributions and should do so as an economic way to offset risk. • Second, the amount an employee contributes from payroll is before tax, providing an advantage in terms of overall earning potential. • Third, money may grow tax free and may be used tax free for qualified medical expenses.

Very few investments in the market afford such favorable tax treatment. At a minimum, employees should always keep enough cash to cover current year deductible exposure and use the account to take advantage of the tax treatments for funding expenses.

Money in may be money out tax free if used correctly. Employees may consider taking funding from a taxable account, making a deposit and then a withdrawal to pay for qualified medical expenses, for example. Contributions taken from a taxable account can be deducted from gross income so long as the contributions do not exceed the yearly maximum.

Are HSAs impacting consumer behavior? If so, how?There are some experts who are now pointing to the HSA experience as a driver in the reduction of overall medical expenses (the cost curve). Other studies are showing that HSA owners act more responsibly with their money, because they realize it is their money; seeking generic therapies and demanding cost transparency from providers for example5. Still others see better preventative care measures, smoking cessation and weight reduction as a result of the connection individuals are making between benefit and the cost of benefit. HSAs are having a profound impact on individual consumer behaviors, in these regards6.

What is the greatest effect on providers?Providers are facing a change in the way that individuals pay for their care. That is, the advent of HSAs creates a need for providers to assess patient liability and propensity to pay up front based on available funds. Banks can work with providers to help them face these new challenges. The saying goes “all that is old is new again.” Going back to pre-Second World War days, patients were always in tune with their individual responsibilities because the advent of “all in one policies” had not occurred yet. We are simply going back to an age of personal responsibility and while no change is easy, I predict that this one will be worthwhile for us all in the end.

ABOUT THE AUTHORJames S. Gandolfo, Senior Vice President for PNC’s Treasury Management Group

James (“Jim”) Gandolfo is the Healthcare lead for PNC’s Treasury Consulting Group (TCG). TCG provides a variety of support to both industry and PNC’s Treasury Management professionals related to comprehensive solutions for commercial payments, receivables and information management.

Gandolfo received bachelor of science degrees in both political science and history from Radford University in Radford, Virginia. He holds a variety of FINRA licenses, including Series 6, 7, 24 and 63. He is chairman of the American Bankers Association’s HSA Council and a member of the board of directors of the HSA Coalition.

James S. Gandolfo can be reached at [email protected]

pnc.com/healthcare

The article you read was prepared for general information purposes only and is not intended as legal, tax or accounting advice or as recommendations to engage in any specific transaction, including with respect to any securities of PNC, and do not purport to be comprehensive. Under no circumstances should any information contained in this article be used or considered as an offer or commitment, or a solicitation of an offer or commitment, to participate in any particular transaction or strategy. Any reliance upon any such information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Neither PNC Bank nor any other subsidiary of The PNC Financial Services Group, Inc. will be responsible for any consequences of reliance upon any opinion or statement contained here, or any omission. The opinions expressed in this article are not necessarily the opinions of PNC Bank or any of its affiliates, directors, officers or employees.

PNC is a registered mark of The PNC Financial Services Group, Inc. (“PNC”). Banking and lending products and services, bank deposit products, and treasury management services, including, but not limited to, services for healthcare providers and payers, are provided by PNC Bank, National Association, a wholly-owned subsidiary of PNC and Member FDIC.

©2014 The PNC Financial Services Group, Inc. All rights reserved..

5 “2013 Employer-Sponsored Health Care: ACA’s Impact,” by the International Foundation of Employee Benefit Plans6 The Employee Benefit Research Institute, July 2013 and consensus of studies conducted through out the years 2006 to 2013 by Cigna, Aetna, various Blues Plans and WellPoint

At a minimum, employees should always keep enough cash to cover current year deductible exposure and use the account to take advantage of the tax treatments for funding expenses.


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