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PERM success for Medicaid agencies through system implementations

By: Hilary Moles,

As a senior consultant in the BerryDunn Government Consulting Group, Christy has valuable expertise in both Medicaid and the private insurance sector. Her experience and background with the Payment Error Rate Measurement (PERM) program has developed a passion for assisting states in identifying the need to prioritize the activities and resulting outcomes of a PERM cycle as well as offering and assisting with implementation of recommendations to mitigate known areas of concern that may otherwise result in PERM errors.

She has provided valuable contributions while working closely with states to evaluate and implement new processes and procedures to ensure federal compliance measures are in place before PERM reviews begin. Christy has a profound understanding of state and federal policies as they apply to PERM reviews and a broad experience working in and understanding the operation and limitation of many state eligibility systems.

Christy Schilling
01.11.22

Read this if your State Medicaid Agency is planning Medicaid Enterprise System enhancements.

Are you a system integrator (SI) or a State Medicaid Agency (SMA) implementing or enhancing a Medicaid system or specific module? Have you considered how decisions made during design and implementation could impact the federal Payment Error Rate Measurement (PERM) reviews for SMAs?

The goal of PERM is to measure and report an unbiased estimate of the true improper payment rate for Medicaid and Children’s Health Insurance Program (CHIP). Every state is reviewed once every three years using a sample that includes both fee for service (FFS) and managed care (MC) payments. A state assigned error rate is not the only consequence resulting from the PERM review; there are also financial implications.

Risk reduction from PERM review

Maintaining a focus on PERM review factors when making decisions during design and implementation can protect states by reducing the risk of:

  • Submitting change requests (CR) during implementation, which can result in additional cost and time
  • Implementing changes to existing Medicaid systems during maintenance and operations
  • Findings reported during certification efforts
  • Refunding federal dollars due to improperly paid claims
  • A reduction in federal match on all claims paid

It is also important to understand the benefits of a dedicated PERM team within the state organization that includes members from the system vendor and outside PERM experts. These benefits include providing states an additional level of security to help ensure a positive outcome to the federal PERM review, helping to protect federal funding.

Having a dedicated team will help ensure all decisions made during system updates and/or implementations are made while keeping focus on PERM requirements and the further impacts of PERM reviews, saving time and remaining compliant.

Plan ahead for best results

When planning for a new module or Medicaid system request for proposal (RFPs), consider PERM-related requirements to help ensure all PERM needs are met to prevent errors and repayment of federal funds. Including PERM requirements can also help your agency ensure federal compliance and successful PERM audits. Doing so will likely reduce the amount of time system integrators spend re-working earlier development decisions and help ensure claim payments are processed, and eligibility determinations are made in accordance with federal and state regulations.

If you have questions about PERM or your specific situation, please contact our Medicaid Consulting team. We’re here to help.

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Read this if you are a state Medicaid or CHIP agency.

The Centers for Medicare & Medicaid Services (CMS) has temporarily suspended all Payment Error Rate Measurement (PERM) improper payment-related engagement/communication and data requests to providers and state agencies as a result of the COVID-19 nationwide public health emergency declaration. 

CMS has also adopted a temporary policy of relaxed enforcement regarding activities related to Medicaid Eligibility Quality Control (MEQC) until further notice.

CMS continues to provide state Medicaid and Children’s Health Insurance Program (CHIP) agencies with a number of methods to assist in each state’s approach and response to the COVID-19 pandemic. Some flexibilities offered to state Medicaid and CHIP agencies include:

  • Eligibility and enrollment 
  • Benefits 
  • Cost-sharing 
  • Financing 
  • Managed care 

While this has been communicated with state Medicaid and CHIP agencies, you should take some important steps to manage these flexibilities to ensure you don’t encounter issues when PERM and MEQC review activities resume. Reviews are conducted according to state and federal policies and regulations in force at the time of service on the sampled claims under review. 

CMS has issued guidance to identify whether or not each of the flexibilities requires an approved state plan amendment (SPA), waiver, or whether simply providing documentation in the individual case file will provide the required support when PERM and MEQC activities resume. 

Additionally, it is equally important to ensure the “pre-COVID” processes and procedures resume immediately upon expiration of the public health emergency declaration in order to remain in compliance with state and federal regulations. 

Here are a few key considerations to help reduce the number of errors identified once PERM resumes:

  • Management of new state-specific policies and procedures in effect during the COVID-19 pandemic is critical. You need to ensure all processes requiring CMS approval or notification have been enacted and that these temporary processes revert back to pre-COVID processes immediately upon termination of the public health emergency.
  • Continued training and guidance to Medicaid and CHIP staff during this time to ensure understanding of expectations and adherence to new processes. Applying and understanding eligibility and enrollment flexibilities for both members and providers is vital to meet all expectations and documentation requirements.

New updates continue to be announced by CMS to ensure Americans have access to the care they need during this time. This requires remaining diligent to the expectations of these flexibilities and preparing for the impact of PERM and MEQC outcomes when these activities resume. This is key to reducing improper payment error rates. 

For additional detailed information regarding the identified flexibilities above, please refer to the PERM cycle preparation tool we have prepared.

If you have questions regarding relaxed requirements or you would like to have an in-depth conversation with our PERM experts, please contact the Medicaid Consulting team.
 

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PERM is suspended―key considerations during COVID-19 

Read this if you are a state Medicaid Director, State Medicaid Chief Information Officer, State Medicaid Project Manager, State Procurement Officer, or work in a State Medicaid Program Integrity Unit.

The Centers for Medicare & Medicaid Services (CMS) issued a Payment Error Rate Measurement (PERM) Final Rule on July 5, 2017, that made several changes to the PERM requirements. One important change was the updates to the Medicaid Eligibility Quality Control (MEQC) requirement. 

The Final Rule restructures the MEQC program into a pilot program that requires states to conduct eligibility reviews during the two years between PERM cycles. CMS has also introduced the potential for imposing disallowances or reductions in federal funding percentage (FFP) as a result of PERM eligibility error rates that do not meet the national standard. One measure states can use to lessen the chance of this happening is by successfully carrying out the requirements of the MEQC pilot. 

What states should know―important points to keep in mind regarding MEQC reviews:

  • Each state must have a team in place to conduct MEQC reviews. The individuals responsible for the MEQC reviews and associated activities must be separate from the state agencies and personnel responsible for Medicaid and Children’s Health Insurance Program (CHIP) policy and operations, including eligibility determinations.
  • States can apply for federal funding to help cover the costs of the MEQC activities. CMS encourages states to partner with a contractor in conducting the MEQC reviews.
  • The deadline to submit the state planning document to CMS is November 1 following the end of your state’s PERM cycle. If you are a Cycle 2 state, your MEQC planning document is due by November 1, 2019. 
  • If you are a Cycle 1 state, you are (or should be) currently undergoing the MEQC reviews.
  • There are minimum sample size requirements for the MEQC review period: 400 negative cases and 400 active cases (consisting of both Medicaid and CHIP cases) over a period of 12 months.
  • Upon conclusion of all MEQC reviews, states must submit a final findings report along with a corrective action plan that addresses all error findings identified during the MEQC review period.

CMS encourages states to utilize federal funding to carry out and fulfill MEQC requirements. BerryDunn has staff with experience in preparing Advanced Planning Documents (APD) and can assist your state in submitting an APD request to CMS for these MEQC activities. 

Check out the previously released blog, “PERM: Prepared or Not Prepared?” and stay tuned for upcoming blogs about specific PERM topics, including the financial impacts of PERM, and how each review phase will affect your state.   

For questions or to find out more, contact the team

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PERM: Does MEQC affect states?

Federal contractors with the Centers for Medicare & Medicaid Services (CMS) have begun performing Payment Error Rate Measurement (PERM) reviews under the Final Rule issued in July 2017—a rule that many states may not realize could negatively impact their Medicaid budgets.

PERM is a complex process—states must focus on several activities over a recurring three-year period of time—and states may not have the resources needed to make PERM requirements a priority. However, with the Final Rule, this PERM eligibility review could have financial implications. 

After freezing the eligibility measurement for four years while undergoing pilot review, CMS has established new requirements for the eligibility review component and made significant changes to the data processing and medical record review components. As part of the Final Rule, CMS may implement reductions in the amount of federal funding provided to a state’s Medicaid and Children’s Health Insurance Program (CHIP) programs based on the error rates identified from the eligibility reviews. 

Since the issuance of the Final Rule in July 2017, Cycle 1 states are the first group of states to undergo a PERM cycle, including reviews of the data processing, medical record, and eligibility components. These states are wrapping up the final review activities, and Cycle 2 states are in the early stages of their PERM reviews.

How can your state prepare?

Whether your state is a Cycle 1, Cycle 2, or Cycle 3 state, there are multiple activities your Medicaid departments should engage in throughout each three-year period of time during and between PERM cycles: 

  • Analyzing prior errors cited or known issues, along with the root cause of the error
  • Identifying remedies to reduce future errors
  • Preparing and submitting required questionnaires and documents to the federal contractors for an upcoming review cycle
  • Assisting federal contractors with current reviews and findings
  • Preparing for and undergoing Medicaid Eligibility Quality Control (MEQC) planning and required reviews
  • Corrective action planning

Is your state ready?

We’ve compiled a few basic questions to gauge your state’s readiness for the PERM review cycle:

  • Do you have measures in place to ensure all eligibility factors under review are identifiable and that all federal and state regulations are being met? The eligibility review contractor (ERC) will reestablish eligibility for all beneficiaries sampled for review. This process involves confirming all verification requirements are in the case file, income requirements are met, placement in an accurate eligibility category has taken place, and the timeframe for processing all determinations meets federal and state regulations. 
  • Do you have up-to-date policy and procedures in place for determining and processing Medicaid or CHIP eligibility of an individual? Ensuring eligibility policies and procedures meet federal requirements is just as important as ensuring the processing of applications, including both system and manual actions, meet the regulations. 
  • Do you have up-to-date policy, procedures, and system requirements in place to ensure accurate processing of all Medicaid/CHIP claims? Reviewers will confirm the accuracy of all claim payments based on state and federal regulations. Errors are often cited due to the claims processing system allowing claims to pay that do not meet regulations.
  • Do you have a dedicated team in place to address all PERM requirements to ensure a successful review cycle? This includes staff to answer questions, address review findings, and respond to requests for additional information. During a review cycle, the federal contractors will cite errors based on their best understanding of policies and/or ability to locate required documentation. Responding to requests for information or reviewing and responding to findings in a timely manner should be a priority to ensure accurate findings. 
  • Have you communicated all PERM requirements and updates to policy changes to all Medicaid/CHIP providers? Providers play two integral roles in the success of a PERM review cycle. Providers must understand all claims submission requirements in order to accurately submit claims. Additionally, the medical record review component relies on providers responding to the request for the medical records on a sampled claim. Failure to respond will result in an error. Therefore, states must maintain communication with providers to stress the importance of responding to these requests.
  • Have you begun planning for the MEQC requirement? Following basic requirements identified by CMS during your state’s MEQC period, your state must submit a case planning document to CMS for approval prior to the MEQC review period. After the MEQC review, your state should be prepared to issue findings reports, including a corrective action plan as it relates to MEQC findings.

Need help piloting your state’s PERM review process?

BerryDunn has subject matter experts experienced in conducting PERM reviews, including a thorough understanding of all three PERM review components—eligibility, data processing, and medical record reviews. 

We would love to work with your state to see that measures are in place that will help ensure the lowest possible improper payment error rate. Stay tuned for upcoming blogs where we will discuss other PERM topics, including MEQC requirements, the financial impacts of PERM, and additional details related to each phase of PERM. For questions or to find out more, please email me
 

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PERM: Prepared or not prepared?

Release Date: July 07, 2022
Federal Register Publication Date: Scheduled for July 29, 2022
Effective Date: January 1, 2023
End of Comment Period: September 6, 2022

The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would update Medicare payment rates under the Physician Fee Schedule (PFS) for the calendar year 2023, as well as other Part B provisions. Following is a summary of the major provisions of this proposed rule.

PFS Proposed Changes to Conversion Factor:

  • PFS conversion factor reflects the statutory update of 0%, expiration of the 3% increase in PFS payments for CY2022 provided by the Consolidated Appropriations Act of 2021 (CCA), 1.55% reduction necessary for changes in relative value units for budget neutrality, and anesthesia-specific practice expense and malpractice adjustments of 0.53%.

Major Provisions Proposed:

  • Future rebasing and revision of the Medicare Economic Index (MEI) cost share weights that would use publicly available data from the US Census Bureau NAICS 6211 Offices of Physicians to set PFS payments rates. Using new MEI cost weights for PFS rate setting would not change overall spending on PFS services but would likely result in significant changes to payments among the various PFS services. Therefore, CMS is not proposing the use of the newly proposed method for CY2023 rate setting and is seeking comment on the proposed updated MEI cost share weights to calibrate payment rates and update the geographic practice cost indices (GPCI) under the PFS in the future.
  • Changes in coding and documentation for Other Visits (hospital inpatient, hospital observation, emergency department, nursing facility, home or residence services, and cognitive impairment assessment) intended to reduce administrative burden using a similar approach to changes finalized in the CY2021 PFS final rule for office/outpatient Evaluation and Management (E/M) visit coding and documentation. Also propose to maintain the current billing policies that apply to E/M visits while potential revisions are considered for future rulemaking. 
  • Delay the Split (or Shared) E/M visits policy finalized in CY 2022 related to the definition of substantive portion as more than half the total time. Until CY 2024, clinicians will continue to have a choice of meeting the definition of substantive portion based on history, physical exam, medical decision making, or more than half of the total practitioner time spent.
  • Proposing to cover several services that were temporarily available as telehealth services during the PHE through CY 2023 on a Category III basis and extending the time these services are temporarily included on the telehealth services list for a period of 151 days following the end the PHE. 
  • Telehealth claims would require the appropriate place of service (POS) indicator to be included on the claim instead of modifier “95” after the period of 151 days following the end of the PHE. For Medicare telehealth services furnished via audio-only technology modifier “93” would be available, where appropriate. 
  • Establish a new General Behavioral Health Integration (BHI) service for monthly care integration where mental health services performed by Clinical Psychologists (CP) or Clinical Social Workers (CSWs) is the focal point of care integration. This new General BHI service would also allow a psychiatric diagnostic evaluation to serve as the initiating visit. 
  • Make an exception to the direct supervision requirement under “incident to” regulations to allow behavioral health services provided by auxiliary personnel (such as licensed professional counselors and licensed marriage and family therapists) incident to the services of a physician or non-physician practitioner (NPP) to be allowed under general supervision of a physician or NPP, rather than under direct supervision.
  • Proposing new HCPCS codes and valuation for Chronic Pain Management and treatment services (CPM) that would include a bundle of services furnished during a month. 
  • Opioid Treatment Program (OTP) would revise the pricing methodology for the drug component of the methadone weekly bundle and the add-on code for take-home supplies of methadone. CMS also proposes to allow the OTP intake to be furnished via two-way audio-video communications technology when billed for the initiation of treatment with buprenorphine, when authorized by the Drug Enforcement Administration (DEA) and Substance Abuse and mental Health Services Administration (SAMHSA). Audio-only communication technology to initiate treatment with buprenorphine would also be permitted where audit-video technology is not available. 
  • Create a new G-code for audiologists to bill for services without a physician referral for non-acute hearing or balance assessments unrelated to disequilibrium, hearing aids or examinations for the purpose of prescribing, fitting, or changing hearing aids. Billing the new G-code would be limited to once every 12 months.
  • Expand coverage for certain colorectal cancer screening tests by reducing the minimum age to 45 years and considering a follow-up screening colonoscopy after a Medicare covered at-home test to be a preventative service.
  • Preventive vaccine administration would receive annually updated payment amount based on the increase in the MEI and adjustment for geographic locality. Also, CMS proposes to continue the additional payment for at-home COVID-19 vaccinations and clarifies that policies regarding the administration of COVID-19 vaccines and monoclonal antibody products will continue until the Emergency Use Authorization (EUA) declaration for drugs and biological products is terminated.
  • CMS proposes a variety of changes for the Quality payment Program and Medicare Shared Savings Program.

Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs):

  • Add the new chronic pain management and behavioral health integration services to the RHC/FQHC-specific general care management HCPCS code, G0511.
  • Policies to extend telehealth flexibilities for 151 days after the PHE would be applicable to RHCs and FQHCs as well. 
  • Provider-based RHC’s payment limit per visit would be established by using a 12-consecutive month cost report. 

Sources: 
CMS-1770-P Medicare and Medicaid Programs; CY 2023 Payment Policies under the Physician Fee Schedule and Other Changes to Part B Payment Policies; Medicare Shared Savings Program Requirements; Medicare and Medicaid Provider Enrollment Policies, Including for Skilled Nursing Facilities; Conditions of Payment for Suppliers of Durable Medicaid Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS); and Implementing Requirements for Manufacturers of Certain Single-dose Container or Single-use Package Drugs to Provide Refunds with Respect to Discarded Amounts

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Medicare Proposed Rule for CY 2023 Medicare Physician Fee Schedule

Release Date: July 15, 2022
Federal Register Publication Date: Scheduled for July 26, 2022
Effective Date: January 1, 2023
End of Comment Period: September 13, 2022

The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would update Medicare payment rates and policies for outpatient hospitals and Ambulatory Surgery Centers (ASC) for the calendar year 2023, as well as other provisions. Following is a summary of the major provisions of this proposed rule.

OPPS/ASC Proposed Changes to Payment Rates:

  • Net increase in FY 2023 Medicare OPPS/ASC rates of 2.7% for hospitals that meet relevant quality reporting requirements, broken down as follows:

  • Continue 2% reduction for hospitals that fail to meet quality reporting requirements

Rural Emergency Hospitals (REH) Payment Policies:

  • Covered outpatient department services would be paid OPPS plus 5%. Medicare beneficiary coinsurance will not be applied to the additional 5%.
  • Monthly facility payment is proposed to be $268,294 in CY 2023 and subsequently increased by the hospital market basket %.  The initial monthly facility payment calculation is based on the 2019 average payment difference between CAHs and amounts the CAHs would’ve been paid under PPS
  • Outpatient services not paid under OPPS (e.g., paid under Clinical Lab Fee Schedule) and provider-based Skilled Nursing Facilities (SNFs) would not be considered REH services (not receive enhanced payment)
  • Propose an expedited enrollment process for Critical Access Hospitals (CAH) converting to the new REH designation

Other Major Provisions Proposed:

  • Rate setting would be based on CY 2021 claims data and June 2020 Cost Report data from HCRIS, which only includes cost reports that predate the public health emergency
  • Removes 10 services from the Inpatient Only List (mostly maxillofacial procedures) and adds 1 service to the ASC Covered Procedures List (lymph node biopsy or excision)
  • Proposes paying 340(b) drugs at Average Sales Price (ASP) minus 22.5%. However, considering the June 15th Supreme Court’s decision that CMS may not vary payment rates for drugs without conducting an acquisition cost survey, CMS anticipates revising this provision during final rulemaking to ASP plus 6%, with the corresponding reduction in the conversion factor for budget neutrality.
  • Paying separately for certain non-opioid pain management drugs in the ASC setting to ensure there are no financial disincentives to using these alternatives to opioids. CMS is proposing separate payment for 4 non-opioid pain management drugs that function as surgical supplies, including certain local anesthetics, and ocular drugs, in the ASC setting. 
  • Covering behavioral health services furnished remotely to beneficiaries in their homes, including proposed requirements for in-person services within 6 months prior to the initial remote service and within 12 months following a remote service (some exceptions). Audio-only communications are also proposed to be covered in certain situations.
  • Proposes IPPS and OPPS payment adjustments for the additional cost of procuring domestically produced NIOSH-approved surgical N95 respirators. These payments would made bi-weekly as interim lump-sum payments and reconciled at cost report settlement, effective for cost reporting periods beginning on or after January 1, 2023. 
  • Proposes to exempt Rural Sole Community Hospitals (SCHs) from the clinic visit payment policy for excepted off-campus provider-based departments (PBD) under which the off-campus PBD is paid an amount equivalent to the Physician Fee Schedule. SCHs would be paid the full OPPS rate for excepted off-campus provider-based clinic visits. 
  • Partial Hospital Program (PHP) per diem rate structure would remain unchanged with a single Ambulatory Payment Classification (APC) for each provider type for days with 3 or more services per day
  • Adds prior authorization requirement for facet joint injections and nerve destruction in outpatient departments.
  • CMS proposes a variety of changes for the Hospital Outpatient Quality Reporting (OQR), Ambulatory Surgical Center Quality Reporting (ASCQR), and Rural Emergency Hospital Quality Reporting (REHQR) Programs, as well as seeking comment on several measures. 

Sources: 
CMS-1772-P Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Organ Acquisition; Rural Emergency Hospitals: Payment Policies, Conditions of Participation, Provider Enrollment, Physician Self-Referral; New Service Category for Hospital Outpatient Department Prior Authorization Process; Overall Hospital Quality Star Rating
 

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Medicare Proposed Rule for CY 2023 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System

Read this if you are at a state Medicaid agency.

The COVID-19 PHE has raised many questions for Medicaid programs across the country. The Centers for Medicare & Medicaid Services (CMS) and other healthcare organizations have been providing guidance on how to best manage the PHE since it began. In particular, CMS has provided recommendations on how Medicaid programs can implement new processes and rules into their Medicaid Enterprise Systems (MES) for individuals to remain under continuous enrollment until the end of the PHE. 

Strategies for MES

BerryDunn has been working with many states and territories to develop strategic plans to comply with specific rules and requirements throughout the PHE. Some of these strategies involve changes to the original designs of the MES. Examples include:

  • Updating system rules to maintain individuals enrolled in continuous coverage throughout the PHE
  • Retesting system rules to confirm systems are working properly once PHE rules are removed
  • Revamping system notifications so reminders keep individuals informed about ongoing changes
  • Training staff on the new system updates so they can manage calls and orient individuals on changes regarding their eligibility

CMS continues to release updated guidance on how Medicaid programs can best prepare for the end of the PHE in order to resume normal operations. These recommendations indicate that Medicaid programs adopt strategies to maintain coverage of eligible individuals as the continuous enrollment requirements come to an end, following the conclusion of the PHE, while allowing coverage for ineligible individuals to terminate. Medicaid programs must ensure their systems are prepared for the transition, but some of these updates and changes to the systems may pose greater challenges: 

  • Since there are no precedents to compare with the current PHE unwinding event, Medicaid programs will need to execute changes within a limited timeline and work with the issues that may arise as they execute unwinding
  • For some Medicaid programs, system rules, both current and updated ones, are not able to run simultaneously
  • Medicaid programs may need to hire additional staff, train new employees, and retrain or cross train current employees within a small window of time
  • Medicaid programs will need to perform additional MES testing to confirm those systems are working as required
  • Medicaid programs will incur additional costs to cover additional operational efforts
  • System vendors will incur extra work that may affect project timelines and other priorities

If you have any questions or would like to learn more about how BerryDunn can assist you with the PHE unwinding efforts, please contact the Medicaid consulting team.

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Design, Development, and Implementation (DDI) and project impacts resulting from the Public Health Emergency (PHE)

Read this if you work for a not-for-profit organization. 

Our annual not-for-profit Recharge event provides attendees with an opportunity to hear about hot button issues in the not-for-profit industry. We polled registrants from across the country to see where they are focusing their attention in the current landscape. 

Employee retention

Overwhelmingly, employee retention is a number one concern for organizations, with 78% of respondents saying they were strongly focused on it in 2022. Not surprisingly, financial stability (67%), cybersecurity (50%) and concerns about access to government funding (43%) were of common concern among respondents.


 
Remarkably, employee retention in 2022 weighed more heavily on respondents than concerns around the remote workplace in 2021. While over 57% of respondents were concerned about the remote workforce in 2021, employee retention did not even make it into the top four concerns for organizations. This shift is consistent with what we are seeing in our client base, as organizations embraced hybrid and remote working arrangements and are well into codification of and adherence to the policies in place. Organizations reported taking significant efforts toward employee retention, most commonly looking at increasing salaries and allowing hybrid and flexible work arrangements as methods to help retain employees.

Financial stability

The concern around financial stability is slowly starting to decline. While financial stability was a top concern for 83% of organizations in 2021, that percentage dropped to 67% of respondents listing it as a top concern in 2022, While multiple factors certainly contribute to these results (availability of COVID relief funds, for example), the decline is significant, especially in this time of inflationary growth and demands on the labor market. This decline may be reflective of the continued transition away from short-term emergency response and toward a more future-oriented mindset. 

Other concerns

Both cybersecurity and government funding concerns held relatively steady in 2022 compared to 2021, with 45% of respondents concerned with cybersecurity and government funding in 2021, compared to 50% and 43% in 2022, respectively. 

Participants also reflected on the perceived top concerns for their board members, with employee retention and recruitment and overall financial stability leading in top importance. These mirrored concerns are of no surprise, but speak to the continued need for regular and reliable reporting to boards to allow for continued rapid response by those charged with governance.

If you have any questions about your specific concerns or situation, please don’t hesitate to contact our not-for-profit team. We’re here to help.

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Employee retention and other concerns: NFP outlook for the year ahead

What the C-Suite should know about CECL and change management

Read this if you are at a financial institution. 

Some institutions are managing CECL implementation as a significant enterprise project, while others have assigned it to just one or two people. While these approaches may yield technical compliance, leadership may find they fail to realize any strategic benefits. In this article, Dan Vogt, Principal in BerryDunn’s Management and IT Consulting Practice, and Susan Weber, Senior Manager and CECL expert in BerryDunn’s Financial Services Practice, outline key actions leaders can take now to ensure CECL adoption success.  

Call it empathy, or just the need to take a break from the tactical and check in on the human experience, but on a recent call, I paused the typical readiness questions to ask, “How’s the mood around CECL adoption – what’s it been like getting others in the organization involved?” The three-word reply was simple, but powerful: “Kicking and screaming.”  

Earlier this year, by a vote of 5-2, the FASB (Financial Accounting Standards Board) closed the door to any further delays to CECL adoption, citing an overarching need to unify the industry under one standard. FASB’s decision also mercifully ended the on-again off-again cycle that has characterized CECL preparation efforts since early 2020. One might think the decision would have resulted in relief. But with so much change in the world over the past few years, is it any wonder institutions are instead feeling change-saturated?  

Organizational change

CECL has been heralded as the most significant change to bank accounting ever, replacing 40+ years of accounting and regulatory oversight practices. But the new standard does much more than that. Implementing CECL has an effect on everything from executive and board strategic discussions to interdepartmental workflows, systems, and controls. The introduction of new methods, data elements, and financial assets has helped usher in new software, processes, and responsibilities that directly affect the work of many people in the organization. CECL isn’t just accounting—it’s organizational change. 

Change management

Change management best practices often focus on leading from optimism—typically leadership and an executive sponsor talk about opportunities and the business reasons for change. Some examples of what this might sound like as it relates to CECL might include, by converting to lifetime loss expectations, the institution will be better prepared to weather economic downturns; or, by evolving data and modeling precision, an institution’s understanding and measure of credit risk is enhanced, resulting in more strategic growth, pricing, and risk management. 

But leading from optimism is sometimes hard to do because it isn’t always motivating—especially when the change is mandated rather than chosen.  

Perhaps a more judiciously used tactic is to focus on the risk, or potential penalty, of not changing. In the case of CECL, examples might include, your external auditor not being able to sign-off on your financials (or significant delays in doing so), regulatory criticism, inefficient/ineffective processes, control issues, tired and frustrated staff. These examples expose the institution to all kinds of key risks: compliance, operational, strategic, and reputational, among them.

CECL success and change management

With so much riding on CECL implementation and adoption going well, some organizations may be at heightened risk simply because the effort is being compartmentalized—isolated within a department, or assigned to only one or two people. How effectively leadership connects CECL implementation with tenets of change management, how quickly they understand, then together embrace, promote, and facilitate the related changes affecting people and their work, may prove to be the key factor in achieving success beyond compliance.  

One important step leaders can take is to perform an impact assessment to understand who in the organization is being affected by the transition to CECL, and how. An example of this is below. Identifying the departments and functions that will need to be changed or updated with CECL adoption might expose critical overlaps and reveal important new or enhanced collaborations. Adding in the number of people represented by each group gives leaders insight into the extent of the impact across the institution. By better understanding how these different groups are affected, leaders can work together to more effectively prioritize, identify and remove roadblocks, and support peoples’ efforts longer term.           

 
No matter where your institution is currently in its CECL implementation journey, it is not too late to course-correct. Leadership—unified in priority, message, and understanding—can achieve the type of success that produces efficient sustainable practices, and increases employee resilience and engagement.

For more information, visit the CECL page on our website. If you would like specific answers to questions about your CECL implementation, please visit our Ask the Advisor page to submit your questions. For more tips on documenting your CECL adoption, stay tuned for our next article in the series, revisit past articles, or tune in to our CECL Radio podcast. You can also follow Susan Weber on LinkedIn.

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Implementing CECL: Kicking and screaming

Read this if you are a leader in the healthcare industry.

BerryDunn recently held its first annual Healthcare Leadership Summit. Here are some highlights of the topics, presentations, and discussions of the day. 

Healthcare CFO survey results

The day began with an industry update where Connie Ouellette and Lisa Trundy-Whitten had the opportunity to present with Rob Culburt, Managing Director, Healthcare Advisory, The BDO Center for Healthcare Excellence & Innovation. Rob shared highlights from a recent survey of healthcare CFOs by The BDO Center for Healthcare Excellence & Innovation, while Connie and Lisa reflected on the similarities between study results and hospital and senior living clients.

It was no surprise the study found one of the most significant challenges CFOs are facing at both the national and local level is the sustained strain on healthcare systems amid the pandemic, and ongoing supply chain and workforce struggles. Additionally, providers are concerned about the upcoming reporting and regulation requirements. Also top of mind are the Provider Relief Fund (PRF) reporting requirements, as the requirements have been ambiguous and ever changing. There is also concern among survey respondents that a misinterpretation or reporting error could cause providers to have to pay back funding they received from PRF.

The BDO healthcare survey reported that 63% of the providers who responded to the survey are thriving, but 34% are just surviving. Out of those surveyed, 82% expect to be thriving in one year. You can view the full results of the survey here

Recruitment and retention in the current climate

Recruitment and retention of direct care providers are significant challenges within the senior living industry. Providers are facing workforce shortages that are forcing them to temporarily suspend admissions, take beds off line, and, in worst case scenarios close whole units or facilities. Sarah Olson, BerryDunn's Director of Recruiting and Bill Enck, Principal at BerryDunn discussed factors leading to the talent shortage, and shared creative short- and long-term recruitment and retention strategies to try.

Change management

The pandemic has forced many in healthcare to rethink how they operate their facilities. Employees have had to pivot on a moment’s notice, and in general do more with less. However, there are still initiatives that need to be undertaken and projects that must be completed in order for your facility to operate and remain financially viable. How do you manage the change associated with these projects? Can you manage the change without burning out your employees? Dan Vogt, BerryDunn Principal, and Boyd Chappell from Schoolcraft Memorial Hospital provided tips and strategies for managing change fatigue. 

Overall, the Leadership Healthcare Summit proved to be an informative and engaging event, and many new ideas and forward-looking strategies were shared to help enable providers to continue to weather current challenges and pistion themselves for success. For more in-depth information on these topics and others discussed, please visit our Healthcare Leadership Summit resources page

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Top three takeaways from BerryDunn's first annual Healthcare Leadership Summit